Annual Report 2019
Annual
Report
2019
Table of Contents
Letter to Shareholders
Business Update
Financial Review
Corporate Governance
Consolidated IFRS Financial Statements for the year ended December 31, 2019
Report from the Auditor on the Consolidated IFRS Financial Statements
Statutory Financial Statements of ObsEva SA for the year ended December 31, 2019
Report from the Auditor on the Statutory Financial Statements of ObsEva SA
Compensation Report of ObsEva SA for the year ended December 31, 2019
Report from the Auditor on the Compensation Report of ObsEva SA
Forward-Looking Statements
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4
50
64
86
119
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155
157
1ObsEva Annual Report 2019 Letter to shareholders
Dear Shareholders,
2019 was a very important year for ObsEva, with Phase 3 clinical trial results for two of our three
compounds in development. As always, we wish to sincerely thank our employees for their hard work and
commitment, and the physicians and patients who participate in our trials.
The most exciting news for ObsEva in 2019 was the results of our first Phase 3 trial for linzagolix, our once-
a-day, oral, gonadotropin-releasing hormone (GnRH) receptor antagonist. The PRIMROSE 2 trial is being
conducted in Europe and in the US, in approximately 500 women with heavy menstrual bleeding due to
uterine fibroids. Following 6 months of treatment, an impressive 94% of women receiving the high linzagolix
dose of 200mg combined with hormonal add back therapy (ABT) achieved the primary endpoint defined as a
reduction in bleeding of more than 50% and reaching a level below < 80mL. Equally as exciting, we are the
only company developing a low dose regimen without ABT for women who cannot or do not want to take
synthetic hormones. Women receiving this 100mg linzagolix dose achieved a 57% response rate, indicating
that a majority of women could be adequately treated without full estrogen suppression.
With these highly efficacious dual dosing options, we believe that linzagolix is positioned with best in class
potential for both the uterine fibroid indication, as well as for treating endometriosis associated pelvic pain,
which is also currently being studied in Phase 3 trials. In the second quarter of 2020, we expect to receive
additional linzagolix Phase 3 trial results in uterine fibroids, the 12-month treatment data from the
PRIMROSE 2 trial, and 6-month primary endpoint results from our PRIMROSE 1 trial being conducted solely in
the U.S. In anticipation of positive results, we are preparing for submitting a Marketing Authorization
Application (MAA) to the European Medecine Agency (EMA) in the fourth quarter of 2020, preceding a
potential new drug application (NDA) submission to the U.S. Food and Drug Administration (FDA) in early
2021.
In order to maximize the commercial potential of linzagolix for both indications, one important corporate
objective for 2020 is to establish a partnership for marketing linzagolix, to appropriately target the millions
of women suffering from uterine fibroids and endometriosis.
Although we were disappointed with the results of the confirmatory Phase 3 IMPLANT 4 trial of our oral
oxytocin receptor antagonist nolasiban in women undergoing embryo transfer (ET) following in-vitro
fertilization (IVF), we take great pride having conducted the most rigorous set of clinical trials in this field.
There is indeed a huge need for bringing to the market therapeutics that can increase the likelihood of
pregnancy following ET and the ultimate goal of taking home a baby. We recently announced a partnership
to begin the next chapter for nolasiban. YuYuan Bioscience will conduct Phase 1 and 2 trials in China, which
has the largest IVF population in the word. This agreement allows us to further explore the therapeutic
potential of nolasiban in IVF, and enables ObsEva to utilize these new clinical trial results, should they
support further development in the United States and Europe.
We have also made great progress with our third compound, OBE022, our oral prostaglandin F2 alpha
receptor antagonist in development for treating acute preterm labor in pregnant women at 24–34 weeks
gestation. Of all the areas we focus upon, pre-term labor may be the most in need of safe and effective
therapies, and also with the largest healthcare cost impact.
2ObsEva Annual Report 2019 Following completion of the open label Part A of the Phase 2a PROLONG trial of OBE022 in 2018, we spent
2019 enrolling the randomized, placebo-controlled, double-blind Part B of the trial. Twice during the year,
the trial’s Independent Data Monitoring Committee (IDMC) recommended continuation without any changes
necessitated by safety. We look forward to releasing efficacy results in 120 patients in the second half of
2020, and subsequently deciding next steps in development.
In summary, 2019 was a year with great challenges and also tremendous achievements. We are more
committed than ever to generating more important clinical trial data in 2020 and also preparing for
commercialization of new treatments for women who suffer from debilitating and life altering medical
conditions. At a time when much of the pharmaceutical industry has abandoned R&D for Women’s Health,
we are proud to pursue our focus and efforts for innovating in this field. We thank you for your continued
support in these important endeavors.
Sincerely,
Dr. Ernest Loumaye
CEO & Co-Founder
3ObsEva Annual Report 2019Letter to Shareholders Business
Update
Business Update
We are a clinical-stage biopharmaceutical company focused on the development and commercialization of
novel therapeutics for serious conditions that compromise a woman’s reproductive health and pregnancy. We
are advancing a pipeline of orally-administered innovative new chemical entities, or NCEs, for the treatment
of symptoms associated with endometriosis and uterine fibroids, treatment of preterm labor and improvement
of clinical pregnancy and live birth rates in women undergoing IVF. We have assembled a strong management
team with extensive experience in successfully developing and commercializing therapeutics in our target
market. Our goal is to build the leading women’s reproductive health and pregnancy company focused on
conditions where current treatment options are limited and significant unmet needs exist.
We were founded in November 2012 by former executives of PregLem SA, or PregLem, a Swiss-based specialty
biopharmaceutical company dedicated to the development and commercialization of innovative drugs for
women’s reproductive medicine. While at PregLem, our senior management team collaborated in the clinical
development and commercialization of several women’s reproductive health therapeutics, including Esmya
(ulipristal acetate) for the treatment of uterine fibroids. PregLem was subsequently acquired by Gedeon Richter
in 2010. We believe we will be able to leverage our senior management team’s long-standing experience
working together and with key opinion leaders, patient groups, payors, reproductive health networks, fertility
clinics, obstetricians and gynecologists, or OB/GYNs, nurses and pharmacists to identify, in-license or acquire,
develop and commercialize product candidates. We are merging our passion for, and extensive experience in,
the field of women’s reproductive health and pregnancy, to develop therapeutics that can help women lead
healthier and more fulfilling lives.
We are focused on providing therapeutic solutions for women between the ages of 15 and 49 who suffer from
reproductive health conditions that affect their quality of life, ability to conceive or that complicate pregnancy
and the health of newborns. There are millions of women of reproductive age affected by conditions such as
endometriosis, uterine fibroids and preterm labor, or that require IVF to conceive. We believe the efficacy of
current treatment options is limited and creates a significant unmet need for improved therapeutics for these
women.
Our portfolio currently consists of three in-licensed NCEs in clinical development for four indications intended
to address areas that we believe present significant unmet medical needs:
Linzagolix for the treatment of pain associated with endometriosis and HMB associated with
uterine fibroids.
We are developing linzagolix as a novel, oral GnRH receptor antagonist, for the treatment of pain associated
with endometriosis and HMB associated with uterine fibroids in pre-menopausal women. Endometriosis is an
often painful disorder in which the tissue that normally lines the inside of the uterus, called the endometrium,
grows outside of the uterus, causing monthly bleeding and chronic inflammatory reactions inside the
abdomen that may result in ovarian cyst formation, scar tissue and adhesions. The symptoms of endometriosis
include significant pain during menstrual periods (dysmenorrhea), chronic pelvic pain, pain during intercourse
(dyspareunia), pain during defecation (dyschezia), excessive menstrual bleeding and infertility. These
symptoms can impact general physical, mental and social well-being. We believe that approximately 5 million
5ObsEva Annual Report 2019 women in the United States were diagnosed and being treated annually for endometriosis and that the majority
of those women experience significant pain during menstrual periods as well as non-menstrual pelvic pain
that is not associated with their menstrual periods. Uterine fibroids are common non-cancerous tumors that
develop in the muscular wall of the uterus and have disabling symptoms such as HMB and pain. According to
a study published in the American Journal of Obstetrics & Gynecology in 2003, uterine fibroids affect an
estimated 20 to 40% of women over the age of 30 in the United States based on clinical cases and women who
undergo treatment.
In previous early stage Phase 1 and Phase 2 clinical trials, linzagolix was observed to have a linear PK profile,
a predictable dose-dependent suppression of estradiol and a dose range that was well-tolerated and provided
symptom relief. Aimed at addressing the need of the largest possible population in each indication, our clinical
trials for both of these indications are designed to assess and potentially support the registration of two
regimens of administrations for linzagolix i.e. (i) a moderate dose of linzagolix without hormonal add-back
therapy and (ii) a high dose of linzagolix with hormonal add-back therapy. Add-back therapy (ABT) consists of
co-administering estrogen and progestin with a high dose of GnRH receptor antagonist to compensate for the
severe depletion of estrogen levels and thus prevent the side effects of full estrogen suppression such as hot
flushes, vaginal dryness, and loss of bone mineral density (BMD).
We have completed a placebo-controlled Phase 2b clinical trial of linzagolix in approximately 330 patients
with endometriosis, the EDELWEISS 1 trial, which met its primary endpoint at Month 3 and showed
maintenance or increase of the effect of linzagolix on endometriosis-associated pain and favorable safety up
to 52 weeks of treatment and up to 24 weeks after end of treatment. The results were presented at the 75th
American Society of Reproductive Medicine (ASRM) Scientific Congress & Expo in October 2019.
We believe the BMD results support our plan to pursue further development of two doses of linzagolix for the
treatment of endometriosis, including a 75 mg once daily dose without ABT, and a 200 mg once daily dose in
combination with ABT (1mg E2 / 0.5mg NETA, or Activella). Based on the results of our EDELWEISS 1 trial, we
believe nearly three out of four patients with moderate to severe endometriosis-associated pain may achieve
significant symptom relief with linzagolix 75 mg once daily with no need for ABT to mitigate BMD loss.
Following the positive results of EDELWEISS 1 and the End of Phase 2 meeting with the U.S. Food and Drug
Administration (FDA) in December 2018, the EDELWEISS 2 and EDELWEISS 3 Phase 3 clinical trials were initiated
in May 2019. These Phase 3 trials will each enroll approximately 450 patients with endometriosis associated
pain, with a co-primary endpoint of dysmenorrhea (menstrual pain) and non-menstrual pain (NMPP). Both trials
include a 75 mg once daily dose without ABT option, and a 200 mg once daily dose in combination with ABT
option.
For the uterine fibroids indication, we have completed a Phase 1 PK/PD clinical trial to assess two different
doses of ABT in patients receiving 100 mg and 200 mg doses of linzagolix over six weeks. The results of this
clinical trial, which were announced in June 2017, support the ABT dose (1mg E2 /0.5mg NETA) being utilized
in the two randomized, placebo-controlled Phase 3 clinical trials that commenced in the first half of 2017.
We refer to these Phase 3 clinical trials of linzagolix in patients with HMB associated with uterine fibroids as
the PRIMROSE 1 (conducted in the US) and PRIMROSE 2 (conducted in Europe and in the US) clinical trials. In
December 2019, we announced positive Phase 3 trial results from the PRIMROSE 2 trial of linzagolix for the
treatment of heavy menstrual bleeding (HMB) due to uterine fibroids. The PRIMROSE 2 trial enrolled 535
women with uterine fibroids. The trial was conducted in Europe and the US, and evaluated the efficacy and
safety of once daily oral linzagolix, including 100 mg and 200 mg doses, both with and without hormonal
ABT. The primary efficacy endpoint was the reduction in HMB at 24 weeks; responders were defined as patients
with menstrual blood loss volume of ≤ 80 mL and a 50 percent or greater reduction from baseline in menstrual
blood loss volume, measured using the alkaline hematin method. BMD was measured centrally via Dual Energy
X-ray Absorptiometry (DEXA) scan at baseline and 24 weeks. The responder rate was 93.9% (p < 0.001) for
patients receiving 200 mg with ABT and 56.7% for patients receiving 100 mg without ABT (p < 0.001),
compared to 29.4% in the placebo group. Both doses achieved significant rates of amenorrhea (p< 0.001),
6ObsEva Annual Report 2019Business Update
reduction in pain (p < 0.001), and improvement in quality of life (p < 0.001). Additionally, significant
improvement (p< 0.001) in Hb levels, a reduction in number of days of bleeding and reduction in uterine
volume were observed. A significant reduction in fibroid volume was also observed for the 200 mg dose with
ABT (p = 0.008). The overall safety profile was in line with expectations. The most frequently observed adverse
events (occurring in > 5% of patients) were headache, hot flushes, and anemia. Mean percentage change from
baseline in BMD was consistent with the previous trial.
We expect to report both the primary endpoint results following 24 weeks of treatment from the PRIMROSE 1
trial conducted in the U.S. and the 52 weeks of treatment results from PRIMROSE 2 trial in the second quarter
of 2020. A Marketing Authorization Application (MAA) submission to the European Medicines Agency (EMA)
and a New Drug Application (NDA) submission to the FDA are planned by the fourth quarter of 2020 and the
first quarter of 2021 respectively, pending PRIMROSE 1 positive results and feedback from regulatory
agencies.
We believe linzagolix, if approved in either or both indications, has the potential to be a best-in-class oral
GnRH receptor antagonist based on its favorable PK and PD profiles, and its expected balance between safety
and efficacy. We expect linzagolix to potentially reduce endometriosis-associated pain symptoms and heavy
menstrual bleeding associated with uterine fibroids, while mitigating bone mineral density loss and other
adverse effects associated with full estradiol suppression. Further, we believe that linzagolix has the potential
to offer flexible dosing alternatives to achieve either partial or full estrogen suppression that can be
administered with or without hormonal add-back therapy. Our intent is to demonstrate that the majority of
endometriosis patients may be able to experience significant symptomatic relief by utilizing our partial
estrogen suppression linzagolix dose of 75 mg with no ABT. For uterine fibroids, we believe our 100 mg
linzagolix dose without ABT is the only oral GnRH dosing regimen being developed for this indication without
the use of ABT. Finally, we believe linzagolix has certain advantageous characteristics including the absence
of food effect, high bioavailability, low volume of distribution, no induction of liver enzymes known as
cytochrome P450 3A4, or CYP3A4, no active transport into the liver by organic-anion-transporting polypeptide
1B1 and 1B3 or OATP1B1/1B3, and low PK and PD variability. We believe these characteristics could be key
product differentiators compared to other oral GnRH receptor antagonists in clinical development. We are also
exploring various alternatives for the future potential commercialization of linzagolix, including through a
collaboration with a third party.
OBE022 for the treatment of preterm labor (GA 24-34 weeks).
We are developing OBE022, an oral and selective prostaglandin F2α, or PGF2α, receptor antagonist, as a once
daily treatment for preterm labor from 24 to 34 weeks gestational age, or GA. PGF2α is a naturally occurring
prostaglandin, or active lipid compound, that acts to induce labor. Preterm labor, defined as the body
commencing the birthing process prior to 37 weeks, is characterized by uterine contractions, cervical dilation
and potential rupture of the fetal membranes that surround and protect the fetus during pregnancy. Preterm
labor can lead to preterm birth, which is currently the leading worldwide cause of death of newborn babies.
According to the National Center for Health Statistics, approximately 9.6% of babies in the United States were
born preterm in 2014. Over 1 million children under the age of five died in 2013 worldwide due to preterm
birth complications, and many infants who survive preterm birth are at greater risk for cerebral palsy, delays
in development, hearing and vision issues, and often face a lifetime of disability. The rates of preterm births
are rising in almost all countries with reliable data for preterm birth, and are associated with an immense
financial impact to the global healthcare system.
To date, only treatments with limited efficacy and/or restrictive safety issues are available to treat preterm
labor. In the United States, no drugs are approved for acute treatment of preterm labor and recommended
off-label tocolytic treatments (medications that inhibit labor) include beta-adrenergic receptor agonists,
calcium channel blockers, or NSAIDs, which are used for short-term prolongation of pregnancy (up to 48
hours) to allow for the administration of antenatal steroids (e.g. betamethasone). Magnesium sulfate, used
for fetal neuroprotection can also be used (up to 48 hours) to inhibit acute preterm labor, but has limited
7ObsEva Annual Report 2019Business Update efficacy. Approved tocolytic treatments in Europe include beta-adrenergic agonists, which carry severe
maternal cardiovascular risks, and intravenous infusions of atosiban (an oxytocin receptor antagonist).
While prostaglandin synthesis inhibitors, a sub-group of NSAIDs, have been shown to be effective for inhibiting
preterm labor, use of such drugs is limited, due to the threat of serious and sometimes life-threatening side
effects in the fetus. In nonclinical studies, ObsEva has observed that OBE022 markedly reduces spontaneous
and induced uterine contractions in pregnant rats without causing the fetal side effects seen with NSAIDS,
such as indomethacin. Through specific antagonism of the PGF2α receptor, OBE022 is designed to control
preterm labor by reducing inflammation, decreasing uterine contractions and preventing cervical changes and
fetal membrane rupture. Based on its PK profile and efficacy observed in animal models, we believe OBE022
has the potential to become a first-in-class therapy to suppress preterm labor and delay or avoid preterm
birth, without significant safety concerns for the fetus. In February 2017, we completed a Phase 1 clinical trial
assessing the safety, tolerability and PK profile of OBE022 in healthy post-menopausal female volunteers after
single doses of 10 mg to 1,300 mg and multiple doses between 100 mg per day and 1,000 mg per day over
7 consecutive days. In this trial, OBE022 was observed to have a favorable PK profile, no clinically significant
food effect, a favorable safety profile and to be well-tolerated at doses up to 1,300 mg after single dose
administration and up to 1,000 mg per day after multiple dose administration over 7 days, each of which are
above the estimated clinical effective dose. In March 2017, we completed a set of drug-drug interaction, or
DDI, Phase 1 clinical pharmacology studies investigating the safety, tolerability and PK profile of OBE022 when
combined with magnesium sulfate, atosiban, nifedipine or betamethasone (medications typically used in
patients with preterm labor) in pre-menopausal female volunteers. OBE022 in combination with those drugs
was observed to have a favorable safety profile and to be well-tolerated up to 1,100 mg per day, which was
the highest tested dose. In December 2017, we announced the initiation of our Phase 2a proof-of-concept
trial of OBE022, referred to as the PROLONG clinical trial. PROLONG is a proof-of-concept Phase 2a trial
conducted in two parts: Part A and Part B. In this trial, OBE022 is orally administered daily for 7 days, to
pregnant women, who are already receiving standard of care therapy for preterm labor, atosiban infusion for
48 hours. This clinical trial will enroll up to 120 pregnant women presenting with spontaneous preterm labor
at gestational ages between 24 and 34 weeks.
In December 2018, we announced the completion of the open label Part A of the PROLONG trial in nine patients
assessing OBE022 safety and pharmacokinetic (PK) profile. OBE022 was observed to be well tolerated by the
mothers and their fetuses and we were able to demonstrate that the pharmacokinetics of OBE022 were similar
to those previously observed in non-pregnant women. Also, 8 of the 9 treated women did not deliver during
the 7 days of treatment. Based on these data, we began the randomized Part B of the trial assessing efficacy
in delaying childbirth in women at 24 to 34 weeks gestation who are experiencing symptoms of preterm labor
and potentially preterm delivery. We announced in July 2019 that the trial Independent Data Monitoring
Committee (IDMC) completed the unblinded review of data from the first 30 subjects randomized in Part B of
the PROLONG trial and recommended to continue the trial without modifications. We subsequently announced
in January 2020 that the IDMC completed the unblinded review of data from the first 60 subjects and again
recommended to continue the trial without modifications. Pending enrollment of the remaining 60 subjects,
final PROLONG trial results are anticipated in the second half of 2020.
Nolasiban to improve embryo transfer outcomes after IVF.
We have been developing nolasiban, an oral oxytocin receptor antagonist, to improve clinical pregnancy and
live birth rates in women undergoing embryo transfer (ET) following an IVF cycle. In 2018, we reported positive
results for the primary endpoint of ongoing pregnancy 10 weeks post embryo transfer and the secondary
endpoint of live birth rate from the European Phase 3 clinical trial in 778 women undergoing IVF, or the
IMPLANT 2 clinical trial. Patients receiving nolasiban prior to either Day 3 or Day 5 ET experienced an
approximate 7% absolute or 25% relative increase in live birth rate over placebo. The Day 5 ET only population
experienced an approximate 12% absolute or 35% relative increase in live birth rate over placebo.
8ObsEva Annual Report 2019Business Update
In November 2019, we announced that the IMPLANT 4 trial did not meet the primary endpoint of an increase
in ongoing pregnancy rate at 10 weeks, (39.1 % placebo vs 40.5 % nolasiban) (p = 0.745). As these results did
not confirm the prior positive Phase 3 IMPLANT 2 trial findings, we have discontinued our previously ongoing
development of nolasiban for IVF, and are exploring potential repositioning of the compound, such as through
higher dose levels and earlier and longer exposure of nolasiban, as well as focusing on subjects with a high
uterus contraction rate at the time of ET. In connection with this potential repositioning, in January 2020, we
and Hangzhou Yuyuan BioScience Technology Co., Ltd. (Yuyuan) entered into a sublicense agreement to
develop and commercialize nolasiban for improving clinical pregnancy and live birth rates in women
undergoing embryo transfer as part of an IVF cycle in the People's Republic of China (PRC). Under the terms
of the agreement, Yuyuan has the exclusive rights to develop and commercialize nolasiban in the PRC. They
will fund all development and registration activities in the PRC, starting with the obligation to fund and conduct
a Phase 1 trial and a Phase 2 proof-of-concept trial in China. We and Yuyuan will collaborate on the global
development of nolasiban. We retain all rights to the product outside of PRC.
The following table summarizes key information regarding our current product candidates:
We are also evaluating additional indications for our current product candidates as well as opportunities to
in-license or acquire additional product candidates in our therapeutic field.
Our executive team has substantial experience in developing and commercializing pharmaceutical products
in this field. For example, Ernest Loumaye, M.D., Ph.D., OB/GYN, our Chief Executive Officer and co-founder,
is a board certified and academically trained OB/GYN with extensive experience developing therapeutics for
women’s health and over 90 publications in peer-reviewed journals. Most recently he was the Chief Executive
Officer and Co-Founder of PregLem. Prior to PregLem, Dr. Loumaye spent nine years as Head of Clinical
Development for Reproductive Health at Serono, now Merck Serono, where he led the worldwide clinical
development and contributed to the worldwide registration of Gonal-F, Luveris and Ovidrel.
9ObsEva Annual Report 2019Business Update In addition, Jean-Pierre Gotteland, Ph.D., our Chief Scientific Officer and Head of R&D, held the same roles at
PregLem where he worked with Dr. Loumaye for six years and successfully in-licensed, developed and
registered a first-in-class product, Esmya (ulipristal acetate), for the treatment of uterine fibroids.
Wim Souverijns, our Chief Commercial Officer is based at our headquarters in Geneva, Switzerland and is
responsible for leading our transition from a development company to a commercial company. Mr. Souverijns
brings nearly 20 years of experience in the pharmaceutical industry and recently served as Corporate Vice
President, Global Marketing, Hematology & Oncology within Celgene out of Summit, New Jersey. Previously,
Mr. Souverijns developed his pharmaceutical experience through various international assignments at PwC
Consulting and in different market access leadership roles at Amgen, both in Europe and the U.S.
In July 2019, Elizabeth Garner joined us as our Chief Medical Officer, after spending many years in the women’s
health industry at Agile Therapeutics Inc., Myriad Genetics Laboratories, Abbott Laboratories, and Merck. Dr.
Garner has several years of experience in academic clinical practice, research and teaching at Harvard Medical
School. Dr. Garner holds M.D. and M.P.H. degrees from the Harvard Medical School and Harvard School of
Public Health, Boston, and received board certification in both general Obstetrics and Gynecology and
Gynecologic Oncology.
Collectively, our management team has led the clinical development or contributed to the worldwide
registration of three market-leading fertility products at Serono, Gonal-F, Luveris and Ovidrel, as well as other
products including Esmya, Puregon Pen, Implanon, NuvaRing and Evamist. In addition, members of our
management team bring pharmaceutical development, regulatory approval, manufacturing, reimbursement
and commercialization experience from other pharmaceutical and biotechnology companies, including Merck
Serono, PregLem, Organon, Allergan, Pierre Fabre, Novartis Pharma AG, Roche, SmithKline Beecham, Shire,
Galderma, Speedel, Evolva SA and Acrux.
We have demonstrated an ability to successfully execute on the first part of our strategy by leveraging our
extensive network in the field of women’s reproductive health and pregnancy to in-license linzagolix from
Kissei and nolasiban and OBE022 from Merck Serono. Additionally, we have raised $334.2 million in equity
financing from inception to December 31, 2019 from leading healthcare investors, as well as $25.0 million
from the issuance of a debt instrument.
Our Strengths
We believe our clinical and product development experience in the field of women’s reproductive health and
pregnancy provides us with the following strengths:
Strategic focus on diseases in women’s reproductive health and pregnancy that affect growing female
populations with high unmet medical needs and significant commercial potential;
Product candidates with clear mechanisms of action and early evidence of efficacy that have the potential
to progress into and through late-stage clinical trials and potentially commercial stage;
Management with substantial experience working together and developing and commercializing
pharmaceutical products in the field of women’s reproductive health and pregnancy;
Strong industry and key opinion leader relationships in the field of women’s reproductive health and
pregnancy that provide access to potential product in-licensing opportunities and product development
experience; and
Support from leading healthcare-focused investors and board members with experience in building and
operating life science companies.
10ObsEva Annual Report 2019Business Update
Our Strategy
Our goal is to build the leading women’s reproductive health and pregnancy company focused on conditions
where current treatment options are limited and significant unmet needs exist. The key elements of our
strategy include the following:
•
•
•
•
Continue to advance each of our current product candidates in their respective indications.
Develop a targeted commercialization strategy for any approved product candidates. We have
obtained worldwide commercial rights to our lead product candidates, except for certain countries in Asia
with respect to linzagolix and for the PRC with respect to nolasiban. As we move our product candidates
through development toward regulatory approval we will evaluate several options for each product
candidate’s commercialization strategy. These options include building our own internal sales force,
entering into a joint marketing partnership with another pharmaceutical or biotechnology company, or
out-licensing the product to another pharmaceutical or biotechnology company. We are also exploring
various alternatives for the future potential commercialization of linzagolix, including through a
collaboration with a third party.
Pursue additional indications for our current product candidates. We believe each of our current
product candidates have application outside the indications we are currently developing and we plan to
pursue additional indications for our existing product candidates in the near future.
Leverage our international product development experience and extensive network of clinical
experts and pharmaceutical industry executives within women’s reproductive health and
pregnancy to in-license or acquire novel product candidates. We are focused on identifying, and in-
licensing or acquiring, additional clinical-stage product candidates that we believe have the potential to
become best-in-class or first-in-class products for the treatment of serious conditions in women’s
reproductive health and pregnancy, if approved. We intend to focus on product candidates that we believe
will be efficient from a capital-management standpoint, and we are exploring additional needs in our
therapeutic field, such as premenstrual syndrome, fibrocystic breast disease, post-menopausal hot
flashes, preeclampsia, dysmenorrhea and menopause-related auto-immune diseases.
Linzagolix: Investigational GnRH Receptor Antagonist for Symptoms Associated with Endometriosis and
Uterine Fibroids
We are developing linzagolix as an oral GnRH receptor antagonist, which we have observed in our clinical
trials to induce a dose-dependent reduction of estradiol levels. Through that mechanism, we expect linzagolix
to be indicated for the treatment of endometriosis-associated pain and heavy menstrual bleeding associated
with uterine fibroids. We believe linzagolix, if approved, has the potential to be a best-in-class oral GnRH
receptor antagonist based on its favorable PK and PD profiles, and its potential to provide targeted estradiol
suppression to reduce pain symptoms associated with endometriosis and HMB associated with uterine
fibroids, while mitigating bone mineral density loss and other adverse effects that are typically associated
with full estradiol suppression. We believe that linzagolix has the potential to offer flexible dosing alternatives
to address the symptoms of the broad patient population, supported by key differentiating product
characteristics, including absence of food effect, high bioavailability, low volume of distribution, no CYP3A4
induction or OATP1B1/B3 interaction, and low PK and PD variability. We believe these characteristics are key
product differentiators compared to other GnRH receptor antagonists in development.
In 2015, we in-licensed linzagolix from Kissei. Kissei completed three Phase 2a clinical trials in Japan of
linzagolix in patients with endometriosis, including one double blind placebo-controlled trial with a subgroup
of patients diagnosed with both endometriosis and uterine fibroids.
11ObsEva Annual Report 2019Business Update Aimed at addressing the needs of the largest possible population in each indication, our clinical trials for both
of these indications are designed to assess and potentially support the registration of two regimens of
administrations for linzagolix i.e. (i) a moderate dose of linzagolix without hormonal ABT and (ii) a high dose
of linzagolix with hormonal ABT. We have completed a 330-patient multiple-dose, placebo-controlled Phase
2b EDELWEISS 1 clinical trial of linzagolix in endometriosis patients across 70 sites in the United States and
15 sites in Central and Eastern Europe. This prospective, dose finding, randomized, parallel-group, double-
blind, placebo-controlled Phase 2b study was designed to investigate the efficacy and safety of a range of
doses of linzagolix in the treatment of women with endometriosis associated pain. The 24-week treatment
period (primary endpoint after 12 weeks of treatment) was followed either by a 24-week post treatment follow-
up (PTFU) or an optional treatment extension phase with a 24-week PTFU.
The EDELWEISS 1 clinical trial successfully met its primary endpoint, a statistically significant patient response rate
vs. placebo following 12 weeks of treatment. Patient response was measured by a reduction of at least 30% in
combined menstrual and non-menstrual pelvic pain on a verbal rating scale (VRS) of 0 (no pain) through 3 (severe
pain). Observed response rates were 34.5% for placebo, 61.5% for 75mg linzagolix, and 56.3% for 200mg linzagolix.
Respective p values were 0.003 and 0.034. The efficacy in reducing pelvic pain, including dysmenorrhea and non-
menstrual pelvic pain, as well as improvements in dyspareunia, dyschezia, and quality of life measures observed
after 12 weeks of treatment were further improved or maintained up to Week 52, with the greatest treatment benefit
observed at dose levels of 75 mg and above. The EDELWEISS 1 trial also demonstrated that linzagolix is well
tolerated and has clinical benefits when administered continuously for up to 52 weeks.
After an End of Phase 2 meeting with the FDA in December 2018, we announced the initiation of the EDELWEISS
2 and EDELWEISS 3 Phase 3 clinical trials in May 2019. These Phase 3 trials will each enroll approximately 450
patients with endometriosis associated pain, with a co-primary endpoint of patients’ response on both
dysmenorrhea (menstrual pain) and non-menstrual pain. Both trials include a 75 mg once daily dose without
hormonal ABT option, and a 200 mg once daily dose in combination with ABT (1mg E2 / 0.5mg NETA) option.
In addition, we are conducting two Phase 3 clinical trials of linzagolix in patients with HMB associated with
uterine fibroids, the PRIMROSE 1 (conducted in the US) and PRIMROSE 2 (conducted in Europe and in the US)
clinical trials.
In December 2019, we announced positive Phase 3 trial results from the PRIMROSE 2 trial of linzagolix for the
treatment of HMB due to uterine fibroids. The PRIMROSE 2 trial enrolled 535 women with uterine fibroids. The
trial was conducted in Europe and the US, and evaluated the efficacy and safety of once daily oral linzagolix,
including 100 mg and 200 mg doses, both with and without hormonal ABT. The primary efficacy endpoint
was the reduction in HMB at 24 weeks; responders were defined as patients with menstrual blood loss volume
of ≤ 80 mL and a 50 percent or greater reduction from baseline in menstrual blood loss volume, measured
using the alkaline hematin method. Bone mineral density (BMD) was measured centrally via Dual Energy X-ray
Absorptiometry (DEXA) scan at baseline and 24 weeks. The responder rate was 93.9% (p < 0.001) for patients
receiving 200 mg with ABT and 56.7% for patients receiving 100 mg without ABT (p < 0.001), compared to
29.4% in the placebo group. Both doses achieved significant rates of amenorrhea (p< 0.001), reduction in pain
(p < 0.001), and improvement in quality of life (p < 0.001). Additionally, significant improvement (p< 0.001)
in Hb levels, a reduction in number of days of bleeding and reduction in uterine volume were observed. A
significant reduction in fibroid volume was also observed for the 200 mg dose with ABT (p = 0.008). The
overall safety profile was in line with expectations. The most frequently observed adverse events (occurring
in > 5% of patients) were headache, hot flushes, and anemia. Mean percentage change from baseline in BMD
was consistent with previous clinical data.
We expect to report both the primary endpoint results following 24 weeks of treatment from the PRIMROSE 1
trial conducted in the U.S. and the 52 weeks of treatment results from PRIMROSE 2 trial in the second quarter of
2020. A MAA submission to the EMA and a NDA submission to the FDA are planned by the fourth quarter of
2020 and the first quarter of 2021 respectively, pending PRIMROSE 1 positive results and feedback from
regulatory agencies.
12ObsEva Annual Report 2019Business Update
Background on Endometriosis and Uterine Fibroids
Endometriosis is a painful disorder in which endometrial tissue grows outside of the uterus, typically on the
lining of the pelvis, on the ovaries, in the rectovaginal septum, on the bladder, and on the bowels.
Endometriosis causes pain with monthly bleeding and chronic inflammatory reactions in the abdomen that
may result in ovarian cyst formation, scar tissue and adhesions. The symptoms of endometriosis include
significant pain during menstrual periods, chronic pelvic pain, pain during intercourse, excessive menstrual
bleeding and infertility which in turn can impact general physical, mental and social well-being. Often the pain
associated with endometriosis is cyclical in nature and reflects the response to reproductive hormones
circulating throughout the body, particularly estrogen. Endometriosis is also one of the leading causes of
infertility. In many instances, endometriosis is only diagnosed when women seek treatment for such infertility.
According to the World Endometriosis Research Foundation, as of 2014, endometriosis affects an estimated
one in ten women during their reproductive years, totaling approximately 176 million women globally
between the ages of 15 and 49. We believe that approximately 5 million women in the United States were
diagnosed and treated annually for endometriosis, and the majority of those women experience significant
pain during menstrual periods.
Uterine fibroids are common non-cancerous tumors that develop in the muscular wall of the uterus. Uterine
fibroids can vary in size from a few millimeters to more than 20 centimeters, and in number from a single
fibroid to several dozen fibroids. The main symptoms of uterine fibroids are heavy menstrual bleeding,
anemia, abdominal pressure, abdominal pain, bloating, increased urinary frequency and reproductive
dysfunction. Heavy menstrual blood loss is the most frequent disabling symptom of uterine fibroids which
often lead to anemia. Uterine fibroids also carry an increased risk of pregnancy complications such as
infertility, miscarriage, placental abruption and premature onset of labor.
According to a study published in the American Journal of Obstetrics & Gynecology in 2003, uterine fibroids
affect an estimated 20 to 40% of women over the age of 30 in the United States based on clinical cases and
women who undergo treatment. We believe that approximately four million women in the United States are
diagnosed and being treated for uterine fibroids.
The Role of GnRH
The exact causes of endometriosis and uterine fibroids are not currently understood. However, several factors
can contribute to their development and progression, including the rise and fall of hormones, particularly
estrogen, mainly in the form of estradiol. The production of estrogen in the body is regulated by GnRH. GnRH
is responsible for stimulating the synthesis and release of luteinizing hormone, or LH, and follicle stimulating
hormone, or FSH, by the pituitary gland. LH and FSH in turn drive estrogen production through stimulation of
the ovaries. Estradiol is the hormone that, among other effects, causes the endometrium inside the uterus to
thicken during the menstrual cycle. Similarly, estradiol has been determined to promote the growth of
endometriosis lesions and uterine fibroids. Various pharmacological treatments directed at addressing
endometriosis and uterine fibroids attempt to regulate the production of estrogen, particularly estradiol, by
controlling the activity of GnRH.
13ObsEva Annual Report 2019Business Update Limitations of Current Therapies for Endometriosis and Uterine Fibroids
Current treatment options for endometriosis and uterine fibroids are either pharmacological or surgical.
Endometriosis
For endometriosis, the treatment selected is based on the severity of pain and the extent of the disease.
Endometriosis treatments aim first to alleviate pain, then to remove or decrease the size and number of
endometrial lesions, and possibly improve fertility. Oral contraceptives, progestins and NSAIDs are generally
first-line treatments for women experiencing pain. Following the failure of first-line therapies, current
treatment options are limited to intra-muscular or subcutaneous GnRH agonist injections and GnRH agonists
nasal spray pumps. In July 2018, AbbVie Inc. announced that their GnRH antagonist elagolix (Orilissa) received
regulatory approval in the U.S. for the treatment of moderate-to-severe endometriosis-associated pain.
Surgery may be performed for the most symptomatic cases. However, in most cases conservative surgery can
provide short-term relief by excising and/or ablating endometrial lesions, but often does not prevent the
endometrial lesions and associated symptoms from recurring. Surgery requires general anesthesia, and has a
risk of scar tissue and adhesion formation in the pelvis, which can lead to infertility, worsened pain,
requirement for additional surgeries, and damage to other pelvic structures. Surgical treatments for
endometriosis range from laparoscopy to more complex open abdominal surgery. If a woman has not
responded to other medical or surgical treatments, a hysterectomy, which is the removal of all or part of the
uterus, may be performed. Depending on the woman, removal of the ovaries may also be required, resulting
in definitive infertility and immediate menopause.
The World Endometriosis Research Foundation through its EndoCost study estimated the aggregate annual
cost of endometriosis to be approximately $80 billion in the United States and approximately $60 billion in
Germany, the UK, France and Italy in 2012 based on current exchange rates.
Uterine Fibroids
Current treatment options for heavy menstrual bleeding associated with uterine fibroids are limited and
generally consist of oral contraceptives, GnRH agonist injections or surgery. Oral contraceptives are generally
used as the first-line therapy, but are often not effective in reducing heavy bleeding. Upon failure of a first-
line therapy or contraindication to oral contraceptives, surgical intervention is generally the next treatment
option. Hysterectomy is the most commonly performed surgical treatment option. Other less invasive
procedures include (1) myomectomy, which is selective removal fibroids, typically performed by laparoscopy;
this usually preserves fertility, (2) uterine artery embolization, which is a procedure to obstruct the arteries
feeding the fibroid, performed by arterial catheterization, and (3) if the dominant symptom is bleeding,
endometrial ablation, which is a procedure to remove the lining of the uterus performed by thermic or
ultrasonic process.
According to a study published in the American Journal of Obstetrics & Gynecology in 2012, approximately
300,000 hysterectomies and 30,000 myomectomies are performed annually for the treatment of uterine
fibroids in the United States as of 2003. Hysterectomies are major surgeries and, according to the National
Uterine Fibroids Foundation, approximately 660 women die each year in the United States from complications
from a hysterectomy. Hysterectomies can be both physically and psychologically damaging, not only resulting
in loss of fertility, but they also can be perceived by some women as impairing their sense of femininity.
Surgery also carries a risk of scar tissue and adhesions, which can lead to infertility, worsening of pain, damage
to other pelvic structures, and may require additional surgical management.
Treating uterine fibroids is expensive, as surgery constitutes a significant cost burden. Patients who do not
undergo surgery often require medical management, hospitalization and additional outpatient physician
14ObsEva Annual Report 2019Business Update
visits, which further increase the annual costs of the disease. According to a systematic review of literature
published in the American Journal of Obstetrics &Gynecology in 2012, direct and indirect costs associated
with uterine fibroids were estimated in 2010 to be up to $34.4 billion annually in the United States.
Mechanism of Action and Limitations of GnRH Agonists
GnRH agonists are a standard pharmaceutical therapy for estrogen dependent conditions such as
endometriosis and uterine fibroids as they have been demonstrated to reduce estradiol levels. GnRH agonists
act by overstimulating the GnRH receptors which initially may worsen the symptoms for several weeks (the
flair effect). Subsequently the pituitary cells are desensitized, resulting in reduced secretion of LH and FSH,
and severely reduced production of estrogen. This leads to a state referred to as pseudo-menopause, in which
patients experience menopausal symptoms before ultimately experiencing symptom relief. While GnRH
agonists may be effective at treating the symptoms of endometriosis and uterine fibroids, they can be
accompanied with serious drawbacks and limitations including:
•
•
•
•
•
Full suppression of estradiol and related unfavorable side effect profile. Because GnRH agonists
cannot be titrated, they act by fully suppressing estradiol to a post-menopausal level of less than 20
picogram/milliliter, or pg/ml. Excessive suppression of estrogen can result in multiple side effects before
the patient experiences any relief, including hot flashes, vaginal dryness, and bone mineral density loss.
Clinical trials of an approved GnRH agonist demonstrated that patients lose an average of up to 6% of
their bone mineral density after 12 months of GnRH agonist treatment.
Delayed therapeutic effect and initial worsening of symptoms. Since GnRH agonists act by
overstimulating the GnRH receptors, they can cause an initial worsening of symptoms that can last for
several weeks.
Administration by injection. Many GnRH agonists such as Lupron (leuprolide acetate) must be injected
on a monthly basis or a tri-monthly basis, which generally requires the assistance of a doctor or nurse.
Required add-back therapy. To counteract the side effects of the full estrogen suppression, additional
administration of estrogen, referred to as “add-back therapy,” may be recommended after three months
of treatment and is required after six months of treatment. ABT is standard hormone replacement therapy
or HRT, and is most commonly used in post-menopausal women. For some women, ABT is contraindicated
due to related and potentially serious adverse effects.
Variable and unpredictable reversibility of treatment. After stopping treatment with injectable GnRH
agonists, ovarian function can take weeks or months to return to normal. This is particularly relevant and
problematic if a woman wishes to conceive after treatment or if treatment is interrupted for lack of
tolerability.
Linzagolix Mechanism of Action and Solution to GnRH Agonist Drawbacks and Limitations
Linzagolix has been designed to be an orally administered GnRH receptor antagonist with low PK/PD
variability. Linzagolix binds to and blocks the GnRH receptor in the pituitary gland, which clinical trials suggest
results in a dose-dependent reduction of LH and FSH production. This reduction in LH and FSH production in
turn leads to a dose-dependent reduction of estrogen levels.
At selected doses, linzagolix has been observed to maintain estradiol levels in the target range of 20 to 60
pg/ml, which we believe is the optimal range to relieve symptoms associated with endometriosis and uterine
fibroids while mitigating bone mineral density loss or other adverse effects that can be associated with full
estradiol suppression. Higher doses of linzagolix drive estradiol below 20 pg/mL, considered full suppression.
15ObsEva Annual Report 2019Business Update We believe linzagolix has the potential to overcome certain drawbacks and limitations of GnRH agonists. The
potential advantages of linzagolix compared to GnRH agonists include:
•
•
Rapid onset of therapeutic effect. By blocking, as opposed to stimulating, the GnRH receptor, linzagolix
has the potential to suppress LH and FSH within hours, lowering estradiol levels and reducing pain within
days while potentially avoiding the initial worsening of symptoms (symptom flare) which is often
associated with GnRH agonist treatments.
Ease of administration. Linzagolix has the potential to be administered orally once daily, and regardless
of food intake timing. This potential dosing regime is a more convenient and less invasive treatment
option than GnRH agonist intramuscular or subcutaneous injections.
• Optionality for endometriosis and uterine fibroids treatment: stand alone or in combination with
ABT. In contrast to GnRH agonists, for which hormonal ABT is required when treatment exceeds six
months, and may be considered earlier, we believe that the 75mg once daily dose tested in our EDELWEISS
1 Phase 2b trial and the 100mg once daily dose tested in our PRIMROSE 2 trial, have the potential to be
utilized as a stand-alone treatment for a majority of patients with endometriosis-associated pain and in
heavy menstrual bleeding associated with uterine fibroids by maintaining estradiol levels between 20 and
60 pg/ml. Model-based analysis based on more than 900 patients and healthy volunteers showed that
linzagolix doses ranging from 75 mg to 125 mg demonstrated clinical benefit and reached bone safety
targets. These results support the potential use of linzagolix without ABT in premenopausal women with
these conditions, avoiding the known risks of ABT while providing symptom relief and protection of bone.
The results of this study were presented in October 2019 both at the 13th European Society of Gynecology
(ESG) Congress in Vienna (Austria) and the 10th American Conference on Pharmacometrics (ACoP)
meeting in Orlando (FL).
The once daily 200 mg dose of linzagolix will require the addition of ABT if used long-term to counteract the
side effects associated with full suppression of estradiol i.e. below 20 pg/ml.
These doses of 75 mg or 100mg without ABT and 200 mg with ABT are being tested in the confirmatory Phase
3 trials.
•
Rapid reversibility of effect. As a result of the observed linzagolix half-life of approximately 15 hours,
we believe it has the potential for ovarian function to resume within days following the end of treatment.
In contrast, a patient’s ovarian function can take weeks or months to return to normal after stopping
treatment with injectable GnRH agonists.
Potential Clinical Profile of linzagolix
In July 2018, AbbVie Inc. announced that their oral GnRH antagonist elagolix (Orilissa®) received regulatory approval
in the U.S. for the treatment of women with moderate to severe endometriosis-associated pain (150mg QD up to
2-year and 400mg (200mg BID) up to 6 months). In addition, AbbVie Inc. is conducting Phase 3 trials with elagolix
600mg daily dose (300mg BID) in combination with ABT for the indication of heavy menstrual bleeding associated
with uterine fibroids and announced the filing of a NDA for this indication in August 2019. Only the high dose of
elagolix (300mg BID) with ABT is being developed for the uterine fibroids indication.
In addition, Myovant Sciences, Inc. is conducting Phase 3 trials with the oral GnRH receptor antagonist
relugolix 40mg daily in combination with ABT for the treatment of symptoms associated with endometriosis
and uterine fibroids. This is the only dose level being studied for both indications. In 2019, Myovant reported
positive 6-month results for the two Phase 3 trials in the fibroid indication (LIBERTY 1 and 2) and stated it
would file a MAA and a NDA on the basis of 52-week treatment data in the first quarter of 2020 and in April
2020, respectively.
16ObsEva Annual Report 2019Business Update
We believe that linzagolix has a favorable overall clinical profile as assessed by:
• Optimal characteristics for consistent PK. Linzagolix has been observed to have a consistent PK profile
and low variability, due to high bioavailability and low volume of distribution. In addition, its half-life
allows for once daily dosing for across indications. We believe these characteristics are important for
optimizing patient compliance and drug exposure.
•
•
•
Two dosing options. Based on its consistent PK and PD profile observed in preclinical studies and clinical
trials, we are currently pursuing the development of linzagolix doses both with and without hormonal
ABT, which is related to partial or full suppression of estrogen. We believe that various levels of estrogen
suppression may be required to successfully treat symptoms in different patients in different indications
to account for patient characteristics, individual response or patient preference, but that the option of
partial suppression, with no need for ABT has the potential to be a first line therapy for many patients.
Potential to avoid hormonal ABT. For symptoms associated with both endometriosis and uterine
fibroids, we are developing linzagolix as a stand-alone treatment (without need for ABT) and in association
with ABT to fulfill the needs of a broad patient population with endometriosis or uterine fibroids. We do
not believe that all patients will have the desire or need for hormonal ABT, some of whom may have a
contraindication or tolerability issue (as per boxed warning on ABT), or simply prefer the management of
endogenous estrogen levels in the clinical setting where bone mineral density loss is not reduced to the
degree that would require hormone replacement.
Compliance benefit. Linzagolix may have an advantage in patient compliance due to the lack of observed
interactions with food, CYP3A4 or OATP1B1/B3 enzyme pathways, and the ability to be taken once
anytime throughout the day, without the risk of reduced and/or variable exposure to active drug.
Linzagolix Preclinical and Clinical Development for Pain Associated with Endometriosis
Prior to in-licensing linzagolix, Kissei completed a preclinical program, a Phase 1 clinical trial in healthy female
volunteers of Japanese and European descent and three Phase 2a clinical trials in patients of Japanese descent
with endometriosis, including one trial that included a subgroup of patients with both endometriosis and
uterine fibroids. In these trials, linzagolix was observed to have a linear PK profile, a predictable dose-
dependent suppression of estradiol and a dose range that was well-tolerated and provided symptom relief.
Following our in-license of linzagolix from Kissei, we submitted an IND for linzagolix in May 2016, which was
accepted by the FDA. In 2019, we completed the EDELWEISS 1 Phase 2b clinical trial and initiated our two
pivotal Phase 3 clinical trials (EDELWEISS 2 and EDELWEISS 3).
Preclinical Studies and Phase 1 Clinical Trial
In preclinical studies, linzagolix was observed to be a highly potent and selective antagonist of the GnRH
receptor. The preclinical toxicology and safety pharmacology studies did not raise tolerance or safety concerns
or potential for DDIs. In the Phase 1 clinical trial, linzagolix was observed to have a favorable safety profile
and to be well-tolerated up to 400 mg once daily for seven days. Additionally, linzagolix had a linear PK profile,
a half-life of approximately 15 hours and no significant differences between women of Japanese and European
descent. Moreover, linzagolix was observed to have a low volume of distribution, meaning the drug remained
in the blood and did not accumulate in fatty tissue (Figure 1). Furthermore, in the Phase 1 clinical trial, there
was no food effect observed.
Linzagolix was observed to induce a dose-dependent decrease in LH and FSH over time (Figure 2), which we
believe correlates with its ability to control estradiol levels in a dose-dependent manner. Based on the low PK
variability and lack of dose overlap observed in the Phase 1 clinical trial, we believe we will be able to more
tightly control biological response with personalized doses of linzagolix. In addition, in 2016 we completed
17ObsEva Annual Report 2019Business Update a Phase 1 trial to assess the impact of linzagolix on the potential induction of CYP3A4, which is responsible
for most of the metabolism of ABT. In this trial, we observed no relevant CYP3A4 induction, which we believe
indicates that linzagolix will not interfere with ABT and has low risk of drug-drug interactions.
Figure 1:
Mean linzagolix Concentration Over Time
Figure 2:
LH Reduction from Baseline Over Time
In 2017, we conducted a Phase 1 PK and PD clinical trial to assess two different doses of add-back therapy in
patients receiving 100 mg and 200 mg doses of linzagolix over six weeks. The results of this clinical trial,
which we announced in June 2017, supported our add-back therapy dose (1mg E2 / 0.5mg NETA) and
linzagolix doses being utilized our clinical trials. We are planning to utilize solely the 200 mg dose in our
Phase 3 endometriosis clinical trials that we started in May 2019.
In 2018, we completed a drug-drug interaction study for the organic anion-transporting polypeptide (OATP)
1B1 and OATP1B3, which demonstrated that clinically relevant drug interactions between linzagolix and
OATP1B1 / OATP1B3 inhibitors are not to be expected.
Completed Phase 2a Clinical Trials
Kissei completed three Phase 2a clinical trials of linzagolix in patients of Japanese descent with endometriosis
in 2013 and 2014. In these studies (KLH1201, KLH1202, and KLH1202), which evaluated doses of 50, 75,
100, or 200 mg of linzagolix or placebo, linzagolix demonstrated improvement in endometriosis-associated
pain and showed dose-dependent E2 suppression. These studies supported the design and dose selection for
the EDELWEISS 1 Phase 2b trial.
Completed Phase 2b Clinical trial EDELWEISS 1 - Endometriosis-Associated Pain
In 2019, we completed our Phase 2b EDELWEISS 1 clinical trial in patients with endometriosis. In this trial,
women with moderate-to-severe endometriosis-associated pain were recruited from 64 gynecological clinics
across the U.S. and Europe. The trial included a screening period, two consecutive 12-week treatment periods
(Part A and Part B) followed by an optional 28 week treatment extension phase or, for those who did not enter
the optional treatment extension phase, a 24-week PTFU. In total, 328 subjects were randomized to 1 of 6
treatment groups: placebo, fixed dose groups at 50 mg, 75 mg, 100 mg and 200 mg daily and a 75 mg
titrated dose group. In the placebo group, the placebo was provided for 12 weeks (Part A) after which all
placebo subjects were crossed over on to active treatment (100 mg daily) for a further 12 weeks (Part B). In
18ObsEva Annual Report 2019Business Update
the titrated dose arm, all subjects started on 75 mg daily for 12 weeks (Part A) after which the dose was
titrated up to 100 mg or down to 50 mg or remained the same (75 mg) for the next 12 weeks (Part B), based
on the mean of serum E2 results collected at Weeks 4 and 8. The majority (71%) of subjects who completed
the 24-week treatment entered the optional treatment extension, where they received linzagolix for an
additional 28 weeks. Subjects randomized to the 200 mg group, received 100 mg daily dose of linzagolix
during the extension treatment, while subjects in all other groups continued the treatment they were receiving
at the end of Part B. The trial design is provided in Figure 3 below.
Figure 3: Design of Phase 2b EDELWEISS Clinical Trial
Menstrual (dysmenorrhea) and non-menstrual pelvic pain (NMPP) were assessed with a 4-point Verbal Rating
Scale, or VRS, and an 11-point Numeric Rating Scale, or NRS. The primary endpoint of the EDELWEISS clinical
trial was a responder analysis, with responses defined as a reduction of at least 30% in combined menstrual
and non-menstrual pelvic pain, recorded daily and assessed via electronic diary over the last 28 days of
treatment on a verbal rating scale (VRS) of 0 (no pain) through 3 (severe pain). The key secondary safety
endpoint was the bone mineral density after 24 weeks of treatment assessed with a dual-energy x-ray
absorptiometry scan (DXA).
In June 2018, we announced that the EDELWEISS clinical trial successfully met its primary endpoint, a
statistically significant difference in patient response rate vs. placebo following 12 weeks of treatment.
Observed response rates were 34.5% for placebo, 61.5% for 75mg linzagolix and 56.3% for 200mg linzagolix.
With respect to the dysmenorrhea (DYS), VRS scale, patients receiving a 200 mg dose reported the highest
responder rate at 78.9%, compared to a placebo responder rate of 28.5%. Response to doses from 75 mg and
above were highly statistically significant. Responder rates for the non-menstrual pelvic pain (NMPP) VRS scale
endpoint were statistically significant for the 75 mg dose and the 100 mg dose, and both doses showed
comparable responder rates at 58.5% and 61.5% respectively.
In addition, the 75, 100 and 200 mg doses of linzagolix were observed to improve dyschezia and patient well-
being as assessed by Endometriosis Health Profile-30 score (EHP- 30), Patient Global Impression of Change
(PGIC) scale, Patient Global Impression of Severity (PGIS), the activity impairment score and the modified
Biberoglu & Behrman score. Dyspareunia was also improved for all doses and reached statistical significance
at the 200 mg dose.
19ObsEva Annual Report 2019Business Update In general, treatment effects observed at Week 12 at all linzagolix doses were maintained or further improved
at Week 24, and generally maintained until Week 52. Treatment with linzagolix demonstrated clinical benefit
over a 52-week continuous daily administration in alleviating endometriosis-associated pain symptoms. The
greatest benefits were derived by subjects treated at doses of 75 mg and above. Significant reductions in
pelvic pain were observed at Week 12 and maintained or increased at Weeks 24 and 52. This long-term
treatment with linzagolix showed sustained reductions in dysmenorrhea, non-menstrual pelvic pain,
dyspareunia and dyschezia, as well as improvements in quality of life and subject assessment of endometriosis
severity.
The key safety endpoint for linzagolix is BMD loss due to suppression of estradiol. In the 75 mg treatment
group, the mean BMD loss for lumbar spine at 6 months was -0.798% with the lower boundary of the 95%
confidence interval of BMD reduction from baseline to week 24 at -1.57%; therefore, we believe that this dose
could be given chronically with an appropriate benefit/risk ratio without the need for ABT. By contrast, in the
linzagolix 200 mg group, the mean BMD at lumbar spine decreased by more than -2.5% after 6 months of
treatment, which indicates the need for combining the high dose of linzagolix with ABT.
Linzagolix was well-tolerated during long-term administration of up to a year. In line with the therapeutic class
and mechanism of action, the most frequently reported related treatment-emergent adverse event (TEAE) was
hot flush, which was more frequently reported at the higher doses. Changes in BMD between baseline and
Week 52, measured by DXA scan, were consistent with the values observed after 24 weeks of treatment. BMD
loss for the linzagolix 75 mg dose was within an acceptable range, whereas the decrease with linzagolix
200/100 mg dose was clinically relevant. Consequently, for confirmatory testing, we are combining the 200
mg dose with estrogen/progestin add-back therapy (E2 1 mg/NETA 0.5 mg) to avoid significant BMD loss
during chronic administration.
We believe the BMD results support our plan to pursue further development of two doses of linzagolix for the
treatment of endometriosis, including a 75 mg once daily dose without ABT, and a 200 mg once daily dose in
combination with ABT. With regards to the titration scheme, although there were some numerical differences
between treatment groups, we did not conclude there was sufficient benefit to continue further development,
and are instead focused upon fixed dosing of linzagolix.
Ongoing Phase 3 Clinical trials EDELWEISS 2 and EDELWEISS 3 —Endometriosis-Associated Pain
After discussion of the planned Phase 3 trial design with the FDA during an End of Phase 2 meeting in
December 2018, we initiated the Phase 3 program in 2019. Our Phase 3 program consists of two clinical trials:
EDELWEISS 2 will enroll approximately 450 patients (150 per arm) in the United States and Puerto Rico.
EDELWEISS 3 will enroll approximately 450 patients (150 per arm) across sites in the U.S., as well as Canada,
Europe and CIS countries. In these two double-blind, placebo-controlled trials, we will evaluate two once daily
doses of linzagolix, the 75 mg without ABT and 200 mg with ABT. Patients will report their pain on a daily
basis with an electronic diary.
The data will be analyzed at 24 weeks after initial treatment. After the initial 24-week evaluation period, an
optional extension study will be proposed to patients. In this extension study, patients receiving placebo will
be randomly allocated to either 75 mg without ABT or 200 mg with ABT, whereas patients on active doses of
linzagolix will continue on their respective dose. The co-primary endpoint will be a responder analysis of
Dysmenorrhea (DYS) and non-menstrual pelvic pain (NMPP) performed after 12-weeks of treatment. After
treatment, all patients will be followed for at least an additional 24-week treatment-free period.
20ObsEva Annual Report 2019Business Update
Figure 4 below depicts the trial design of the ongoing Phase 3 EDELWEISS 2 and 3 clinical trials:
Figure 4: Design of Phase 3 EDELWEISS 2/3 Clinical Trials
Linzagolix Clinical Development for Heavy Menstrual Bleeding Associated with Uterine Fibroids
We are also developing linzagolix for reduction of heavy menstrual bleeding associated with uterine fibroids
in adult women of reproductive age. We believe linzagolix has the potential to provide an alternative to
surgery, which is the most common treatment for uterine fibroids.
Completed Phase 2a Trial in Japanese Patients
In a Phase 2a double-blind clinical trial in Japanese patients with endometriosis (Study KLH1202), 50, 100, or
200 mg linzagolix or placebo was orally administered once daily after breakfast for 12 weeks. 57 patients
presented with uterine fibroids in addition to endometriosis, which allowed assessment of endpoints relevant
to fibroids. In subjects with endometriosis and concomitant uterine fibroids, the 50 mg dose suppressed
menstrual bleeding in only 8.3%, the 100 mg dose led to absence of menstrual bleeding in 66.7% of subjects,
and in the 200 mg group all subjects reported suppressed menstrual bleeding. Amenorrhea was quickly
achieved with patients being most frequently amenorrhoeic in the 200 mg arm and less frequently in the 50
mg arm. However, presence of uterine fibroids impacted the bleeding control and the rapidity of onset; for
example, at the 50 mg dose, only roughly 25% of patients were in amenorrhea after approximately 1 month of
treatment when concomitant fibroids were present. The 50 mg dose suppressed bleeding in approximately 55%
of patients, whereas the 200 mg daily dose of linzagolix suppressed bleeding in approximately 95% of patients.
In addition, most patients in the 100 mg and 200 mg groups stopped bleeding within a few weeks of treatment
initiation. A dose-dependent reduction in uterine volume was observed in the active treatment arms.
Ongoing Phase 3 Clinical Trials PRIMROSE 1 and PRIMROSE 2 for Heavy Menstrual Bleeding Associated with
Uterine Fibroids
Based on the above Phase 2 results and the feedback we received from the FDA in November 2016, we
commenced the two PRIMROSE Phase 3 clinical trials in patients with heavy menstrual bleeding associated
with uterine fibroids in the first half of 2017. We are assessing the efficacy of both a 100 mg once daily dose
21ObsEva Annual Report 2019Business Update and a 200 mg once daily dose of linzagolix both with and without ABT. We believe that the 200 mg dose will
require ABT to prevent excessive bone mineral density loss, while the 100mg dose may not necessitate the
use of ABT. Both trials have a target enrollment of approximately 500 patients.
Figure 5 below depicts the trial design of the Phase 3 PRIMROSE clinical trials:
Figure 5: Design of Phase 3 PRIMROSE Clinical Trials
The primary endpoint of heavy menstrual bleeding will be measured via two approaches. Patients collect and
deliver their used sanitary protection to a central laboratory analysis using a validated alkaline hematin
method; this will provide an objective measure of bleeding. In addition, patients report their bleeding status
on a daily basis with an electronic diary.
The PRIMROSE clinical trials have a 52-week evaluation period. The primary endpoint is the reduction of
menstrual blood loss at week 24, defined as menstrual blood loss of less than 80 mL and equal to or greater
than a 50% reduction from baseline. A key safety endpoint will be the bone mineral density after 24 weeks of
treatment assessed with DXA. After the 52-week evaluation period, all patients will be followed for an
additional 24-week treatment free period.
We announced that the PRIMROSE 2 trial, conducted in the United States and in Europe, completed patient
recruitment in December 2018, and the PRIMROSE 1 trial, conducted in the U.S., completed patient recruitment
in July 2019.
In December 2019, we announced positive Phase 3 trial results from the PRIMROSE 2 trial. The results were
performed by an unblinded statistical team keeping the sponsor and study team still blinded to individual
patients. The trial enrolled 535 women heavy uterine bleeding associated with uterine fibroids. The primary
endpoint demonstrated a reduction in menstrual blood loss with a responder rate of 93.9% (p < 0.001) for
patients receiving 200 mg with ABT, and 56.7% for patients receiving 100 mg without ABT (p < 0.001),
compared to 29.4% in the placebo group. Both doses achieved significant rates of amenorrhea (p< 0.001),
reduction in pain (p < 0.001), and improvement in quality of life (p < 0.001). Additionally, significant
improvement (p< 0.001) in Hb levels, a reduction in number of days of bleeding and reduction in uterine
volume were observed. A significant reduction in fibroid volume was also observed for the 200 mg dose with
ABT (p = 0.008). The overall safety profile was in line with expectations. The most frequently observed adverse
events (occurring in > 5% of patients) were headache, hot flushes, and anemia. Mean percent change from
22ObsEva Annual Report 2019Business Update
baseline in BMD was consistent with the previous trials and showed a mean percent change from baseline of
-2.1 for the 100 mg group without ABT and -1.3 for the 200 mg group with ABT at the lumbar spine (the site
which is the most sensitive to BMD loss).
We expect to report both the primary endpoint results following 24 weeks of treatment from the PRIMROSE 1
trial conducted in the U.S. and Puerto Rico and the 52 weeks of treatment results from PRIMROSE 2 trial in the
second quarter of 2020. A MAA submission to the EMA and a NDA submission to the FDA are planned by the
fourth quarter of 2020 and the first quarter of 2021 respectively, pending PRIMROSE 1 positive results and
feedback from regulatory agencies.
Safety Results of Phase 1, Phase 2a and Ongoing Phase 2b and Phase 3 Clinical Trials
As of February 2020, more than 2,100 subjects have been exposed to linzagolix in completed and ongoing
clinical studies and linzagolix has been generally well tolerated.
In the three completed Phase 1 clinical trials (n=177), adverse events were reported with similar frequency in
all groups, including the placebo group. No serious adverse events were reported.
In the three completed Phase 2a clinical trials (n=128), almost all of the adverse events were mild. The most
common adverse events were abnormal bleeding from the uterus, upper respiratory tract infection, headaches and
hot flushes. Most hot flushes were mild, three were moderate in severity and none were severe. No serious adverse
events were reported in the KLH1203 trial. A single serious adverse event was observed in each of the KLH1201
and KLH1202 trials and both were determined by the principal investigators to be unrelated to linzagolix.
In the EDELWEISS 1 Phase 2b clinical trial in European and U.S. subjects (n=327), headaches were the most
frequently reported TEAE followed by hot flushes. The occurrence of headaches did not show any dose-
dependent increase and ranged from 20.2% to 29.8%. The occurrence of hot flushes increased with increasing
dose, but their intensity was most often mild to moderate. A dose-dependent decrease in BMD was observed.
In the PRIMROSE 2 trial which is currently still blinded to the sponsor and the study team for individual
patients, a BMD decrease in line with previous studies was observed. The most frequently observed adverse
events (occurring in > 5% of patients) were headache, hot flushes, and anemia. Overall multiple dose trials, in
a very small number of subjects, an increase in transaminase values was observed under treatment, however
this increase was generally reversible under treatment and was not associated with any increase in Bilirubin.
OBE022: Our PGF2α Receptor Antagonist for the Treatment of Preterm Labor (GA 24-34 weeks)
We are developing OBE022 as a potential first-in-class, once daily, oral and selective PGF2α, receptor antagonist
for the treatment of preterm labor in weeks 24 to 34 of pregnancy. PGF2α is a naturally occurring prostaglandin
that acts to induce labor in pregnant women. Through specific antagonism of the PGF2α receptor, OBE022 is
designed to control preterm labor by reducing inflammation, decreasing uterine contractions and preventing
cervical changes and membrane ruptures. Based on its PK profile and efficacy observed in animal models, we
believe OBE022 has the potential to become a first-in-class therapy to suppress premature labor and delay or
avoid preterm birth while also being safe for the fetus. In February 2017, we completed a Phase 1 clinical trial
assessing the safety, tolerability and PK profile of OBE022 in healthy post-menopausal female volunteers after
single doses of 10 mg to 1,300 mg and multiple doses between 100 mg per day and 1,000 mg per day over
7 consecutive days. OBE022 was observed to have a favorable pharmacokinetic profile, no clinically significant
food effect, a favorable safety profile and to be well-tolerated at doses up to 1,300 mg after single dose
administration and up to 1,000 mg per day after multiple dose administration over 7 days, each of which are
above the estimated clinical effective dose. In March 2017, we completed a set of drug-drug interaction, or
DDI, Phase 1 clinical pharmacology studies investigating the safety, tolerability and PK profile of OBE022 when
combined with magnesium sulfate, atosiban, nifedipine or betamethasone (medications typically used in
patients with preterm labor) in pre-menopausal female volunteers. OBE022 in combination with those drugs
23ObsEva Annual Report 2019Business Update was observed to have a favorable safety profile and to be well-tolerated up to 1,100 mg per day, which was
the highest tested dose. In December 2017, we announced the initiation of our Phase 2a proof-of-concept
clinical trial of OBE022 known as PROLONG, which is being conducted in two parts: Part A and Part B. In this
trial, OBE022 is orally administered daily for 7 days to pregnant women, who are already receiving standard
of care therapy for preterm labor, atosiban infusion for 48 hours. Part A is an open-label trial assessing the
safety and pharmacokinetics of OBE022. Part B, is a randomized, double-blind, placebo-controlled, parallel-
group trial to assess the efficacy, safety and pharmacokinetics of OBE022. In December 2018, following
completion of the open-label Part A and based on the favorable safety and pharmacokinetics results, we
announced the initiation of the randomized placebo-controlled Part B of the trial. Part B will enroll up to 120
women at 24-34 weeks gestation. We announced in July 2019 that the trial IDMC completed the unblinded
review of data from the first 30 subjects randomized in Part B of the PROLONG trial and recommended to
continue the trial without modifications. We announced in January 2020 that the IDMC has completed the
unblinded review of data from the first 60 women randomized in Part B of the Phase 2 PROLONG trial and
recommended to continue the trial without modifications. At present, final PROLONG trial results in 120
patients are anticipated in the second half of 2020.
Background and Impact of Preterm Labor
Preterm labor, defined as the body commencing the birthing process prior to 37 weeks, is characterized by
uterine contractions, cervical dilation and rupture of the fetal membranes that surround and protect the fetus
during pregnancy. According to a study published in the Lancet in 2012, approximately 15 million babies
were born preterm in 2010, accounting for 11.1% of all live births worldwide. In the 65 countries with reliable
data for preterm birth, 62 countries had increasing rates of preterm birth over the period from 1990 to 2010.
According to the National Center for Health Statistics, the United States’ preterm birth rate was 9.6% in 2014,
which, according to the March of Dimes Foundation, ranks among the worst of high-resource countries. In
2007, the Institute of Medicine reported that the cost associated with premature birth in the United States
was approximately $26.2 billion each year.
According to the World Health Organization, preterm birth is the leading worldwide cause of neonatal death,
defined as death in the first 28 days of life. Preterm birth complications are also the leading cause of death
in children under the age of five, having caused nearly one million deaths in 2013 worldwide. Infants who
survive preterm birth may have lifelong health problems such as cerebral palsy, vision and hearing impairment
and intellectual disabilities. Approximately one-third of children born prematurely need special school
services, according to the March of Dimes Foundation.
Role of Prostaglandins in Preterm Labor
Prostaglandins play a major role in the normal function of the female reproductive system. There are various
prostaglandins at work in the human body with different functions, such as prostaglandin E2, or PGE2, and
PGF2α . PGE2 and PGF2α have opposing effects on the female reproductive system. PGE2 causes the widening
of blood vessels. PGE2 is produced by the fetus and is important in fetal physiology and development, and
therefore, blocking its action has the potential to produce unwanted fetal effects. By contrast, PGF2α is a
constrictor of the myometrium and uterine blood vessels. PGF2α is present in the uterus and plays a major
role in the initiation and process of childbirth. PGF2α modulates various functions leading to the progression
of labor and is involved in all aspects of childbirth including ripening of the cervix, membrane rupture and
induction of uterine contraction. PGF2α promotes the establishment of a pro-inflammatory intra-uterine
environment by stimulation of pro-inflammatory cytokine and chemokine production in the myometrium,
leading to the initiation of labor.
Limitations of Current Treatment Options
Various classes of pharmaceutical agents that decrease uterine contractions, also known as tocolytics, are
used to delay preterm labor. These different classes act on the uterine muscle through various mechanisms
24ObsEva Annual Report 2019Business Update
of action but have limited efficacy, restrictive safety issues and are all used off-label in the United States.
These different classes include nifedipine, a calcium channel blocker, magnesium sulfate, indomethacin (a
NSAID) and glyceryl trinitrate, each of which have been observed to have limited efficacy and/or safety issues.
Beta-adrenergic agonists have been largely discontinued because of severe maternal cardiovascular side
effects. Atosiban, an oxytocin receptor antagonist, is approved in Europe but not in the United States. It can
delay preterm labor, but is administered through a bolus injection followed by an infusion and is not indicated
for dosing beyond 48 hours.
Reviews of these different classes of tocolytic drugs concluded that prostaglandin synthesis inhibitors, such
as NSAIDs, provided the best efficacy for delaying labor at 48 hours and seven days. According to a study
published in Obstetrics & Gynecology in 2009, prostaglandin antagonists were most effective at delaying
delivery at 48 hours and seven days among the class of drugs available in the United States. Delaying delivery
as long as possible up to full term is ideal, but delaying delivery by at least 48 hours is significant because
betamethasone (a glucocorticosteroid) can be administered to the mother to mature the baby’s lungs so the
baby can potentially breathe on its own. The table below, which shows the results of that study, displays the
percentage of patients that did not deliver a baby at various time points following treatment.
Figure 6: Weighted Percentages of Tocolytic Agents for Efficacy
Placebo/Control
Betamimetics
Calcium-Channel Blocker
Magnesium Sulfate
Oxytocin Receptor Antagonists
Prostaglandin Inhibitors
Delay of Delivery
48 Hours
53 (45-61) [9]
75 (65-85) [29]
76 (57-95) [17]
89 (85-93) [11]
86 (80-91) [8]
93 (90-95) [8]
7 Days
39 (28-49) [8]
65 (59-71) [26]
62 (56-69) [10]
61 (39-84) [5]
78 (68-88) [6]
76 (67-85) [3]
•
•
•
Data presented as percentage of women experiencing delay
() = 95% confidence interval
[] = number of studies
Currently available prostaglandin inhibitors, such as the NSAID indomethacin, act by non-selective inhibition
of prostaglandin-forming enzymes, thus blocking the generation and signaling of many prostaglandin sub-
types, including both PGE2 and PGF2α. Because they potentially adversely affect fetal physiology, use of
NSAIDs is restricted to 48 hours in women at gestational age below 32 weeks, due to these unwanted side
effects. According to a publication in 2015 in the American Journal of Obstetrics and Gynecology, the most
concerning side effects associated with the non-selective prostaglandin inhibitors include severe conditions
in newborn babies, such as renal function impairment, constriction of the blood vessel connecting the
pulmonary artery to the aorta, bleeding in the area surrounding the fluid-filled areas of the brain, necrotizing
enterocolitis, which is a serious condition that occurs when the intestinal tissue blood flow is damaged and
begins to die, and periventricular leukomalacia, which is a form of brain injury that can lead to serious
disabilities.
As a result of the limited efficacy and unfavorable safety profile of many current therapies used off-label to
treat preterm labor, we believe there remains a significant unmet need for a selective prostaglandin inhibitor
focused on the inhibition of only PGF2α to delay preterm labor and provide a safe treatment option for both
mother and child.
25ObsEva Annual Report 2019Business Update OBE022 Preclinical and Clinical Development
OBE022 was discovered and initially developed by Merck Serono as a selective inhibitor of PGF2α. We in-
licensed OBE022 from Merck Serono in 2015. In preclinical studies, OBE022 was observed to reduce uterine
contractions and to exert a synergistic effect in combination with nifedipine to delay delivery. We advanced
OBE022 into Phase 2a proof-of-concept clinical trial in December 2017 to assess the safety and efficacy of
OBE022 to delay birth in women 24 to 34 weeks pregnant who face preterm labor and potentially preterm
delivery. In February 2017, we completed a Phase 1 clinical trial assessing the safety, tolerability and PK profile
of OBE022 in healthy post-menopausal female volunteers after single doses of 10 mg to 1,300 mg and
multiple doses between 100 mg per day and 1,000 mg per day over 7 consecutive days. OBE022 was observed
to have a favorable PK profile, no clinically significant food effect, a favorable safety profile and to be well-
tolerated at doses up to 1,300 mg after single dose administration and up to 1,000 mg per day after multiple
dose administration over 7 days. In March 2017, we completed a set of DDI Phase 1 clinical pharmacology
studies investigating the safety, tolerability and PK profile of OBE022 when combined with magnesium sulfate,
atosiban, nifedipine or betamethasone (medications typically used in patients with preterm labor) in pre-
menopausal female volunteers. OBE022 in combination with those drugs was observed to have a favorable
safety profile and to be well-tolerated up to 1,100 mg per day, which was the highest tested dose.
Preclinical Development
In the preclinical pharmacology, PK and toxicology studies conducted by Merck Serono, OBE022 was observed
to be a highly selective, competitive and reversible PGF2α receptor antagonist with over 100 times the affinity
for it compared to other prostaglandin receptor subtypes. OBE022 has been observed to have tocolytic effects
in vitro and in vivo by markedly reducing spontaneous uterine contractions in a preterm labor animal model. At
the Society for Reproductive Investigations’ 64th Annual Scientific Meeting in March 2017, we presented results
of a non-clinical study in which we observed that OBE022 exerted a synergistic effect in combination with
nifedipine on the delay of delivery in an animal model for preterm labor. The study evaluated the effect of OBE022
and nifedipine, alone and in combination with each other, on an animal model of RU486-induced birth in
pregnant mice. The induction of labor by the antiprogestin RU486 results from inhibition of progesterone
activation leading to the up-regulation of labor-associated proteins as seen in the case of idiopathic preterm
labor. Compared to the vehicle control, we observed nifedipine (5mg/kg, taken orally), as well as OBE022
(100mg/kg, taken orally), alone resulted in statistically significant delays in RU486-induced preterm labor. We
also observed a synergistic effect of combination treatment with OBE022 and nifedipine on the delay of delivery
when compared to vehicle, nifedipine or OBE022 alone (p<0.001, p<0.001 and p<0.01, respectively).
Preclinical studies have also been conducted to support oral administration of OBE022 in humans. Overall,
the toxicological profile of OBE022 observed in repeated-dose toxicity studies in rats and dogs as well as
reprotoxicity in rabbits and rats appeared to be benign. We also conducted safety studies to evaluate OBE022
compared to NSAIDs in pregnant rats prior to delivery. In these studies, we observed that the NSAID
indomethacin induced, as expected, constriction of the blood vessel connecting the pulmonary artery to the
aorta and impaired the renal function in the newborn rats, while OBE022 did not. In addition, we have observed
that OBE022 does not inhibit platelet aggregation whereas the NSAIDs were confirmed to significantly inhibit
it, which is considered to be a potential risk factor for neonatal tissue hemorrhage, e.g. periventricular brain
hemorrhage. Based on the results of these preclinical studies, we believe that OBE022 has the potential to be
an effective, safer tocolytic agent for the treatment of preterm labor.
Phase 1 Clinical Trials
We completed a Phase 1 clinical trial assessing the safety, tolerability and PK profile of OBE022 when
administered in approximately 70 healthy post-menopausal female volunteers as single and multiple
ascending doses at one site in the United Kingdom. As PGF2α is also involved in uterine contractions and the
related pain that can occur during normal menstruation in non-pregnant women, we are assessing the
feasibility of measuring the ability of OBE022 to reduce the intra-uterine pressure and the pelvic pain scores
26ObsEva Annual Report 2019Business Update
in healthy female volunteers of child bearing age during menstruation. From the single doses administered
of 10 mg to 1,300 mg and multiple doses between 100 mg per day and 1,000 mg per day administered over
7 consecutive days in the completed Phase 1 clinical trial, we observed that pro-drug OBE022 was readily
absorbed and rapidly converted into its equally active stable metabolite OBE002. The plasma level of OBE002
increased with increasing doses of OBE022, reaching exposure levels that were anticipated to be clinically
relevant within an hour following administration. There was no clinically significant food interaction with peak
exposures reduced to 80% and AUC staying bioequivalent. The mean half-life of OBE002 ranged between 8
and 11 hours following administration of a single dose and between 22 to 29 hours after multiple doses
(figure 7). Single and multiple administrations of OBE022 were well tolerated at all doses. There have been no
serious adverse events and no clinically relevant changes in safety parameters.
Figure 7:
We also completed a set of DDI Phase 1 clinical pharmacology studies investigating the safety, tolerability and
PK profile of OBE022 when combined with therapeutic doses of magnesium sulfate, atosiban, nifedipine or
betamethasone (medications typically used in patients with preterm labor) in pre-menopausal female
volunteers. We performed an open-label, randomized, three-period crossover trial assessing co-administration
of single doses of OBE022 (1100 mg) and MgSO4 (15.5g) and also performed an open-label, single-sequence
crossover trial assessing the interactions of OBE022 (1000 mg/d) at steady-state co-administered with single
doses of atosiban (60.75 mg), nifedipine (20 mg) and betamethasone (12 mg). Both trials enrolled 12 healthy
non-pregnant women of reproductive age at one clinical center in the United Kingdom. There were no clinically
relevant pharmacokinetic interactions between OBE022 and MgSO4, betamethasone or atosiban; however,
nifedipine exposure increased notably. Co-administration of OBE022 with MgSO4, betamethasone, atosiban
and nifedipine was generally well tolerated.
Ongoing Phase 2a Clinical Trial PROLONG- Acute Preterm Labor
Based on these Phase 1 clinical trial results, we initiated the PROLONG Phase 2a proof-of-concept clinical trial.
The trial objectives are to assess the pharmacokinetic, the safety and efficacy of OBE022 when co-administered
with atosiban, to delay birth after oral administration in pregnant women who face preterm labor and
potentially preterm delivery. The targeted patient population will include women who are at least 24 weeks
and less than 34 weeks pregnant, with intact membranes, presenting with spontaneous preterm labor for
which they receive atosiban for 48 hours and no contraindications to a prolongation of pregnancy.
The PROLONG Phase 2a trial is being conducted in two parts: Part A and Part B. Part A was an open-label trial
of OBE022 administered orally, with a loading dose of 1000 mg, then 500 mg twice a day for 7 days to
pregnant women with threatened preterm labor. OBE022 pharmacokinetics and maternal, fetal and infant
safety were assessed. Fetal cardiac safety was monitored using Doppler ultrasound. Time to delivery was also
measured. 9 patients were included in this part. Eight of the nine patients did not deliver within the 7 days of
OBE022 treatment and one patient delivered the day after starting OBE022. OBE022 was observed to be well
27ObsEva Annual Report 2019Business Update absorbed from Day 1 to Day 7 and steady-state serum concentrations and pharmacokinetics were comparable
to those observed previously in non-pregnant women. OBE022 administration was observed to be well
tolerated by the mother and there were no fetal adverse events reported. There were also no clinically
significant abnormal findings on Doppler ultrasound including no constrictive effect on the ductus arteriosus.
The results were presented at the 66th Annual Scientific Meeting of the Society for Reproductive Investigation
from 12th to 16th of March 2019.
In January 2019, based on the favorable safety and pharmacokinetic results we observed in Part A, we
announced the initiation of Part B of the PROLONG trial, which is a randomized, double-blind, placebo-
controlled, parallel-group trial to assess the efficacy, safety and pharmacokinetics of OBE022. We are planning
to enroll up to 120 patients with preterm labor at a gestational age of 24 to 34 weeks. As in Part A, OBE022
or placebo will be administered orally, with 1,000 mg as a starting dose, then 500 mg twice a day for 7 days
to women already receiving atosiban infusion for 48 hours.
We announced in July 2019 that the trial IDMC completed the unblinded review of data from the first 30
subjects randomized in Part B of the PROLONG trial and recommended to continue the trial without
modifications. We announced in January 2020 that the IDMC completed the unblinded review of data from the
first 60 women randomized in Part B of the Phase 2 PROLONG trial and recommended to continue the trial
without modifications. At present, final PROLONG trial results in 120 patients are anticipated in the second
half of 2020.
Nolasiban in IVF
Nolasiban is an oral oxytocin receptor antagonist that is designed to improve clinical pregnancy and live birth
rates in women undergoing embryo transfer following IVF, including intracytoplasmic sperm injection, or ICSI.
We believe nolasiban improves uterine receptivity by decreasing uterine contractions, improving uterine blood
flow and enhancing the receptivity of the endometrium to embryo implantation. We in-licensed nolasiban from
Merck Serono, which had previously completed preclinical studies and Phase 1 clinical trials in 103 healthy
female volunteers that evaluated the safety and PK profile of nolasiban.
Background on Assisted Reproductive Technology (IVF/ICSI)
Infertility is a disease of the reproductive system that impairs the body’s ability to reproduce. From 2006 to
2010, the inability to have a child affected approximately 6.7 million women in the United States, which
represented approximately 11% of the reproductive-age population. An increasing number of women in
developed countries are delaying having children until their mid-thirties, which has resulted in decreased
fertility rates and increased demand for reproductive therapies.
ART is used primarily for infertility treatments. According to the Centers for Disease Control and the European
Society of Human Reproduction and Embryology, IVF represents the vast majority of ART treatments or
procedures. IVF helps women achieve pregnancy by the collection of mature eggs in the ovaries, followed by
fertilization and early embryo development in the laboratory before transfer of the embryos into the womb.
According to the European Society of Human Reproduction and Embryology, more than 2.0 million ART cycles
are performed worldwide. In Europe, ART treatments doubled from 2000 to 2010, and nearly 800,000 IVF
cycles were performed in 2014. In the United States, IVF treatments increased by 41.7% from 2010 to 2014.
Approximately 230,000 IVF treatments were performed in the United States in 2015. In Japan, approximately
400,000 IVF treatments were performed in 2015. In China, more than 700,000 ART cycles were performed in
2017, and year over year growth is double digit supported by government policies related to childbirth. We
are currently assessing the regulatory development pathway in China, as well as various alternatives for future
potential commercialization.
28ObsEva Annual Report 2019Business Update
The first step in IVF is stimulation of egg production. Approximately ten days later, the eggs are harvested
from the ovaries, otherwise known as ovum pick-up, or OPU, and co-incubated with sperm cells, with this day
being referred to as Day 0. The resulting embryos are either used for fresh transfer to the uterus over the
next three to five days or frozen for future use. In Europe in 2012, we estimate that approximately 39% of all
embryo transfers occur three days after Day 0 and an additional 36% occur five days after Day 0, with the
remaining 25% frozen for future transfer. In the United States in 2015, we estimate that the respective
percentages were 19% (Day 3, or D3), 38% (Day 5, or D5) and 43% (frozen-thawed embryo transfers). The
figure below depicts the IVF procedure:
The cost of one IVF cycle varies between $8,000 to $15,000 in the United States, EUR 2,000 to EUR 10,000 in
Europe and $3,000 to $6,000 in Japan. As of 2006, fertility drugs account for more than $2,000 of the cost
of a treatment cycle. Most patients require multiple fertility treatment cycles. Data from IQVIA estimates that
global sales of fertility drugs approximated $2.7 billion in 2017.
The success of IVF depends on the quality of the embryo, the transfer procedure and ultimately the receptivity
of the uterus. In order for the embryo transfer to be successful, it is important for the uterus to be receptive
to embryo implantation, which includes a proper hormonal environment, appropriate blood flow within the
uterus, and minimal uterine contractions at the time of embryo transfer. The endometrium is the inner layer
of the uterus that is in direct contact with the implanting embryo.
Role of Oxytocin in Embryo Implantation
Oxytocin is a hormone that is secreted by the pituitary gland. Oxytocin receptors are present on the uterus
smooth muscle cells, the endometrium and the uterus arteries. The release of oxytocin by the pituitary gland
activates oxytocin receptors, which results in uterine contractions. As shown in the graphic below, blocking
the activation of the uterine oxytocin receptors at the time of embryo transfer may enhance uterine receptivity
by decreasing uterine contractions, improving uterine blood flow and enhancing the receptivity of the
endometrium to embryo implantation, which can lead to increased clinical pregnancy and live birth rates.
29ObsEva Annual Report 2019Business Update A systematic review and meta-analysis of investigator-sponsored trials conducted in 2014 and published in
Fertility & Sterility concluded that pregnancy rates doubled with the infusion of an oxytocin receptor
antagonist at the time of embryo transfer. As part of this analysis, it was observed that improvement in
pregnancy rates was not restricted to women with a high rate of uterine contractions. According to this
analysis, additional mechanisms, such as endometrium receptivity and uterine blood flow, may also contribute
to improving pregnancy rates. A systematic review and meta-analysis of investigator-sponsored trials
conducted in 2017 and published in PLOS/one by Qian-Yi Huang also concluded that the clinical pregnancy
rates was significantly increased with the infusion of an oxytocin receptor antagonist at the time of embryo
transfer (OR = 1.84, 95% CI: 1.31±2.57; P < 0.001), but not the live birth rate (P=0.083). Moreover, in a recent
trial published in 2016 involving patients with endometriosis undergoing frozen-thawed embryo transfer,
clinical pregnancy rates were approximately 20% higher after treatment with an oxytocin receptor antagonist,
representing a 51% increase relative to the placebo. In addition, according to studies published in Archives of
Gynecology and Obstetrics in 2011, women who received an oxytocin receptor antagonist after embryo
transfer, were observed, based on three dimensional power Doppler ultrasound, to have improved
characteristics for uterine receptivity, including enhanced endometrial blood flow.
The nolasiban clinical development program
We previously conducted a Phase 3 clinical development program for nolasiban to evaluate its potential to
improve clinical pregnancy and live birth rates for women undergoing IVF. In 2018, we completed a Phase 3
clinical trial in Europe, which we refer to as IMPLANT 2. This was a Phase 3 trial in women undergoing Day 3
(D3, n=388) and Day 5 (D5, n=390) fresh single embryo transfer (SET) following IVF. 778 subjects were
randomized from 41 fertility clinics in Europe. 900 mg of nolasiban or placebo was administered as a single
dose 4 hours before ET. The primary endpoint was ongoing pregnancy rate (confirmed by ultrasound
observation of one gestational sac and at least one positive fetal heartbeat) at 10 weeks after ET. Results from
this trial demonstrated the efficacy of 900 mg dose on ongoing pregnancy and live birth rate as well as its
similar safety profile to placebo.
There was a statistically significant 25% relative increase in ongoing pregnancy rate in the nolasiban 900 mg
group compared to placebo (nolasiban 900 mg 35.6%, placebo 28.5%; p=0.031) in the pooled D3/D5 group.
30ObsEva Annual Report 2019Business Update
There was also a statistically significant 32% relative increase in the ongoing pregnancy rate in the D5 sub-
group (placebo 34.7%, nolasiban 900 mg 45.9%; p=0.034). There was no significant increase in the D3 sub-
group (placebo 22.2%, nolasiban 900 mg 25.3%; p=0.477). However, the interaction term between the factors
treatment and day of ET was not significant (p=0.518), and therefore, there is no conclusive evidence that the
nolasiban treatment effect was different following D3 or D5 SET. Relative increases in live birth rates with
nolasiban were 26% in the pooled D3/D5 group. The live birth rate in women undergoing Day 5 ET was 44.8%
for those receiving nolasiban vs. 33.2% for those receiving placebo (p value = 0.025), a 35% relative increase.
Serum pregnancy and clinical pregnancy rates at 6 week post-ET followed a similar pattern to the ongoing
pregnancy rates. Miscarriage rates (any pregnancy loss up to Week 10 post-ET after a positive serum
pregnancy test at Week 2) were numerically higher in the placebo group compared to the nolasiban group (no
significance testing was performed for this endpoint). In the pooled D3/5 population, there were 37 (21%)
pregnancy losses in the nolasiban group compared to 44 (28%) in the placebo group.
Furthermore, the safety profile was similar to placebo and the multiple pregnancy rate less than 5%. At the 6-
month infant follow-up, developmental outcomes showed no notable differences between the nolasiban and
placebo groups in terms of ASQ-3 domain scores.
Based on feedback received in the third quarter of 2018 from regulatory authorities in Europe on our nolasiban
development program, we initiated in November 2018 an additional Phase 3 trial primarily in Europe, with
some additional sites in Canada and Russia, also known as the IMPLANT 4 trial. In June 2019, we announced
completion of patient recruitment in the IMPLANT 4 trial. In addition, we announced the clearance of our
investigational new drug (IND) in October 2019 for the U.S. Phase 3 clinical trial of nolasiban, known as
IMPLANT 3.
In November 2019, we announced that the IMPLANT 4 trial did not meet the primary endpoint of an increase
in ongoing pregnancy rate at 10 weeks, (39.1 % placebo vs 40.5 % nolasiban) (p = 0.745). As these results did
not confirm the prior positive Phase 3 IMPLANT 2 trial findings, we have discontinued our previously ongoing
development of nolasiban for IVF, and are exploring potential repositioning of the compound, such as through
higher dose levels and earlier and longer exposure of nolasiban, as well as focusing on subjects with a high
uterus contraction rate at the time of ET. In connection with this potential repositioning, in January 2020, we
and Hangzhou Yuyuan BioScience Technology Co., Ltd. (Yuyuan) entered into a sublicense agreement to
develop and commercialize nolasiban for improving clinical pregnancy and live birth rates in women
undergoing embryo transfer as part of an IVF cycle in the People's Republic of China (PRC). Under the terms
of the agreement, Yuyuan has the exclusive rights to develop and commercialize nolasiban in the PRC. They
will fund all development and registration activities in the PRC, starting with the obligation to fund and conduct
a Phase 1 trial and a Phase 2 proof-of-concept trial in China. We and Yuyuan will collaborate on the global
development of nolasiban. We retain all rights to the product outside of PRC
Commercialization
We have not yet established a sales, marketing or product distribution infrastructure. In order to
commercialize any of our product candidates if approved for commercial sale, we must either establish a sales
and marketing organization with technical expertise and supporting distribution capabilities or collaborate
with third-parties that have sales and marketing experience. For example, in January 2020, we announced our
entrance into a sublicense agreement with Yuyuan to develop and commercialize nolasiban for improving
clinical pregnancy and live birth rates in women undergoing embryo transfer following IVF in the PRC. Under
the terms of the sublicense agreement, Yuyuan has the exclusive rights to develop and commercialize
nolasiban in the PRC. We are also exploring various alternatives for the future potential commercialization of
linzagolix, including through a collaboration with a third party. As we move our product candidates through
development toward regulatory approval we will evaluate several options for each product candidate’s
commercialization strategy. These options include building our own internal sales force, entering into a joint
marketing partnership with another pharmaceutical or biotechnology company, or out-licensing the product
to another pharmaceutical or biotechnology company.
31ObsEva Annual Report 2019Business Update
Manufacturing
We rely on CMOs to produce our product candidates in accordance with the FDA’s cGMP regulations for use
in our clinical trials. The manufacture of pharmaceuticals is subject to extensive cGMP regulations, which
impose various procedural and documentation requirements and govern all areas of record keeping,
production processes and controls, personnel and quality control. Replacement of any of our CMOs would
require us to qualify new manufacturers and negotiate and execute contractual agreements with them. If any
of our supply or service agreements with our CMOs are terminated, we will experience delays and additional
expenses in the completion of the development of and obtaining regulatory approval for linzagolix, OBE022
and nolasiban.
To meet our projected needs for clinical supplies to support our activities through regulatory approval and
commercial manufacturing, the CMOs with whom we currently work will need to increase scale of production
or we will need to secure alternate suppliers. Pursuant to the Kissei license and supply agreement, we have
agreed to exclusively purchase the active pharmaceutical ingredient for linzagolix from Kissei who is now
obtaining linzagolix cGMP supply from two suppliers, both of which are different from the supplier who
received the warning letter from the FDA in November 2016. If we are unable to obtain sufficient quantities
of our products candidates or receive raw materials in a timely manner, we could be required to delay our
ongoing clinical trials and seek alternative manufacturers, which would be costly and time-consuming.
The CMOs with whom we currently work will also need to ensure and maintain quality (cGMP compliance,
specifications, shelf-life, expiry, in-process-control) throughout the production process of our clinical and
commercial supplies. If we are unable to ensure and maintain quality of our products candidates, we could be
required to delay our ongoing clinical trials which would be costly and time-consuming.
To mitigate the risks above, our relationships with CMOs are managed by internal personnel with extensive
experience in NCE pharmaceutical development and chemistry, manufacturing and controls, or CMC.
Competition
Biopharmaceutical product development is highly competitive and subject to rapid and significant
technological advancements. Our success is highly dependent upon our ability to in-license, acquire, develop
and obtain regulatory approval for new and innovative products on a cost-effective basis and to market them
successfully. In doing so, we face and will continue to face intense competition from a variety of businesses,
including large, fully integrated, well-established pharmaceutical companies who already possess a large share
of the market, specialty pharmaceutical and biopharmaceutical companies, academic institutions, government
agencies and other private and public research institutions in the European Union, United States and other
jurisdictions.
With respect to linzagolix, in 2018 the first compound from the oral gonadotropin-releasing hormone, or
GnRH, receptor antagonist class received regulatory approval in the United States for the treatment of pain
associated with endometriosis. AbbVie Inc. has been commercializing elagolix, brand named Orilissa, in the
United States since August 2018, and submitted a regulatory application for its uterine fibroids indication in
August 2019. We are aware of relugolix (Myovant Sciences, Inc.), another oral GnRH receptor antagonist
product candidate being developed in Phase 3 clinical trials for the endometriosis and uterine fibroids
indications. In 2019, Myovant reported positive 6-month results for the two Phase 3 trials in the fibroid
indication (LIBERTY 1 and 2) and stated it would file a MAA and a NDA on the basis of 52-week treatment data
in the first quarter of 2020 and in April 2020, respectively. We also anticipate competing with GnRH receptor
agonists, including Lupron (leuprolide acetate), marketed by AbbVie Inc. and Takeda Pharmaceuticals, Visanne
(dienogest), which is approved for the treatment of endometriosis outside the United States and is marketed
by Bayer. Ulipristal acetate, a Selective Progesterone Receptor Modulator (or SPRM) which is approved for the
treatment of moderate-to-severe symptoms of uterine fibroids outside the United States and is marketed by
Gedeon Richter in Europe and other regions, and by Allergan in Canada. Severe label restrictions regarding
32ObsEva Annual Report 2019Business Update
usage of Ulipristal acetate were added in 2018 due to post marketing liver safety issues. Allergan had
submitted an NDA for ulipristal acetate but disclosed receipt of a complete response letter (CRL) from the FDA
in August 2018 indicating that the NDA was not approvable in its current form and requesting additional
information. Recently, Bayer Schering which was conducting an exhaustive clinical development program for
Vilaprisan for the treatment of uterine fibroids and endometriosis, announced that it would be stopping its
development activities. In addition, oral contraceptives and nonsteroidal anti-inflammatory drugs, or NSAIDs,
are routinely used as a first-line therapy for the treatment of symptoms associated with endometriosis and
uterine fibroids and have a meaningful success rate at mitigating the symptoms associated with these
conditions.
With respect to OBE022, Tractotile (atosiban) is approved to delay preterm birth outside of the United States,
and we anticipate potential competition as a single agent, if not used in combination with OBE022, given their
different mechanisms of action. In terms of clinical development, it is our understanding that GlaxoSmithKline
terminated the in-house development of retosiban, an oxytocin receptor antagonist, designed to delay
preterm birth. Currently available prostaglandin synthesis inhibitors, such as NSAIDs may also represent
competitive therapies, some of which may be used off-label as standard of care, despite risk of serious side
effects for the neonates. Makena, which is registered in the USA for preventing preterm delivery in high risk
patients is seen as a complement rather than a competitor for OBE022, due to its mechanism of action and
regimen of administration (bi-weekly administration to be initiated between week 16 and 20 of gestation). A
recent FDA Advisory Committee voted 9 to 7 for withdrawal of the approval of Makena, given negative results
from a required post-approval study. Seven committee members voted to keep Makena on the market with
requirement for an additional trial.
With respect to nolasiban, there are no other oxytocin receptor antagonists approved either for oral
administration or for use in connection with IVF. However, it is our understanding that Ferring Pharmaceuticals
Inc. has barusiban in its development pipeline, an oxytocin receptor antagonist, to be administered
subcutaneously, that may be developed for use in connection with IVF. Nevertheless, to our knowledge, no
new clinical trial activity has been publicly announced since completion of a Phase 2 in 2015. Ferring
Pharmaceuticals’ atosiban, an oxytocin receptor antagonist, to be administered by continuous infusion, has
been used off-label in investigator-initiated trials in connection with IVF outside the United States.
We may also compete with other companies acquiring and developing or marketing drug therapies or products
for women’s reproductive health diseases.
Many of the companies against which we are competing or against which we may compete in the future have
significantly greater financial resources and expertise in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do.
Mergers and acquisitions in the biopharmaceutical industry could result in even more resources being
concentrated among a small number of our competitors. Smaller or early-stage companies may also prove to
be significant competitors, particularly through collaborative arrangements with large and established
companies. These third parties compete with us in recruiting and retaining qualified scientific and
management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in
acquiring technologies complementary to, or necessary for, our programs.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize
products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less
expensive than linzagolix, OBE022, nolasiban or any other product candidate that we may develop. Our
competitors also may obtain FDA or other regulatory approval for their product candidates more rapidly than
we may obtain approval for our product candidates, which could result in our competitors establishing a
strong market position before we are able to enter the market. Any new product that competes with an
approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety
in order to overcome price competition and to be commercially successful.
33ObsEva Annual Report 2019Business Update In addition, established biopharmaceutical companies may invest heavily to accelerate discovery and
development of novel compounds or to in-license novel compounds that could make linzagolix, OBE022,
nolasiban or any of our future product candidates less competitive.
Intellectual Property
We have filed numerous patent applications and have licensed numerous issued patents and patent
applications pertaining to our product candidates and methods of manufacture and clinical use. We strive to
protect and enhance the proprietary technology, inventions, and improvements that are commercially
important to the development of our business by seeking, maintaining and defending our intellectual
property, whether developed internally or licensed from third parties. For additional information regarding
the license agreements to which we are a party, see the sections entitled “2013 License Agreement with Merck
Serono,” “2015 License Agreement with Merck Serono” and “License and Supply Agreement with Kissei.” We
also rely on trade secrets, know-how, continuing technological innovation and potential in-licensing
opportunities to develop, strengthen and maintain our proprietary position in the field of reproductive
healthcare. Additionally, we intend to rely on regulatory protection afforded through data exclusivity and
market exclusivity, as well as patent term extensions, where available.
As of December 31, 2019, our patent portfolio as it pertains to certain of our product candidates included:
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five United States (U.S.) patents, projected to expire between 2034 and 2035, five U.S. patent applications,
which, if granted, project to expire between 2034 and 2040, as well as corresponding patents and patent
applications internationally, directed to nolasiban as a composition of matter and uses of nolasiban in
assisted reproductive technology;
three U.S. patent applications, which, if granted, project to expire between 2037 and 2040, as well as
corresponding patent applications internationally, directed to compositions of matter containing OBE022
and uses of OBE022 for the treatment of preterm labor;
four U.S. patent applications, which, if granted, project to expire between 2038 and 2040, as well as
corresponding patent applications internationally, directed to uses of linzagolix for the treatment of sex
hormone-dependent diseases; and
two PCT applications, which, if granted in the U.S., project to expire in 2039, directed to uses of linzagolix
for the treatment of sex hormone-dependent diseases.
As of December 31, 2019, our in-licensed patent portfolio as it pertains to certain of our product
candidates included:
one U.S. patent, projected to expire in 2023, as well as corresponding patents and patent applications
internationally, directed to nolasiban as a composition of matter;
four U.S. patents, projected to expire between 2024 and 2036, one U.S. patent application, which, if
granted, projects to expire in 2036, as well as corresponding patents and patent applications
internationally, directed to OBE022 as a composition of matter and uses of OBE022 for the treatment of
preterm labor; and
three U.S. patents, projected to expire between 2030 and 2032, two U.S. patent applications, which, if
granted, project to expire between 2031 and 2037, as well as corresponding patents and patent
applications internationally outside of specified Asian countries, directed to linzagolix as a composition
of matter and uses of linzagolix for the treatment of sex hormone-dependent diseases.
The terms of individual patents may vary based on the countries in which they are obtained. Generally, patents
34ObsEva Annual Report 2019Business Update
issued for applications filed in the United States are effective for 20 years from the earliest effective non-
provisional filing date in the absence, for example, of a terminal disclaimer shortening the term of the patent
or patent term adjustment increasing the term of the patent. In addition, in certain instances, a patent term
can be extended to recapture a portion of the term effectively lost as a result of FDA regulatory review periods.
The restoration period cannot be longer than five years and the total patent term, including the restoration
period, must not exceed 14 years following FDA approval. The duration of patents outside of the United States
varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest
effective non-provisional filing date.
In addition to the U.S. patents and U.S. patent applications described above, our patent portfolio and our in-
licensed patent portfolio include issued patents and pending patent applications in various other
jurisdictions. For example, we have obtained, or we license from third parties, issued patents in Europe that
pertain to certain aspects of our product candidates described above.
In addition to patents and patent applications that we own and license, we rely on trade secrets and know-
how to develop and maintain our competitive position. However, trade secrets can be difficult to protect. We
seek to protect our proprietary technology and processes, and obtain and maintain ownership of certain
technologies, in part, through confidentiality agreements and invention assignment agreements with our
employees, consultants, scientific advisors, contractors, and commercial partners.
Our future commercial success depends, in part, on our ability to obtain and maintain patent and other
proprietary protection for commercially important technology, inventions and know-how related to our
business; defend and enforce our patents; preserve the confidentiality of our trade secrets; and operate
without infringing valid enforceable patents and proprietary rights of third parties. Our ability to stop third
parties from making, using, selling, offering to sell, or importing our products may depend on the extent to
which we have rights under valid and enforceable patents or trade secrets that cover these activities. With
respect to our owned and licensed intellectual property, we cannot be sure that patents will issue from any of
the pending patent applications to which we own or license rights or from any patent applications that we or
our licensors may file in the future, nor can we be sure that any of our licensed patents or any patents that
may be issued in the future to us or to our licensors will be commercially useful in protecting our product
candidates and methods of using or manufacturing the same. Moreover, we may be unable to obtain patent
protection for certain aspects of our product candidates generally, as well as with respect to certain
indications. See the section entitled “Risk Factors—Risks Related to Our Intellectual Property” for a more
comprehensive description of risks related to our intellectual property.
2013 License Agreement with Merck Serono
In August 2013, we entered into a license agreement, or the 2013 license agreement, with Merck Serono,
pursuant to which we received a worldwide exclusive license to develop, manufacture and commercialize
compounds covered by the licensed patent rights, including nolasiban, which we are developing for the
treatment of conditions associated with ART. In consideration for the license, we issued 914,069 Series A
preferred shares to Merck Serono at the time of our Series A financing, which had a fair-value of $4.9 million.
With respect to any products we commercialize under the 2013 license agreement, we have agreed to pay Merck
Serono quarterly royalties based on our annual net sales of each product at a high-single-digit percentage of
annual net sales, subject to specified reductions, until the later of the date that all of the patent rights for that
product have expired, as determined on a country-by-country and product-by-product basis, or ten years from
the first commercial sale of such product on a country-by-country and product-by-product basis.
We are solely responsible for the development and commercialization of the product candidates licensed
under the 2013 license agreement. Merck Serono has the first right to maintain, prosecute, and even enforce
the licensed patent rights. The 2013 license agreement expires on the date of expiration of all royalty
obligations, at which time our license becomes fully paid-up, irrevocable, and perpetual. Either party may
terminate the 2013 license agreement earlier for an uncured material breach, subject to notice requirements
and specified exceptions. Merck may terminate the 2013 license agreement if we or any of our affiliates or
35ObsEva Annual Report 2019Business Update
sublicensees challenge the licensed patent rights or in the event of our bankruptcy if we do not obtain a
sublicensee within two years thereafter. We may also terminate the 2013 license agreement without cause at
any time upon advance written notice to Merck Serono. Upon any termination, all license granted to us under
the 2013 license agreement terminate.
2015 License Agreement with Merck Serono
In June 2015, we entered into a second license agreement with Merck Serono, or the 2015 license agreement,
which we amended in July 2016, pursuant to which we received a worldwide exclusive license to develop,
manufacture and commercialize compounds covered by the licensed patent rights, including OBE022, which
we are developing for the treatment of preterm labor in weeks 24 to 34 of pregnancy. In consideration for the
license, we agreed to issue 325,000 Series A preferred shares to Merck Serono upon the initiation of a Phase
1 clinical trial for a licensed product. With respect to any products we commercialize under the 2015 license
agreement, we have agreed to pay Merck Serono quarterly royalties based on our annual net sales of each
product at a mid-single-digit percentage of annual net sales, subject to specified reductions, until the later of
the date that all of the patent rights for that product have expired, as determined on a country-by-country and
product-by-product basis or ten years from the first commercial sale of such product on a country-by-country
and product-by-product basis.
We are solely responsible for the development and commercialization of the product candidates licensed
under the 2015 license agreement. Merck Serono has the first right to maintain, prosecute, and even enforce
the licensed patent rights. The 2015 license agreement expires on the date of expiration of all royalty
obligations, at which time our license becomes fully paid-up, irrevocable and perpetual. Either party may
terminate the 2015 license agreement earlier for an uncured material breach, subject to notice requirements
and specified exceptions. Merck may terminate the 2015 license agreement if we or any of our affiliates or
sublicensees challenge the licensed patent rights or in the event of our bankruptcy if we do not obtain a
sublicensee within two years thereafter. We may also terminate the agreement without cause at any time upon
advance written notice to Merck Serono. Upon any termination, all license granted to us under the 2015 license
agreement terminate.
License and Supply Agreement with Kissei
In November 2015, we entered into a license and supply agreement, or the Kissei license and supply
agreement, with Kissei. Pursuant to the Kissei license and supply agreement we received an exclusive license
to develop, manufacture and commercialize products, or the Product, containing the compounds which is a
specified GnRH antagonist and covered by certain licensed patent rights, or the Compound, throughout the
world except for specified Asian countries and we arranged to exclusively acquire from Kissei the material
necessary to produce linzagolix. Under the Kissei license and supply agreement, we are developing linzagolix
for the treatment of HMB associated with uterine fibroids and pain associated with endometriosis. The
agreement also establishes a joint development committee, and upon the filing of regulatory approval, a joint
marketing committee, each of which shall be composed of an equal number of representatives for each party,
which will exchange information and monitor progress in the development and marketing of the Product,
respectively. We must use commercially reasonable efforts to develop, manufacture and commercialize the
Compound and the Product. We and Kissei will share development data and regulatory filings from our
respective territories with one another. Further, we granted Kissei an exclusive license under any of our know-
how and patents related to inventions or improvements resulting from our activities under the Kissei license
and supply agreement, for Kissei to use in exploiting the Compound and the Product in their retained territory.
In consideration for the license, we made an initial $10.0 million upfront payment. We also made two
payments of $5.0 million each to Kissei in 2017 and 2019 related to our commencement of the PRIMROSE
and EDELWEISS Phase 3 clinical trials in the uterine fibroid and endometriosis indications, respectively. In
addition, we have agreed to make additional aggregate milestone payments of up to $53.0 million upon the
achievement of specified developmental milestones, such as the initiation of clinical trials and receipt of
36ObsEva Annual Report 2019Business Update
regulatory approvals. With respect to any Product we commercialize under the Kissei license and supply
agreement, we have agreed to make additional aggregate milestone payments of up to $125.0 million to
Kissei upon the achievement of specified commercial milestones.
Pursuant to the Kissei license and supply agreement, we have agreed to exclusively purchase the active
pharmaceutical ingredient for linzagolix from Kissei. During the development stage, we are obligated to pay
Kissei a specified supply price. Following the first commercial sale of licensed product, we are obligated to
pay Kissei a royalty payment in the low twenty percent range as a percentage of net sales, which includes
payment for Kissei’s supply of the active pharmaceutical ingredient until the latest of the date that the valid
claim of a patent for the Product has expired, the expiration of our regulatory exclusivity period or 15 years
from the first commercial sale of such product on a country-by-country and product-by-product basis. During
the term, we are restricted from developing, marketing and selling GnRH agonists and GnRH antagonists other
than the Compound to the extent allowed by applicable laws.
We are solely responsible, at our expense, for the development and commercialization of the Product
candidates licensed under the Kissei license and supply agreement in the licensed territory. Kissei has the
responsibility to maintain and prosecute the licensed patent rights in the licensed territory and we have the
right to enforce any of them in the event that Kissei abandons it. The Kissei license and supply agreement
terminates on the date of expiration of all royalty obligations, unless we elect to continue to purchase the
Compound from Kissei after the expiration of all royalty obligations. Either party may terminate the Kissei
license and supply agreement earlier for an uncured breach, subject to notice requirements and specified
exceptions, including that Kissei has the option to convert the exclusive licenses granted to us to non-
exclusive if we breach the agreement and fail to cure within a specified time period. We may also terminate
the agreement for scientific, commercial, strategic or intellectual property reasons at any time upon advance
written notice to Kissei. Kissei may also terminate the agreement if we do not fulfill certain development-
related obligations for a specified period of time, or if, in connection with a change of control by us, we do
not fulfill certain diligence obligations for a specified period of time. Further, under the terms of the Kissei
license and supply agreement, Kissei is obligated to have a backup supplier based on the pharmaceutical
industry standard. We may only gain the right to obtain an alternative source of the supply of linzagolix upon
Kissei failing to deliver a substantial percentage of the requested supply, delivering the supply late or
delivering the supply of linzagolix in nonconforming manner; provided that Kissei has a specified period of
time to cure any of these defects. In the event that Kissei failed to deliver a substantial percentage of requested
supply of linzagolix, we may gain the right to obtain an alternative source of supply. Further, we and Kissei
are each obligated to maintain a specified percentage of supply in excess of the estimate for yearly
requirements that we submit to Kissei.
Sublicense Agreement with Yuyuan
In January 2020, we entered into a sublicense agreement, or the 2020 sublicense agreement, with Hangzhou
Yuyuan BioScience Technology Co., Ltd., or Yuyuan, pursuant to which we granted to Yuyuan an exclusive
sublicense under certain of our patents, trademarks and know-how to use, register, import, develop, market,
promote, distribute, offer for sale and commercialize nolasiban for use in humans in the People’s Republic of
China, including Hong Kong and Macau. Yuyuan will be responsible for the continued development of
nolasiban in China at its sole cost, and is required to use commercially reasonable efforts to develop the
product in accordance with certain development milestones. Yuyuan will be responsible for commercialization
of nolasiban in China at its sole cost. We are obligated to supply Yuyuan with its clinical and commercial
requirements of the product at cost. Yuyuan has agreed to not develop, market or sell any oxytocin receptor
antagonist other than nolasiban during the term of the 2020 sublicense agreement. The development and
commercialization activities for nolasiban will be governed by a joint development committee and joint
commercialization committee, respectively, with each party having final decision making authority for its
territory. In consideration for entering into the 2020 sublicense agreement, Yuyuan has agreed to make
aggregate milestone payments of up to $17.0 million upon the achievement of specified development,
regulatory and first sales milestones and aggregate milestone payments of up to $115.0 million upon the
37ObsEva Annual Report 2019Business Update achievement of additional, tiered sales milestones. In addition, Yuyuan has agreed to pay tiered royalties on
net sales at percentages ranging from high-single digit to low-second decile, subject to specified reductions,
until the later of the expiration of the last valid claim covering the product in China and ten years from the
first commercial sale of the produt in China. We have the first right to file, prosecute and maintain the licensed
patents in China. In the event that we do not elect to file, prosecute or maintain a licensed patent in China,
Yuyuan will have the right to request an assignment of such patent, in which event, Yuyuan would be
responsible for further filing, prosecution and maintenance. We have the first right to enforce licensed patents
in China. Subject to the consent of our licensor of the licensed patents, Yuyuan will have a back-up right to
enforce licensed patents in China. The 2020 sublicense agreement expires on the date of expiration of all
royalty obligations. The 2020 sublicense agreement is subject to earlier termination by either party upon an
uncured material breach of the 2020 sublicense agreement by the other party or an unresolved force majeure
event. Yuyuan may terminate the agreement upon specified written notice in the event that certain clinical
results are negative. Additionally, we may terminate the agreement if Yuyuan fails to make certain payments
in a timely manner, if Yuyuan is acquired by a party with a competing product, if Yuyuan fails to achieve first
commercial sale within a specified timeframe after approval, and in the event that Yuyuan challenges the
validity, enforceability or patentability of the licensed patents.
Government Regulation
FDA Drug Approval Process
In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal
Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations, govern, among
other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling,
promotion and marketing, distribution, post-approval monitoring and reporting, sampling and import and
export of pharmaceutical products. To obtain regulatory approvals in the United States and in foreign
countries, and subsequently comply with applicable statutes and regulations, we will need to spend
substantial time and financial resources.
Approval Process
The FDA must approve any new drug or a drug with certain changes to a previously approved drug before a
company can market it in the United States. Failure to comply with applicable U.S. requirements may subject
a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending
applications, warning or untitled letters, clinical holds, withdrawal of an approval, product recalls, product
seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government
contracts, restitution, disgorgement, civil penalties or criminal prosecution.
The steps required before a drug may be marketed in the United States generally include the following:
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completion of extensive preclinical laboratory tests, animal studies and CMC studies, all performed in
accordance with the FDA’s Good Laboratory Practice, or GLP, regulations;
submission to the FDA of an IND application for human clinical testing, which must become effective
before human clinical trials may begin. The sponsor must update the IND annually;
approval of the study by an IRB or ethics committee at each site before the study begins;
performance of adequate and well-controlled human clinical trials in accordance with good clinical
practice, or GCP, requirements to establish the safety and efficacy of the drug for each proposed
indication to the FDA’s satisfaction;
submission to the FDA of an NDA after completion of all clinical trials;
38ObsEva Annual Report 2019Business Update
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potential review of the drug application by an FDA advisory committee, if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the
products is produced to assess compliance with cGMP regulations and to assure that the facilities,
methods and controls are adequate to preserve the drug’s identity; and
FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States.
Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required
may vary substantially based upon the type, complexity and novelty of the product or disease.
Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal
trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the
preclinical tests must comply with federal regulations and requirements, including GLP. The company submits
the results of the preclinical testing, together with manufacturing information, analytical data and any
available clinical data or literature to the FDA as part of an IND along with other information, including
information about product CMC and a proposed clinical trial protocol. Long term preclinical tests, such as
animal tests of reproductive toxicity and carcinogenicity, may continue after submitting the initial IND.
The FDA requires a 30-day waiting period after the submission of each IND before the company can begin
clinical testing in humans. The FDA may, within the 30-day time period, raise concerns or questions relating
to one or more proposed clinical trials and place the study on a clinical hold. In such a case, the company and
the FDA must resolve any outstanding concerns before the company may begin the clinical trial. Accordingly,
the submission of an IND may or may not be sufficient to permit the sponsor to start a clinical trial. If, following
the 30-day period, the FDA does not raise any concerns regarding the IND submission, the company may
begin clinical testing under the IND. The company must also make a separate submission to an existing IND
for each successive clinical trial conducted during drug development.
Clinical Trials
Clinical trials involve administering the investigational new drug to healthy volunteers or patient trials under
the supervision of a qualified investigator. The company must conduct clinical trials:
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in compliance with federal regulations;
in compliance with GCP, an international standard meant to protect the rights and health of patients and
to define the roles of clinical trial sponsors, administrators, and monitors; as well as
under protocols detailing the objectives of the trial, the safety monitoring parameters, and the
effectiveness criteria to be evaluated.
The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose
other sanctions, if it believes that the sponsor is not conducting the clinical trial in accordance with FDA
requirements or presents an unacceptable risk to the clinical trial patients. The sponsor must also submit the
study protocol, any amendments to protocols and informed consent information for patients in clinical trials
to an IRB for approval at each site at which the clinical trial will be conducted. An IRB may halt the clinical trial,
either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other
conditions. Information about certain clinical trials and their results must be also submitted within specific
timeframes to the National Institutes of Health, or NIH, for public dissemination on their www.clinicaltrials.gov
website.
39ObsEva Annual Report 2019Business Update Companies generally divide the clinical investigation of a drug into three or four phases. While companies
usually conduct these phases sequentially, they are sometimes overlapped or combined.
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Phase 1. These trials typically evaluate the safety, dosage tolerance, metabolism and pharmacologic
actions of the investigational new drug in humans, the side effects associated with increasing doses, and
if possible, gain early evidence on effectiveness. Other Phase 1 or clinical pharmacology studies generally
evaluate the drug for potential DDI, cardiovascular safety and special population interactions. These
studies, if needed, are to be conducted prior to NDA submission but may be conducted in parallel to
Phase 2 and Phase 3.
Phase 2. The drug is administered to a limited patient population to evaluate dosage tolerance and
optimal dosage, identify possible adverse side effects and safety risks, and preliminarily evaluate efficacy.
Phase 2 trials may be denoted as Phase 2a, wherein initial dose-response relationship is explored, and
Phase 2b, wherein dose ranging and proof-of-concept is targeted.
Phase 3. The drug is administered to an expanded patient population, generally at geographically
dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically
evaluate dosage, clinical effectiveness and safety, to establish the overall benefit-risk relationship of the
investigational drug, and to provide an adequate basis for labeling and product approval.
Phase 4. In some cases, the FDA may condition approval of an NDA for a drug on the company’s
agreement to conduct additional clinical trials after approval. In other cases, a sponsor may voluntarily
conduct additional clinical trials after approval to gain more information about the drug. Companies
typically refer to such post-approval trials as Phase 4 clinical trials.
The FDA, the IRB, or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various
grounds, including a finding that the research patients are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not
being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected
serious harm to patients. Additionally, an independent group of qualified experts organized by the clinical
trial sponsor, known as a data safety monitoring board or committee, may oversee some clinical trials. This
group provides authorization for whether or not a trial may move forward at designated check points based
on access to certain data from the trial. We may also suspend or terminate a clinical trial based on evolving
business objectives and the competitive climate.
Submission of an NDA
After we complete the required preclinical, CMC and clinical testing, we can prepare and submit an NDA to
the FDA, which must approve the NDA before we can start marketing the drug in the United States. An NDA
must include all relevant data available from pertinent preclinical studies and clinical trials, including negative
or ambiguous results as well as positive findings, together with detailed information relating to the drug’s
chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from
company-sponsored clinical trials on a drug, or from a number of alternative sources, including studies
initiated by investigators. To support marketing authorization, the data we submit must be sufficient in quality
and quantity to establish the safety and effectiveness of the investigational drug to the FDA’s satisfaction.
The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally
subject to a substantial application user fee, and the sponsor under an approved NDA is also subject to annual
program user fees. The FDA typically increases these fees annually.
The FDA has 60 days from its receipt of an NDA to determine whether it will accept the application for filing
based on the agency’s threshold determination that the application is sufficiently complete to permit
substantive review. The FDA may request additional information rather than accept an NDA for filing. In this
40ObsEva Annual Report 2019Business Update
event, the application must be resubmitted with the additional information. The resubmitted application is
also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA
begins an in-depth substantive review. The FDA reviews an NDA to determine, among other things, whether
the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or
held meets standards designed to assure the product’s continued safety, quality and purity. Once the FDA
accepts the filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the
review of NDAs. Under the Prescription Drug User Fee Act, the FDA has a goal of responding to standard
review NDAs within ten months after the 60-day filing review period, but this timeframe is often extended.
The FDA reviews most applications for standard review drugs within ten to 12 months and most applications
for priority review drugs within six to eight months. Priority review can be applied to drugs that the FDA
determines offer major advances in treatment, or provide a treatment where no adequate therapy exists.
In addition, under the Pediatric Research Equity Act of 2003, as amended and reauthorized, certain NDAs or
supplements to an NDA must contain data that are adequate to assess the safety and effectiveness of the
drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and
administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on
its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data
until after approval of the product for use in adults, or full or partial waivers from the pediatric data
requirements.
The FDA may also refer applications for novel drug products, or drug products that present difficult questions
of safety or efficacy, to an advisory committee. This is typically a panel that includes clinicians and other
experts that will review, evaluate, and recommend whether the FDA should approve the application. The FDA
is not bound by the recommendation of an advisory committee, but it generally follows such
recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure
compliance with GCP, and will inspect the facility or the facilities at which the drug is manufactured. The FDA
will not approve the product unless compliance with cGMP is satisfactory and the NDA contains data that
provide evidence that the drug is safe and effective in the indication studied.
The FDA’s Decision on an NDA
After the FDA evaluates the NDA and all related information, including the advisory committee
recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites,
it issues either an approval letter or a complete response letter. A complete response letter indicates that the
FDA has completed its review of the application, and the agency has determined that it will not approve the
application in its present form. A complete response letter generally outlines the deficiencies in the
submission and may require substantial additional clinical data or other significant, expensive, and time-
consuming requirements related to clinical trials, preclinical studies or manufacturing. The FDA has
committed to reviewing resubmissions of the NDA addressing such deficiencies in two or six months,
depending on the type of information included. Even with the submission of this additional information, the
FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The government may
establish additional requirements, including those resulting from new legislation, or the FDA’s policies may
change, which could delay or prevent regulatory approval of our drugs under development.
An approval letter authorizes commercial marketing of the drug with specific prescribing information for
specific indications. As a condition of NDA approval, the FDA may require an REMS, to help ensure that the
benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans
for healthcare professionals, special training or certification for prescribing or dispensing, dispensing only
under certain circumstances, special monitoring, and the use of patient registries. The requirement for REMS
can materially affect the potential market and profitability of the drug. Moreover, the FDA may condition
approval on substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy.
41ObsEva Annual Report 2019Business Update Changes to some of the conditions established in an approved application, including changes in indications,
labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA
supplement before we can implement the change. An NDA supplement for a new indication typically requires
clinical data similar to that in the original application, and the FDA uses the same procedures and actions in
reviewing NDA supplements as it does in reviewing new NDAs. As with new NDAs, the FDA often significantly
extends the review process with requests for additional information or clarification.
Post-approval Requirements
The FDA regulates products that are manufactured or distributed pursuant to FDA approvals and has specific
requirements pertaining to recordkeeping, periodic reporting, product sampling and distribution, advertising
and promotion and reporting of adverse experiences with the product. After approval, the FDA must provide
review and approval for most changes to the approved product, such as adding new indications or other
labeling claims. There also are continuing, annual user fee requirements for any marketed products and the
establishments who manufacture our products, as well as new application fees for supplemental applications
with clinical data.
In some cases, the FDA may condition approval of an NDA for a product on the sponsor’s agreement to
conduct additional clinical trials after approval. In other cases, a sponsor may voluntarily conduct additional
clinical trials after approval to gain more information about the product. Such post-approval trials are typically
referred to as Phase 4 clinical trials.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved
drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic
unannounced inspections by the FDA and state agencies for compliance with cGMP requirements. There are
strict regulations regarding changes to the manufacturing process, and, depending on the significance of the
change, it may require prior FDA approval before we can implement it. FDA regulations also require
investigation and correction of any deviations from cGMP and impose reporting and documentation
requirements upon us and any third-party manufacturers that we may decide to use. Accordingly,
manufacturers must continue to expend time, money and effort in the area of production and quality control
to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval if a company does not comply with regulatory requirements and maintain
standards or if problems occur after the product reaches the market. If a company or the FDA discovers
previously unknown problems with a product, including adverse events of unanticipated severity or frequency,
issues with manufacturing processes, or the company’s failure to comply with regulatory requirements, the
FDA may revise the approved labeling to add new safety information; impose post-marketing trials or other
clinical trials to assess new safety risks; or impose distribution or other restrictions under a REMS program.
Other potential consequences may include:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from
the market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
the FDA refusing to approve pending NDAs or supplements to approved NDAs, or suspending or revoking
of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the
market. Products may be promoted only for the approved indications and in accordance with the provisions
42ObsEva Annual Report 2019Business Update
of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the
promotion of off-label uses. We could be subject to significant liability if we violated these laws and regulations.
Healthcare Reform
In the United States, the European Union and foreign jurisdictions, the legislative landscape continues to
evolve. There have been a number of legislative and regulatory changes to the healthcare system that could
affect our future results of operations. In particular, there have been and continue to be a number of initiatives
at the United States federal and state levels that seek to reduce healthcare costs. In March 2010, the Patient
Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or
collectively, the ACA, was enacted, which includes measures that have significantly changed health care
financing by both governmental and private insurers. The provisions of the ACA of importance to the
pharmaceutical and biotechnology industry are, among others, the following:
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an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription
drugs agents and biologic agents, which is apportioned among these entities according to their market
share in certain government healthcare programs;
an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1%
and 13% of the average manufacturer price for branded and generic drugs, respectively;
a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer
70% point-of-sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during
their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under
Medicare Part D;
extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are
enrolled in Medicaid managed care organizations, unless the drug is subject to discounts under the 340B
drug discount program;
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program
are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer
Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain
individuals with income at or below 133% of the federal poverty level, thereby potentially increasing
manufacturers’ Medicaid rebate liability;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing
program;
new requirements under the federal Physician Payments Sunshine Act for drug manufacturers to report
information related to payments and other transfers of value made to physicians and teaching hospitals
as well as ownership or investment interests held by physicians and their immediate family members;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct
comparative clinical effectiveness research, along with funding for such research; and
establishment of a Center for Medicare and Medicaid Innovation at the CMS to test innovative payment
and service delivery models to lower Medicare and Medicaid spending, potentially including prescription
drug spending.
43ObsEva Annual Report 2019Business Update There remain judicial and Congressional challenges to certain aspects of the ACA, as well as efforts by the
Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump
has signed two Executive Orders and other directives designed to delay the implementation of certain
provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by
the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part
of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the
implementation of certain taxes under the ACA have been signed into law. Legislation enacted in 2017,
informally titled the Tax Cuts and Jobs Act, or Tax Act, includes a provision repealing, effective January 1,
2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to
maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual
mandate”. In addition, the 2020 federal spending package permanently eliminates, effective January 1, 2020,
the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax
and, effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018, or
the BBA, among other things, amended the ACA, effective January 1, 2019, to close the coverage gap in most
Medicare drug plans, commonly referred to as the “donut hole”. In December 2018, CMS published a new final
rule permitting further collections and payments to and from certain ACA qualified health plans and health
insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court
litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas
U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate”
was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of
Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional
and remanded the case back to the District Court to determine whether the remaining provisions of the ACA
are invalid as well. It is unclear how this decision, future decisions, subsequent appeals, and other efforts to
repeal and replace the ACA will impact the ACA.
In addition, other federal health reform measures have been proposed and adopted in the United States since
the ACA was enacted. For example, as a result of the Budget Control Act of 2011, providers are subject to
Medicare payment reductions of 2% per fiscal year, which, due to subsequent legislation, including the BBA,
will remain in effect through 2029 unless additional Congressional action is taken.
Further, the American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and
increased the statute of limitations period for the government to recover overpayments from providers from
three to five years. More recently, there has been heightened governmental scrutiny recently over the manner
in which manufacturers set prices for their marketed products, which have resulted in several recent
Congressional inquiries and proposed and enacted federal and state legislation designed to, among other
things, bring more transparency to product pricing, review the relationship between pricing and manufacturer
patient programs, reduce the cost of drugs under Medicare and reform government program reimbursement
methodologies for products.
At the federal level, the Trump administration’s budget proposal for fiscal year 2020 contains further drug
price control measures that could be enacted during the 2020 budget process or in other future legislation,
including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under
Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing
for generic drugs for low-income patients. Additionally, the Trump administration released a “Blueprint” to
lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase
manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize
manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products
paid by consumers. The U.S. Department of Health and Human Services, or HHS, has solicited feedback on
some of these measures and has implemented others under its existing authority. For example, in May 2019,
CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs
beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019.
While a number of these and other measures may require additional authorization to become effective,
Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or
44ObsEva Annual Report 2019Business Update
administrative measures to control drug costs. At the state level, individual states in the United States have
increasingly passed legislation and implemented regulations designed to control pharmaceutical and
biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on
certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed
to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities
and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products
and which suppliers will be included in their prescription drug and other healthcare programs.
Coverage, Reimbursement and Pricing
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may
obtain regulatory approval. In the United States and markets in other countries, sales of any products for
which we receive regulatory approval for commercial sale will depend, in part, on the availability of coverage
and the adequacy of reimbursement from third-party payors. Third-party payors include government
authorities, managed care organizations, private health insurers and other organizations. The process for
determining whether a third-party payor will provide coverage for a product may be separate from the process
for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit
coverage to specific products on an approved list, or formulary, which might not include all of the FDA-
approved products for a particular indication. Moreover, a third-party payor’s decision to provide coverage for
a product does not imply that an adequate reimbursement rate will be approved. For example, the payor’s
reimbursement payment rate may not be adequate or may require co-payments that patients find unacceptably
high. Additionally, coverage and reimbursement for products can differ significantly from payor to payor. The
Medicare and Medicaid programs increasingly are used as models for how private payors and other
governmental payors develop their coverage and reimbursement policies for drugs and biologics. However,
one third-party payor’s decision to cover a particular product does not ensure that other payors will also
provide coverage for the product, or will provide coverage at an adequate reimbursement rate. Adequate third-
party reimbursement may not be available to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product development. Further, some third-party payors may require
pre-approval of coverage for new or innovative devices or drug therapies before they provide reimbursement
for use of such therapies.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-
effectiveness of products and services, in addition to their safety and efficacy. To obtain coverage and
reimbursement for any product that might be approved for sale, we may need to conduct expensive
pharmacoeconomic studies to demonstrate the medical necessity and cost-effectiveness of our product. These
studies will be in addition to the studies required to obtain regulatory approvals. If third-party payors do not
consider a product to be cost-effective compared to other available therapies, they may not cover the product after
approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company
to sell its products at a profit. Thus, obtaining and maintaining reimbursement status is time-consuming and costly.
The U.S. government, state legislatures and foreign governments have shown significant interest in
implementing cost containment programs to limit the growth of government-paid health care costs, including
price controls, restrictions on reimbursement and requirements for substitution of generic products for
branded prescription products. By way of example, the ACA contains provisions that may reduce the
profitability of products, including, for example, increased rebates for products sold to Medicaid programs,
extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare
Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care
programs. Moreover, payment methodologies may be subject to changes in healthcare legislation and
regulatory initiatives. For example, the Medicare Access and CHIP Reauthorization Act of 2015 ended the use
of the statutory formula, also referred to as the Sustainable Growth Rate, for clinician payment and established
a quality payment incentive program, also referred to as the Quality Payment Program. This program provides
clinicians with two ways to participate, including through the Advanced Alternative Payment Models, or APMs,
and the Merit-based Incentive Payment System, or MIPS. In November 2019, CMS issued a final rule finalizing
45ObsEva Annual Report 2019Business Update the changes to the Quality Payment Program. At this time, it is unclear how the introduction of the Quality
Payment Program will impact overall physician reimbursement under the Medicare program. Any reduction in
reimbursement from Medicare or other government programs may result in a similar reduction in payments
from private payors.
In the European Community, governments influence the price of products through their pricing and
reimbursement rules and control of national health care systems that fund a large part of the cost of those
products to consumers. Some jurisdictions operate positive and negative list systems under which products
may only be marketed once a reimbursement price has been agreed to by the government. To obtain
reimbursement or pricing approval, some of these countries may require the completion of clinical trials that
compare the cost effectiveness of a particular product candidate to currently available therapies. Other
member states allow companies to fix their own prices for medicines, but monitor and control company
profits. The downward pressure on health care costs in general, particularly prescription products, has
become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In
addition, in some countries, cross border imports from low-priced markets exert a commercial pressure on
pricing within a country.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer if
the government and third-party payors fail to provide coverage and adequate reimbursement. In addition, the
focus on cost containment measures in the United States and other countries has increased and we expect
will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party
reimbursement rates may change at any time. Even if we attain favorable coverage and reimbursement status
for one or more products for which we receive regulatory approval, less favorable coverage policies and
reimbursement rates may be implemented in the future.
Sales and Marketing
Numerous regulatory authorities in addition to the FDA, including, in the United States, the CMS, other
divisions of HHS, the U.S. Department of Justice, and similar foreign, state, and local government authorities,
regulate sales, promotion and other activities of prescription drug manufacturers. As described above, the
FDA regulates all advertising and promotion activities for products under its jurisdiction both prior to and
after approval. Only those claims relating to safety and efficacy that the FDA has approved may be used in
labeling. Physicians may prescribe legally available products for uses that are not described in the product’s
labeling and that differ from those we tested and the FDA approved. Such off-label uses are common across
medical specialties, and often reflect a physician’s belief that the off-label use is the best treatment for the
patients. The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA
regulations do impose stringent restrictions on manufacturers’ communications regarding off-label uses. If
we do not comply with applicable FDA requirements we may face adverse publicity, enforcement action by the
FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to the
FDA. Promotion of off-label uses of products can also implicate the false claims laws described below.
In the United States, clinical research, sales, marketing and scientific/educational programs must also comply
with various federal and state laws pertaining to healthcare “fraud and abuse,” including anti-kickback laws
and false claims laws. Anti-kickback laws including, without limitation, the federal Anti-Kickback Statute that
applies to items and services reimbursable under governmental healthcare programs such as Medicare and
Medicaid, makes it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any
remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription
of a particular product. Due to the breadth of the statutory provisions and the narrowness of statutory
exceptions and regulatory safe harbors available, it is possible that our practices might be challenged under
the federal Anti-Kickback Statute or similar laws. Moreover, recent healthcare reform legislation has
strengthened these laws. For example, the ACA, among other things, amended the intent requirement of the
federal Anti-Kickback Statute and criminal healthcare fraud statutes to clarify that a person or entity does not
need to have actual knowledge of this statute or specific intent to violate it in order to have committed a
46ObsEva Annual Report 2019Business Update
violation. In addition, the ACA clarifies that the government may assert that a claim that includes items or
services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim
for purposes of the federal civil False Claims Act. In addition, the U.S. federal government and private
individuals, on behalf of the U.S. federal government, can bring similar actions under the federal civil False
Claims Act. False claims laws, including, without limitation, the federal civil False Claims Act, prohibit anyone
from knowingly and willingly presenting, or causing to be presented for payment, to third-party payors
(including Medicare and Medicaid) claims for reimbursed products or services that are false or fraudulent,
claims for items or services not provided as claimed, or claims for medically unnecessary items or services.
Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws,
as well as civil monetary penalties laws and the criminal healthcare fraud provisions enacted as part of the
U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA. Violations of fraud and
abuse laws may be punishable by criminal, civil and administrative sanctions, including significant fines and
civil monetary penalties, the possibility of exclusion from federal healthcare programs (including Medicare
and Medicaid), disgorgement, imprisonment, and corporate integrity agreements, which impose, among other
things, rigorous operational and monitoring requirements on companies. Similar sanctions and penalties, as
well as imprisonment, also can be imposed upon executive officers and employees, including criminal
sanctions against executive officers under the so-called “responsible corporate officer” doctrine, even in
situations where the executive officer did not intend to violate the law and was unaware of any wrongdoing.
Given the significant penalties and fines that can be imposed on companies and individuals if convicted,
allegations of such violations often result in settlements even if the company or individual being investigated
admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary
penalties, and corporate integrity agreements. If the government were to allege or convict us or our executive
officers of violating these laws, our business could be harmed. Our activities could be subject to challenge for
the reasons discussed above and due to the broad scope of these laws and the increasing attention being
given to them by law enforcement authorities. Other healthcare laws that may affect our ability to operate
include HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of
2009, or HITECH, and their implementing regulations, which governs the conduct of certain electronic
healthcare transactions and protects the security and privacy of protected health information; and the federal
Physician Payments Sunshine Act, which requires certain manufacturers of products, devices, biologics, and
medical supplies to report annually to CMS information related to payments and other transfers of value to
physicians, as defined by such law, and teaching hospitals, and ownership and investment interests held by
physicians and their immediate family members.
Further, there are an increasing number of state laws that affect our business operations. Some state and
local laws require manufacturers to make reports to on pricing and marketing information and impose
registration requirements on salespersons within the jurisdiction. Other state laws require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant
compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may
be made to healthcare providers and other potential referral sources. Some states maintain anti-kickback and
false claims laws that apply to claims involving healthcare items or services reimbursed by any third-party
payor, including private insurers. We may also be subject to state laws governing the privacy and security of
health information in certain circumstances, many of which differ from each other in significant ways and
often are not preempted by HIPAA, thus complicating compliance efforts. Many of these state laws contain
ambiguities as to what is required to comply with the laws. Given the lack of clarity in laws and their
implementation, our reporting actions could be subject to the penalty provisions of the pertinent state
authorities. Ensuring that our internal operations and future business arrangements with third parties comply
with applicable healthcare laws and regulations could involve substantial costs.
Similar rigid restrictions are imposed on the promotion and marketing of products in the European Union and
other countries. Even in those countries where we may not be directly responsible for the promotion and
marketing of our products, if our potential international distribution partners engage in inappropriate activity
it can have adverse implications for us.
47ObsEva Annual Report 2019Business Update Foreign Regulation
In order to market any product outside of the United States, we would need to comply with numerous and
varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and
governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of
our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary
approvals by the comparable foreign regulatory authorities before we can commence clinical trials or
marketing of the product in foreign countries and jurisdictions. Although many of the issues discussed above
with respect to the United States apply similarly in the context of the European Union, the approval process
varies between countries and jurisdictions and can involve additional product testing and additional
administrative review periods. The time required to obtain approval in other countries and jurisdictions might
differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or
jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory
approval in one country or jurisdiction may negatively impact the regulatory process in others.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or
authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political
party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist
the individual or business in obtaining or retaining business. The FCPA also obligates companies whose
securities are listed in the United States to comply with accounting provisions requiring the company to
maintain books and records that accurately and fairly reflect all transactions of the corporation, including
international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for
international operations. Activities that violate the FCPA, even if they occur wholly outside the United States,
can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from
government contracts.
European Union—EMA process
In the European Union, products follow a similar demanding process as that we described above for the United
States and the ICH Common Technical Document is the basis for applications.
Centralized Procedure
Under the centralized procedure, after the EMA issues an opinion, the European Commission issues a single
marketing authorization valid across the European Union, as well as Iceland, Liechtenstein and Norway. The
centralized procedure is compulsory for human products that are: derived from biotechnology processes,
such as genetic engineering; contain a new active substance indicated for the treatment of certain diseases,
such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune
dysfunctions; and officially designated orphan drugs. For products that do not fall within these categories, an
applicant has the option of submitting an application for a centralized marketing authorization to the EMA as
long as the product concerned is a significant therapeutic, scientific or technical innovation, or if its
authorization would be in the interest of public health.
National Authorization Procedures
There are also two other possible routes to authorize medicinal products in several countries, which are
available for products that fall outside the scope of the centralized procedure:
• Decentralized procedure. Using the decentralized procedure, an applicant may apply for simultaneous
authorization in more than one European Union country of a medicinal product that has not yet been
authorized in any European Union country and that does not fall within the mandatory scope of the
centralized procedure.
48ObsEva Annual Report 2019Business Update
• Mutual recognition procedure. In the mutual recognition procedure, a medicine is first authorized in one
European Union Member State, in accordance with the national procedures of that country. Thereafter,
further marketing authorizations can be sought from other European Union countries in a procedure
whereby the countries concerned agree to recognize the validity of the original, national marketing
authorization.
Good Manufacturing Practices
Like the FDA, the EMA, the competent authorities of the European Union Member States and other regulatory
agencies regulate and inspect equipment, facilities and processes used in the manufacturing of products prior
to approving a product. If, after receiving clearance from regulatory agencies, a company makes a material
change in manufacturing equipment, location, or process, additional regulatory review and approval may be
required. Once we or our partners commercialize products, we will be required to comply with cGMP, and
product-specific regulations enforced by, the European Commission, the EMA and the competent authorities
of European Union Member States following product approval. Also like the FDA, the EMA, the competent
authorities of the European Union Member States and other regulatory agencies also conduct regular, periodic
visits to re-inspect equipment, facilities, and processes following the initial approval of a product. If, as a
result of these inspections, the regulatory agencies determine that our or our partners’ equipment, facilities,
or processes do not comply with applicable regulations and conditions of product approval, they may seek
civil, criminal or administrative sanctions or remedies against us, including the suspension of our
manufacturing operations or the withdrawal of our product from the market.
Data and Market Exclusivity
Similar to the United States, there is a process to authorize generic versions of innovative products in the
European Union. Generic competitors can submit abridged applications to authorize generic versions of
products authorized by EMA through a centralized procedure referencing the innovator’s data and
demonstrating bioequivalence to the reference product, among other things. New products in the European
Union can receive eight years of data exclusivity coupled with two years of market exclusivity, and a potential
one-year extension, if the marketing authorizations holder obtains an authorization for one or more new
therapeutic indications that demonstrates “significant clinical benefit” in comparison with existing therapies.
This system is usually referred to as “8+2”. Abridged applications cannot rely on an innovator’s data until after
expiration of the eight year date exclusivity term, meaning that a competitor can file an application for a
generic product but the product cannot be marketed until the end of the market exclusivity term.
49ObsEva Annual Report 2019Business Update Financial
Review
Financial Review
We are a clinical-stage biopharmaceutical company focused on the development and commercialization of novel
therapeutics for serious conditions that compromise a woman’s reproductive health and pregnancy. We are
focused on providing therapeutic solutions for women between the ages of 15 and 49 who suffer from
reproductive health conditions that affect their quality of life, ability to conceive or that complicate pregnancy
and the health of newborns. Our goal is to build the leading women’s reproductive health and pregnancy
company focused on conditions where current treatment options are limited and significant unmet needs exist.
We are developing linzagolix as a novel, oral gonadotropin releasing hormone, or GnRH, receptor antagonist,
for the treatment of pain associated with endometriosis and HMB associated with uterine fibroids in pre-
menopausal women. Aimed at addressing the need of the largest possible population in each indication, our
clinical trials for both of these indications are designed to assess and potentially support the registration of
two regimens of administrations for linzagolix i.e. (i) a moderate dose of linzagolix without hormonal ABT
and (ii) a high dose of linzagolix with hormonal ABT.
After an End of Phase 2 meeting with the FDA in December 2018, we announced the initiation of the EDELWEISS
2 and EDELWEISS 3 Phase 3 clinical trials in May 2019. These Phase 3 trials will each enroll approximately 450
patients with endometriosis associated pain, with a co-primary endpoint of patients’ response on both
dysmenorrhea (menstrual pain) and non-menstrual pain. Both trials include a 75 mg once daily dose without
hormonal ABT option, and a 200 mg once daily dose in combination with ABT (1mg E2 / 0.5mg NETA) option.
In addition, we are conducting two Phase 3 clinical trials of linzagolix in patients with HMB associated with
uterine fibroids, the PRIMROSE 1 (conducted in the US) and PRIMROSE 2 (conducted in Europe and in the US)
clinical trials. We expect to report both the primary endpoint results following 24 weeks of treatment from
the PRIMROSE 1 trial conducted in the U.S. and the 52 weeks of treatment results from PRIMROSE 2 trial in the
second quarter of 2020. A MAA submission to the EMA and a NDA submission to the FDA are planned by the
fourth quarter of 2020 and the first quarter of 2021 respectively, pending PRIMROSE 1 positive results and
feedback from regulatory agencies.
In addition, we are developing OBE022, an oral and selective prostaglandin F2α receptor antagonist, for
preterm labor in weeks 24 to 34 of pregnancy. In December 2017, we announced the initiation of our Phase
2a proof-of-concept clinical trial of OBE022 known as PROLONG which is being conducted in two parts: Part A
and Part B. Part A is an open-label trial assessing the safety and pharmacokinetics of OBE022 in pregnant
women, who were already receiving standard of care therapy for preterm labor, atosiban infusion. Part B, is a
randomized, double-blind, placebo-controlled, parallel-group trial to assess the efficacy, safety and
pharmacokinetics of OBE022. In December 2018, following completion of the open-label Part A and based on
the favorable safety and pharmacokinetics results, we announced the initiation of the randomized placebo-
controlled Part B of the trial. Part B will enroll up to 120 women at 24-34 weeks gestation who are experiencing
preterm labor symptom. We announced in July 2019 that the trial Independent Data Monitoring Committee
(IDMC) completed the unblinded review of data from the first 30 subjects randomized in Part B of the PROLONG
trial and recommended to continue the trial without modifications. We announced in January 2020 that IDMC
has completed the unblinded review of data from the first 60 women randomized in Part B of the Phase 2
PROLONG trial and recommended to continue the trial without modifications. At present, final PROLONG trial
results in 120 patients are anticipated in the second half of 2020.
51ObsEva Annual Report 2019 We are also developing nolasiban, an oral oxytocin receptor antagonist, to improve clinical pregnancy and live
birth rates in women undergoing in-vitro fertilization, or IVF. We completed randomization of 778 patients in
our European Phase 3 clinical trial in women undergoing IVF, or the IMPLANT 2 clinical trial, in 2017 and
reported positive results for the primary endpoint of ongoing pregnancy 10 weeks post embryo transfer in
February 2018, and positive live birth rate results in October 2018. Nolasiban was observed to be well
tolerated with a safety profile not different from placebo. 28-day neonatal safety data from the IMPLANT 2
trial did not reveal any adverse consequences from nolasiban treatment.
Based on feedback received in the third quarter of 2018 from regulatory authorities in Europe on our nolasiban
development program, we initiated in November 2018 an additional Phase 3 trial primarily in Europe, with some
additional sites in Canada and Russia, also known as the IMPLANT 4 trial. In June 2019, we announced completion
of patient recruitment in the IMPLANT 4 trial. In addition, we announced the clearance of our investigational new
drug (IND) in October 2019 for the U.S. Phase 3 clinical trial of nolasiban, known as IMPLANT 3.
In November 2019, we announced that the IMPLANT 4 trial did not meet the primary endpoint of an increase
in ongoing pregnancy rate at 10 weeks, (39.1 % placebo vs 40.5 % nolasiban) (p = 0.745). As these results did
not confirm the prior positive Phase 3 IMPLANT 2 trial findings, we have discontinued our previously ongoing
development of nolasiban for IVF, and are exploring potential repositioning of the compound, such as through
higher dose levels and earlier and longer exposure of nolasiban, as well as focusing on subjects with a high
uterus contraction rate at the time of ET. In connection with this potential repositioning, in January 2020, we
and Hangzhou Yuyuan BioScience Technology Co., Ltd. (Yuyuan) entered into a sublicense agreement to
develop and commercialize nolasiban for improving clinical pregnancy and live birth rates in women
undergoing embryo transfer as part of an IVF cycle in the People's Republic of China (PRC). Under the terms
of the agreement, Yuyuan has the exclusive rights to develop and commercialize nolasiban in the PRC. They
will fund all development and registration activities in the PRC, starting with the obligation to fund and conduct
a Phase 1 trial and a Phase 2 proof-of-concept trial in China. We and Yuyuan will collaborate on the global
development of nolasiban. We retain all rights to the product outside of PRC.
We were founded in November 2012 and our operations to date have included organizing and staffing our
company, raising capital, in-licensing rights to linzagolix, OBE022 and nolasiban and conducting nonclinical
studies and clinical trials. To date, we have not generated any revenue from product sales as none of our product
candidates have been approved for commercialization. We have historically financed our operations mostly
through the sale of equity. To date, we have raised an aggregate of $334.2 million of net proceeds, including
$88.5 million of net proceeds from our initial public offering in January 2017, $56.3 million of net proceeds
from our private placement with institutional investors in October 2017, and $72.4 million in net proceeds from
our underwritten public offering in June 2018. In addition, during 2018 and 2019, we sold treasury shares from
our “at the market” (ATM) program, generating net proceeds of $22.9 million. In August 2019, we borrowed
$25.0 million under our $75.0 million senior secured term loan credit facility with Oxford Finance LLC.
We have never been profitable and have incurred significant net losses in each period since our inception. Our
net losses were $108.8 million, $76.7 million and $66.9 million for the years ended December 31, 2019, 2018
and 2017, respectively. As of December 31, 2019, we had accumulated losses of $328.0 million, out of which
$30.6 million were offset with share premium. This reclassification transaction had no impact on total equity.
We expect to continue to incur significant expenses and operating losses for the foreseeable future. We used
$90.6 million and $63.9 million of cash in operations in 2019 and 2018, respectively, and we anticipate that
our expenses will remain significant in connection with our ongoing activities as we:
continue to invest in the clinical development of our product candidates and specifically in connection
with our ongoing EDELWEISS 2 and 3, PRIMROSE 1 and 2, and PROLONG clinical trials, and any
additional clinical trials, nonclinical studies and pre-commercial activities that we may conduct for
product candidates;
hire additional research and development, and general and administrative personnel;
maintain, expand and protect our intellectual property portfolio;
52ObsEva Annual Report 2019Financial Review
identify and in-license or acquire additional product candidates;
prepare for the commercialization of certain product candidates, and
continue to incur additional costs associated with operating as a public company.
We will need substantial additional funding to support our operating activities as we advance our product
candidates through clinical development, seek regulatory approval and prepare for and invest in future
commercialization of these candidates, if approved. Adequate funding may not be available to us on
acceptable terms, or at all. We are also exploring various alternatives for the future potential
commercialization of linzagolix, including through a collaboration with a third party.
We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties.
We currently utilize third-party contract research organizations, or CROs, to carry out our clinical development
and trials. Additionally, we do not yet have a commercialization organization.
53ObsEva Annual Report 2019Financial Review Strategic Licensing Agreements
Linzagolix
In November 2015, we entered into the Kissei license and supply agreement with Kissei Pharmaceutical Co.,
Ltd., or Kissei. Pursuant to the Kissei license and supply agreement we received an exclusive license to
develop, manufacture and commercialize products, or the Product, containing the compounds which is a
specified GnRH antagonist and covered by certain licensed patent rights, or the Compound, throughout the
world except for specified Asian countries. We arranged to exclusively acquire from Kissei the material
necessary to produce linzagolix.
In consideration for the license, we made an initial $10.0 million upfront payment. In addition, we agreed to
make aggregate milestone payments of up to $63.0 million upon the achievement of specified developmental
milestones, such as the initiation of clinical trials and receipt of regulatory approvals. In connection with the
initiations of the Phase 3 clinical programs for linzagolix in uterine fibroids in 2017 and endometriosis in
2019, two $5.0 million milestones were paid. With respect to any products we commercialize under the Kissei
license and supply agreement, we agreed to make further payments of up to an additional $125.0 million to
Kissei upon the achievement of specified commercial milestones.
Pursuant to the Kissei license and supply agreement, we have agreed to exclusively purchase the active
pharmaceutical ingredient for linzagolix from Kissei. During the development stage, we are obligated to pay
Kissei a specified supply price. Following the first commercial sale of licensed product, we are obligated to
pay Kissei a royalty in the low twenty percent range as a percentage of net sales. This payment includes
Kissei’s supply of the active pharmaceutical ingredient until the latest of (i) the date that the valid claim of a
patent for the Product has expired, (ii) the expiration of our regulatory exclusivity period, or (iii) 15 years from
the first commercial sale of such product on a country-by-country and product-by-product basis. During the
term, we are restricted from developing, marketing and selling GnRH agonists and GnRH antagonists other
than the Compound to the extent allowed by applicable laws.
OBE022
In June 2015, we entered into the 2015 license agreement with Merck Serono, which we amended in July 2016,
pursuant to which we received a worldwide exclusive license to develop, manufacture and commercialize
compounds covered by the licensed patent rights, including OBE022. In consideration for the license, we
issued 325,000 Series A preferred shares to Merck Serono in September 2016 upon the initiation of a Phase
1 clinical trial for a licensed product. With respect to any products we commercialize under the 2015 license
agreement, we agreed to pay Merck Serono royalties based on a mid-single-digit percentage of annual net
sales of each product, subject to specified reductions, until the later of (i) the date that all of the patent rights
for that product have expired, as determined on a country-by-country and product-by-product basis or (ii) ten
years from the first commercial sale of such product on a country-by-country and product-by-product basis.
Nolasiban
In August 2013, we entered into the 2013 license agreement with Ares Trading S.A., an affiliate of Merck Serono,
or Merck Serono, pursuant to which we received a worldwide exclusive license to develop, manufacture and
commercialize compounds covered by the licensed patent rights, including nolasiban. In consideration for the
license, we issued 914,069 Series A preferred shares to Merck Serono at the time of our Series A financing, which
had a fair-value of USD 4.9 million based on an exchange rate of USD 1.00 for CHF 0.9244 as of the date of the
transaction. With respect to any products we commercialize under the 2013 license agreement, we agreed to
pay Merck Serono royalties based on a high-single-digit percentage of annual net sales of each product, subject
to specified reductions, until the later of (i) the date that all of the patent rights for that product have expired,
as determined on a country-by-country and product-by-product basis, or (ii) ten years from the first commercial
sale of such product on a country-by-country and product-by-product basis.
54ObsEva Annual Report 2019Financial Review In January 2020, we entered into a sublicense agreement, or the 2020 sublicense agreement, with
Hangzhou Yuyuan BioScience Technology Co., Ltd., or Yuyuan, pursuant to which we granted to Yuyuan an
exclusive sublicense under certain of our patents, trademarks and know-how to use, register, import,
develop, market, promote, distribute, offer for sale and commercialize nolasiban for use in humans in the
People’s Republic of China, including Hong Kong and Macau. In consideration for entering into the 2020
sublicense agreement, Yuyuan has agreed to make aggregate milestone payments of up to $17.0 million
upon the achievement of specified development, regulatory and first sales milestones and aggregate
milestone payments of up to $115.0 million upon the achievement of additional, tiered sales milestones. In
addition, Yuyuan has agreed to pay tiered royalties on net sales at percentages ranging from high-single
digit to low-second decile, subject to specified reductions, until the later of the expiration of the last valid
claim covering the product in China and ten years from the first commercial sale of the product in China.
55ObsEva Annual Report 2019Financial Review Components of Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue
from product sales in the near term.
Operating Expenses:
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with our research and
development activities and consist mainly of direct research and development costs, which include: costs
associated with the use of CROs and consultants hired to assist on our research and development activities;
personnel expenses, which include salaries, benefits and share-based compensation expenses for our
employees; expenses related to regulatory affairs and intellectual property; manufacturing costs in connection
with conducting nonclinical studies and clinical trials; and depreciation expense for assets used in research
and development activities. Research and development costs are generally expensed as incurred. However,
costs for certain activities, such as manufacturing and nonclinical studies and clinical trials, are generally
recognized based on an evaluation of the progress to completion of specific tasks using information and data
provided to us by our vendors and collaborators.
Our employee, consultant and infrastructure resources are typically utilized across our multiple research and
development programs. We track outsourced research and development costs by product candidate or
nonclinical program, but we do not allocate personnel costs, other internal costs or external consultant costs
to specific product candidates.
From inception through December 31, 2019, we have incurred $260.6 million in research and development
expenses to advance the development of our product candidates. The following table provides a breakdown
of our outsourced research and development expenses that are directly attributable to the specified product
candidates for the years ended December 31, 2019, 2018 and 2017, respectively.
Linzagolix
Nolasiban
OBE022
Year Ended December 31,
2019
2018
2017
(in USD ,000)
(in USD ,000)
(in USD ,000)
(51,489)
(39,315)
(32,166)
(17,205)
(7,515)
(8,873)
(2,434)
(2,502)
(2,178)
Total outsourced research and development expenses
(71,128)
(49,332)
(43,217)
We expect our research and development expenses will remain significant for the foreseeable future as we
seek to advance the development of our product candidates through clinical trials and potentially toward
regulatory submissions. At this time, we cannot reasonably estimate or know the nature, timing and estimated
costs of the efforts that will be necessary to complete the development of our product candidates. We are
also unable to predict when, if ever, material net cash inflows will commence from sales of our product
candidates. This is due to the numerous risks and uncertainties associated with developing such product
candidates, including:
•
•
•
the number of clinical sites included in the trials;
the length of time required to enroll suitable patients;
the number of patients that ultimately participate in the trials;
56ObsEva Annual Report 2019Financial Review •
•
•
•
the number of doses patients receive;
the duration of patient follow-up;
the results of our clinical trials; and
regulatory requirements in support of potential approvals.
In addition, the probability of success for any of our product candidates will depend on numerous factors,
including competition, manufacturing capability and commercial viability. A change in the outcome of any of
these variables with respect to the development of any of our product candidates would significantly change
the costs, timing and viability associated with the development of that product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and
share-based compensation expense, related to executive, finance, accounting, business development, legal
and human resource functions. General and administrative expense also includes facility costs not otherwise
included in research and development expenses, legal fees related to corporate matters, fees for accounting
and consulting services, and costs of director and officer insurance.
We anticipate that our general and administrative expenses will remain significant in the future to
support continued research and development activities. We also anticipate that we will keep spending
material accounting, audit, legal, regulatory and compliance costs, as well as investor and public relations
expenses, associated with operating as a public company.
Finance Result, Net
Finance result, net, consists mainly of foreign exchange loss and gain, as well as interest expense associated
with our lease liabilities and debt instruments.
Taxation
We are subject to corporate taxation in Switzerland, Ireland and the United States.
In 2015, the Canton of Geneva granted us a ten-year tax holiday for all income and capital taxes on a
communal and cantonal level commencing in fiscal year 2013 and valid through to 2022, subject to our Swiss
domiciliation and compliance with certain reporting provisions. We remain subject to Swiss federal income
tax on our profits after tax but have only incurred net losses since our inception. We are entitled under Swiss
laws to carry forward any losses incurred for a period of seven years and can offset such losses carried forward
against future taxes. As of December 31, 2019, we had tax loss carryforwards totaling USD 287.6 million. We
do not believe it is probable that we will generate sufficient profits to avail ourselves of these tax loss
carryforwards.
Our Irish subsidiary had no activity in 2018 and 2019 and our U.S. subsidiary, as a service organization to the
group under cost plus arrangement, was the only entity to generate income tax expenses for the year ended
December 31, 2019.
57ObsEva Annual Report 2019Financial Review A. Operating Results
Analysis of Results of Operations
The following table sets forth our selected consolidated statements of operations data for the periods
indicated:
Consolidated Statements of Operations Data:
Operating income other than revenue
16
15
16
2019
Year Ended December 31,
2017
2018
(in USD ,000)
(in USD ,000)
(in USD ,000)
Operating expenses:
Research and development expenses
General and administrative expenses
Total operating expenses
Finance result, net
Income tax (expense) / benefit
Net loss
Years Ended December 31, 2019 and 2018
Operating Expenses
Research and Development Expenses
(unaudited)
Research and development expenses by product candidate:
Linzagolix
Nolasiban
OBE022
Unallocated expenses:
Staff costs
Other research and development costs
Total research and development expenses
(88,053)
(19,058)
(62,872)
(14,297)
(54,912)
(12,568)
(107,111)
(77,169)
(67,480)
(1,628)
(67)
393
45
589
(51)
(108,790)
(76,716)
(66,926)
Year Ended December 31,
2018
2019
(in USD ,000)
(in USD ,000)
(51,489)
(17,205)
(2,434)
(13,817)
(3,108)
(88,053)
(39,315)
(7,515)
(2,502)
(11,001)
(2,539)
(62,872)
Research and development expenses increased by $25.2 million in 2019 compared to 2018 primarily due to
our linzagolix program, including the initiation of our Phase 3 clinical trials in endometriosis that resulted in
$12.8 million additional costs compared to 2018. We also incurred $9.7 million in additional costs in
connection with our nolasiban program, compared to 2018 as a result of our IMPLANT 4 clinical trial that we
conducted in 2019. Staff costs and other research and development costs also contributed to the overall
increase, primarily due to additional headcounts.
58ObsEva Annual Report 2019Financial Review General and Administrative Expenses
(unaudited)
Staff costs
Professional fees
Other general and administrative costs
Total general and administrative expenses
Year Ended December 31,
2018
2019
(in USD ,000)
(in USD ,000)
(10,740)
(5,734)
(2,584)
(19,058)
(8,536)
(3,739)
(2,022)
(14,297)
General and administrative expenses increased by $4.8 million in 2019 compared to 2018 primarily due to
increased staff costs of $2.2 million associated with new commercial headcount, and increased professional
fees of $1.9 million mainly associated with pre-commercial activities.
Finance Result, Net
Foreign exchange (loss) / gain
Interest expense
Finance result, net
Year Ended December 31,
2018
2019
(in USD ,000)
(in USD ,000)
(442)
(1,186)
(1,628)
(393)
-
(393)
Finance result, net, in 2019 and 2018 primarily consisted of foreign exchange gains and losses, as well as
interest expense associated with our lease liabilities and debt instruments in 2019.
B. Liquidity and Capital Resources
Since our inception, we have not generated any revenue and have incurred net losses and negative cash flows
from our operations. We have funded our operations primarily through the sale of equity. From inception
through December 31, 2019, we have raised an aggregate of $334.2 million of net proceeds from the sale of
equity securities. In August 2019, we borrowed $25.0 million under our senior secured term loan credit
facility.
In January 2017, we completed our initial public offering of 6,450,000 common shares at a public offering
price of $15.00 per share. We received $88.5 million in net proceeds after deducting $8.3 million of
underwriting discounts and commissions and other offering expenses. Additionally, in October 2017, we
raised $56.3 million of net proceeds after deducting $3.7 million of placement expenses through the issuance
of 7,500,000 shares at a price of $8.00 per share in a private placement with institutional investors.
In May 2018, we sold 1,600,851 treasury shares at a price of $12.50 per share as part of our ATM program,
receiving net proceeds of $19.4 million after deducting $0.6 million of directly related issuance costs.
In June 2018, we completed an underwritten public offering of common shares and issued 4,750,000 shares
at a price of $15.39 per share, raising $68.0 million in net proceeds after deducting $5.1 million of
underwriting discounts, commissions and other offering expenses. In July 2018, we raised additional funds
for net proceeds of $4.4 million from the exercise of the option available to the underwriters in connection
with the June 2018 offering.
During the year ended December 31, 2019, we sold a total of 691,133 treasury shares at an average price of
$5.14 per share, as part of our ATM program initiated in May 2018, and received net proceeds of $3.5 million
after deducting $0.1 million of directly-related issuance costs.
59ObsEva Annual Report 2019Financial Review
On August 7, 2019, we entered into a loan and security agreement, or the Credit Facility Agreement with
Oxford, for a term loan of up to $75.0 million, subject to funding in three tranches. We received gross
proceeds of $25.0 million from the first tranche of the credit facility upon entering into the agreement and
intend to use the funds as part of our various clinical trials programs. The second tranche of $25.0 million
was available to be drawn at our option between December 1, 2019 and January 31, 2020 upon positive
results in the Phase 3 IMPLANT 4 clinical trial of nolasiban. Since the primary endpoint of the IMPLANT 4 trial
was not successfully met, we were not eligible to draw the second tranche. The third tranche of $25.0 million
may be drawn at our option between August 1, 2020 and September 30, 2020 upon positive results in the
Phase 3 PRIMROSE 1 and 2 clinical trials of linzagolix. The credit facility is secured by substantially all of our
assets, including our intellectual property. The loan bears a floating interest rate (partially based on thirty-day
U.S. LIBOR rate) currently amounting to 8.68% per year in total and will mature on August 1, 2024.
As of December 31, 2019, we had $69.4 million in cash and cash equivalents.
Our primary uses of cash are to fund operating expenses, primarily research and development expenditures.
Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected
in the change in our outstanding accounts payable and accrued expenses. Other than our Credit Facility
Agreement with Oxford, we have no other ongoing material financing commitments, such as lines of credits
or guarantees.
We expect our expenses to remain significant in connection with our ongoing activities, particularly as we
continue the research and development of, continue or initiate clinical trials of, and seek marketing approval
for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates,
we expect to incur significant commercialization expenses related to program sales, marketing,
manufacturing and distribution to the extent that such sales, marketing and distribution are not the
responsibility of potential collaborators. Furthermore, we expect to continue to incur additional costs
associated with operating as a public company. Accordingly, we will need to obtain substantial additional
funding in connection with our continuing operations. If we are unable to raise capital when needed or on
attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or
future commercialization efforts.
We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital
expenditure requirements into the first quarter of 2021. We have based this estimate on assumptions that
may prove to be wrong, and we could exhaust our available capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
•
•
•
•
•
•
the scope, progress, results and costs of our ongoing and planned nonclinical studies and clinical trials
for linzagolix, OBE022 and nolasiban;
the cost and timing of ongoing and planned manufacturing activities including active pharmaceutical
ingredient and drug product pharmaceutical development and clinical trial supplies production for
linzagolix, OBE022 and nolasiban;
the timing and amount of milestone and royalty payments we are required to make under our license
agreements;
the extent to which we in-license or acquire other product candidates and technologies;
the number and development requirements of other product candidates that we may pursue;
the costs, timing and outcome of regulatory review of our product candidates;
60ObsEva Annual Report 2019Financial Review
•
•
•
•
the costs and timing of future commercialization activities, including drug manufacturing, marketing,
sales and distribution, for any of our product candidates for which we receive marketing approval;
the revenue, if any, received from commercial sales of our product candidates for which we receive
marketing approval;
our ability to establish strategic collaborations; and
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing
our intellectual property rights and defending any intellectual property-related claims.
Identifying potential product candidates and conducting nonclinical studies and clinical trials is a time-
consuming, expensive and uncertain process that takes many years to complete, and we may never generate
the necessary data or results required to obtain marketing approval and achieve product sales. In addition,
our product candidates, if approved, may not achieve commercial success. Our revenue, if any, will be derived
from sales of products that we do not expect to be commercially available for many years, if at all.
Until such time that we can generate substantial product revenue, if ever, we may finance our cash needs through
a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.
To the extent that we raise additional capital through the sale of equity or convertible debt securities,
shareholder ownership interest may be diluted, and the terms of any additional securities may include
liquidation or other preferences that adversely affect the rights of shareholders. Debt financing, if available,
may involve agreements that include covenants limiting or restricting our ability to take specific actions, such
as incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research
programs or product candidates, or to grant licenses on terms that may not be favorable to us.
If we are unable to raise additional funds through equity or debt financings when needed, we may be required
to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant
rights to develop and market product candidates that we would otherwise prefer to develop and market
ourselves.
61ObsEva Annual Report 2019Financial Review The following table shows a summary of our cash flows for the periods indicated:
(In USD ,000)
Cash and cash equivalents at beginning of period
Net cash used in operating activities
Net cash used in investing activities
Net cash from / (used in) financing activities
Effect of exchange rates
Cash and cash equivalents at end of period
Operating Activities
2019
138,640
(90,611)
(5,046)
26,627
(240)
69,370
Year Ended December 31,
2018
2017
110,841
(63,941)
(271)
91,652
359
138,640
25,508
(55,715)
(5,285)
145,743
590
110,841
Net cash used in operating activities consists of net loss before tax adjusted for changes in net working
capital, or current assets less current liabilities, and for non-cash items such as depreciation and amortization,
as well as the value of share-based services.
During the year ended December 31, 2019, $90.6 million of cash was used for operating activities, primarily
as the result of our net loss before tax of $108.7 million, as adjusted for non-cash items and changes in net
working capital. Non-cash items amounted to $13.7 million and mainly consisted of share-based payments.
Changes in net working capital included primarily a $5.5 million increase in payables and a $2.6 million
decrease in accrued expenses, mainly due to the progress made in our various ongoing Phase 3 clinical trials
and the invoicing schedules of our main vendors.
During the year ended December 31, 2018, USD 63.9 million of cash was used for operating activities,
primarily as the result of our net loss before tax of USD 76.8 million, as adjusted for non-cash items and
changes in net working capital. Non-cash items amounted to USD 8.8 million and mainly consisted of share-
based payments. Changes in net working capital included primarily a USD 8.4 million increase in accrued
expenses, primarily due to the progress in our PRIMROSE 1 and 2 clinical trials (including the cost of supplies),
as well as a USD 4.3 million increase in prepaid expenses, mainly attributable to upfront payments made in
relation to our Phase 3 EDELWEISS 2 and 3 clinical trials announced late 2018.
Investing Activities
Net cash used in investing activities consists primarily of investments in leasehold improvements and furniture
and fixtures, as well as investments in intangible assets through the execution of in-licensing agreements or
the payment of development-based milestones to our licensors.
During 2019, net cash used in investing activities consisted primarily of a $5.0 million milestone payment to
Kissei made in connection with the initiation of the Phase 3 clinical program for linzagolix in endometriosis,
as well as purchases of furniture and fixtures for our offices in Switzerland and the United States.
During 2018, net cash used in investing activities consisted primarily of USD 0.2 million in purchases of
furniture and fixtures for our offices in Switzerland and the United States.
Financing Activities
Net cash from financing activities consists primarily of proceeds from the sale of equity securities and
borrowings under our credit facility with Oxford.
62ObsEva Annual Report 2019Financial Review
Cash flows from financing activities in 2019 mainly consisted primarily of the proceeds from the first tranche
of the Credit Facility Agreement with Oxford, as well as from the sales of treasury shares under our “at the
market” (ATM) program, which were partially offset by the principal elements of lease payments as well as
interest expense associated with our leases and debt instruments.
Cash flows from financing activities in 2018 mainly consisted of the net proceeds from our underwritten
public offering completed in June 2018 and our ATM program, which we established in May 2018.
C. Research and Development
For a discussion of our research and development activities, see sections “Business Update” and “Operating Results.”
D. Trend Information
For a discussion of trends, see sections “Operating Results” and “Liquidity and Capital Resources.”
E. OffBalance Sheet Arrangements
During the periods presented, we did not have, and we do not currently have, any off-balance sheet
arrangements, as defined in the rules and regulations of the U.S. Securities and Exchange Commission.
F. Tabular Disclosure of Contractual Obligations
The following table summarizes the contractual maturity profile of our on-balance sheet liabilities, including
interest payments, as of December 31, 2019:
(in thousands)
Less than
1 Year
1 to 3
Years
3 to 5
Years
More than
5 Years
Total
Trade and other payables
(7,873)
—
—
Borrowings
Lease liabilities
Total
(2,206)
(8,521)
(24,125)
(709)
(1,397)
(230)
(10,788)
(9,918)
(24,355)
—
—
—
—
(7,873)
(34,852)
(2,336)
(45,061)
Under our license agreements with Kissei and Merck Serono, we may be required to pay royalties in the future.
In addition, pursuant to the Kissei license and supply agreement, we have agreed to make aggregate milestone
payments of up to $63.0 million upon the achievement of specified developmental milestones, such as the
initiation of clinical trials and receipt of regulatory approvals, of which we had paid $10.0 million as of
December 31, 2019. With respect to any product we commercialize under the Kissei license and supply
agreement, we have agreed to make additional aggregate milestone payments of up to $125.0 million to
Kissei upon the achievement of specified commercial milestones.
We have not included any contingent payment obligation, such as milestone payments and royalties, in the
table above as the amount, timing and likelihood of such payments are not known.
We enter into contracts in the normal course of business with CROs for clinical trials, nonclinical studies,
manufacturing and other services and products for operating purposes. These contracts generally provide for
termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements
are not material.
63ObsEva Annual Report 2019Financial Review
Corporate
Governance
Corporate Governance
ObsEva’s articles of association (the “Articles”), organizational regulations (the “Organizational Regulations”)
and policies provide the basis for the principles of Corporate Governance. This Corporate Governance report
has been prepared in accordance with the SIX Swiss Exchange Directive on Information Related to Corporate
Governance effective as of October 1, 2014, as amended on April 1, 2016, July 1, 2017 and May 1, 2018.
1 – Group Structure and Shareholders.
Group Structure
ObsEva SA (“ObsEva”, or the “Company”) is a Swiss stock corporation (société anonyme) organized under the
laws of Switzerland (CHE-253.914.856) and formed in 2012 with an indefinite duration. ObsEva is registered
in Plan-les-Ouates, Geneva, Switzerland, with principal offices located at Chemin des Aulx, 12, 1228 Plan-les-
Ouates, Geneva, Switzerland.
ObsEva is the holding company of the ObsEva Group (the “Group”) which includes two fully-owned subsidiaries:
•
•
ObsEva USA, Inc., a limited company registered in Delaware, USA, with principal registered offices located
at One Financial Center, 24th Floor, Boston MA 02111, USA, and a share capital of USD 0.50 fully-owned
by ObsEva, and
ObsEva Ireland Ltd, a limited company registered in Ireland, with principal registered offices located at
Penthouse Floor, 5 Lapps Quay, Cork, Ireland, and a share capital of EUR 2.00 fully-owned by ObsEva.
The Group operates in one segment, which is the research and development of innovative women’s
reproductive, health and pregnancy therapeutics, with an aim to market and commercialize such therapeutics
depending on, in large part, the success of the development phases. The Chief Executive Officer (“CEO”) of
the Company reviews the consolidated statement of operations of the Group on an aggregated basis and
manages the operations of the Group as a single operating segment.
ObsEva’s shares have been listed on the Nasdaq Global Select Market (“Nasdaq”) since January 26, 2017 under
the ticker symbol OBSV and the CUSIP number H5861P103, and on the SIX Swiss Exchange (“SIX”) since July
13, 2018 under the ticker symbol OBSN, the ISIN number CH0346177709 and Swiss security number
34’617’770. On December 31, 2019, the market capitalization of ObsEva was USD 185,528,251 on the Nasdaq
and CHF 168,529,589 on the SIX.
65ObsEva Annual Report 2019 Significant Shareholders
As of December 31, 2019, based on published notifications to the SIX (unless otherwise indicated), the
following shareholders own 3% or more of the Company’s share capital:
Shareholder
Sofinnova Investments (3)
New Enterprise Associates 15 L.P.
ObsEva
Ernest Loumaye (4)
OrbiMed Advisors LLC
Venrock Healthcare Capital Partners (5)
Sofinnova Partners
Medicxi Ventures Management (Jersey) Limited
First Manhattan Co.
Number of shares
held (1)
4,749,623
4,586,563
3,975,516
3,099,098
2,605,531
2,383,903
1,846,649
1,570,000
1,508,966
% of capital
(2)
% of voting
rights (2)
9.9%
9.9%
9.5%
8.2%
6.4%
5.4%
4.9%
3.8%
3.2%
3.1%
9.5%
8.2%
6.4%
5.4%
4.9%
3.8%
3.2%
3.1%
(1) This table presents the shares held by the shareholders listed therein, or in respect of which the persons or entities
mentioned have been granted voting discretion. The derivative holdings held by such shareholders are not included.
(2) Based on the share capital registered in the Swiss Commercial Register as of December 31, 2019 (i.e. CHF 3,735,051
and 1/13th of a franc, divided into 48,555,664 registered shares).
(3) Beneficial owners of shares reported under Sofinnova Investments are Dr. Anand Mehra, Dr. James I. Healy and Dr.
Michael F. Powell, which are acting in concert and form an organized group within the meaning of Article 121 of the
Swiss Financial Market Infrastructure Act ("FMIA") pursuant to a shareholders' agreement.
(4) According to the Company’s share register, Dr. Ernest Loumaye held 3,099,098 shares, or 6.4% of the Company’s share
capital and voting rights, as of December 31, 2019.
(5) Beneficial owners of shares reported under Venrock Healthcare Capital Partners are Mr. Bong Koh and Mr. Nimish Shah,
which are acting in concert and form an organized group within the meaning of Article 121 FMIA pursuant to fund
agreements.
For a comprehensive list of notifications of shareholdings received during 2019 pursuant to article 120 and
seq. FMIA and its implementing ordinances, refer to the SIX website (https://www.six-exchange-
regulation.com/en/home/publications/significant-shareholders.html).
Cross Shareholdings
There are no cross-shareholdings in terms of capital or voting rights in excess of 5%.
2 – Capital Structure.
Capital
As of December 31, 2019, the Company’s share capital registered with the Swiss Commercial Register
amounted to CHF 3,735,051 and 1/13th of a franc, consisting of 48,555,664 registered shares (or "common
shares") with a par value of 1/13th of a Swiss franc each, and the issued share capital amounted to CHF
3,735,969 and 8/13th of a franc, consisting of 48,567,605 common shares with a par value of 1/13th of a
66ObsEva Annual Report 2019Corporate Governance Swiss franc each. As of December 31, 2019, the Company directly held 3,975,516 of its own shares, recorded
as treasury shares.
Authorized Share Capital
As of December 31, 2019, according to the Articles, the Board of Directors (the “Board”) is authorized at any
time until May 8, 2021 to increase the share capital by a maximum aggregate amount of CHF
1,513,981, which equates to approximately 40% of the existing share capital, through the issuance of
not more than 19,681,753 common shares, which will have to be fully paid-in, with a par value of 1/13th
of a Swiss franc each. Increases in partial amounts are permitted. The Board may issue new shares
also by means of underwriting or in any other manner by one or more banks and subsequent offer to
shareholders or third parties. The Board determines the type of contributions, the issue price, the time of
the issue, the conditions for the exercise of the pre-emptive rights, the allocation of pre-emptive rights which
have not been exercised, and the date on which the dividend entitlement starts. The Board is authorized
to permit, to restrict or to exclude the trading of pre-emptive rights.
If pre-emptive rights are granted, but not exercised, the Board shall use the relevant shares in the interest of
the Company.
The Board is authorized to withdraw or limit the pre-emptive rights of the shareholders, and to allocate them
to third parties or to the Company, in the event of use of the shares for the purpose of: (i) expanding the
shareholder base in certain capital markets or in the context of the listing, admission to official trading or
registration of the shares at domestic or international stock exchanges; (ii) granting an over-allotment option
(“greenshoe”) to one or several underwriters in connection with a placement of shares; (iii) share placements,
provided the issue price is determined by reference to market price; (iv) the participation of
employees, members of the Board or consultant of the Company or of one of its subsidiaries according to
one or several equity incentive plans adopted by the Board; (v) the acquisition of companies, company assets,
participations, the acquisition of products, intellectual property rights, licenses or new investment projects
or for public or private share placements for the financing and/or refinancing of such transactions; (vi)
for raising equity capital in a fast and flexible manner as such transaction would be difficult to carry out,
or could be carried out only at less favorable terms, without the exclusion of the pre-emptive rights of the
existing shareholders; or (vii) the acquisition of a participation in the company by a strategic partner
(including in the case of a public takeover offer).
Conditional Share Capital for Financing Purposes
As of December 31, 2019, according to the Articles, the Company’s share capital may be increased by a
maximum aggregate amount of CHF 1,302,581, which equates to approximately 35% of the existing share
capital, through the issuance of not more than 16,933,553 common shares, which will have to be fully
paid-in, with a par value of 1/13th of a Swiss franc each, by the exercise of option and conversion rights
which are granted in connection with bonds, similar debt instruments, loans or other financial market
instruments or contractual obligations of the Company or one of its subsidiaries, and/or by the exercise
of option rights issued by the Company or one of its subsidiaries (the “Financial Instruments”). The pre-
emptive rights of shareholders are excluded. The right to subscribe for the new shares shall be held by
the holders of the Financial Instruments. The Board determines the terms of the Financial Instruments.
When issuing Financial Instruments, the Board has the right to limit or exclude the right of shareholders to
subscribe for the Financial Instruments by preference: a) for the purpose of financing or refinancing the
acquisition of enterprises, divisions thereof, or of participations, products, intellectual property rights,
licenses, cooperations or of newly planned investments of the Company; b) if the issuance is made on
domestic or international capital markets, including by means of private placements; or c) for purposes of an
underwriting of the Financial Instruments by a banking institution or a consortium of banks with subsequent
offering to the public.
67ObsEva Annual Report 2019Corporate Governance To the extent that the right of shareholders to subscribe for the Financial Instruments by preference is
excluded, (i) the Financial Instruments shall be placed at market conditions; (ii) the exercise period, the
conversion period or the exchange period of the Financial Instruments shall not exceed 10 years as of the
date of the issue; and (iii) the conversion price, the exchange price or other exercise price of the Financial
Instruments shall be determined by reference to market prices.
Conditional Share Capital for Equity Plans
As of December 31, 2019, according to the Articles, the Company’s share capital may be increased by a
maximum aggregate amount of CHF 447,096 and 6/13th of a franc, which equates to approximately 12% of
the existing share capital, through the issuance of not more than 5,812,254 common shares, which will have
to be fully paid-in, with a par value of 1/13th of a Swiss franc each, by issuance of shares upon the exercise
of options or pre-emptive rights thereof, which have been issued or granted to employees, members of the
Board or consultant of the Company or of one of its subsidiaries under the terms of one or more equity
incentive plans or regulations adopted by the Board. The pre-emptive rights of shareholders are excluded.
The Board determines the terms of the equity incentive plans or regulations and of the issuance of the shares.
Changes in Capital
Before its Initial Public Offering (“IPO”) on the Nasdaq in January 2017, the Company had three categories of
shares which were common shares, preferred shares and non-voting shares. Effective upon the IPO, the
preferred and non-voting shares were converted into common shares. Since then, the Company has had only
common shares.
On January 25, 2017, the Company executed its IPO on the Nasdaq and all existing preferred shares and non-
voting shares were converted into common shares at a 1 for 1 ratio.
On January 30, 2017, upon completion of the IPO, the Company issued 6,450,000 common shares at a
subscription price of USD 15.00 per share and a par value of 1/13th of a Swiss franc per share.
On October 13, 2017, the Company completed a private placement with institutional investors and issued
7,500,000 common shares at a subscription price of USD 8.00 per share and a par value of 1/13th of a Swiss
franc per share.
On March 16, 2018, the Company issued 3,499,990 common shares at par value of 1/13th of a Swiss franc per
share. The shares were subscribed by the Company and held as treasury shares. On May 17 and 25, 2018, the
Company sold 1,000,851 and 600,000 of these treasury shares, respectively, at a price of USD 12.50 per share.
On June 22, 2018, the Company completed an underwritten public offering and issued 4,750,000 common
shares at a subscription price of USD 15.39 per share and a par value of 1/13th of a Swiss franc. Subsequent
to the initial closing of this follow-on offering and the exercise of an overallotment (i.e. "greenshoe") option
granted in this context, the Company issued an additional 306,721 common shares on July 19, 2018, at a
subscription price of USD 15.39 per share and a par value of 1/13th of a Swiss franc.
On July 18, 2019, the Company issued 3,064,048 common shares at par value of 1/13th of a Swiss franc per
share. The shares were fully subscribed for by the Group and held as treasury shares.
In 2019, the Company sold a total of 691,133 treasury shares at an average price of USD 5.14 per share.
In 2018 and 2019, 95,885, respectively 26,420 options granted to employees under equity incentive plans of
the Company have been exercised and 95,885, respectively 26,420 new shares have been issued from the
conditional capital for equity plans at par value of 1/13th of a Swiss franc per share. As of the reporting date,
changes to articles (5) Par Value and Number of Shares and (5c) Conditional Share Capital for Equity Plans in
the Articles have not been recorded yet with the Swiss Commercial Register for 11,941 of these options and
shares to reflect their exercises and issuances.
68ObsEva Annual Report 2019Corporate Governance For further information on changes in capital in 2019, 2018 and 2017, including changes in reserves, refer to
the consolidated statements of changes in equity as well as to note 13 of the consolidated financial statements
on pages 90 and 109, respectively, of this annual report.
Shares and Participation Certificates
ObsEva has one class of shares, which is common shares, i.e. registered shares, with a par value of 1/13th of
a Swiss franc per share. Each share is indivisible towards the Company, which only recognizes one legal owner
for each share. Each share confers the right to a portion of the profit resulting from the balance sheet and the
proceeds of liquidation, in proportion to the payments made to pay-in the share capital. Each share conveys
the right to one vote.
The Company’s shares are uncertificated securities (in terms of the Swiss Code of Obligations) and
intermediated securities (in terms of the Swiss Federal Intermediated Securities Act). Any shareholder
registered in the Company’s share register may request from the Company a statement his/her common
shares at any time. Shareholders are not entitled to request printing and delivery of certificates. However, the
Company may, at any time and at its option: (i) print and deliver certificates for shares; (ii) withdraw
uncertificated shares from the custodian system where they have been registered; and (iii) with the consent
of the shareholder, cancel issued certificates that are returned to the Company. If the Company decides to
print and deliver share certificates, the share certificates shall bear the signatures of two duly authorized
signatories of the Company, at least one of which shall be member of the Board. These signatures may be
facsimile signatures.
The Company has no participation certificates.
Dividend-Right Certificates
The Company has no dividend-right certificates.
Limitations on Transferability and Nominee Registrations
The Articles do not contain clauses limiting the transferability of the Company's shares and do not provide
restrictions to the registration of nominee shareholders.
Convertibles Bonds and Options
As of December 31, 2019, the Company has no convertible bonds outstanding, and has 4,626,385 options
issued under the Company’s equity incentive plans outstanding, corresponding to an amount of CHF 355,875
and 10/13th of a franc of share capital, and equating to approximately 10% of the existing share capital. Such
options have a 1:1 subscription ratio, vest under a 3-year or 4-year vesting schedule, have a 10-year expiration
term and have a strike price in U.S. Dollars equivalent to the closing share price of OBSV on Nasdaq at grant
date. For information on the equity incentive plans operated by the Company and details of grants made and
options outstanding as of December 31, 2019, refer to note 20 of the consolidated financial statements on
page 114 of this annual report.
3 – Board of Directors.
The following table sets forth the name, nationality, year joined the Board, terms of office, position and
directorship term, as well as committee memberships, of each member of the Board, followed by a short
description of each member’s business experience, education and activities. The directors are appointed
individually, for one-year terms, which expire on the occasion of each annual general meeting, and can be re-
elected indefinitely. Accordingly, the terms of the directors set forth below will expire at the closing of the
2020 annual general meeting of shareholders. All members of the Board, to the exception of Dr. Ernest
Loumaye, Co-Founder and CEO of the Company, are non-executive members. None of these non-executive
members have held management roles in the Group in the three financial years preceding the period under
review, nor have had significant business connections with any entity of the Group.
69ObsEva Annual Report 2019Corporate Governance Name
Frank Verwiel
Ernest Loumaye
Annette Clancy
Barbara Duncan
Ed Mathers
Jim Healy
Rafaèle Tordjman
Jacky Vonderscher
Nationality
Dutch
Belgian
British
American
American
American
French
French
First
Appointment
2016
2012
2013
2016
2016
2013
2013
2013
Board
Chair
Member, CEO
Member
Member
Member
Member
Vice-Chair
Member
AC (1)
Member
-
-
Chair
Member
-
-
-
CNCGC (2)
-
-
Chair
-
Member
Member
Member
-
(1) Audit Committee
(2) Compensation, Nominating and Corporate Governance Committee
Frank Verwiel has served as a member of the Company's Board since
March 2016 and has served as the chairperson of the Board since
December 2016. He currently serves as a member of the board of
directors of the public companies Bavarian Nordic A/S, a
biotechnology company and Intellia Inc., also a biotechnology
company. From 2005 to 2014, Dr. Verwiel held senior leadership
functions at Aptalis Pharma Inc., including President, Chief Executive
Officer and member of the board of directors. Dr. Verwiel previously
served on the board of directors of InterMune, Inc. from 2012 to
2014, on the board of Avexis, Inc., a biotechnology company from
2016 to 2018, and on the board of Achillion Pharmaceuticals, Inc., a
pharmaceutical company, from 2014 to 2020. Dr. Verwiel was also a
director of the Biotechnology Industry Organization from 2013 to
2014. Dr. Verwiel received his M.D. from Erasmus University,
Rotterdam, The Netherlands, and his M.B.A. from INSEAD in
Fontainebleau, France.
Ernest Loumaye is a Co-Founder of the Company and has served as
its Chief Executive Officer and member of the Board since its
inception in November 2012. Since September 2019, he is also a
member of the board of directors at AVA, a Zurich-based company
active in all areas of women's health. Previously, Dr. Loumaye co-
founded PregLem, a Swiss specialty biopharmaceutical company sold
to Gedeon Richter Plc., and served as its Chief Executive Officer and
member of the board of directors from 2006 to October 2012. From
2011 to 2016, Dr. Loumaye served as chairperson and member of the
board at Genkyotex, a public biopharmaceutical company developing
treatments against various diseases based on enzyme inhibition. Dr.
Loumaye holds an M.D. and a Ph.D. from University of Louvain,
Belgium, with a specialization in Obstetrics and Gynaecology.
70ObsEva Annual Report 2019Corporate Governance Annette Clancy has served as a member of the Board since November
2013 and served as its Chairperson from November 2013 to
December 2016. From 2009 to 2017, Ms. Clancy has been a senior
advisor at Frazier Healthcare Ventures, a U.S.-based healthcare
venture capital firm. Prior to joining Frazier Healthcare Ventures,
Ms. Clancy held various senior positions at GlaxoSmithKline, a global
healthcare company. Ms. Clancy is currently serving as member of
the board of directors of Swedish Orphan Biovitrum AB since May
2014, a public biopharmaceutical company, as well as Chairperson of
the Board of Directors of ENYO Pharma SA since June 2016, a
European biotech company developing innovative therapeutics for
severe medical needs. From June 2014 to September 2019, she was
a board member of Lysogene, a public biopharmaceutical company
developing treatments against central nervous system and genetic
diseases. Ms. Clancy also served as member of the boards of directors
of Silence Therapeutics, from 2008 to 2012, and Clavis Pharma, from
2010 to 2013, and Chairperson of the board of directors of Genable
Therapeutics, from 2013 to 2016. Ms. Clancy holds a B.Sc. in
Pharmacology from Bath University and a series of American
Management Association diplomas in finance and marketing.
Intercept Pharmaceuticals,
Barbara Duncan has served as a member of the Board since December
2016. From May 2009 through June 2016, Ms. Duncan served as the
Chief Financial Officer of
Inc., a
biopharmaceutical company. Prior to joining Intercept Pharmaceuticals,
Inc., Ms. Duncan served as the Chief Financial Officer and then Chief
Executive Officer of DOV Pharmaceutical, Inc., or DOV, from 2001 to
April 2009. Prior to joining DOV, Ms. Duncan served as a vice president
of Lehman Brothers Inc. in its corporate finance division from August
1998 to August 2001. From September 1994 to August 1998,
Ms. Duncan was an associate and director at SBC Warburg Dillon Read,
Inc. in its corporate finance group. Ms. Duncan serves on the board of
directors of Adaptimmune Therapeutics plc
June
2016), Immunomedics, Inc. (since March 2019), Jounce Therapeutics,
Inc. (since May 2016) and Ovid Therapeutics Inc. (since June 2017),
publicly traded biopharmaceutical companies. Ms. Duncan also served
as a member of the board of directors of Innoviva Inc. (from November
2016 to April 2018) and as a member of the board of directors of Aevi
Genomic Medicine, Inc. (from July 2015 to February 2020). Ms. Duncan
received her B.S. from Louisiana State University in 1985 and her M.B.A.
from the Wharton School, University of Pennsylvania, in 1994.
(since
71ObsEva Annual Report 2019Corporate Governance Ed Mathers has served as a member of the Board since February
2016. Mr. Mathers is a Partner of NEA since August 2008 and is
focused on biotechnology and specialty pharmaceuticals
investments. He is a director of Liquidia Technologies (Nasdaq:
LQDA), Ra Pharmaceuticals (Nasdaq: RARX – Chairman), Rhythm
Pharmaceuticals, Envisia Therapeutics, Synlogic (Nasdaq: SYBX),
Lumos Pharma, Amplyx Pharmaceuticals, Senti Biosciences,
Inozyme, Reneo Pharma, Akouos (since 2017), Trevi Therapeutics
and Mirium Pharmaceuticals (since 2018). Previously he was a board
member of Lumena (sold to Shire), Ziarco (sold to Novartis), Motus
Therapeutics (sold to Allergan), Plexxikon (sold to Daiichi Sankyo),
Intarcia, Satori Pharmaceuticals, Southeast Bio, MedImmune, LLC,
and the Biotechnology Industry Organization (BIO). Prior to joining
NEA, Mr. Mathers most recently served as Executive Vice President,
Corporate Development and Venture, at MedImmune, Inc. Before
joining MedImmune in 2002, he was Vice President, Marketing and
Corporate Licensing and Acquisitions at Inhale Therapeutic Systems.
Mr. Mathers spent 15 years at Glaxo Wellcome, Inc. (GlaxoSmithKline),
where he held sales and marketing positions of increasing
responsibility. He earned his bachelor's degree in chemistry from
North Carolina State University.
James I. Healy has served as a member of the Board since August
2013. Dr. Healy has been a general partner at Sofinnova Investments,
Inc. (previously Sofinnova Ventures, Inc.) since 2000. Prior to June
2000, Dr. Healy held various positions at Sanderling Ventures, Bayer
Healthcare Pharmaceuticals (as successor to Miles Laboratories) and
ISTA Pharmaceuticals, Inc. Dr. Healy is currently on the board of
directors of Ascendis Pharma A/S (since 2014), Coherus BioSciences,
Inc. (since 2014), Iterum Therapeutics plc (since 2015), Natera, Inc.
(since 2014), NuCana plc (since 2014), Y-mAbs Therapeutics (since
2017) and several private companies. Previously, Dr. Healy served as
a board member of Amarin Corporation plc (from 2008 to 2014),
Anthera Pharmaceuticals (from 2006 to 2014), Auris Medical
Holdings AG (from 2013 to 2017), Durata Therapeutics, Inc. (from
2009 to 2012), Edge Therapeutics, Inc. (from 2015 to 2018),
Hyperion Therapeutics, Inc. (from 2007 to 2012), InterMune, Inc.
(from 1999 to 2014), KaloBios Pharmaceuticals, Inc. (from 2001 to
2014), Movetis NV (from 2006 to 2009) and several private
companies. In 2011, Dr. Healy won the IBF Risk Innovator Award and
was named as one of the industry’s top leading Life Science investors
in 2013 by Forbes Magazine. Dr. Healy holds a B.A. in Molecular
Biology and a B.A. Scandinavian Studies from the University of
California at Berkeley, and an M.D. and Ph.D. in Immunology from
Stanford University School of Medicine.
72ObsEva Annual Report 2019Corporate Governance Rafaèle Tordjman has served as a member of the Company's Board
since August 2013. Since April 2017, Dr. Tordjman is founder and
CEO of Jeito SAS, a consulting company. Moreover, Dr. Tordjman
serves on the board of directors of the public company Nucana, a
clinical-stage pharmaceutical company. Previously, Dr. Tordjman
joined the French based venture capital firm Sofinnova Partners in
2001 until March 2017 where she served as Managing Partner
specializing in life sciences investments. Dr. Tordjman has also
served on the boards of directors at several life sciences companies
including, DBV Technologies SA (from 2005 to 2013), a French
publicly traded company specializing in allergy therapies, Ascendis
Pharma A/S (from 2007 to 2017), Flexion Therapeutics, Inc. (from
2009 to 2014), publicly traded companies in clinical-stage
pharmaceuticals, PregLem (from 2006 to 2010), a company
specialized in reproductive female medicine, Lysogene (from 2017 to
2018), a public biopharmaceutical company developing treatments
against central nervous system and genetic diseases, Medday
Pharmaceuticals (from 2013 to 2017), a French company specializing
in therapies against neurodegenerative diseases, and ENYO Pharma
SA (from 2015 to 2017), a clinical stage biopharmaceutical company.
Previously, Dr. Tordjman was a research scientist at the Institut
National de la Santé et de la Recherche Médicale (INSERM) in Cochin
Hospital, Paris, France. Dr. Tordjman has also practiced as a medical
doctor, specializing in clinical hematology and internal medicine.
Dr. Tordjman received an M.D. and completed a fellowship in
hematology and internal medicine at the Paris University Hospitals,
France. She received a Ph.D. in hematopoiesis and angiogenesis from
and completed a post-doctoral fellowship in immunology at the
University of Paris VII.
Jacky Vonderscher has served as a member of the Company's Board
since October 2013. Since September 2013, Dr. Vonderscher has
served as the Chief Executive Officer of Vonderscher & Co GmbH, a
consultancy company. Dr. Vonderscher has also served as the Chief
Executive Officer of ENYO Pharma SA, a biopharmaceutical company,
since July 2016. Dr. Vonderscher serves as a member of the governing
board of IMI (Innovative Medicines Initiative), a public-private
partnership. He is also a member of the board of LyonBiopole, a
business association and of several private companies. From January
2014 until June 2016, Dr. Vonderscher has served as the President of
ENYO Pharma SA. Prior to joining ENYO Pharma SA, Dr. Vonderscher
served as a Senior Vice President of Hoffmann-La-Roche Ltd from
2008 to December 2013. From 1979 to 2008, Dr. Vonderscher held
a variety of senior positions at Novartis Pharma AG. Dr. Vonderscher
holds an engineering degree in Biological Chemistry from the
National Institute of Applied Sciences (INSA), Lyon, France, and a
Ph.D. in Biochemistry from the University of Geneva, Switzerland.
73ObsEva Annual Report 2019Corporate Governance Restrictions on Mandates held outside the Company
The Articles provide certain restrictions to the number of mandates that members of the Board may have in
the supreme governing bodies of legal entities registered in the Swiss commercial register or similar foreign
register. As such no member of the Board may hold more than six additional mandates in the highest
supervisory or management bodies of third party companies whose equity securities are listed on a stock
exchange and ten additional mandates in the highest management bodies of other companies. The following
mandates are not subject to these limitations: (i) mandates in companies which are controlled by the Company
or which control the Company; and (ii) mandates in the highest supervisory bodies of associations, charitable
organizations, foundations, trust and employee welfare foundations. No member of the Board shall hold more
than ten such mandates.
Internal Organizational Structure
Responsibilities of the Board
The Board is entrusted with the ultimate direction of the Company and the supervision of management. The
Board’s duties include:
(i)
the ultimate supervision of the Company and the issuing of all necessary directives;
(ii)
the establishment of the Company's organization, including the enactment and amendment of the
Organizational Regulations;
(iii)
the structuring of the Company's accounting, financial control and financial planning systems, including
the approval of the annual budget;
(iv)
(v)
the appointment and removal of the persons entrusted with the management and the representation of
the Company, as well as the determination of their signatory authority
the ultimate supervision of the persons entrusted with the management of the Company, in particular
with regard to compliance with the law, the articles of association and the Company's internal regulations
and policies;
(vi)
the preparation of the annual report as well as the preparation of the general meeting of shareholders
and the implementing of its resolutions;
(vii)
the notification of the court in the event that the Company is over indebted;
(viii) the other powers and duties that Swiss law requires to be assumed or discharged by the Board; and
(ix)
the adoption of a code of business conduct and ethics for the Company.
Additionally, the Board keeps the power to resolve itself on the following duties:
(x)
approve any loans by the Company to executive officers (to the extent permitted by applicable law and
the Articles) and loans by the Company to employees that are not executive officers, where the amount
of any such loan exceeds $10,000, such duty being also delegated to the compensation, nominating
and corporate governance committee: and
(xi) administer the Company’s share and equity incentive plans, such duty being also delegated to the
compensation, nominating and corporate governance committee and subject to further delegation to
the executive committee under certain circumstances, as described in the Compensation Report on page
147 of this annual report.
The Board may also pass resolutions on all matters not reserved to the general meeting of shareholders or
another corporate body by law or the Articles.
74ObsEva Annual Report 2019Corporate Governance Working method of the Board
The Board of the Company is composed of not more than eight members. The Chairman of Board is appointed
by the general meeting of shareholders for a term of office expiring after completion of the subsequent annual
general meeting of shareholders.
The meetings of the Board are called and chaired by the Chairman as often as business requires, and may be
held by telephone or videoconference. At the first meeting following the annual general meeting of
shareholders, the Board appoints one or more Vice-Chairperson and a Secretary. It is not mandatory that the
Secretary be a member of the Board. The notice convening a Board meeting is made in writing (including via
telefax or email) and mentions the day, the time and the place of the meeting, as well as its agenda. The
relevant documentation relating to the forthcoming meeting is delivered reasonably in advance. Except in
case of emergency, resolutions on items that were not mentioned in the agenda may only be taken if all
members of the Board have been consulted. Resolutions of the Board are made with a majority of the members
present at a meeting. No quorum requirement applies for resolutions regarding the completion of a previously
decided capital increase and the amendment of the Articles evidencing such capital increase.
The discussions and resolutions are kept in minutes signed by the Chairman and the Secretary. Resolutions
may also be made by written consent to a proposed motion, provided no member requests that it be debated
orally. Such resolutions by written consent shall be entered in the minutes of the next meeting.
The Board meets at least four times per year, on a quarterly basis, for regular face-to-face sessions. In 2019,
the Board held four meetings in person, which lasted on average five hours. A vast majority of the Board
Members were present at each Board meeting and teleconference. Members of the Executive Committee are
usually invited to attend the meetings of the Board but are required to leave them for the non-Executive
session that concludes every meeting.
Committees of the Board of Directors
The Board has two established committees: an audit committee and a compensation, nominating and
corporate governance (“CNCG”) committee. Both committees present reports to the Board on their activities
at every regular session of the Board.
Audit Committee
The audit committee, which consists of Barbara Duncan, Ed Mathers and Frank Verwiel, assists the Board in
overseeing the accounting and financial reporting processes and the audits of the Company’s financial
statements. In addition, the audit committee is directly responsible for the compensation, retention and
oversight of the work of the auditors who are appointed by the shareholders pursuant to Swiss law.
Ms. Duncan serves as chair of the audit committee. The audit committee consists exclusively of members of
the Board who are financially literate, and Ms. Duncan is considered an “audit committee financial expert” as
defined by the SEC.
The audit committee is governed by a charter and is responsible, among other things, for:
(i)
recommending an auditor for submission to the shareholders;
(ii)
the compensation, retention and oversight of any auditor or accounting firm engaged for the purpose
of preparing or issuing an audit report or performing other audit, review or attest services;
(iii) pre-approving the audit services and non-audit services to be provided by the independent auditor before
the auditor is engaged to render such services;
(iv)
(v)
reviewing and discussing with the independent auditor its responsibilities under generally accepted
auditing standards, the planned scope and timing of the independent auditor’s annual audit plan(s) and
significant findings from the audit
obtaining and reviewing a report from the independent auditor describing all relationships between the
independent auditor and the Company consistent with the applicable requirements regarding the
independent auditor’s communications with the audit committee concerning independence;
(vi)
confirming and evaluating the rotation of the audit partners on the audit engagement team as required
by law;
75ObsEva Annual Report 2019Corporate Governance (vii)
reviewing with management and the independent auditor, in separate meetings whenever the audit
committee deems appropriate, any analyses or other written communications prepared by the
management or the independent auditor setting forth significant financial reporting issues and
judgments made in connection with the preparation of the financial statements, including analyses of
the effects of alternative IFRS methods on the financial statements, and other critical accounting policies
and practices;
(viii) reviewing, in conjunction with the chief executive officer and the chief financial officer, the Company’s
disclosure controls and procedures;
(ix) establishing procedures for the receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous
submission by the employees of concerns regarding questionable accounting or auditing matters; and
(x)
approving or ratifying any related party transaction (as defined in the company’s related party
transaction policy) in accordance with the Company’s related party transaction policy.
The audit committee meets as often as it determines is appropriate to carry out its responsibilities, but in any
event meets at least four times per year. In 2019, the audit committee held four meetings, which lasted on
average one to two hours. A vast majority of the audit committee members were present at each audit
committee meeting. The Company’s auditors are invited and systematically attend the audit committee
meetings. The Chief Financial Officer and other senior members of the financial team are invited to attend the
meetings of the audit committee too, but are required to leave them for the non-Executive session that
concludes every meeting.
Compensation, Nominating and Corporate Governance Committee
The CNCG committee consists of four members: Annette Clancy, Rafaèle Tordjman, James I. Healy and Ed
Mathers. The chair of the CNCG committee is Ms. Clancy. The primary purpose of the CNCG committee is to
oversee the Company’s compensation policies, plans and programs and to review and determine the
compensation to be paid to the executive officers, directors and other senior management, as appropriate.
The Company is subject to the Swiss Ordinance against excessive compensation in listed stock corporations,
known as the “Minder” rules. As a result of the Minder rules, the members of the CNCG committee must be
elected by the shareholders.
In addition, the CNCG committee is also responsible for director nominations as well as reviewing and making
recommendations to the Board, if required, on the Company’s corporate governance framework and
guidelines.
The CNCG committee has the responsibility to, among other things:
(i)
review and approve, or recommend that the Board approves the compensation of the executive officers
based on the aggregate compensation approved by the shareholders;
(ii)
(iii)
(iv)
(v)
(vi)
review and approve, or recommend that the Board approves the compensation of the members of the
Board based on the aggregate compensation approved by the shareholders;
review and approve, or recommend that the Board approves the terms of compensatory arrangements
with the executive officers;
administer the Company’s share and equity incentive plans, subject to further delegation to the executive
committee under certain circumstances, as described in the Compensation Report on page 147 of this
annual report;
select independent compensation consultants and assess whether there are any conflicts of interest with
any of the committees’ compensation advisers;
review and approve, or recommend that the Board approves incentive compensation and equity plans,
and any other compensatory arrangements for the executive officers and other senior management, as
appropriate;
76ObsEva Annual Report 2019Corporate Governance (vii)
review and establish general policies relating to compensation and benefits of the employees and
reviewing the Company’s overall compensation philosophy;
(viii) identify, evaluate and select, or recommend that the Board approves, nominees for election to the Board;
(ix) evaluate the performance of the Board and of individual directors;
(x)
consider and make recommendations to the Board regarding the composition of its committees;
(xi)
review developments in corporate governance practices;
(xii) evaluate the adequacy of the Company’s corporate governance practices and reporting;
(xiii) review management succession plans;
(xiv) approve any loans by the company to executive officers (to the extent permitted by applicable law and
the Articles) and loans by the company to employees that are not executive officers, where the amount
of any such loan exceeds $10,000;
(xv) develop and make recommendations to the Board regarding corporate governance guidelines and
matters; and
(xvi) oversee periodic evaluations of the Board’s performance.
The CNCG committee meets as often as it determines is appropriate to carry out its responsibilities. In 2019,
the CNCG committee held five meetings, which lasted on average one hour. A vast majority of the CNCG
committee members were present at each CNCG committee meeting. The Chief Executive Officer is invited to
attend the meetings of the CNCG committee but is required to leave them for the non-Executive session that
concludes every meeting.
Definition of Areas of Responsibility
Subject to responsibilities reserved to the Board and its committees, as set forth in this section 3 of this
Corporate Governance report, and except to the extent required by law, the Articles or the Organizational
Regulations, the Board has delegated all areas of management of the Group’s business to the Executive
Committee.
Information and Control Measurements vis-à-vis the Executive Committee
The Board elects the members and appoints the head of the Executive Committee (the CEO), and ensures that
it receives sufficient information from the CEO to perform its supervisory duty and to make the decisions that
are reserved to the Board. At each Board meeting the Board receives reports from the CEO on the status of
finance, business, research and development. These reports focus on the main risks and opportunities related
to the Group. In addition, the Board is provided with other ad hoc reports on significant matters related to the
Group’s operations, as business requires, as well as with monthly financial reporting and unaudited
consolidated financial statements for the Company on a quarterly basis. The Board receives a written report
from the auditors on the results of the audit which includes any findings with respect to internal control risks
arising as a result of the audit procedures.
For further information on controls measures, refer to section 9 of this corporate governance report.
77ObsEva Annual Report 2019Corporate Governance 4 – Executive Committee.
In accordance with the Articles and the Organizational Regulations, the Board has delegated the operational
management to the Executive Committee which conducts the operational management of the Company
pursuant to the Organizational Regulations and reports to the Board on a regular basis.
The following table sets forth the name, nationality, position and year of appointment, of each member of the
Executive Committee, followed by a short description of each member’s business experience, education and activities.
Name
Nationality
Function
Appointment
Term
Ernest Loumaye
Belgian
Chief Executive Officer
Tim Adams
American
Chief Financial Officer
Elizabeth Garner
American
Chief Medical Officer
Jean-Pierre Gotteland
French
Chief Scientific Officer and Head of R&D
Wim Souverijns
Elke Bestel
Ben T.G. Tan
Belgian
German
Dutch
Chief Commercial Officer
V.P. Head of Drug Safety & P.V.
V.P. Commercial & B.D.
Fabien de Ladonchamps
French
V.P. Corporate Affairs & Finance
2013
2017
2019
2015
2018
2015
2014
2013
-
-
-
-
-
2019 (1)
2019 (1)
2019 (1)
(1) On September 11, 2019, the company announced changes to the composition of its executive committee with the step-
down of Elke Bestel, Vice-President, Head of Drug Safety and Pharmacovigilance, Ben T. G. Tan, Vice-President Commercial
and Business Development and Fabien de Ladonchamps, Vice-President Corporate Affairs and Finance.
Ernest Loumaye is a Co-Founder of the Company and has served as
its Chief Executive Officer and member of the Board since its
inception in November 2012. For further information on Dr. Loumaye
biographic details refer to section 3 of this corporate governance
report.
Timothy Adams has served as Chief Financial Officer since January
2017. Mr. Adams has served as a member of the board of directors
of Model N, a public revenue management solutions company, since
December 2016 and Prevail Therapeutics since June 2019. Mr. Adams
has also served as a member of the board of directors of ABILITY
Network, a private healthcare technology company, from November
2014 to April 2018. From June 2014 to September 2016, Mr. Adams
served as the Chief Financial Officer of Demandware, Inc. Mr. Adams
served as Senior Vice President and Chief Financial Officer of
athenahealth, Inc. from January 2010 to June 2014. Previously, from
2008 to 2010, Mr. Adams served as Chief Investment Officer of
Constitution Medical Investors, Inc., a private investment firm
focused on health-care-sector-related acquisitions and investments,
as well as Senior Vice President of Corporate Strategy at Keystone
Dental, Inc., a provider of dental health products and solutions.
Earlier in his career, Mr. Adams was Chief Financial Officer at a
78ObsEva Annual Report 2019Corporate Governance number of other publicly traded companies. Mr. Adams began his
career in public accounting at PricewaterhouseCoopers LLP, formerly
Price Waterhouse, and is a Certified Public Accountant. Mr. Adams
obtained a B.S. from Murray State University and an M.B.A. from
Boston University.
Elizabeth Garner has served as the Company’s Chief Medical Officer
since July 2019. Dr. Garner holds M.D. and M.P.H. degrees from the
Harvard Medical School and Harvard School of Public Health and
received board certification
in both general Obstetrics and
Gynecology and Gynecologic Oncology. She brings 12 years of
pharmaceutical industry experience in women’s health where she has
occupied roles of increasing responsibility. Most recently, Dr. Garner
served as Chief Medical Officer, Senior Vice President Clinical
Development at Agile Therapeutics, Inc., in Princeton, New Jersey.
Previously, she was Vice President, Medical Affairs, Women’s Health
and Preventive Care at Myriad Genetics Laboratories, and Senior
Medical Director, Women’s Health at Abbott Laboratories, where she
was the Clinical Lead of the endometriosis program for elagolix
(Orilissa®), which is now FDA-approved.
Jean-Pierre Gotteland has served as Chief Scientific Officer from
September 2015 to March 2017, and as Chief Scientific Officer and
Head of Research and Development since April 2017. From May 2007
to August 2015, Mr. Gotteland worked at PregLem SA, initially as the
Vice President of Non-Clinical Development and CMC from 2007 to
2012 and as the Chief Development Officer from January 2012 to
August 2015. From 1998 to 2007, Mr. Gotteland held several
research and development positions at Serono (subsequently Merck
Serono). From 1991 to 1998, Mr. Gotteland served as medicinal
chemistry group leader at Pierre Fabre Medicament. Mr. Gotteland
holds a Ph.D. in Organic Chemistry from the University Claude
Bernard, Lyon, France, and an Engineering Diploma from Ecole
Superieure de Chimie Industrielle of Lyon, France.
Wim Souverijns has served as Chief Commercial Officer since
November 2018. Prior to joining ObsEva, Mr. Souverijns spent 11
years, from 2007 to 2018, at Celgene where he contributed to the
successful built out of Celgene’s product portfolio in diverse strategic
(European & Global Marketing), as well as operational (General
Manager for the Nordics and the UK & Ireland) roles. From 2016
through 2018, he served as the head of Global Marketing for
Hematology & Oncology out of Summit, New Jersey. He developed a
broad pharmaceutical background through various international
assignments at PwC Consulting, from 1999 to 2003, and in different
market access leadership roles at Amgen, from 2003 to 2007, both
in the European headquarter in Luzern, Switzerland, as well as at the
global level out of Thousand Oaks, California. He started of his career
working for CTG, from 1997 to 1999, an IT services company, in
Brussels, Belgium. Mr. Souverijns studied as a bio-engineer at the KU
Leuven, Belgium, and obtained a PhD from the same institute.
79ObsEva Annual Report 2019Corporate Governance Elke Bestel has been as a member of the Executive Committee until
September 2019. She has served as Vice President Head of Drug
Safety & Pharmacovigilance since July 2019 and previously served as
Chief Medical Officer and Head of Pharmacovigilance from September
2015 to July 2019. Prior to joining the Company, Dr. Bestel worked at
PregLem SA, initially as a Global Project Director from 2008 to 2009,
then as the Vice President Clinical Operations from 2009 to August
2012 and finally as the Chief Medical Officer from September 2012
to August 2015. Dr. Bestel studied at the Georg-August University
Medical School of Göttingen, Germany and the Ludwig-Maximilian
University Medical School of Munich, Germany. Dr. Bestel holds an
M.D. from the University of Göttingen.
Ben T.G. Tan has been as a member of the Executive Committee until
September 2019. He has served as Vice President of Commercial &
Business Development since September 2014. Prior to joining the
Company, Mr. Tan worked at Evolva SA, as Director, Business
Development Pharmaceuticals from April 2012 to March 2014. Prior
to joining Evolva SA, Mr. Tan worked at Novartis as Global Program
Strategic Director, Cardiovascular and Metabolic Diseases from 2008
to 2011. Prior to joining Novartis, Mr. Tan worked at Speedel as Head
of Business Development & Licensing from 2001 to 2008. Prior to
joining Speedel, Mr. Tan worked at Devgen, as Executive Vice
President of Business from 2000 to 2001. Prior to joining Devgen,
Mr. Tan worked at Organon, as Global Head of Licensing from 1997
to 2000. Prior to joining Organon, Mr. Tan worked at Roche, as Global
Business Leader/International Product Manager from 1994 to 1997,
and at Roche Netherlands, as Head of Medical Marketing from 1990
to 1993. Mr. Tan holds an M.S. from the Vrije Universiteit Amsterdam.
Fabien Lefebvre de Ladonchamps has been as a member of the
Executive Committee until September 2019. He has served as Vice
President Corporate Affairs and Finance since January 2019 and
previously served as Vice President of Finance from January 2016 to
December 2018 and Finance Director from October 2013 to
December 2015. Prior to joining the Company, Mr. de Ladonchamps
worked at Addex Therapeutics, initially as Chief Accountant from
2008 to 2009 and then as Group Financial Controller from 2010 to
September 2013. Mr. de Ladonchamps holds a French degree in
Finance and Accounting from the Lyon III University in Lyon, France.
80ObsEva Annual Report 2019Corporate Governance Restrictions on Mandates held outside the Company
The Articles provide certain restrictions to the number of mandates that members of the Executive Committee
may have in the supreme governing bodies of legal entities registered in the Swiss commercial register or
similar foreign register. As such no member of the Executive Committee may hold more than six additional
mandates in the highest supervisory or management bodies of third party companies whose equity securities
are listed on a stock exchange and ten additional mandates in the highest management bodies of other
companies. Members of the Executive Committee shall only accept such mandates with the prior consent of
the Board. The following mandates are not subject to these limitations: (i) mandates in companies which are
controlled by the Company or which control the Company; and (ii) mandates in the highest supervisory bodies
of associations, charitable organizations, foundations, trust and employee welfare foundations. No member
of the Executive Committee shall hold more than ten such mandates.
Management Contracts
There are no management contracts between the Company and third parties not belonging to the Group.
5 – Compensation, Shareholdings and Loans.
For a discussion on compensation and shareholdings of the members of the Board and of the Executive
Committee, and loans granted to these individuals, refer to the Compensation Report section of this Annual
Report on page 149.
6 – Shareholders’ Participation Rights.
Voting Rights Restrictions and Representation
Voting rights may be exercised only after a shareholder has been recorded in the Company’s share register
as a shareholder or usufructuary with voting rights. A shareholder may be represented by his legal
representative, the independent proxy or by a duly authorized person who does not need to be a shareholder.
Subject to the registration of shares in the share register within the deadline set from time to time by the
Board before the general meetings of shareholders, the Articles do not impose any restrictions on the voting
rights of shareholders. Specifically, there is no limitation on the number of voting rights per shareholder.
A general meeting of shareholders is duly convened and capable of passing resolutions regardless of the
number of shares represented. Resolutions of general meetings of shareholders generally require the approval
of the absolute majority of the votes cast at the shareholders meeting (more than 50% of the share votes cast
at such meeting). Such resolutions include amendments to the Articles, elections of the members of the Board
and statutory and group auditors, election of the chairman of the Board and of the members of the
Compensation Committee, election of the independent proxy, approval of the annual financial statements,
setting the annual dividend, approval of the compensation of the Board and executive committee pursuant to
the Articles, decisions to discharge the members of the Board and executive committee for liability for matters
disclosed to the general meeting of shareholders and the ordering of an independent investigation into
specific matters proposed to the shareholders’ meeting.
However, a qualified majority of at least two-thirds of the votes represented and the absolute majority of the
nominal share capital is required by law or the Articles for resolution pertaining to: (i) changes to the business
purpose; (ii) the creation of shares with privileged voting rights; (iii) restrictions on the transferability of
registered shares; (iv) an increase of the authorized or conditional share capital; (v) an increase in the share
capital by way of conversion of capital surplus, through contribution in kind, or for purposes of an acquisition
of assets or the granting of special privileges; (vi) the withdrawing or limitation of pre-emptive rights of
shareholders; (vii) a relocation of the registered office; (viii) the dissolution of the Company; (ix) an abrogation
or amendment of the Articles regarding the limitations of outside mandates for the Board members; or (x) the
removal of a serving member of the Board. Furthermore, any decision related to a merger, demerger or
81ObsEva Annual Report 2019Corporate Governance conversion of the Company shall be taken in accordance with the Swiss Federal Act on Mergers, De-Mergers,
Transformations and Transfers of Businesses.
Independent Proxy
Article 18 of the Articles provides the basis for election of the independent proxy. The general meeting of
shareholders of May 8, 2019, elected Perréard de Boccard SA, a law firm located at Rue de la Coulouvrenière
29 in Geneva, Switzerland, as the independent proxy of shareholders of the Company.
Quorums Required by the Articles
There is no other provision in the Articles requiring a majority for shareholders’ resolutions beyond the
majority requirements set out by applicable legal provisions other than those disclosed under the above
“Voting Rights Restrictions and Representation” section.
Convocation of the General Meeting of Shareholders
The general meeting of shareholders is the highest authority of the Company and under Swiss law, the
ordinary general meeting of shareholders takes place annually within six months after the close of the
business year. General meetings of shareholders are convened by the Board or, if required by law or the
Articles, by the auditors, the liquidators of the Company or the representatives of the bonds holders, if any.
Furthermore, the Board is required to convene an extraordinary general meeting of shareholders if so
requested by holders of shares representing at least 10% of the share capital or having a total par value of
one million Swiss francs. Such request must be made in writing not less than sixty days ahead of the meeting
and shall include a brief description of the items to be discussed and the proposals.
Annual or extraordinary meetings of the shareholders are called by notice in the “Swiss Official Gazette of
Commerce” not less than twenty days before the date fixed for the meeting. A general meeting of shareholders
may also be called by means of a notice sent to the shareholders at their address registered in the share
register. The notice of the meeting shall state the items on the agenda, the proposals of the Board and the
proposals of the shareholders that requested that a general meeting be convened or that items be included
in the agenda. No resolution shall be passed at a general meeting of shareholders on matters which do not
appear on the agenda except for a resolution convening an extraordinary general meeting, the setting up of
a special audit or the election of auditors. No prior notice is required to bring motions related to items already
on the agenda or for the discussion of matters on which no resolution is to be taken.
Inclusion of Items in the Agenda
Shareholders representing at least 10% of the share capital or holding shares of a total par value of one million
Swiss francs may require that items be included in the agenda of the meeting. Such request must be made in
writing not less than sixty days ahead of the meeting and shall include a brief description of the items to be
discussed and the proposals.
Entries in the Share Register
The Board determines the relevant deadlines for registration in the share register giving the right to attend
and to vote at the general meetings of shareholders. Such deadlines are published by the Company in its
annual report and are mentioned in the invitation to the general meeting of shareholders published in the
Swiss Official Commercial Gazette. The registration deadline for the general meeting of shareholders of May
7, 2020 has been set as April 1, 2020 at 22:00 CET. The Company has not enacted any rules on the granting
of exceptions in relation to these deadlines.
82ObsEva Annual Report 2019Corporate Governance 7 – Changes of Control and Defense Measures.
Duty to Make an Offer
Swiss law provides for the possibility to have the Articles contain a provision which would eliminate the
obligation of an acquirer of shares, exceeding the threshold of 33 1/3% of the voting rights (whether
exercisable or not), to proceed with a public tender offer to acquire 100% of the listed equity securities of the
company (opting-out provision pursuant to Article art. 125 para. 3 FMIA) or which would increase such
threshold to 49% of the voting rights (opting-up provision pursuant to Article art. 135 para. 1 FMIA). The
Articles do not contain an opting-out or an opting-up provision.
Clauses of Changes of Control
The following agreements and schemes executed by the Company contain provisions in respect of changes
in the Company’s shareholder base:
(i)
the equity incentive plan dated 2013 contains provisions such as all equity instruments granted under
that plan, consisting of 1,844,319 outstanding shares as of December 31, 2019, shall be immediately
retransferred to the Company in case of a change of control at the shares’ fair market value at the time
and for the purpose of the change of control;
(ii)
25% of the unvested portion of stock-options granted under the equity incentive plan dated 2017 to an
employee that is not a member of the Executive Committee, or an aggregate 155,964 unvested stock-
options as of December 31, 2019, shall vest immediately if, within three months before or 12 months
following a change in control, (a) the employee is terminated without cause, or (b) the employee resigns
for good reason;
(iii) all of the unvested portion of stock-options granted under the equity incentive plan dated 2017 to a
member of the Executive Committee, or an aggregate of 1,238,012 unvested stock-options as of
December 31, 2019, shall vest immediately if, within three months before or 12 months following a
change in control, (a) the member of the Executive Committee is terminated without cause, or (b) the
member of the Executive Committee resigns for good reason; and
(iv)
all of the unvested portion of stock-options granted on October 13, 2019 under the equity incentive
plan dated 2017, or an aggregate of 1,187,300 unvested stock-options as of December 31, 2019, shall
vest immediately upon a change of control. The grant made on October 13, 2019 forfeited in full on
January 28, 2020.
8 – Auditors.
Duration of the Mandate and Term of Office of the Lead Auditor
The Articles provide the basis for election of the Company’s auditors. The general meeting of shareholders of
May 8, 2019, elected PricewaterhouseCoopers SA as the Company's Auditors and Independent Registered
Public Accounting Firm for the fiscal year 2019. PricewaterhouseCoopers SA has served as auditor of the
Company since 2013, and PricewaterhouseCoopers SA’s lead auditor, Mike Foley, has been serving in this
capacity since the business year 2016. The Company, through its audit committee, has not adopted a policy
regarding the rotation of audit firms yet.
Auditing Fees
Auditing fees charged for 2019 by the auditor amounted to USD 444 thousands and consisted of fees billed
for the annual audit of the Company’s consolidated financial statements, and the statutory audit of the
Company’s consolidated and stand-alone financial statements. Audit Fees also include services that only the
independent external auditor of the Company can reasonably provide, such as the review of documents filed
with the U.S. stock exchange.
83ObsEva Annual Report 2019Corporate Governance Additional Fees
Additional fees charged for 2019 by the auditor amounted to USD 203 thousands and consisted of fees for
tax consultation as well as fees billed for assurance and related services that are related to the performance
of the audit or review of the financial statements or that are traditionally performed by the external auditor,
and mainly include services such as comfort letters issued in connection with securities offerings, due
diligence and agreed-upon or expanded audit procedures.
Information Instruments Pertaining to the External Audit
The audit committee assumes the task of supervising the auditors, and in this regard meets with the auditors
at least four times a year to discuss the scope and the results of the audit and reviews performed by them, as
well as other communications as may be required by applicable auditing standards. The auditors prepare an
audit report to inform the audit committee of the result of the annual audit and quarterly reviews, as
applicable, and to provide it with observations arising from the audit or reviews that are significant to the
financial reporting process. The auditors also communicate once a year to the audit committee an overview
of the overall audit strategy and timing of the audit. Other instruments available to the audit committee to
obtain information on the activities of the auditors include a written disclosure by the auditors prior to their
engagement on the assessment of their independence, including a delineation of all relationships between
them, or their affiliates, and the Group. Furthermore, the quality of the auditors’ service is assessed at least
once a year by the audit committee.
9 – Controls and Procedures.
Management’s Annual Report on Internal Control over Financial Reporting
The Audit Committee oversees the Company's financial reporting process on behalf of the Board. The
management is responsible for establishing and maintaining adequate internal control over financial reporting
and for the assessment of the effectiveness of such. Under the supervision and with the participation of the
Company’s Chief Executive Officer and Chief Financial Officer, management assessed the internal control over
financial reporting and concluded that such was effective as of December 31, 2019.
Conduct of a Risk Assessment
The Company conducts risk management processes to identify and mitigate risks at an early stage. The
responsibility for risk assessment and management is allocated to the Executive Committee and to other
specialized corporate functions such as the finance and administrative functions of the Group. Financial risk
management is described in more details in note 3 to the Consolidated IFRS Financial Statements for the year
ended December 31, 2019.
Insider policy
The Board has issued an insider policy and implemented procedures to prevent insiders from benefiting from
confidential information. The policy defines guidelines on how to deter corporate insiders from making use
of confidential information. The Board has established blocking periods to prevent insiders from trading
during sensitive periods.
Ethical business conduct
As a pharmaceutical business, the Group is operating in a highly regulated business environment. Strict
compliance with all legal and health authority requirements, as well as requirements of other regulators, is
mandatory. The Group expects its employees, contractors and agents to observe the highest standards of
integrity in the conduct of the Group’s business. The Code of Business Conduct and Ethics sets forth the
Group’s policy embodying the highest standards of business ethics and integrity required of all directors,
executives, employees and agents when conducting business affairs on behalf of the Group.
84ObsEva Annual Report 2019Corporate Governance 10 – Information Policy.
The Company usually publishes financial results in the form of an Annual Report and quarterly interim reports.
In addition, the Company informs shareholders and the public regarding the Group’s business through press
releases, conference calls, as well as roadshows and Key Opinion Leaders meetings. Where required by law or
the Company’s Articles, publications are made in the Swiss Official Commercial Gazette. The Annual Report,
usually published no later than March of the following year, and the quarterly interim reports, usually
published no later than in May, August and November, respectively, are announced by press release. Published
Annual Reports, quarterly interim reports and press releases are available on request in printed form to all
registered shareholders, and are also made available on the Group’s website at www.obseva.com. The Group’s
website, which is the Group’s permanent source of information, also provides other information useful to
investors and the public, including information on the Group’s research and development programs as well
as contact information. Additionally, the latest versions of the Articles, Organizational Regulations, charter of
the audit committee, charter of the CNCG committee, as well as the Company’s Code of Business Conduct
and Ethics and whistleblower policy can be found and downloaded in the Corporate Governance section of the
Investors tab of the Group’s website. The Board has issued a disclosure policy to ensure that investors are
informed in compliance with all applicable regulations. The Group’s investor relations department is available
to respond to shareholders’ or potential investors’ queries under IR@obseva.com, through the address and
telephone number of ObsEva’s principal executive office in Geneva, Chemin de Aulx 12, 1228 Plan-les-Ouates,
telephone number +41 22 552 38 40, or via the U.S. office at 1 Financial Center in Boston, MA, telephone
number +1 (857) 972-9366.
85ObsEva Annual Report 2019Corporate Governance
Consolidated
IFRS Financial
Statements
Consolidated IFRS Financial Statements
for the year ended December 31, 2019
Consolidated Balance Sheet
ASSETS
Current assets
Cash and cash equivalents
Other receivables
Prepaid expenses
Total current assets
Noncurrent assets
Right-of-use assets
Furniture, fixtures and equipment
Intangible assets
Other long-term assets
Total noncurrent assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Other payables and current liabilities
Accrued expenses
Current lease liabilities
Total current liabilities
Noncurrent liabilities
Non-current lease liabilities
Non-current borrowings
Post-employment obligations
Other long-term liabilities
Total noncurrent liabilities
Shareholders’ equity
Share capital
Share premium
Reserves
Accumulated losses
Total shareholders’ equity
Total liabilities and shareholders’ equity
Notes
2019
2018
(In USD ,000)
(In USD ,000)
As of December 31,
4
5
6
9
7
8
10
5
6
9
9
12
11
10
13
13
13
13
69,370
1,044
4,359
74,773
2,042
245
26,608
275
29,170
103,943
8,432
10,418
618
19,468
1,541
24,917
7,946
1,116
35,520
3,499
320,955
21,912
(297,411)
48,955
103,943
138,640
885
5,715
145,240
–
319
21,608
273
22,200
167,440
2,766
14,163
–
16,929
–
–
3,547
48
3,595
3,420
314,565
12,858
(183,927)
146,916
167,440
The accompanying notes form an integral part of these consolidated financial statements.
87 Consolidated Statement of Comprehensive Loss
(in USD ,000, except per share data)
Notes
2019
2018
2017
Year ended December 31,
Operating income other than revenue
OPERATING EXPENSES
Research and development expenses
General and administrative expenses
Total operating expenses
OPERATING LOSS
Finance income
Finance expense
NET LOSS BEFORE TAX
Income tax (expense) / benefit
NET LOSS FOR THE YEAR
Net loss per share
Basic
Diluted
14
15
15
17
17
18
19
19
16
15
16
(88,053)
(62,872)
(54,912)
(19,058)
(14,297)
(12,568)
(107,111)
(77,169)
(67,480)
(107,095)
(77,154)
(67,464)
854
(2,482)
393
–
590
(1)
(108,723)
(76,761)
(66,875)
(67)
45
(51)
(108,790)
(76,716)
(66,926)
(2.49)
(2.49)
(1.91)
(1.91)
(2.25)
(2.25)
OTHER COMPREHENSIVE LOSS
Items that will not be reclassified to profit and loss
Remeasurements on post-employment benefit plans
(4,694)
(544)
(142)
Items that may be reclassified to profit or loss
Currency translation differences
TOTAL OTHER COMPREHENSIVE LOSS
-
(4,694)
–
(544)
–
(142)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(113,484)
(77,260)
(30,884)
The accompanying notes form an integral part of these consolidated financial statements.
88ObsEva Annual Report 2019Consolidated IFRS Financial Statements
Consolidated Statement of Cash Flows
(in USD ,000)
Notes
2019
2018
2017
Year ended December 31,
NET LOSS BEFORE TAX FOR THE YEAR
(108,723)
(76,761)
(66,875)
Adjustments for:
Depreciation expense
Post-employment (benefit) cost
Share-based compensation expense
Income tax paid
Finance expense / (income net)
Decrease / (increase) in other receivables
Decrease / (increase) in prepaid expenses, deferred costs and
other long term-assets
Increase / (decrease) in other payables and current liabilities
Decrease / (increase) in accrued expenses and other
long-term liabilities
7&9
737
(477)
20
11,884
(80)
1,628
193
1,356
5,499
109
(96)
9,152
(11)
(359)
(96)
(4,225)
(16)
70
7
8,856
—
(589)
—
721
399
(2,628)
8,362
1,696
NET CASH FLOWS USED IN OPERATING ACTIVITIES
(90,611)
(63,941)
(55,715)
Cash used for rental deposits
Payments for plant and equipment
Acquisition of a license
NET CASH FLOWS USED IN INVESTING ACTIVITIES
Proceeds from issuance of shares
Payment of share issuance costs
Proceeds from exercise of stock-options
Payment from issuance of debt, net of issuance costs
Principal elements of lease payments
Interest paid
Interest received
NET CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents as of January 1,
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents as of December 31,
7
8
13
13
13
12
9
3.2
4
(46)
(5,000)
(5,046)
3,206
(119)
193
24,736
(571)
(818)
—
26,627
(69,030)
138,640
(240)
69,370
(83)
(188)
—
(271)
97,861
(6,881)
672
—
—
—
—
91,652
27,440
110,841
359
(96)
(189)
(5,000)
(5,285)
156,786
(11,042)
—
—
—
(1)
—
145,743
84,743
25,508
590
138,640
110,841
The accompanying notes form an integral part of these consolidated financial statements.
89ObsEva Annual Report 2019Consolidated IFRS Financial Statements Consolidated Statement of Changes in Equity
Notes
Share
capital
Share
premium
Share
based
payments
reserve
Foreign
currency
translation
reserve
Total
reserves
Accumu-
lated
losses
Total
1,740
71,966
2,423
(489)
1,934
(39,599)
36,041
(All in USD ,000)
December 31, 2016
Loss for the year
Other comprehensive loss
Total comprehensive
loss
Issuance of shares – IPO
Issuance of shares – PIPE
Issuance of shares – EIP
2013
Share issuance costs
13
13
13
Share-based remuneration
20
December 31, 2017
Loss for the year
Other comprehensive loss
Total comprehensive
loss
Issuance of shares – EIP
2013
Issuance of shares – June
2018 offering
Issuance of shares – ATM
program
Share issuance costs
Exercise of stock-options –
EIP 2017
Share-based remuneration
December 31, 2018
Loss for the year
Other comprehensive loss
Total comprehensive
loss
Issuance of shares - EIP
2013
Issuance of shares - ATM
program
Share issuance costs
Exercise of stock-options -
EIP 2017
Share-based remuneration
13
13
13
20
20
13
13
20
20
2,864
219,335
–
–
–
496
592
36
–
–
–
–
–
27
392
130
–
7
–
–
–
–
96,254
59,408
–
–
–
–
–
3,671
(3,671)
(11,964)
–
–
–
–
–
8,856
7,608
–
–
–
2,947
(2,947)
77,431
19,881
(6,160)
–
–
–
1,131
(466)
–
9,152
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,671)
–
8,856
(66,926)
(66,926)
(142)
(142)
(67,068)
(67,068)
–
–
–
–
–
96,750
60,000
36
(11,964)
8,856
(489)
7,119
(106,667)
122,651
–
–
–
–
–
–
–
–
–
–
–
(76,716)
(76,716)
(544)
(544)
–
(77,260)
(77,260)
(2,947)
–
–
–
(466)
9,152
–
–
–
–
–
–
27
77,823
20,011
(6,160)
672
9,152
3,420
314,565
13,347
(489)
12,858
(183,927)
146,916
–
–
–
21
56
–
2
–
–
–
–
–
–
–
2,696
(2,696)
3,498
(130)
–
–
326
(134)
–
11,884
–
–
–
–
–
–
–
–
–
–
(108,790)
(108,790)
(4,694)
(4,694)
–
(113,484)
(113,484)
(2,696)
–
–
(134)
11,884
–
–
–
–
–
21
3,554
(130)
194
11,884
December 31, 2019
3,499
320,955
22,401
(489)
21,912
(297,411)
48,955
The accompanying notes form an integral part of these consolidated financial statements.
90ObsEva Annual Report 2019Consolidated IFRS Financial Statements Notes to the Consolidated Financial
Statements
1.
General information
ObsEva SA (the “Company”) was founded on November 14, 2012, and its address is 12 Chemin des Aulx, 1228
Plan-les-Ouates, Geneva, Switzerland. The terms “ObsEva” or “the Group” refer to ObsEva SA together with its
subsidiaries included in the scope of consolidation (note 2.2).
The Group is focused on the development and commercialization of novel therapeutics for serious conditions
that compromise women’s reproductive health and pregnancy. The Group has a portfolio of three mid- to late-
stage development in-licensed compounds (linzagolix, OBE022 and nolasiban) being developed in four
indications. The Group has no currently marketed products.
These consolidated financial statements are presented in dollars of the United States (USD), rounded to the
nearest thousand, except share and per share data, and have been prepared on the basis of the accounting
principles described in note 2.
These consolidated financial statements were authorized for issue by the Company’s Board of Directors (the
“Board of Directors”) on March 5, 2020.
2.
Accounting principles applied in the preparation of the consolidated financial statements
2.1 Basis of preparation
These consolidated financial statements have been prepared in accordance with the International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The
consolidated financial statements are based on a historical cost basis.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 2.5.
Due to rounding, numbers presented throughout these consolidated financial statements may not add up
precisely to the totals provided. All ratios and variances are calculated using the underlying amount rather
than the presented rounded amount.
2.2 Scope of consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Company currently consolidates the financial operations of its two fully-owned subsidiaries, ObsEva
Ireland Ltd, which is registered in Cork, Ireland and organized under the laws of Ireland, and ObsEva USA Inc.,
which is registered and organized under the laws of Delaware, USA. ObsEva Ireland Ltd had no operations and
no results of operations to report as of December 31, 2019 and 2018.
91ObsEva Annual Report 2019Consolidated IFRS Financial Statements Standards and interpretations published by the IASB
2.3
The IASB and the International Financing Reporting Standards Interpretations Committee have recently issued
new standards and interpretations to be applied to the Group’s consolidated financial statements.
IFRS 16 – Leases
On January 1, 2019, the Group adopted IFRS 16 Leases, which replaced IAS 17 Leases and Related
Interpretations. The Group has adopted IFRS 16 retrospectively from January 1, 2019, but has not restated
comparatives for the year ended December 31, 2018, as permitted under the specific transitional provisions
in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore
recognized in the opening balance sheet on January 1, 2019. The new standard requires lessees to recognize
a lease liability measured at the present value of the remaining lease payments and a right-of-use asset for
virtually all lease contracts, removing the distinction between operating and finance leases.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the
standard:
•
•
•
•
relying on previous assessments on whether leases are onerous as an alternative to performing an
impairment review (there were no onerous contracts as of January 1, 2019);
accounting for operating leases with a remaining lease term of less than 12 months as of January 1,
2019 as short-term leases;
excluding initial direct costs for the measurement of the right-of-use asset at the date of initial
application; and
using hindsight in determining the lease term where the contract contains options to extend or
terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial
application. Instead, for contracts entered into before the transition date the Group relied on its assessment
made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.
The following table presents the reconciliation between the non-cancellable operating lease commitments
reported as of December 31, 2018 and the lease liabilities recognized on January 1, 2019. The weighted
average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 4.9%.
(in USD ’000)
Operating lease commitments disclosed as of December 31, 2018
Discounted using the Group’s incremental borrowing rate at the date of initial application
(Less): short-term and low-value leases recognized on a straight-line basis as expense
(Less): adjustments relating to changes in the index or rate affecting variable payments
Lease liability recognized as of January 1, 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
Total
3,074
2,772
(37)
(28)
2,707
577
2,130
Right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognized in the balance sheet as of December 31,
2018. Right-of-use assets mainly relate to office buildings.
The adoption of IFRS 16 Leases did not have a material impact on the Group’s net loss after tax or on the
Group’s loss per share for the year ended December 31, 2019.
92ObsEva Annual Report 2019Consolidated IFRS Financial Statements No other new standards and amendments applied by the Group in 2019 had a material impact on its consolidated
financial statements. In addition, there are no new standards and amendments published but not yet effective
that are expected to have a material impact on the consolidated financial statements of the Group
2.4 Significant accounting policies
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
Current assets
Other receivables and other current receivables or prepaid expenses are carried at their nominal value.
Individual receivables that are known to be uncollectible are written off by reducing the carrying amount directly.
The Group considers that there is evidence of impairment if any of the following indicators are present:
–
–
–
significant financial difficulties of the debtor;
probability that the debtor will enter bankruptcy or financial reorganization; and
default or delinquency in payments (more than 30 days overdue).
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all receivables
Furniture, fixtures and equipment
Furniture, fixtures and equipment are carried at cost less depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated using the
straight-line method, on the basis of the following useful lives:
–
–
–
furniture
hardware
leasehold improvement
5 years
3 years
duration of lease
Furniture, fixtures and equipment are reviewed for impairment whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable, on an individual basis. An impairment loss is
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
Leases
From January 1, 2019, the Group has changed its accounting policy for leases where the Group is a lessee, as
explained in note 2.3. The Group leases various office buildings and equipment, which are recognized as a
right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the
Group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease payments:
–
–
–
–
–
fixed payments (including in-substance fixed payments), less any lease incentives receivable,
variable lease payment that are based on an index or a rate, initially measured using the index or rate as
at the commencement date,
amounts expected to be payable by the Group under residual value guarantees,
the exercise price of a purchase option if the Group is reasonably certain to exercise that option,
lease payments to be made under reasonably certain extension options, and
payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
93ObsEva Annual Report 2019Consolidated IFRS Financial Statements The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is
used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an
asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security
and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period.
Right-of-use assets are measured at cost comprising the following:
–
–
–
–
the amount of the initial measurement of lease liability,
any lease payments made at or before the commencement date less any lease incentives received,
any initial direct costs, and
restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on
a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful life. Payments associated with short-term leases of equipment
and vehicles and all leases of low-value assets are recognized on a straight-line basis as an expense in profit
or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small
items of office furniture and equipment.
Until December 31, 2018, leases of assets under which all the risks and rewards of ownership are effectively
retained by the lessor were classified as operating leases, and payments made are charged to the statement
of comprehensive loss on a straight-line basis. The Group did not have any finance leases.
Intangible assets
Separately acquired patents, licenses and other intangible assets are recorded at historical cost and
subsequently measured at cost less accumulated amortization and any impairment losses.
The acquisition of certain intangible assets, mainly licenses, may involve additional payments contingent on
the occurrence of specific events or milestones. Unless the Group already has a present obligation to make
the payment at a future date, the initial measurement of the intangible asset does not include such contingent
payments. Instead, such payments are subsequently capitalized as intangible assets when the contingency or
milestone occurs.
Estimated useful life is the lower of legal duration and economic useful life, which does not exceed 20 years.
The estimated useful life of the intangible assets is annually reviewed, and if necessary, the future
amortization charge is accelerated.
For licenses, the amortization starts when the assets become available for use, generally once proper
regulatory and marketing approval are obtained.
Intangible assets are subject to impairment testing annually, and whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
94ObsEva Annual Report 2019Consolidated IFRS Financial Statements Post-employment benefits
Group companies operate two pension schemes.
All employees of ObsEva SA participate in a retirement defined benefit plan. A defined benefit plan is a pension
plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent
on one or more factors such as age, years of service and compensation. The liability recognized in the balance
sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the
end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated
annually by an independent actuary, using the projected unit credit method. The present value of the defined
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.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income in the period in which they arise. Past-service
costs are recognized immediately in the consolidated statement of comprehensive loss.
During 2017, ObsEva USA, Inc. established a 401K, defined contribution plan, for the employees of the
company. A defined contribution plan is a pension plan under which the amounts paid by the employer are
fixed in advance. The plan assets are held by a third party custodian. ObsEva USA, Inc. contributions to the
defined contribution plan are charged to the income statement as incurred. The Group has no further
obligation once the contributions have been paid.
Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the
redemption amount is recognized in profit or loss over the period of the borrowings using the effective
interest method. Borrowings that are due within 12 months after the end of the reporting period are classified
as current liabilities unless the Group has an unconditional right to defer settlement of the liability until more
than 12 months after the reporting period.
Equity
Incremental costs directly attributable to the issuance of common shares and options are recognized as a
deduction from equity, net of any tax effects.
Research and development
Research expenses are charged to the consolidated statement of comprehensive loss as incurred.
Development expenses are capitalized as intangible assets when it is probable that future economic benefits
will flow to the Group, and the following criteria are fulfilled:
it is technically feasible to complete the intangible asset so that it will be available for use or sale;
–
– management intends to complete the intangible asset and use or sell it;
–
–
–
there is an ability to use or sell the intangible asset;
the asset will generate probable future economic benefits and demonstrate the existence of a market;
adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset are available; and
the expenditure attributable to the intangible asset during its development can be reliably measured.
–
In the opinion of management, due to uncertainties inherent in the development of the Group’s product
candidates, the criteria for development costs to be recognized as an asset as defined by IAS 38 Intangible
Assets are not met.
95ObsEva Annual Report 2019Consolidated IFRS Financial Statements
Foreign currencies
Functional and presentation currency
Items included in the consolidated financial statements of the Group are measured using the currency of the
primary economic environment in which each Group’s entity operates (the “functional currencies”).
The functional and presentation currencies of the Company is the U.S. dollar (USD), which is also the functional
currency of ObsEva USA, Inc.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates
of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange rates are recognized in profit or loss.
Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement of
comprehensive loss, within finance costs. All other foreign exchange gains and losses are presented in the
consolidated statement of comprehensive loss on a net basis within other income or other expenses.
Share-based compensation
The Group operates two equity incentive plans.
A share-based, equity-settled, plan was formally set-up by the Group in 2013 (the “2013 EIP”). Participants eligible
for awards under the 2013 EIP are executives, directors, employees, agents and consultants. The fair value of
the shares granted under the 2013 EIP is determined at each grant date by using either an option pricing method
that uses a Black-Scholes model or a hybrid method, as appropriate, both based on a combination of the
discounted cash flow method, under the income approach, and the back solve method.
A share-based, equity-settled, plan was formally set-up by the Group in 2017 (the “2017 EIP”). Participants eligible
for awards under this plan are executives, directors, employees, agents and consultants. The fair value of the
stock-options granted under the 2017 EIP is determined at each grant date by using a Black-Scholes model.
When the equity instruments granted do not vest until the counterparty completes a specified period of
services, the Group accounts for those services as they are rendered by the counterparty, during the vesting
period, with a corresponding increase in equity.
Deferred income taxes
Deferred income tax is provided in full, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither accounting nor taxable profit
and loss, it is not accounted for. Deferred income tax is determined using tax rates and laws that have been
enacted or substantively enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilized.
Segment information
The Group operates in one segment, which is the research and development of innovative women’s
reproductive, health and pregnancy therapeutics. The marketing and commercialization of such therapeutics
depend, in large part, on the success of the development phase. The Chief Executive Officer of the Company
(Chief Operating Decision Maker) reviews the consolidated statement of operations of the Group on an
aggregated basis and manages the operations of the Group as a single operating segment.
96ObsEva Annual Report 2019Consolidated IFRS Financial Statements The Group currently generates no revenue from the sales of therapeutics products. The Group’s activities are
not affected by any significant seasonal effect.
The geographical analysis of non-current assets is as follows:
(in USD ,000)
Switzerland
USA
Total noncurrent assets
As of December 31,
2018
2019
28,391
779
29,170
21,954
246
22,200
The geographical analysis of operating expenses is as follows:
(in USD ,000)
Switzerland
USA
Total operating expenses
2019
102,492
4,619
107,111
Year ended December 31,
2018
2017
73,050
4,119
77,169
63,956
3,524
67,480
2.5 Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will
not necessarily equal to related actual outcome. The following areas involve a higher degree of judgement or
complexity or are areas where assumptions and estimates can have a significant impact on the consolidated
financial statements:
–
–
–
–
–
Post-employment obligations: the actuarial valuation involves making assumptions about discount rates,
future salary increases, mortality rates and future pension increases. Due to the long-term nature of these
plans, such estimates are subject to significant uncertainty (note 11);
Leases: the calculation of right of use assets and lease liabilities involves making assumptions about
lessee’s incremental borrowing rate and renewal options, which are subject to judgment (note 9);
Share-based compensation: the determination of the fair value of the equity instruments granted involves
the use of certain assumptions subject to judgement (note 20);
Commencement of depreciation and amortization: the depreciation and amortization starts when the
assets are available for use in the manner intended by management, which requires judgement (notes 7
and 8);
Research and development costs: the Group recognizes expenditure incurred in carrying out its research and
development activities until it becomes probable that future economic benefits will flow to the Group, which
results in recognizing such costs as intangible assets, involving a certain degree of judgement (note 15);
97ObsEva Annual Report 2019Consolidated IFRS Financial Statements
– Deferred taxes: the recognition of deferred tax assets requires assessment of whether it is probable that
–
sufficient future taxable profit will be available against which the deferred tax assets can be utilized (note 18);
Impairment of assets: as part of impairment tests, the recoverable amounts of tested assets have been
determined based on fair value calculations requiring the use of certain assumptions, subject to
judgement (note 8)
3.
Financial risk management
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks such as foreign exchange risk, credit risk, interest
rate risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of
financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.
Financial risk management is carried out by the Group`s finance department subject to and pursuing policies
approved by the Board of Directors.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the Swiss franc (CHF), Euro (EUR) and British Pound (GBP). Foreign
exchange risk arises from future commercial transactions (e.g. costs for clinical services) and recognized
assets and liabilities. Management has set up a policy to manage the foreign exchange risk against their
functional currency. To manage its foreign exchange risk arising from future commercial transactions and
recognized assets and liabilities, the Group’s finance department maintains foreign currency cash balances to
cover anticipated future requirements.
The sensitivity of profit or loss to changes in the exchange rates in the reported periods are as follows:
EUR positions
Increase /decrease
exchange rate vs USD
Effect on profit
before tax
Effect on share
holders’ equity
2019
2018
+5%
-5%
+5%
-5%
(in USD ,000)
(in USD ,000)
1,248
(1,248)
770
(770)
1,248
(1,248)
770
(770)
GBP positions
Increase /decrease
exchange rate vs USD
Effect on profit
before tax
Effect on share
holders’ equity
2019
2018
+5%
-5%
+5%
-5%
(in USD ,000)
(in USD ,000)
139
(139)
110
(110)
139
(139)
110
(110)
CHF positions
Increase /decrease
exchange rate vs USD
Effect on profit
before tax
Effect on share
holders’ equity
2019
2018
+5%
-5%
+5%
-5%
(in USD ,000)
(in USD ,000)
884
(884)
607
(607)
884
(884)
607
(607)
98ObsEva Annual Report 2019Consolidated IFRS Financial Statements Credit risk
Cash and cash equivalents are deposited with top tier banks and institutions with a short term rating of “A-1”
or “P-1” with Standard & Poor’s and Moody’s, respectively.
The maximum credit risk exposure the Group faces in connection with its financial assets, being cash and cash
equivalents and other receivables, is the carrying amounts of these balances as shown in the consolidated
balance sheet.
Interest rate risk
Interest rate risks arise from changes in interest rates that may have a negative impact on the Group’s financial
position and results. Fluctuations in interest rates lead to changes in interest expense on floating-rate liabilities
and thus affect the financial result. The financial liabilities subject to interest rate risk are exclusively floating-
rate debt instruments denominated in USD, carried at amortized cost. The Group does not hold hedging
instruments to manage the interest rate risk.
The below table shows sensitivity to changes in market interest rates for the Group’s debt instruments.
(in USD ,000)
Interest rates - increase by 100 basis points
Interest rates - decrease by 100 basis points
Impact on loss before
taxes
2019
2018
(47)
—
—
—
3.2 Capital and liquidity management
The Group’s principal source of liquidity is the cash reserves which are obtained through the issuance of new
shares and debt instruments. The Group’s policy is to invest these funds in low risk investments including
interest bearing deposits. The ability of the Group to maintain adequate cash reserves to sustain its activities
in the medium term is subject to risk as it is highly dependent on the Group’s ability to raise further funds from
the sale of new shares.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to ensure the financing of successful research and development activities so that future profits
can be generated and to maintain sufficient financial resources to mitigate against risks and unforeseen events.
The Group is also subject to capital maintenance requirements under Swiss law. To ensure that statutory capital
requirements are met, the Group monitors capital periodically.
99ObsEva Annual Report 2019Consolidated IFRS Financial Statements A reconciliation of the net debt position is shown in the table below:
(in USD ’000)
Borrowings
Net debt as of January 1, 2018
Cash flows
Foreign exchange adjustments
Net debt as of December 31, 2018
Recognized on adoption of IFRS 16
—
—
—
—
—
—
Cash flows
Interest expense
Foreign exchange adjustments
(24,736)
(368)
—
Total
liabilities
from
financing
activities
—
—
—
—
(2,707)
(2,707)
(24,047)
(486)
(23)
Cash and
cash
equivalents
Total
110,841
110,841
27,440
27,440
359
359
138,640
138,640
—
138,640
(69,030)
—
(240)
(2,707)
135,933
(93,077)
(486)
(263)
Lease
liabilities
—
—
—
—
(2,707)
(2,707)
690
(119)
(23)
Net debt as of December 31, 2019
(25,104)
(2,159)
(27,263)
69,370
42,107
In addition, the maturity profile of the Group’s financial liabilities is presented in the table below.
(in USD ’000)
Carrying
amount
Total
undiscounted
cash flows
up to 1 year
1 to 5 years
Maturities
more than
5 years
Trade and other payables
(7,873 )
(7,873)
(7,873 )
—
Borrowings
(25,104 )
(34,852)
(2,206 )
(32,646 )
Lease liabilities
(2,159 )
(2,336)
(709 )
(1,627 )
Total as of December 31, 2019
(35,136 )
(45,061)
(10,788 )
(34,273 )
—
—
—
—
As of December 31, 2018, all financial liabilities had a contract maturity within one year.
3.3 Fair value estimation and financial instruments
The carrying value less impairment provision of receivables and payables approximate their fair values due to
their short-term nature.
All financial assets and liabilities, respectively, are held at their amortized cost.
The Group’s financial assets consist of cash and cash equivalents and other receivables which are classified as
financial assets at amortized cost according to IFRS 9. The Group’s financial liabilities consist of debt instruments,
other payables and accruals which are classified as liabilities at amortized cost according to IFRS 9.
100ObsEva Annual Report 2019Consolidated IFRS Financial Statements 4.
Cash and cash equivalents
Bank deposits
Interest bearing deposits
Total cash and cash equivalents
Split by currency:
CHF
USD
EUR
GBP
As of December 31,
2018
2019
(in USD ,000)
(in USD ,000)
69,370
138,640
—
–
69,370
138,640
2019
2018
14%
73%
12%
1%
5%
89%
5%
1%
5.
Receivables and payables
As of December 31, 2019 and 2018, other receivables consist mainly of reimbursements to be received from
third parties, including VAT, insurance premiums and shared-costs of research and development studies, and
other payables and other current liabilities include mainly costs of clinical services. All receivables and payables
are due from and to third parties and carried at amortized cost.
All payables have a contract maturity within one year.
6.
Prepaid and accrued expenses
As of December 31, 2019 and 2018, prepaid expenses mainly consist of advance or milestone payments made
as part of our ongoing clinical trials.
As of December 31, 2019 and 2018, accrued expenses consisted of the following:
Accrued research and development expenses
Accrued compensation-related expenses
Accrued other expenses
Total accrued expenses
As of December 31,
2018
2019
(in USD ,000)
(in USD ,000)
7,244
1,882
1,292
10,734
2,364
1,065
10,418
14,163
101ObsEva Annual Report 2019Consolidated IFRS Financial Statements
7.
Furniture, fixtures and equipment
Net book value as of January 1
Additions
Depreciation charge
Currency translation effects
Net book value as of December 31
Total cost
Accumulated depreciation
2019
2018
(in USD ,000)
(in USD ,000)
319
46
(120)
–
245
653
(408)
323
105
(109)
–
319
600
(281)
Furniture, fixtures and equipment assets mainly consist of office furniture and leasehold improvements.
8.
Intangible assets
Net book value as of January 1
Additions
Amortization charge
Currency translation effects
Net book value as of December 31
Total cost
Accumulated amortization
2019
2018
(in USD ,000)
(in USD ,000)
21,608
5,000
–
–
26,608
26,608
–
21,608
–
–
–
21,608
21,608
–
As of December 31, 2019, the Group holds a number of licenses to operate several biopharmaceutical product
candidates, the value of which is recorded at USD 26.6 million (2018: USD 21.6 million).
Merck Serono licenses
On August 28, 2013, the Group in-licensed nolasiban for USD 4.9 million from Ares Trading S.A., an affiliate of
Merck Serono (“Merck Serono”).
In June 2015, the Group acquired the in-license for OBE022 from Merck Serono for an amount of USD 2.4 million.
Kissei license
On November 19, 2015, the Group entered into an exclusive in-license and supply agreement with Kissei
Pharmaceutical Co., Ltd. (“Kissei”) to acquire the product candidate linzagolix (formerly OBE2109) for which
Kissei successfully completed a Phase 2 trial in Japan. This in-license agreement grants the Group an exclusive
license to use, develop and commercialize the product candidate worldwide excluding certain Asian countries.
This in-license was acquired for an upfront cash consideration of USD 10 million, with additional contingent
payments upon occurrence of certain milestones (note 21).
102ObsEva Annual Report 2019Consolidated IFRS Financial Statements On April 25, 2017, the Group announced the initiation of its Phase 3 clinical program for linzagolix in uterine
fibroids and related activation of sites and start of recruitment. This event triggered the recognition and
payment of a USD 5.0 million milestone to Kissei during the second quarter of 2017, that was accounted for as
an intangible asset.
Similarly, on May 9, 2019, the Group announced the initiation of its Phase 3 clinical program for linzagolix in
endometriosis, which includes the EDELWEISS 2 and EDELWEISS 3 clinical trials. On July 19, 2019, the Group
randomized the first patient as part of the EDELWEISS 2 trial, resulting in a milestone payment of USD 5 million
to Kissei, accounted for as an intangible asset.
The Group has concluded that the Merck Serono licenses and the Kissei license acquisitions do not qualify as
business combinations per IFRS 3, as the Group did not acquire processes that are capable of producing outputs
given the in-licensed compounds are very early-stage.
Amortization and impairment
The licenses are currently not amortized as no regulatory and marketing approvals were obtained. The Group's
intangible assets are subject to a multi-phase clinical trials process, and as of December 31, 2019, the Group
does not expect to receive regulatory and marketing approvals and potentially start the commercialization of
pharmaceutical products until another few years, if at all.
In accordance with IAS 38, the licenses have been reviewed for impairment by assessing the fair value less costs
of disposal (“FVLCOD”). The valuation is considered to be Level 3 in the fair value hierarchy due to unobservable
inputs used in the valuation. No impairment was identified.
The key assumptions used in the valuation model (income approach) to determine the FVLCOD of the licenses
are as follows:
–
–
–
–
–
–
–
Expected research and development costs;
Probabilities of achieving development milestones based on industry standards;
Reported disease prevalence;
Expected market share;
Commercialization expectations
Drug reimbursement, costs of goods and marketing expenses; and
Expected patent life.
The valuation model covers a 20-year period due to the length of the development cycle for assets of this nature.
A discount factor of 15%, based on the assumed cost of capital for the Group, has been used over the forecast
period.
Based on sensitivity analysis performed, including changes in discount rates and peak sales assumptions, no
reasonably possible change in assumption would cause the carrying value of the licenses to exceed their
recoverable amount.
The Group has also collectively reviewed its licenses for impairment on the basis of the market capitalization
for the entire Group as of December 31, 2019 less the value of its tangible assets as well as cash and cash
equivalents. This analysis resulted in a headroom exceeding USD 110.0 million. The valuation is considered to
be Level 1 in the fair value hierarchy and further supported the Group’s conclusion that no impairment was
identified as of December 31, 2019 and 2018.
103ObsEva Annual Report 2019Consolidated IFRS Financial Statements 9.
Leases
The consolidated financial statements show the following amounts relating to leases:
Right-of-use assets
in USD ‘000
Net book value as of January 1*
Additions
Depreciation charge
Currency translation effects
Net book value as of December 31
Total cost
Accumulated depreciation
2019
2,658
–
(616)
–
2,042
2,658
(616)
*Value recognized upon transition to IFRS 16. See note 2.3
Rights-of-use assets mainly relate to office buildings. The expense relating to short-term and low-value leases
is not material. The total cash outflow for leases in 2019 was USD 0.7 million.
Lease liabilities
in USD ‘000
Current
Non-current
Total lease liabilities
December 31,
2019
618
1,541
2,159
As of
January 1,
2019*
577
2,130
2,707
*Value recognized upon transition to IFRS 16. See note 2.3
The lease liabilities have been measured based on the Group’s weighted average incremental borrowing rate of
4.9%. The maturity of the lease liabilities is provided in note 3.2.
10. Other longterm assets and liabilities
The Group’s other long-term assets mainly consist of security rental deposits for the Group’s offices.
The Group’s other long-term liabilities consist of various provisions.
11. Post-employment benefits
In accordance with the mandatory Swiss pension fund law, all employees of the Company participate in a
retirement defined benefit plan. Swiss based pension plans are governed by the Swiss Federal Law on
Occupational Retirement, Survivors’ and Disability Pension Plans (the “LPP”), which stipulates that pension plans
are to be managed by independent, legally autonomous units. Under the terms of the pension plan, participants
are insured against the financial consequences of old age, disability and death. The various insurance benefits
are governed by regulations, with the LPP specifying the minimum benefits that are to be provided. The
employer and employees pay contributions to the pension plan. In the event the pension plan’s statutory
104ObsEva Annual Report 2019Consolidated IFRS Financial Statements
funding falls below a certain level, various measures can be taken to increase funding above such level, such as
increasing the current contribution, lowering the interest rate on the retirement account balances or reducing
the additional prospective benefits. The employer can also make additional restructuring contributions. Since
the risks of death and disability are fully reinsured by an insurance group, the savings plan must be qualified
as a defined benefit plan. As required by IAS 19 Employee
Benefits, the projected unit credit method has been used in the calculation of present value of the benefit
obligations and the related current service cost.
The investment risk is borne by the insurer and the reinsurer respectively, and the investment decision is taken
by the board of trustees of the collective insurance.
In 2018, the pension fund changed the pension conversion rates, what has been considered as an amendment
of the pension plan. In 2019, the contributions levels for certain employees was changed, which also has been
considered as a plan amendment.
Change in defined benefit obligation
Defined benefit obligation at January 1,
Current service cost
Interest cost
Net benefits paid
Currency translation effects
Remeasurements:
Impact of plan amendment
Effect of changes in demographic assumptions
Effect of changes in financial assumptions
Effect in experience assumptions
Defined benefit obligation at December 31,
Change in plan assets
Fair value of plan assets at January 1,
Interest income
Employer contributions
Employee contributions
Net benefits paid
Currency translation effects
Remeasurements: return on plan assets (excluding interest income)
Fair value of plan assets at December 31,
2019
2018
(in USD ,000)
(in USD ,000)
(14,502)
(1,269)
(140)
(4,071)
(536)
527
366
(3,037)
(2,043)
(24,705)
(12,230)
(1,046)
(101)
(888)
137
172
–
96
(642)
(14,502)
2019
(in USD ,000)
2018
(in USD ,000)
10,955
115
622
622
4,071
354
20
16,759
9,131
80
479
479
888
(104)
2
10,955
105ObsEva Annual Report 2019Consolidated IFRS Financial Statements Components of defined benefit cost
Current service cost
Interest expense on defined benefit obligation
Interest income on plan assets
Employee contributions
Impact of plan amendment
Total included in staff costs (note 14)
Remeasurements recognized in other comprehensive loss
Effect of changes in demographic assumptions
Effect of changes in financial assumptions
Effect in experience assumptions
Return on plan assets (excluding interest income)
Total remeasurements recognized as other comprehensive loss
Cumulative amount of remeasurements immediately recognized in other
comprehensive loss
Amounts recognized in the statement of financial position
Defined benefit obligation
Fair value of plan assets
Net liability
Year ended December 31,
2019
(in USD ,000)
2018
(in USD ,000)
1,269
140
(115)
(622)
(527)
145
1,046
101
(80)
(479)
(172)
416
Year ended December 31,
2019
(in USD ,000)
2018
(in USD ,000)
366
(3,037)
(2,043)
20
(4,694)
(8,819)
–
96
(642)
2
(544)
(4125)
Year ended December 31,
2019
(in USD ,000)
2018
(in USD ,000)
(24,705)
16,759
(7,946)
(14,502)
10,955
(3,547)
106ObsEva Annual Report 2019Consolidated IFRS Financial Statements Change in defined benefit liability
Net defined benefit liability at January 1,
Defined benefit cost included in statement of comprehensive loss
Total remeasurements included in other comprehensive loss
Employer contributions
Currency translation effects
Net defined benefit liability at December 31,
Year ended December 31,
2019
(in USD ,000)
2018
(in USD ,000)
(3,547)
(145)
(4,694)
622
(182)
(7,946)
(3,099)
(416)
(544)
479
33
(3,547)
As of the date of preparation of these consolidated financial statements, the annual report for 2019 of the
pension fund has not yet been issued, and therefore the detailed structures and assets held at December 31,
2019, are not currently available for presentation. The detailed structures and assets held at December 31,
2018, are as follows:
Plan Assets
Cash
Bonds
Shares
Real estate
Mortgages
Alternative investments
Total
The principal actuarial assumptions used were as follows:
Discount rate
Salary increase (including inflation)
Rate of pension increases
Post-employment mortality table
As of
December 31, 2018
(in USD ,000)
3.0%
59.0%
12.9%
17.1%
8.0%
-
100.0%
2018
0.85%
1.00%
0.25%
2019
0.20%
1.00%
0.25%
LPP 2015 G
LPP 2015 G
107ObsEva Annual Report 2019Consolidated IFRS Financial Statements
Sensitivity analysis illustrates the sensitivity of the Group defined benefit obligation at December 31, 2019 by
varying the discount rate and the salary increase rate by plus / minus 50 basis points:
(in USD ,000)
Sensitivity analysis
Discount rate
Salary increase
Rate of pension
increases
Defined benefit
obligation
Average duration
of the defined
benefit obligation
Duration in years
Discount
rate
Discount
rate
Salary
increase
Salary
increase
Rate of
pension
increase
Rate of
pension
increase
plus
50bps
0.70%
1.00%
0.25%
minus
50bps
(0.30)%
1.00%
0.25%
plus
50bps
0.20%
1.50%
0.25%
minus
50bps
0.20%
0.50%
plus
25bps
0.20%
1.00%
minus
25bps
0.20%
1.00%
0.25%
0.50%
0.00%
(22,399)
(27,416)
(24,754)
(24,658)
(25,426)
(24,022)
2019
20.2
2018
18.9
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared
to the prior period.
Expected contributions by the employer to be paid to the post-employment benefit plans during the annual
period beginning after the end of the reporting period amount to approximately USD 730,000.
12. Borrowings
In August 2019, the Company entered into a loan and security agreement, or the credit facility, with Oxford
Finance LLC for a term loan of up to USD 75.0 million, subject to funding in three tranches. The Company
received gross proceeds of USD 25.0 million, net of transaction costs of USD 0.3 million, from the first tranche
of the credit facility upon entering into the agreement and intends to use the funds for its various clinical
trials programs. The second tranche of USD 25.0 million was available to be drawn at the Company’s option
between December 1, 2019 and January 31, 2020 upon positive results in the Phase 3 IMPLANT 4 clinical trial
of nolasiban. Since the primary endpoint of the IMPLANT 4 clinical trial was not successfully met, the Company
was not eligible to draw the second tranche. The third tranche of USD 25.0 million may be drawn at the
Company’s option between August 1, 2020 and September 30, 2020 upon positive results in the Phase 3
PRIMROSE 1 and PRIMROSE 2 clinical trials of linzagolix.
The credit facility is presented in the balance sheet as follows:
(in USD ,000)
Face value of Oxford loan
Transaction costs
Interest expense
Interest paid
Total borrowings
Of which are:
Current
Non-current
As of December 31,
2019
2018
25,000
(264)
24,736
1,067
(699)
25,104
187
24,917
—
—
—
—
—
—
—
—
108ObsEva Annual Report 2019Consolidated IFRS Financial Statements The credit facility is secured by substantially all of the Company’s assets, including cash and cash equivalents
as well as the Company’s intellectual property and licenses. Each tranche bears interest at a floating interest
rate of thirty day U.S. LIBOR, plus 6.25%, or a minimum of 8.68% per year in total. The Company is required
to make monthly interest-only payments on each tranche through the amortization start date on August 1,
2022. The credit facility will mature on August 1, 2024, at which date a final fee payment of 6.75% of each
funded tranche will be due, resulting in an effective interest rate of 10.32% per year. The credit facility contains
customary conditions to borrowings and events of default and contains various negative covenants limiting
the Company’s ability to, among other things, transfer or sell certain assets, allow changes in business,
ownership or business locations, consummate mergers or acquisitions, incur additional indebtedness, create
liens, pay dividends or make other distributions and make investments. As of December 31, 2019, the
Company was in compliance with its covenants.
13. Shareholders’ equity
January 1, 2018
Issuance of shares - Incentive Plan
Issuance of shares – June 2018 offering
Issuance of shares – ATM program
Share issuance costs
Exercise of stock-options
December 31, 2018
Number of
common shares
36,342,945
347,509
5,056,721
1,600,851
–
95,885
43,443,911
Share capital
(in USD ,000)
Share premium
(in USD ,000)
Total
(in USD ,000)
2,864
219,335
222,199
27
392
130
–
7
2,947
2,974
77,431
77,823
19,881
20,011
(6,160)
(6,160)
1,131
1,138
3,420
314,565
317,985
Number of
common shares
Share capital
(in USD ,000)
Share premium
(in USD ,000)
Total
(in USD ,000)
January 1, 2019
43,443,911
3,420
314,565
317,985
suance of shares - Incentive Plan
Issuance of shares – ATM program
Share issuance costs
Exercise of stock-options
December 31, 2019
261,984
691,133
–
26,420
21
56
–
2
2,696
3,498
(130)
326
2,717
3,554
(130)
328
44,423,448
3,499
320,955
324,454
Share capital and share premium
As of December 31, 2019, the total outstanding share capital of USD 3.5 million, fully paid, consists of
44,423,448 common shares, excluding 168,641 non-vested shares and 3,975,516 treasury shares. As of
December 31, 2018, the total outstanding share capital of USD 3.4 million, fully paid, consisted of 43,443,911
common shares, excluding 430,625 non-vested shares and 1,602,601 treasury shares. All shares have a
nominal value of 1/13 of a Swiss franc, translated into USD using historical rates at the issuance date.
In March 2018, the Company issued 3,499,990 common shares at par value of 1/13 of a Swiss franc per
share. The shares were subscribed by the Company and are held as treasury shares, hence the operation did
not impact the share capital. Share issuance costs of USD 11 thousand related to the operation were recorded
as a deduction in equity.
109ObsEva Annual Report 2019Consolidated IFRS Financial Statements In May 2018, the Company sold 1,600,851 treasury shares at a price of USD 12.50 per share, from its “at the
market” (ATM) program, generating gross proceeds of USD 20.0 million. Directly related share issuance costs
of USD 0.6 million were recorded as a deduction in equity.
In June 2018, the Company completed an underwritten public offering of 4,750,000 common shares at a price
of USD 15.39 per share, with an option to issue to an additional 712,500 common shares (the “follow-on
offering”). The gross proceeds of USD 73.1 million resulting from this transaction have been recorded in equity
net of directly related share issuance costs of USD 5.3 million. Subsequent to the initial closing of the follow-
on offering, on July 19, 2018, the Company sold an additional 306,721 common shares for total gross
proceeds of USD 4.7 million (USD 15.39 per share). These shares were sold pursuant to the 30-day option
granted in connection with the follow-on offering to purchase up to an additional 712,500 common shares.
Directly related share issuance costs amounted to USD 0.3 million.
During the year ended December 31, 2019, the Company sold a total of 691,133 treasury shares at an average
price of USD 5.14 per share, as part of its ATM program initiated in May 2018. These multiple daily
transactions generated total gross proceeds of USD 3.6 million. Directly related share issuance costs of USD
0.1 million were recorded as a deduction in equity.
In July 2019, the Company issued 3,064,048 common shares at par value of 1/13 of a Swiss franc per share.
The shares were fully subscribed for by the Group, and are held as treasury shares, hence the operation did
not impact the share capital.
Equity incentive plans
In 2019, the Company issued 261,984 common shares (2018: 347,509) under its 2013 EIP (see note 20). All
shares issued under the 2013 EIP have a nominal value of 1/13 of a Swiss franc, translated into USD using
historical rates at the issuance date.
Authorized share capital
The authorized share capital that is not outstanding is as follows:
Number of common shares
As of December 31,
2018
2019
Authorized share capital
19,681,753
15,565,620
14. Revenue and other operating income
The Group currently derives no revenue from sales of its biopharmaceutical product candidates.
Operating income other than revenue mainly relates to compensation received from the Swiss tax authorities
as the Company acts as collecting agent of the withholding tax on salaries.
110ObsEva Annual Report 2019Consolidated IFRS Financial Statements 15. Operating expenses by nature
USD ‘000
External research and development costs
Staff costs (note 16)
Professional fees
Rents
Travel expenses
Patent registration costs
Depreciation
Other
Total operating expenses by nature
Year ended December 31,
2017
2018
2019
70,531
24,556
7,072
21
1,398
882
737
1,914
107,111
49,480
19,537
3,871
827
1,044
1,002
109
1,299
77,169
43,268
17,999
2,862
592
1,073
426
70
1,190
67,480
Due to the difficulty in assessing when research and development projects would generate revenue, the Group
expenses all research and development costs on the consolidated statement of comprehensive loss. In 2019,
research and development expenses amounted to USD 88.1 million (2018: USD 62.9 million, 2017: USD
54.9 million).
The depreciation expense has been allocated as follows:
USD ‘000
Research and development expenses
General and administrative expenses
Total depreciation
16. Staff costs
USD ‘000
Wages and salaries
Social charges
Post-employment benefits expense
Share-based payments
Total staff costs
Year ended December 31,
2017
2018
2019
429
308
737
63
46
109
44
26
70
Year ended December 31,
2017
2018
2019
10,403
9,023
7,715
2,124
145
11,884
24,556
946
416
993
435
9,152
8,856
19,537
17,999
The Group employed on average 48.5 full-time equivalents (“FTE”) in 2019, compared to 39.6 FTE in 2018 and
32.3 FTE in 2017, and 50.1 FTE as of December 31, 2019 compared to 43.2 FTE as of December 31, 2018
and 37.7 FTE as of December 31, 2017.
For the year ended December 31, 2019, the post-employment benefits line includes a gain of USD 527
thousand relating to the plan amendment enacted in 2019 (2018: 172 thousand, 2017: nil).
111ObsEva Annual Report 2019Consolidated IFRS Financial Statements 17. Finance income and expense
Our finance income and expense primarily consist of foreign exchange gain and loss as well as interest
expense associated with our lease liabilities and debt instruments.
USD ‘000
Foreign exchange (loss) / gain
Interest expense
Finance result, net
18.
Income taxes and deferred taxes
Year ended December 31,
2017
2018
2019
(442)
(1,186)
(1,628)
393
-
393
589
-
589
The Group is subject to income taxes in Switzerland, Ireland and the United States.
The Company is subject in Switzerland to a municipal and cantonal income tax rate of 22.6% and to a federal
tax rate of 8.5% on its profits after tax. It is entitled to carry forward any loss incurred for a period of seven
years and can offset such losses carried forward against future taxes. In 2015, the Company was granted by
the State Council of the Canton of Geneva an exemption of income and capital tax at municipal and cantonal
levels for the period from 2013 until 2022. Because of this exemption, and the fact that the Company has
incurred net losses since its inception, no income tax expense at the municipal, cantonal or federal levels was
recorded in the Company for the years ended December 31, 2019 and 2018. Additionally, due to the
uncertainty as to whether it will be able to use its net loss carryforwards for tax purposes in the future, no
deferred taxes have been recognized on the balance sheet of the Company as of December 31, 2019 and
December 31, 2018.
On May 19, 2019, the Canton of Geneva approved the implementation of the national proposal of the tax law
named “Federal Act on Tax Reform and AHV Financing” (TRAF). This new tax law results in the abolition of
special tax status companies at cantonal level (privileged taxation as holding company, mixed company and
domiciliary company), and introduces a range of tax measures including the reduction of corporate income
tax rate and capital tax base. As a result of this reform, the Company will be subject to a municipal and
cantonal income tax rate of 14.0%, effective on January 1, 2020, while keeping the benefit of the exemption
granted in 2013. Since the Company has incurred recurring losses since inception, it does not expect a
significant impact resulting from the implementation of the TRAF.
The following table details the tax losses carry forwards of the Company and their respective expiring dates.
Expiring tax losses
USD ‘000
2020
2021
2022
2023
2024
2025
2026
As of December 31,
2018
2019
2,950
11,687
16,394
28,879
59,103
68,662
99,915
2,896
11,473
16,093
28,349
58,019
67,403
-
Total unrecorded tax losses carry forward
287,590
184,233
The Company’s Irish subsidiary has no activity, and, therefore, no income tax expense was recorded in such
entity for the years ended December 31, 2019 and 2018.
112ObsEva Annual Report 2019Consolidated IFRS Financial Statements The Company’s U.S. subsidiary, ObsEva USA Inc., is a service organization for the Group and is therefore
subject to taxes on the revenues generated from its services to the Group that are charged based upon the
U.S. subsidiary’s cost plus arrangement with the Group. The profits of the U.S. subsidiary for the year ended
December 31, 2019 and 2018 were subject to a total U.S. income tax rate of 27.3% based on both the U.S.
federal and Massachusetts state tax rates. The income tax for the year ended December 31, 2019 and 2018
were USD 67 thousand and USD (45) thousand, respectively. Additionally, since ObsEva USA Inc. is totally
dependent on ObsEva SA for revenue, there is uncertainty as to whether ObsEva USA Inc. will be able to use a
deferred tax asset for tax purposes in the future, therefore, no deferred taxes have been recognized on the
balance sheet of the Group as of December 31, 2019 and December 31, 2018.
The following elements explain the difference between the income tax expense at the applicable Group tax
rate and the effective income tax expense:
in USD ,000
ObsEva SA
ObsEva USA
Total Group
Year ended December 31, 2019
Net loss before tax
Statutory tax rate (blended at Group level)
Income tax credit at statutory tax rates
Tax impact of permanent differences
Temporary differences not recognized as deferred tax assets
Adjustments for current tax of prior periods
Tax on losses not recognized as deferred tax assets
Effective income tax expense
Effective tax rate
(107,120)
7.80%
(8,355)
770
-
-
7,586
-
0.00%
(1,603)
27.30%
(438)
76
448
-
(19)
67
(4.20)%
(108,723)
8.10%
(8,793)
846
448
-
7,567
67
(0.1)%
in USD ,000
Net loss before tax
Statutory tax rate (blended at Group level)
Income tax credit at statutory tax rates
Tax impact of permanent differences
Temporary differences not recognized as deferred tax assets
Adjustments for current tax of prior periods
Tax on losses not recognized as deferred tax assets
Effective income tax credit
Effective tax rate
19. Loss per share
ObsEva SA
Year ended December 31, 2018
Total Group
ObsEva USA
(75,616)
7.80%
(5,898)
602
-
-
5,296
-
0.00%
(1,145)
27.30%
(313)
76
251
(59)
-
(45)
3.90%
(76,761)
8.10%
(6,211)
678
251
(59)
5,296
(45)
0.1%
As of December 31, 2019, 2018 and 2017, the Company has one category of shares, which are common
shares, since the Company’s non-voting shares and series A and series B preferred shares were converted into
common shares upon the closing of the IPO on January 25, 2017.
113ObsEva Annual Report 2019Consolidated IFRS Financial Statements The basic loss per share is calculated by dividing the loss of the period attributable to the ordinary shares by the
weighted average number of ordinary shares (common and non-voting) outstanding during the period as follows:
Year ended December 31, 2019
Common Shares
Net loss attributable to shareholders (in USD ‘000)
Weighted average number of shares outstanding
Basic and diluted loss per share (in USD)
(108,790)
43,674,746
(2.49)
Year ended December 31, 2018
Common Shares
Net loss attributable to shareholders (in USD ‘000)
Weighted average number of shares outstanding
Basic and diluted loss per share (in USD)
(76,716)
40,172,498
(1.91)
Year ended December 31, 2017
Common Shares
Net loss attributable to shareholders (in USD ‘000)
Weighted average number of shares outstanding
Basic and diluted loss per share (in USD)
(66,926)
29,799,047
(2.25)
For the year ended December 31, 2019, 168,641 non-vested shares and 4,626,385 shares issuable upon the
exercise of stock-options, which would have an anti-dilutive impact on the calculation of the diluted earnings
per share, were excluded from the calculation. For the year ended December 31, 2018, 430,625 non-vested
shares and 3,028,275 shares issuable upon the exercise of stock-options were excluded. For the year ended
December 31, 2017, 778,134 non-vested shares and 1,866,740 shares issuable upon the exercise of stock-
options were excluded.
20. Share-based compensation
The total expenses arising from share-based payment transactions recognized during the period as part of
staff costs were as follows:
USD ‘000
Employee 2013 EIP
Employee 2017 EIP
Total share-based compensation
Year ended December 31,
2017
2018
2019
1,006
10,878
11,884
2,242
6,910
9,152
5,497
3,359
8,856
Employee equity incentive plan 2013
The Company established the 2013 EIP for employees, executives, directors and consultants (the
“Beneficiaries”) of the Group.
Upon enrollment in the 2013 EIP, Beneficiaries were granted a certain number of shares which they were
entitled to acquire at a pre-determined price of 1/13 of a Swiss franc. The pre-determined price was generally
paid by the Beneficiaries at the grant date and recognized as a pre-payment until the vesting period elapses
resulting in the shares issuance being accounted for.
114ObsEva Annual Report 2019Consolidated IFRS Financial Statements The shares generally fully vest over a four-year vesting period, with 25% of the shares underlying the grant
vesting after one year, and 1/48th of the shares underlying the grant vesting each month over a further period
of three years.
The Group has no present obligation to repurchase or settle the shares in cash.
Number of shares issued under the 2013 EIP
261,984
347,509
454,548
Expense arising from the 2013 EIP (in USD ‚000)
1,006
2,242
5,497
2019
2018
2017
The fair value of the shares was calculated using a combination of the discounted cash flow method, under
the income approach, and the backsolve method. The income approach estimates value based on the
expectation of future cash flows that the Company will generate, such as cash earnings, costs savings, tax
deduction and the proceeds from disposition. These future cash flows were discounted to their present values
using a discount rate derived based on an analysis of the cost of capital of comparable publicly traded
companies in similar lines of business, as of each valuation date, and was adjusted to reflect the risks inherent
in the Company’s cash flows. The backsolve method, a form of the market approach to valuation, derives the
implied enterprise equity value and the fair value of the non-voting share from a recent and contemporaneous
transaction involving the Company’s own securities, using the following assumptions: rights and preferences
of the different categories of shares, probability of various liquidity event scenarios, expected timing of a
liquidity event, volatility and expected value in a liquidity event.
The Group has stopped granting equity instruments under the 2013 EIP in 2016.
Employee equity incentive plan 2017
The Company established in 2017 the 2017 EIP for Beneficiaries of the Group, under which 1,683,303 and
1,317,420 stock-options were granted during the year ended December 31, 2019 and 2018, respectively. The
stock-options vest under a 3-year or 4-year vesting schedule, have a 10-year expiration term and have an
exercise price equivalent to the share price at grant date. Certain grants also include non-market performance
vesting conditions, common to all employees, regularly assessed to determine the numbers of awards
expected to vest.
Movements in the number of stock-options outstanding under the 2017 EIP were as follows:
Average exercise price Number of options
2019
2018
Average exercise price Number of options
(USD)
11.39
8.89
10.94
7.32
10.51
3,028,275
1,683,303
(58,773)
(26,420)
4,626,385
(USD)
9.19
13.98
6.98
7.01
11.39
1,866,740
1,317,420
(60,000)
(95,885)
3,028,275
January 1,
Granted
Forfeited / Expired
Exercised
At December 31,
The weighted average share price at the date of exercise of options exercised during the years ended
December 31, 2019 and 2018 was USD 11.64 and USD 13.04, respectively.
115ObsEva Annual Report 2019Consolidated IFRS Financial Statements The outstanding stock-options have the following range of exercise prices and remaining contractual life:
Range of exercise prices
USD 15.00 to USD 17.99
USD 12.00 to USD 14.99
USD 9.00 to USD 11.99
USD 6.00 to USD 8.99
Total outstanding options
out of which are exercisable
Weighted-average remaining contractual life (in years)
As of December 31,
2019
361,500
1,276,240
1,458,595
1,530,050
4,626,385
1,312,557
8.8
2018
361,500
1,109,370
1,185,905
371,500
3,028,275
447,538
9.2
The weighted average fair value of the stock-options granted during the years ended December 31, 2019 and
2018, determined using a Black-Scholes model was USD 6.45 and USD 10.36, respectively. The significant
inputs to the model were:
Weighted average share price at grant date
Weighted average exercise price
Weighted average 10-year volatility
Dividend yield
Weighted average 10-year risk free rate
2019
USD 8.89
USD 8.89
65%
0%
1.88%
2018
USD 13.98
USD 13.98
65%
0%
3.06%
Since the Company has a short track record as a public company, expected volatility has been determined
based on the historical trend of an appropriate sample of public companies operating in the biotech and
pharmaceutical industry.
21. Commitments and contingencies
Operating lease commitments
The Group leases arrangements mostly relate to buildings offices for its headquarters in Geneva, Switzerland
and its subsidiary’s lease in Boston, Massachusetts, USA.
From January 1, 2019, the Group has applied IFRS 16 Leases, and recognized right-of-use assets for its leases,
except for short-term and low-value leases, as indicated in note 2.3. Future lease liabilities payments and
associated maturities are provided in note 3.2.
in USD ‚000
Within 1 year
Later than 1 year and no later than 5 years
Later than 5 years
Total
As of December 31,
2018
2019
—
—
—
—
705
2,369
—
3,074
116ObsEva Annual Report 2019Consolidated IFRS Financial Statements Contingencies
As a result of the licenses granted to the Group, the following contingencies are to be noted:
Kissei license
Under the terms of the license and supply agreement, the Group would be obligated to make milestone
payments upon the achievement of specified regulatory milestones with respect to linzagolix. The total of all
potential undiscounted future payments that the Group could be required to make under this arrangement
ranges between USD 0 and USD 188 million, of which USD 10 million have already been paid.
Pursuant to the Kissei license and supply agreement, the Group has agreed to exclusively purchase the active
pharmaceutical ingredient for linzagolix from Kissei. During the development stage, the Group is obligated
to pay Kissei a specified supply price. Following the first commercial sale of licensed product, the Group is
obligated to pay Kissei a royalty payment in the low twenty percent range as a percentage of net sales, which
includes payment for Kissei’s supply of the active pharmaceutical ingredient until the latest of the date that
the valid claim of a patent for the product has expired, the expiration of our regulatory exclusivity period or
15 years from the first commercial sale of such product on a country-by-country and product-by-product basis.
Merck Serono licenses
Under the terms of the two license agreements with Merck Serono for OBE022 and nolasiban, the Group would
be obligated to pay Merck Serono a high-single digit and a mid-single digit royalty, respectively, of net sales
generated by the Group, its affiliates or sub-licensees of any product containing the in-licensed compounds.
22. Related parties transactions
As of December 31, 2019, the Group’s related parties include key management (Board of Directors and
Executive Committee) and members of their immediate families. The following transactions were carried out
with related parties:
Key management remuneration
The Board of Directors is composed of eight members, whereas the Executive Committee is composed of five
members (2018: seven). The following table sets forth the total remuneration recorded for members of the
Board of Directors and Executive Committee:
in USD ‚000
Short-term employee benefits (including base and variable
cash remuneration)
Post-employment benefits
Share-based payments
Total
Year ended December 31,
2019
2018
4,181
186
8,485
12,852
4,150
117
6,125
10,392
Other transactions with related parties
There were no other significant transactions with related parties during the years presented.
117ObsEva Annual Report 2019Consolidated IFRS Financial Statements 118ObsEva Annual Report 2019Consolidated IFRS Financial Statements23. Going concernThe Group fulfills its obligations by the use of its cash reserves. The Group has incurred recurring losses since inception, including net losses of USD 108.8 million for the year ended December 31, 2019. As of December 31, 2019, the Group had accumulated losses of USD 328.0 million, out of which USD 30.6 million were offset with share premium. The Group expects to continue to generate operating losses in the foreseeable future, and that it will be able to meet all of its obligations as they fall due for at least 12 months from the date these financial statements are issued, hence, the audited consolidated financial statements have been prepared on a going concern basis. However, the future viability of the Group beyond that point is dependent on its ability to raise additional capital to finance its future operations. The Group will seek additional funding through public or private financings, debt financing or collaboration agreements. The inability to obtain funding, as and when needed, would have a negative impact on the Group’s financial condition and ability to pursue its business strategies. If the Group is unable to obtain funding, the Group could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Group may be unable to continue operations. Although management intends to pursue plans to obtain additional funding to finance its operations, there is no assurance that the Group will be successful in obtaining sufficient funding on terms acceptable to the Group to fund continuing operations, if at all, which could have material adverse effect on the Group's business, results of operations and financial conditions. 24. Events after the reporting periodATM proceeds From January 1, 2020 until February 28, 2020, the Group sold an additional 1,731,922 treasury shares at an average price of USD 3.65 per share, as part of its ATM program. Total gross proceeds amounted to USD 6.3 million. There were no other material events after the balance sheet date. Report from the
Auditor on
the Consolidated
IFRS Financial
Statements
Report of the statutory auditor
to the General Meeting of ObsEva SA
Plan-les-Ouates
Report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of ObsEva SA and its subsidiaries (the Group)
contained in the section labeled "Consolidated IFRS Financial Statements for the year ended December 31,
2019" on pages 87 to 118, which comprise the consolidated balance sheet as at 31 December 2019
and the consolidated statement of comprehensive loss, consolidated statement of changes in equity and
consolidated statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at 31 December 2019 and its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with the International
Financial Reporting Standards (IFRS) and comply with Swiss law.
Basis for opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss
Auditing Standards. Our responsibilities under those provisions and standards are further described in the
“Auditor’s responsibilities for the audit of the consolidated financial statements” section of our report.
We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the
Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit approach
Overview
120 Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide
reasonable assurance that the consolidated financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including
the overall Group materiality for the consolidated financial statements as a whole as set out in the table
below. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate, on the consolidated financial statements as a whole.
We agreed with the Audit Committee that we would report to them misstatements above USD 107,000
identified during our audit as well as any misstatements below that amount which, in our view, warranted
reporting for qualitative reasons.
Audit Scope
We designed our audit by determining materiality and assessing the risks of material misstatement in the
consolidated financial statements. In particular, we considered where subjective judgements were made;
for example, in respect of significant accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk
of management override of internal controls, including among other matters consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable to provide an opinion on
the consolidated financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
The Group is comprised of three entities located in three different countries, namely Switzerland, the
United States of America (US), and Ireland (inactive). The Group financial statements are a consolidation
of these three entities, comprising the Group’s operating business and centralized functions. Based on
the client’s operations we have performed full scope audit work on the Swiss entity and specified
procedures on the US entity.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
121ObsEva Annual Report 2019Report from the Auditor on the Consolidated IFRS Financial Statements Carrying value of intangible assets
Key audit matter
How our audit addressed the key audit matter
The Group has intangible assets totaling USD
26.6 million at December 31, 2019 comprised of
licenses to operate several biopharmaceutical
product candidates. The Group is required to
review its intangibles for impairment whenever
events or changes in circumstances indicate that
their carrying amounts may not be recoverable,
and at least annually. As part of such review, the
Group did not identify any impairment.
Intangible assets are significant to the Group
and relate to licenses that haven’t yet received
regulatory and marketing approvals. The Group
for
its
reviewed
has collectively
licenses
impairment on
the market
the basis of
capitalization of the Group at year end less the
carrying value of its tangible assets which
consist primarily of cash and cash equivalents,
resulting in significant headroom.
Additionally, the licenses have been reviewed for
impairment by assessing the fair value less costs
of disposal (FVLCOD), using a 20-year forecast,
assuming
and
various
commercialization
biopharmaceutical product candidates.
development
the
successful
of
of
the
development
and
Successful
various
commercialization
biopharmaceutical product candidates depend
on the continuing funding, progress of clinical
trials and future market opportunities. The
forecasts performed by the Group contain a
number of significant judgments and estimates,
including expected research and development
costs, probabilities of achieving development
standards,
milestones based on
reported disease prevalence, expected market
share, commercialization expectations, drug
reimbursement, costs of goods sold, marketing
expenses, expected patent life and a discount
factor of 15%.
industry
Refer to Note 2 Accounting principles applied in
the preparation of the consolidated financial
statements
8
Intangible assets (page 102).
(page
Note
and
94)
a
and
that
Board
assessed
indicators
with Management
We
potential
impairment may exist by performing a review of
the minutes of Management,
of
Board Committee meetings,
Directors
inquiry
the
trials, external
ongoing progress of clinical
releases and
communications,
communications
other public
coming
and
from
subsequent
consideration of
event procedures performed.
filings, public
direct
the
including press
competitors,
results of
concerning
We assessed the reasonableness of key inputs
included in the market valuation models used by
management to determine the recoverable amounts
of intangible assets and recalculated the headroom.
We assessed the sensitivity of the FVLCOD models
of each of the licenses by assessing the key
assumptions used, including the discount factor,
over the forecasted period.
We reviewed the budget approved by the board of
directors which included continued funding for
ongoing and new clinical trials for the Group’s
licenses.
We inquired of management as to whether the
trials was satisfactory,
progress of clinical
discussions with regulatory authorities for new
trials were progressing as planned, and enrollment
status for ongoing clinical trials was taking place
as expected.
included assessments of
We reviewed external analyst reports of the Group,
the Group’s
which
with
product
management on the potential adverse impact of
competitor products and product candidates.
candidates,
inquired
and
As a result of procedures performed, we concluded
management’s assessment that the carrying value
of
impaired as of
December 31, 2019 was based upon reasonable
assumptions, consistently applied.
intangible assets
is not
122ObsEva Annual Report 2019Report from the Auditor on the Consolidated IFRS Financial Statements
Other information in the annual report
The Board of Directors is responsible for the other information in the annual report. The other information
comprises all information included in the annual report, but does not include the consolidated financial
statements, the stand-alone financial statements and the remuneration report of ObsEva SA and our
auditor’s reports thereon.
Our opinion on the consolidated financial statements does not cover the other information in the annual
report and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information in the annual report and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Responsibilities of the Board of Directors for the consolidated financial statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a
true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the
Board of Directors determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Board of Directors either intends to liquidate the
Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Swiss law, ISAs and Swiss Auditing Standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
123ObsEva Annual Report 2019Report from the Auditor on the Consolidated IFRS Financial Statements concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine those
matters that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an
internal control system exists which has been designed for the preparation of consolidated financial
statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers SA
Michael Foley
Audit expert
Auditor in charge
Florent Rossetto
Audit expert
Genève, 5 March 2020
124ObsEva Annual Report 2019Report from the Auditor on the Consolidated IFRS Financial Statements
Statutory Financial
Statements of
ObsEva SA
Statutory Financial Statements of ObsEva SA
for the year ended December 31, 2019
Balance Sheet as of December 31,
ASSETS
Current assets
Cash and cash equivalents
Other current receivables
Notes
2019
(in USD)
2018
(in USD)
2019
(in CHF)
2018
(in CHF)
68,197,737
138,237,935
65,942,503
136,164,366
Other current receivables – Group Comp.
610,301
–
1,025,019
879,225
991,122
590,119
866,038
–
Deferred costs and prepaid expenses
4,669,715
5,672,840
4,515,292
5,587,747
Total current assets
Noncurrent assets
Financial assets
Investments
Property, plant and equipment
Intangible assets
Other non-current assets
Total noncurrent assets
74,502,772
144,790,000
72,039,037
142,618,151
4
5
6
7
8
195,053
191,692
188,602
188,816
3
3
3
3
129,108
154,246
124,838
151,932
24,503,378
19,503,378
23,693,075
19,210,827
1,209,375
1,169,382
26,036,917
19,849,319
25,175,901
19,551,578
Total assets
100,539,688
164,639,319
97,214,937
162,169,729
LIABILITIES & SHAREHOLDERS’ EQUITY
Current liabilities
Trade payables
Other current liabilities
Other current liabilities - Group Comp.
Accrued expenses
Total current liabilities
Non-current liabilities
Borrowings
Other non-current liabilities
Total non-current liabilities
Shareholders’ equity
Share capital
Treasury shares
7,138,800
2,350,655
6,902,727
2,315,395
1,177,491
—
266,358
235,370
1,138,553
—
262,363
231,839
10,134,852
13,725,727
9,799,702
13,519,841
18,534,476
16,578,110
17,921,559
16,329,438
8
26,464,045
1,260,824
27,580,195
—
—
—
25,588,904
1,219,130
26,668,144
—
—
—
3,826,421
3,586,269
3,699,885
3,498,373
(312,452)
(130,584)
(302,119)
(123,408)
Legal reserve from capital contribution
304,146,301
300,586,132
294,088,475
296,136,491
Accumulated deficit
Total shareholders’ equity
(253,235,253)
(155,980,608)
(244,861,007)
(153,671,165)
11
54,425,017
148,061,209
52,625,234
145,840,291
Total liabilities & shareholders’ equity
100,539,688
164,639,319
97,214,937
162,169,729
Plan les Ouates, March 5, 2020
The accompanying notes form an integral part of these financial statements.
126ObsEva Annual Report 2019 Statement of Loss for the year ended December 31,
INCOME
Other income
Total income
OPERATING EXPENSES
Staff costs
2019
(in USD)
2018
(in USD)
2019
(in CHF)
2018
(in CHF)
16,357
16,357
15,198
15,198
16,249
16,249
14,862
14,862
(11,419,741)
(8,705,747)
(11,344,113)
(8,513,278)
External research and development costs
(70,223,177)
(49,480,468)
(69,758,123)
(48,386,537)
Patent costs
Professional fees
(881,641)
(1,002,140)
(875,802)
(979,984)
(6,563,799)
(3,442,277)
(6,520,330)
(3,366,174)
Professional fees – Group Companies
(3,075,384)
(2,973,751)
(3,055,017)
(2,908,007)
Facilities
Other operating expenses
Depreciation
Total operating expenses
OPERATING LOSS
Finance income
Finance expense
(2,085,212)
(567,361)
(2,071,402)
(554,817)
(1,638,511)
(2,036,147)
(1,627,660)
(1,991,131)
(71,432)
(60,725)
(70,959)
(59,382)
(95,958,895)
(68,268,616)
(95,323,405)
(66,759,311)
(95,942,538)
(68,253,418)
(95,307,157)
(66,744,449)
509,520
358,509
506,146
350,583
(1,821,628)
–
(1,809,564)
–
NET LOSS BEFORE TAX
(97,254,645)
(67,894,909)
(96,610,575)
(66,393,865)
Income tax expense
–
–
–
–
NET LOSS FOR THE PERIOD
(97,254,645)
(67,894,909)
(96,610,575)
(66,393,865)
Plan les Ouates, March 5, 2020
127ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA The accompanying notes form an integral part of these financial statements.
Notes to the Financial Statements 2019
1.
General information
ObsEva Ltd was founded on November 14, 2012 in Geneva, Switzerland, and is domiciled 12 chemin des Aulx,
1228 Plan-les-Ouates. The purpose of the Company is all activities and services in the domains of research,
development, fabrication, registration, promotion and commercialization of biotechnological and
pharmaceutical products.
2.
Accounting principles applied in the preparation of the financial statements
These financial statements have been prepared in accordance with the provisions of commercial accounting
as set out in the Swiss Code of Obligations (Art. 957 to 963b CO, effective since January 1, 2013). Significant
balance sheet items are accounted for as follows:
–
–
–
–
Current assets
Other current receivables are carried at their nominal value. Impairment charges are calculated for these
assets on an individual basis.
Non-current assets
Property, plant and equipment is carried at cost less depreciation. Depreciation is calculated using the
straight-line method, on the basis of the following useful lives:
–
furniture
– hardware
–
Property, plant and equipment and intangible assets are reviewed for impairment whenever events or
changes in circumstances indicate that their carrying amount may not be recoverable, on an individual
basis. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount.
5 years
3 years
duration of lease
leasehold improvement
Recognition of income
Income is recognized if its amount can be reliably measured and it is sufficiently probable that the
economic benefits will flow to the company.
Foreign currencies
Monetary and non-monetary items in foreign currency are translated into the company functional currency
as follows:
–
–
the exchange rates used for balance sheet items are the rates prevailing on 31 December;
the exchange rates used for transactions conducted during the course of the year and for items in
the profit and loss statement are the exchange rates prevailing at the dates of the transactions or
valuations where items are re-measured.
128ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA
The functional currency of ObsEva SA is the U.S. dollar (USD). Values in Swiss franc presented in accordance
with Art. 958d of the Swiss code of Obligations were converted from the functional currency as follows:
USD/CHF prevailing rate
USD/CHF rate used
for year ended
December 31, 2019
USD/CHF rate used
for year ended
December 31, 2018
Statement of loss
Shareholders’ equity
Average rate for the period
Historical rates
Balance sheet, other line items
Closing rate as of December 31
0.99338
–
0.96693
0.977892
–
0.985000
All resulting exchange differences were reported as currency translation differences in equity.
3.
Fulltime positions
The company employed on average 42.8 full-time equivalents (FTE) in 2019 (2018: 33.3 FTE) and 44.1 FTE
as of December 31, 2019 (December 31, 2018: 37.2 FTE).
4.
Pledges on assets to secure own liabilities
Escrow accounts
Total
2019
(in USD)
195,053
195,053
December 31,
2018
(in USD)
191,692
191,692
2019
(in CHF)
188,603
188,603
December 31,
2018
(in CHF)
188,816
188,816
As of December 31, 2019, USD 195,053 (CHF 188,603) were held on escrow accounts as security rental
deposits (December 31, 2018, USD 191,692 (CHF 188,816)).
5.
Investments
ObsEva SA owned as of December 31, 2019:
Company
Business
Capital
ObsEva Ireland Ltd, Cork, Ireland
Research and development
EUR 2.00
ObsEva USA Inc., New York, USA
Research and development
USD 0.50
Interest
in capital
Voting
Rights
100%
100%
100%
100%
129ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA Recognized in the balance sheet as follows:
2019
(in USD)
December 31,
2018
(in USD)
2019
(in CHF)
December 31,
2018
(in CHF)
Shareholding ObsEva Ireland Ltd
Shareholding ObsEva USA Inc.
Total
2
1
3
2
1
3
2
1
3
2
1
3
6.
Property, plant and equipment
Net book value as of 1st Jan. 19
Additions
Depreciation charge
Net book value as of 31 Dec. 19
Total cost
Accumulated depreciation
Net book value as of 1st Jan. 18
Additions
Depreciation charge
Net book value as of 31 Dec. 18
Total cost
Accumulated depreciation
Net book value as of 1st Jan. 19
Additions
Currency translation difference
Depreciation charge
Net book value as of 31 Dec. 19
Total cost
Accumulated depreciation
Furniture
(in USD)
Hardware
(in USD)
Leasehold
improvement
(in USD)
Total
(in USD)
55,959
5,612
(18,383)
43,187
109,733
(66,545)
57,611
40,682
(35,903)
62,389
182,050
40,676
154,246
—
46,294
(17,145)
(71,432)
23,531
129,108
122,402
414,185
(119,662)
(98,870)
(285,078)
Furniture
(in USD)
Hardware
(in USD)
Leasehold
improvement
(in USD)
Total
(in USD)
45,183
26,828
(16,052)
55,959
104,121
(48,162)
29,806
51,714
(23,909)
57,611
141,368
(83,757)
39,938
114,927
21,502
100,044
(20,764)
(60,725)
40,676
154,246
122,402
367,891
(81,726)
(213,645)
Furniture
Hardware
Leasehold
improvement
Total
(in CHF)
(in CHF)
(in CHF)
(in CHF)
55,119
5,502
(258)
(18,023)
42,340
107,581
(65,240)
56,747
39,884
(265)
(35,200)
61,166
178,481
40,066
151,932
—
45,386
(187)
(711)
(16,809)
(16,809)
23,070
126,576
120,002
406,064
(117,316)
(96,932)
(279,488)
130ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA Furniture
(in CHF)
Hardware
(in CHF)
improvement
(in CHF)
Total
(in CHF)
Leasehold
44,066
26,235
515
(15,697)
55,119
102,559
(47,440)
29,070
50,571
486
(23,380)
56,747
139,247
(82,500)
38,952
112,088
21,026
393
97,832
1,394
(20,305)
(59,382)
40,066
151,932
120,566
362,372
(80,500)
(210,440)
Net book value as of 1st Jan. 18
Additions
Currency translation difference
Depreciation charge
Net book value as of 31 Dec. 18
Total cost
Accumulated depreciation
7.
Intangible assets
As of December 31, 2019 the Company holds a number of licenses to operate several pharmaceutical
compounds, which were acquired for USD 24,503,378 (CHF 23,693,075) (31 December 2018: USD 19,503,378
(CHF 19,021,645)).
On May 9, 2019, the Company announced the initiation of its Phase 3 clinical program for linzagolix in
endometriosis, which includes the EDELWEISS 2 and EDELWEISS 3 clinical trials. On July 19, 2019, the Company
randomized the first patient as part of the EDELWEISS 2 trial, resulting in a milestone payment of USD 5 million
to Kissei Pharmaceutical Co., Ltd., accounted for as an intangible asset.
8.
Borrowings
In August 2019, the Company entered into a loan and security agreement with Oxford Finance for a term loan
of up to USD 75.0 million, subject to funding in three tranches. The Company received gross proceeds of USD
25.0 million, net of transaction costs of USD 0.3 million, from the first tranche of the credit facility upon
entering into the agreement and intends to use the funds for its various clinical trials programs. The second
tranche of USD 25.0 million could be drawn at the Company’s option between December 1, 2019 and January
31, 2020 upon positive results in the Phase 3 IMPLANT 4 clinical trial of nolasiban. Since the primary endpoint
of the IMPLANT 4 clinical trial was not successfully met, the Company was not eligible to draw the second
tranche. The third tranche of USD 25.0 million may be drawn at the Company’s option between August 1,
2020 and September 30, 2020 upon positive results in the Phase 3 PRIMROSE 1 and PRIMROSE 2 clinical trials
of linzagolix.
The credit facility is secured by substantially all of the Company’s assets, including cash and cash equivalents
as well as the Company’s intellectual property and licenses. Each tranche bears interest at a floating interest
rate of thirty day U.S. LIBOR, plus 6.25%, or a minimum of 8.68% per year in total. The Company is required
to make monthly interest-only payments on each tranche through the amortization start date on August 1,
2022. The credit facility will mature on August 1, 2024, at which date a final fee payment (disagio) of 6.75%
of each funded tranche will be due. The disagio has been recognized as other non-current asset and will be
amortized over the term of the loan. The credit facility contains customary conditions to borrowings and
events of default and contains various negative covenants limiting the Company’s ability to, among other
things, transfer or sell certain assets, allow changes in business, ownership or business locations,
consummate mergers or acquisitions, incur additional indebtedness, create liens, pay dividends or make other
distributions and make investments. As of December 31, 2019, the Company complies with its covenants.
131ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA 9.
Amounts due to pension funds
As of December 31, 2019, amounts due to pension funds amounted to USD 346,598 (CHF 335,136) (December
31, 2018: USD 256,944 (CHF 253,090)).
10. Lease commitments not reported in the balance sheet
Operating lease commitments (including rent costs)
December 31,
December 31,
2019
(in USD)
2018
(in USD)
2019
(in CHF)
2018
(in CHF)
Within 1 year
Later than 1 year and no later than 5
years
Later than 5 years
Total
458,229
458,762
443,076
451,881
1,145,573
1,605,697
1,107,690
1,581,611
—
–
—
–
1,603,802
2,064,459
1,550,766
2,033,492
11. Shareholders’ equity
January 1, 2019
3,455,685
300,586,132
(155,980,608)
148,061,209
Share
capital
(in USD)
Legal reserve
from capital
cont.
Accumulated Shareholders’
equity
deficit
(in USD)
(in USD)
(in USD)
Issuance of shares – ATM offering
Costs of share issuance – ATM
Stock-option exercise
Net loss for the year
December 31, 2019
56,255
3,498,293
—
2,028
—
(129,594)
191,471
—
—
—
3,554,548
(129,594)
193,499
3,513,968
304,146,301
(253,235,253)
54,425,017
—
(97,254,645)
(97,254,645)
132ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA January 1, 2018
2,926,352
208,769,597
(88,085,699)
123,610,250
Share
capital
(in USD)
Legal reserve
from capital
cont.
Accumulated Shareholders’
equity
deficit
(in USD)
(in USD)
(in USD)
Issuance of shares – Follow-on offering
(incl. Green-shoe)
Issuance of shares – ATM offering
Costs of share issuance – Follow-on
Costs of share issuance – ATM
Stock-option exercise
Net loss for the year
December 31, 2018
391,601
130,303
–
–
7,429
–
77,431,335
19,880,675
(5,552,419)
(608,170)
665,114
–
–
–
–
–
77,822,936
20,010,978
(5,552,419)
(608,170)
672,543
–
(67,894,909)
(67,894,909)
3,455,685
300,586,132
(155,980,608)
148,061,209
Share capital
Legal reserve
from capital
cont.
Accumulated
deficit
Shareholders’
equity
(in CHF)
(in CHF)
(in CHF)
(in CHF)
January 1, 2019
3,374,965
296,136,491
(153,671,165)
145,840,291
Issuance of shares – ATM offering
Costs of share issuance – ATM
Stock-option exercise
Currency translation differences
Net loss for the year
December 31, 2019
53,420
3,321,967
—
2,032
—
—
(123,062)
191,895
—
—
—
—
—
(50,735)
3,375,387
(123,062)
193,928
(50,735)
(96,610,575)
(96,610,575)
3,430,417
299,527,292
(250,332,475)
52,625,234
Share capital
Legal reserve
from capital
cont.
Accumulated
deficit
Shareholders’
equity
(in CHF)
(in CHF)
(in CHF)
(in CHF)
January 1, 2018
2,855,468
205,865,074
(88,163,465)
120,557,077
Issuance of shares – Follow-on offering (incl.
Green-shoe)
Issuance of shares – ATM offering
Costs of share issuance – Follow-on
Costs of share issuance – ATM
Stock-option exercise
Currency translation differences
Net loss for the year
December 31, 2018
388,979
76,912,867
123,143
18,788,232
–
–
7,375
–
–
(5,515,241)
(574,751)
660,310
–
–
–
–
–
–
–
886,165
77,301,846
18,911,375
(5,515,241)
(574,751)
667,685
886,165
(66,393,865)
(66,393,865)
3,374,965
296,136,491
(153,671,165)
145,840,291
133ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA Outstanding Share Capital and Non-Voting Share Capital
As of December 31, 2019, the total outstanding share capital of USD 3,513,969 (CHF 3,397,765), fully paid,
consists of 48,567,605 common shares, less 3,975,516 shares held by the Company as treasury shares. All
shares have a nominal value of 1/13 of a Swiss franc.
As of December 31, 2018, the total outstanding share capital of USD 3,455,685 (CHF 3,374,965), fully paid,
consists of 45,477,137 common shares, less 1,602,601 shares held by the Company as treasury shares. All
shares have a nominal value of 1/13 of a Swiss franc.
Significant Changes in Shareholders’ Equity
On March 16, 2018, the Company issued 3,499,990 common shares at par value of 1/13 of a Swiss franc per
share. The shares were subscribed by the Company and are held as treasury shares, hence the operation did
not impact the share capital.
On May 17 and 25, 2018, the Company sold 1,000,851 and 600,000 treasury shares, respectively, at a price
of USD 12.50 per share, from its “at the market” (ATM) program, generating gross proceeds of USD 20,010,978
(CHF 18,911,375). Directly related share issuance costs of USD 608,170 (CHF 574,751) were recorded as a
deduction in equity.
On June 22, 2018, the Company completed an underwritten public offering of 4,750,000 common shares at
a price of USD 15.39 per share, with an option to issue to an additional 712,500 common shares (the “follow-
on offering”). The gross proceeds resulting from this transaction amounted to USD 73,102,500 (CHF
72,613,017). Subsequent to the initial closing of the follow-on offering, on July 19, 2018, the Company sold
an additional 306,721 common shares for total gross proceeds of USD 4,720,436 (CHF 4,688,829). These
shares were sold pursuant to the 30-day option granted in connection with the follow-on offering to purchase
up to an additional 712,500 common shares (“green-shoe”). Directly related share issuance costs for the
overall transaction (follow-on and green-shoe) amounted to USD 5,552,419 (CHF 5,515,241) and have been
recorded as a deduction in equity.
Throughout the year ended December 31, 2019, the Company sold a total of 691,133 treasury shares at an
average price of USD 5.14 per share, as part of its ATM program initiated in May 2018. These multiple daily
transactions generated total gross proceeds of USD 3,554,548 (CHF 3,375,387).
On July 18, 2019, the Company issued 3,064,048 common shares at par value of 1/13 of a Swiss franc per
share. The shares were fully subscribed for by the Company, and are held as treasury shares, hence the
operation did not impact the share capital.
Treasury shares
The changes in the number of treasury shares owned by the company in 2019 and 2018 are as follows:
(number of treasury shares)
At January 1,
Sale of treasury shares
Purchase of treasury shares
At December 31,
2019
1,602,601
(691,133)
3,064,048
3,975,516
2018
10,183
(1,907,572)
3,499,990
1,602,601
134ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA 12. Authorized capital and conditional capital
The authorized share capital and conditional share capital as of December 31, 2019 and December 31, 2018
are as follows:
Authorized share capital
Conditional share capital
13. Major shareholders
December 31, 2019
December 31, 2018
(CHF)
(CHF)
1,513,981
1,749,677
1,197,355
1,562,740
A list of our major shareholders is disclosed in the Corporate Governance section of this Annual Report (page 66).
14. Going concern
The Company fulfills its obligations by the use of its cash reserves. The Company expects it will be able
to meet all of its obligations as they fall due for at least 12 months from the date these financial statements
are issued, hence, the audited financial statements have been prepared on a going concern basis.
However, the future viability of the Company beyond that point is dependent on its ability to raise
additional capital to finance its future operations. The Company will seek additional funding through
public or private financings, debt financing or collaboration agreements. The inability to obtain funding,
as and when needed, would have a negative impact on the Company’s financial condition and ability to
pursue its business strategies. If the Company is unable to obtain funding, the Company could be forced to
delay, reduce or eliminate some or all of its research and development programs, product portfolio
expansion or commercialization efforts, which could adversely affect its business prospects, or the Company
may be unable to continue operations. Although management intends to pursue plans to obtain additional
funding to finance its operations, there is no assurance that the Company will be successful in obtaining
sufficient funding on terms acceptable to the Company to fund continuing operations, if at all, which could
have material adverse effect on the Company’s business, results of operations and financial conditions.
15. Events after the balance sheet date
ATM proceeds
From January 1, 2020 until February 28, 2020, the Company sold an additional 1,731,922 treasury shares at
an average price of USD 3.65 per share, as part of its ATM program. Total gross proceeds amounted to USD
6.3 million.
There were no other material events after the balance sheet date.
135ObsEva Annual Report 2019Statutory Financial Statements of ObsEva SA Report from the
Auditor on the
Statutory Financial
Statements of
ObsEva SA
Report of the statutory auditor
to the General Meeting of ObsEva SA
Plan-les-Ouates
Report on the audit of the financial statements
Opinion
We have audited the financial statements of ObsEva SA (the entity) contained in the section labeled "Statutory
Financial Statements of ObsEva SA for the year ended December 31, 2019" on pages 126 to 135, which
comprise the balance sheet as at 31 December 2019, statement of loss and notes for the year then ended,
including a summary of significant accounting policies.
In our opinion, the accompanying financial statements as at 31 December 2019 comply with Swiss law and
the company’s articles of incorporation.
Basis for opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under
those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the
financial statements” section of our report.
We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the
Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Our audit approach
Overview
We agreed with the Audit Committee that we would report to them misstatements above USD 95,800
identified during our audit as well as any misstatements below that amount which, in our view, warranted
reporting for qualitative reasons.
137ObsEva Annual Report 2019 Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide
reasonable assurance that the financial statements are free from material misstatement. Misstatements may
arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including
the overall materiality for the financial statements as a whole as set out in the table below. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate,
on the financial statements as a whole.
We agreed with the Audit Committee that we would report to them misstatements above USD 95,800 identified
during our audit as well as any misstatements below that amount which, in our view, warranted reporting for
qualitative reasons.
Audit scope
We designed our audit by determining materiality and assessing the risks of material misstatement in the
financial statements. In particular, we considered where subjective judgements were made; for example, in
respect of significant accounting estimates that involved making assumptions and considering future events
that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of
internal controls, including among other matters consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
138ObsEva Annual Report 2019Report from the Auditor on the Statutory Financial Statements of ObsEva SA Carrying value of intangible assets
Key audit matter
How our audit addressed the key audit matter
The entity has intangible assets totaling USD 24.3 million
at December 31, 2019 comprised of licenses to operate
several biopharmaceutical product candidates. The entity
is required to review its intangibles for impairment
whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable,
and at least annually. As part of such review, the entity
did not identify any impairment.
We assessed indicators for potential impairment by
reviewing minutes of Management, Board of
Directors and Board Committee meetings, performed
inquiry with Management concerning the ongoing
progress of clinical trials, and reviewed external
communications, including press releases, other
public filings and public communications coming
from direct competitors, and considered results of
subsequent event procedures performed.
received
that haven’t
yet
approvals.
Intangible assets are significant to the entity and relate to
licenses
regulatory
and marketing
The entity has
collectively reviewed its licenses for impairment on
the basis of the market capitalization of the entity at
year end less the carrying value of its tangible assets
which consist primarily of cash and cash equivalents,
resulting in significant headroom.
Additionally, the licenses have been reviewed for
impairment by assessing the fair value less costs of
forecast,
(FVLCOD), using a 20-year
disposal
assuming
and
commercialization of the various biopharmaceutical
product candidates.
development
successful
product
biopharmaceutical
Successful development and commercialization of the
various
candidates
depend on the continuing funding, progress of
clinical trials and future market opportunities. The
forecasts performed by the entity contain a number
of significant judgments and estimates, including
costs,
and
expected
probabilities of achieving development milestones
industry standards, reported disease
based on
share,
prevalence,
drug
commercialization
reimbursement, costs of goods sold, marketing
expenses, expected patent life and a discount factor
of 15%.
market
expectations,
development
expected
research
We assessed the reasonableness of key inputs
included in the market valuation models used by
recoverable
management
amounts of intangible assets and recalculated the
headroom.
to determine
the
We assessed the sensitivity of the FVLCOD models
of each of the licenses by assessing the key
assumptions used, including the discount factor,
over the forecasted period.
We reviewed the budget approved by the board of
directors which included continued funding for
ongoing and new clinical trials for the entity’s
licenses.
We inquired of management as to whether the
trials was satisfactory,
progress of clinical
discussions with regulatory authorities for new
trials were progressing as planned, and
enrollment status for ongoing clinical trials was
taking place as expected.
included assessments of
We reviewed external analyst reports of the entity,
the entity’s
which
with
product
management on the potential adverse impact of
competitor products and product candidates.
candidates,
inquired
and
Refer to Note 2 Accounting principles applied in the
preparation of the financial statements (page 128) and
Note 7 Intangible assets (page 131).
result of procedures performed, we
As a
concluded management’s assessment that the
carrying value of intangible assets is not impaired
as of December 31, 2019 was based upon
reasonable assumptions, consistently applied.
ObsEva Annual Report 2019
Report from the Auditor on the Statutory Financial Statements of ObsEva SAObsEva Annual Report 2019139 Responsibilities of the Board of Directors for the financial statements
The Board of Directors is responsible for the preparation of the financial statements in accordance with the
provisions of Swiss law and the company’s articles of incorporation, and for such internal control as the Board
of Directors determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of these financial statements.
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
•
•
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the entity to cease to continue as a going concern.
140ObsEva Annual Report 2019Report from the Auditor on the Statutory Financial Statements of ObsEva SA We communicate with the Board of Directors or its relevant committee regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine those
matters that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an
internal control system exists which has been designed for the preparation of financial statements according
to the instructions of the Board of Directors.
Furthermore, we draw attention to the fact that half of the share capital and legal reserves is no longer covered
(article 725 para. 1 CO).
We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers SA
Michael Foley
Audit expert
Auditor in charge
Florent Rossetto
Audit expert
Genève, 5 March 2020
141ObsEva Annual Report 2019Report from the Auditor on the Statutory Financial Statements of ObsEva SA Compensation
Report of
ObsEva SA
Compensation Report of ObsEva SA
for the year ended December 31, 2019
This compensation report has been prepared in accordance with the Federal Ordinance Against Excessive
Compensation in Stock Exchange Listed Companies (“Ordinance”), effective as from January 1, 2014, and the
SIX Swiss Exchange Directive on Information Related to Corporate Governance (“DCG”), effective as of October
1, 2014, as amended on April 1, 2016, July 1, 2017, May 1, 2018 and January 2, 2020. The Ordinance and
DCG are applicable to ObsEva SA (the “Company”) as from its Initial Public Offering (“IPO”) on the Nasdaq
Global Select Market in January 2017, and the subsequent listing of its shares on the SIX Swiss Exchange in
July 2018, respectively.
A. GUIDING PRINCIPLES
The Company’s articles of association (the “Articles”), organizational regulations and policies provide the basis
for the principles of compensation (the “Compensation Policy”). The Board of Directors (the “Board”) is
responsible for establishing the Compensation Policy guidelines within the group.
The term “compensation” has the meaning set forth in Article 14 of the Ordinance, or any successor
legislation, and includes, without limitation, salary, long-term incentives, bonuses, perquisites, equity
incentives, severance arrangements (to the extent permitted by applicable law), retirement benefits and other
related benefits and benefit plans.
The Company’s Compensation Policy is designed to attract, motivate, and retain well-qualified employees and
gain new, highly skilled staff, in order to support the achievement of the Company’s strategic objectives. The
compensation package must be fair and competitive, and the Company uses the services of a reputable,
independent expert firm to assess the appropriateness of its compensation level and structure for the
members of its Board (the “Board Members”) and the members of its Executive Committee (the “Executive
Officers”). The individual overall compensation takes into account the individual’s professional skills,
engagement and personal performance. It is made up of short-term compensation components, which are
generally paid in cash, and long-term compensation components, generally in the form of a participation to
an equity incentive plan.
B. ORGANIZATION AND COMPETENCIES
Subject to the powers of the general meeting of shareholders, the Board determines the compensation of its
members and of the Executive Officers in accordance with the Company’s Compensation Policy, on the
recommendation of the Compensation, Nominating and Corporate Governance Committee (the “Committee”).
The Committee is composed of two or more members of the Board who have been individually elected by the
general meeting of shareholders, for a term of one year, until the end of the next annual general meeting. If
the Committee is not complete, the Board nominates the missing members for the remaining period of office.
The Board elects the chair from the members of the Committee. Members of the Committee are eligible for
re-election indefinitely.
The Committee supports the Board in establishing and reviewing the Company’s compensation strategy,
guidelines and the performance targets. The Committee may also submit proposals to the Board in other
compensation-related issues. For a more detailed description of the Committee, please refer to section 3
of the Corporate Governance Report on page 69.
143 The Committee meets as often as necessary to fulfil its role, and generally at least once:
a) during the first semester of each business year, to review and make recommendations to the Board
regarding the proposals to be made to the Annual General Meeting of Shareholders (“AGM”) of such
year, as required under Swiss law, regarding the maximum aggregate compensation, on a prospective
basis, for (i) the Board Members for the period from the AGM of such year until the AGM of the
following year and (ii) the Executive Officers for the following business year; and
b) during the fourth quarter of each business year, to review and make recommendations to the Board,
based on the maximum aggregate compensation approved by the shareholders, regarding (i) the
fixed cash compensation to be paid to the Board Members for the period from the AGM of the
following business year until the following AGM; (ii) the variable cash compensation to be paid to the
Executive Officers for the current business year; (iii) the fixed cash compensation to be paid to the
Executive Officers for the following business year; (iv) the grant of equity instruments to the Board
Members for the current business year as part of their fixed non-cash compensation; and (v) the grant
of equity instruments to the Executive Officers for the current business year as part of their variable
non-cash compensation.
The Board generally resolves on the recommendations of the Committee either during the meeting of the
Board which immediately follows the meeting of the Committee during which a recommendations was made.
As a principle, the Chief Executive Officer (“CEO”) attends the meetings of the Committee and, as a Board
Member, attends and votes during the meetings of the Board where the compensation of the Board Members
and the compensation of the Executive Officers are discussed. However, discussions and decisions of the
Board and of the Committee regarding the compensation of the CEO are resolved in his absence. The other
Executive Officers do not attend the meetings of the Committee nor the parts of the meetings of the Board,
where the compensation of the Board Members or the compensation of the Executive Officers are discussed.
Board Members, who are not members of the Committee, do not attend the meetings of the Committee, but
take part to the meetings of the Board during which are discussed the compensation of the Board Members
and the compensation of the Executive Officers as well as the vote relating thereto.
Maximum Aggregate Compensation subject to Shareholders’ Approval
Based on the Committee’s recommendations, the Board submits two proposals for approval at the
shareholders meeting: (i) the maximum aggregate compensation for the Board Members until the next annual
general meeting; and (ii) the maximum aggregate compensation for the Executive Officers for the following
business year. The approval of these proposals requires an absolute majority (50% plus one) of the vote cast
at the shareholders meeting. Specific procedures in case a proposal is not approved or for new hires to the
executive committee are described in the Articles and are set forth under the “Rules in the Articles regarding
Compensation of the Board Members and of the Executive Officers” section of this Compensation Report.
C.
COMPENSATION COMPONENTS
Compensation Review Process of the Committee and General Philosophy
In its review process, the Committee considers compensation packages of other companies in the biotech and
pharmaceutical industry that are comparable to ObsEva, with respect to size, listing place or business model,
the professional experience and areas of responsibility of the respective members. Such benchmark is
conducted by a reputable, independent expert firm which has not been awarded additional mandates by the
Company, and is used to assess the appropriateness of the Company’s compensation level and structure.
144ObsEva Annual Report 2019Compensation Report of ObsEva SA For the business year 2019, the peer groups used for benchmark purposes were composed of:
•
•
18 U.S. public biotech or pharmaceutical companies: Acceleron Pharma, Aimmune Therapeutics, Ardelyx,
Cara Therapeutics, Clearside Biomedical, Concert Pharmaceuticals, Corbus Pharmaceuticals, Epizyme,
Global Blood Therapeutics, Intra-Cellular Therapies, Minerva Neurosciences, Myovant Sciences, Reata
Pharmaceuticals, Revance Therapeutics, Savara, TG Therapeutics, XBiotech and Xencor; and
17 European public biotech or pharmaceutical companies: AC Immune, Adaptimmune Therapeutics,
Argenx, Ascendis Pharma, Basilea Pharmaceutica, Cassiopea, CRISPR Therapeutics, DBV Technologies,
Innate Pharma, Merus, Mithra Pharmaceuticals, Molecular Partners, Newron Pharmaceuticals, Nordic
Nanovector, NuCana, UniQure and Zealand Pharma.
The Company is a leading biotech operating and listed in both Europe and the U.S. and needs to attract and
retain the best talents in order to ensure its strategic objectives. In this regard, the compensation philosophy
is to target rewards approaching the 75th European market percentile for the annual cash compensation of
the Executive Officers based in Switzerland, and the 75th U.S. market percentile for the annual cash
compensation of the Executive Officers based in the US, the annual cash compensation of the Board Members
and the value of equity instruments granted to the Board Members and the Executive Officers.
Board of Directors Members Annual Cash Compensation
Each member of the Board who is not also serving as an employee of the Company or/and of its affiliates,
receives an annual fixed cash compensation, payable in quarterly installments, as determined under the review
process of the Committee and approved by the Board, as set forth below:
1 - Annual Board service retainer:
a) Chairman of the Board $ 70,000
b) All other eligible members of the Board $ 40,000
2 - Annual committee member service retainer:
a) Member of the Audit Committee $ 7,500
b) Member of the Compensation, Nominating and Corporate Governance Committee $ 7,500
3 - Annual committee chair service retainer (in addition to committee member service retainer)
a) Chair of the Audit Committee $ 7,500
b) Chair of the Compensation, Nominating and Corporate Governance Committee $ 7,500
Social contributions, to the extent required by Swiss law, are accrued on the annual cash compensation of the
Board and committee’s members.
In addition, the Company reimburses Board Members for out-of-pocket expenses incurred in relation to their
services on an on-going basis upon presentation of the corresponding receipts. Expenses reimbursements are
not part of the compensation.
Pursuant to organizational regulations of the Board, Board Members who are also serving as an employee of
the Company or/and of its affiliates only receive compensation in their capacity as employees and do not
receive additional compensation for their activities as members of the Board.
145ObsEva Annual Report 2019Compensation Report of ObsEva SA Executive Committee Members Annual Cash Compensation
The annual cash compensation of the Executive Officers consists of fixed and variable compensation elements.
Fixed compensation comprises the base salary and other compensation elements, as determined under the
review process of the Committee and approved by the Board, and based on the position and level of
responsibility of the recipient.
Variable compensation comprises performance-related cash bonuses that are based on target bonuses which
could be of 30%, 35%, 40% or 50% of the base salary before September 11, 2019 and of 40% or 50% of the
base salary after the changes to the composition of its Executive Committee on September 11, 2019,
depending on the Executive Officer’s position and level of responsibility, and as determined under the review
process of the Committee and approved by the Board. Actual amount of cash bonus awarded for a specific
year to an Executive Officer ranges from 50% to 150% of the target bonus for such Executive Officer.
Adjustment rate applied to target bonus of an Executive Officer is determined at the end of every year based
on the Company’s general performance and the Executive Officer individual performance for such business
year, which performance is being assessed based on annual corporate and individual objectives. The Company
doesn’t use specific metrics to calculate the adjustment rates, which are determined at the sole and full
discretion of the Committee and subject to Board approval. The average adjustment rate to target bonuses of
Executive Officers was of 110% for the business year 2018, and was capped to 60% for the business year
2019, as a result of the Company’s general performance.
For both 2019 and 2018, on average, variable cash compensation represented approximately 20% and 31%,
respectively, of the total cash compensation of the Executive Officers, or 22% and 45%, respectively, of their
fixed cash compensation.
Social contributions, to the extent required by Swiss law, are accrued on the annual cash compensation of the
Executive Officers.
In addition, the Company reimburses the Executive Officers for out-of-pocket expenses incurred in relation to
their services on an on-going basis upon presentation of the corresponding receipts. Expenses
reimbursements are not part of the compensation.
Equity incentive plans
The Company has established two equity incentive plans, in 2013 (the “2013 EIP”) and 2017 (the “2017 EIP”).
The purpose of the Company’s 2013 EIP and 2017 EIP is to provide Board Members, Executive Officers,
employees and certain consultants (the “Beneficiaries”) with an opportunity to benefit from the potential
appreciation in the value of the Company’s shares, thus providing an increased incentive for participants to
contribute to the future success and prosperity of the Company, enhancing the value of the shares for the
benefit of the shareholders of the Company and increasing the ability of the Company to attract and retain
individuals of exceptional skill. In addition, these plans provide the Company with a mechanism to engage
services for non-cash consideration.
Under 2013 EIP, the Company has granted the Beneficiaries non-voting shares that were converted into
common shares upon completion of the Company’s IPO in January 2017. The Company has stopped granting
equity instruments under the 2013 EIP in 2016. Under 2017 EIP, the Company has been granting stock-options
to the Beneficiaries.
The grant of equity instruments under 2013 EIP or 2017 EIP is at the discretion of the Board, which has
delegated authority to the Committee and, collectively, the CEO and Chief Financial Officer (“CFO”) to grant
equity instruments under certain circumstances to new joiners that are not Board Members or Executive
Officers, and subject to semi-annual reporting to the Committee when grants are approved by the CEO and
CFO. The Board, the Committee or the CEO and CFO, depending on the delegation of competences, determine
146ObsEva Annual Report 2019Compensation Report of ObsEva SA grant, vesting, exercise and forfeiture conditions. In particular, they may provide for continuation, acceleration
or removal of vesting and exercise conditions, for payment or grant of compensation based upon assumed
target achievement, or for forfeiture, in each case in the event of pre-determined events such as a change-of-
control or termination of an employment or mandate agreement. Key factors considered by the Board when
approving grants of equity instruments include the amount of outstanding authorized or conditional share
capital approved by shareholders. The Company may procure the required shares through purchases in the
market, either directly or through companies controlled by it, or by issuing new shares. The Board has the
authority to amend 2013 EIP and 2017 EIP.
Annual grants of equity instruments to Board Members represent a fixed part of their compensation, whose
value is determined under the review process of the Committee, based on peers group benchmark, and
approved by the Board.
Annual grants of equity instruments to Executive Officers represent a variable part of their compensation, whose
value is based on peers group benchmark as part of the review process of the Committee, subject to further
adjustments based on individual performance of each Executive Officer. The Company doesn’t use specific
metrics to calculate such adjustments, which are determined at the sole and full discretion of the Committee
and subject to Board approval. Equity instruments granted to Executive Officers under 2017 EIP include
accelerated vesting conditions for the full unvested portion of such instruments in case of change of control.
Value of equity instruments granted in 2019 and 2018 represented approximately 0% and 75%, respectively,
of the total compensation of the Board Members and 58% and 67%, respectively, of the total compensation of
the Executive Officers.
Indirect benefits
The Company contributes to pension contributions and maintains certain insurance for death and invalidity
for its Executive Officers in accordance with the regulations applicable to the pension schemes in which the
Company or any of its subsidiary participate.
Loans, credits and guarantees
Subject to vote of the general meeting of shareholders on compensation proposals, which is binding, the
Company does not grant loans or credit facilities to Board Members or Executive Officers.
Rules in the Articles regarding Compensation of the Board Members and of the Executive Officers
The Articles set forth the following rules regarding the Compensation of the Board Members and of the
Executive Officers.
Article 32: Compensation Principles
The Compensation of the Board Members consists of a fixed compensation and attendance allowances. Executive
members of the Board can receive in addition compensation elements applicable to Executive Officers.
The Compensation of the Executive Officers consists of fixed and variable compensation elements. Fixed
compensation comprises the base salary. Variable compensation may comprise short-term and long-term
compensation elements. Short-term variable compensation elements shall be governed by performance
metrics that take into account the performance of the Company and some or all of its subsidiaries, market
performance, other companies or comparable benchmarks and/or individual quantitative and qualitative
performance targets. Long-term variable compensation elements shall be governed by performance metrics
that take into account strategic and/or financial objectives, as well as retention elements.
The determination of such performance metrics, the target levels as well as of their achievement is the
responsibility of the Board or the Committee, to the extent delegated to it. The total compensation takes into
account the position and level of responsibility of the Executive Officer.
147ObsEva Annual Report 2019Compensation Report of ObsEva SA Compensation may be paid in the form of cash or in the form of other types of benefits, including the grant
of shares, stock options or other financial instruments. The Board or, to the extent delegated to it, the
Committee have authority to determine grant, vesting, exercise and forfeiture conditions. In particular, they
may provide for continuation, acceleration or removal of vesting and exercise conditions, for payment or grant
of compensation based upon assumed target achievement, or for forfeiture, in each case in the event of pre-
determined events such as a change-of-control or termination of an employment or mandate agreement. The
Company may procure the required shares through purchases in the market, either directly or through
companies controlled by it, or by issuing new shares.
Board Members and/or Executive Officers may participate in share purchase plans established by the Company
or companies controlled by it, under the terms of which eligible employees may allocate a portion of their
compensation to the purchase of shares of the Company at a discount to market price.
Compensation may be paid by the Company or companies controlled by it.
Reimbursement of expenses incurred by the Board Members and Executive Officers in their functions are not
part of their compensation.
Article 33: Loans, credits and retirement benefits
Subject to other decision from the general meeting of shareholders, the Company is not allowed to grant
loans or credit facilities to Board Members or Executive Officers.
Pension contributions and retirement benefits are made or provided in accordance with the regulations
applicable to the pension schemes in which any Group company participates.
Article 34: Vote of the general meeting of shareholders on the compensation of the members of the Board
and of the Executive Officers
Following a proposal by the Board, the general meeting of shareholders annually and separately approves
(i) the aggregate compensation of the Board until the next AGM and (ii) the aggregate compensation of the
Executive Officers for the following business year. The Board can also submit at its discretion compensation
proposals for other periods or for only some individuals from the Board or the executive committee. The vote
of the general meeting of shareholders on the compensation proposals is binding.
If the general meeting of shareholders does not approve a compensation proposal made by the Board, the
Board has to convene an extraordinary general meeting of shareholders. Compensation may be paid out prior
to their approval by the general meeting of shareholders, subject to their subsequent approval by the general
meeting of shareholders and, in the absence of such subsequent approval, to restitution to the Company.
If the maximum aggregate amount of compensation already approved by the general meeting of shareholders
is not sufficient to also cover the compensation of one or more persons who became members of the Executive
Committee during a compensation period for which the general meeting of shareholders has already approved
the compensation of the Executive Officers (new hire), the Company is authorized to pay an additional amount
with respect to the compensation period already approved. Such additional amount cannot exceed (i) for the
head of the Executive Committee (CEO), 140% of the total annual compensation of the former CEO and (ii) for
any new hire other than the CEO, 140% of the highest total annual compensation of any member of the
Executive Committee in office other than the CEO.
148ObsEva Annual Report 2019Compensation Report of ObsEva SA D. COMPENSATION FOR PERIODS UNDER REVIEW (audited)
The measurement basis for each component of compensation is as follows:
•
•
•
•
Cash based-compensation: accrual basis;
Social charges: accrual basis except for social charges on equity incentives which are estimated based on
fair value at grant date;
Indirect benefits: accrual basis;
Equity incentives: total fair value at grant date as determined under IFRS
Compensation of the Board Members for the financial years 2019 and 2018
The following table sets forth the name, year joined the Board, position and directorship term, as well as
committee memberships, of each member of the Board:
Name
Frank Verwiel
Ernest Loumaye
Annette Clancy
Barbara Duncan
Ed Mathers
Jim Healy
Rafaèle Tordjman
Jacky Vonderscher
First
Appointment
Elected until
2016
2012
2013
2016
2016
2013
2013
2013
2020
2020
2020
2020
2020
2020
2020
2020
Board
Chair
Member, CEO
Member
Member
Member
Member
Vice-Chair
Member
AC (1)
Member
-
-
Chair
CNCGC (2)
-
-
Chair
-
Member
Member
-
-
-
Member
Member
-
(1) Audit Committee
(2) Compensation, Nominating and Corporate Governance Committee
The compensation received by the Board Members for the financial year 2019 in U.S. dollars, the functional
currency of the Company, and as converted in Swiss francs according to an USD/CHF exchange rate of 0.99338
corresponding to the average USD/CHF exchange rate for the year 2019, was as follows:
(in USD thousands)
Name
Frank Verwiel
Annette Clancy
Barbara Duncan
Ed Mathers
Jim Healy
Rafaèle Tordjman
Jacky Vonderscher
Total
Cash-based comp.
Social charges
Pension contrib.
Equity granted
Total comp.
78
55
55
52
48
48
40
376
7
3
5
5
4
4
3
31
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
85
58
60
57
52
52
43
407
149ObsEva Annual Report 2019Compensation Report of ObsEva SA (in CHF thousands)
Name
Frank Verwiel.
Annette Clancy
Barbara Duncan
Ed Mathers
Jim Healy
Rafaèle Tordjman.
Jacky Vonderscher.
Total
Cash-based comp.
Social charges
Pension contrib.
Equity granted
Total comp.
78
55
55
52
48
48
40
7
3
5
5
4
4
3
376
31
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
85
58
60
57
52
52
43
407
The compensation received by the Board Members for the financial year 2018 in U.S. dollars, the functional
currency of the Company, and as converted in Swiss francs according to an USD/CHF exchange rate of
0.977892 corresponding to the average USD/CHF exchange rate for the year 2018, was as follows:
(in USD thousands)
Name
Frank Verwiel
Annette Clancy
Barbara Duncan
Ed Mathers
Jim Healy
Rafaèle Tordjman
Jacky Vonderscher
Total
Cash-based comp.
Social charges(1)
Pension contrib.
Equity granted(2)
Total comp.
78
55
55
48
48
48
40
28
22
26
26
26
26
25
372
179
-
-
-
-
-
-
-
-
245
245
245
245
245
245
245
351
322
326
319
319
319
310
1,715
2,266
150ObsEva Annual Report 2019Compensation Report of ObsEva SA (in CHF thousands)
Name
Frank Verwiel.
Annette Clancy
Barbara Duncan
Ed Mathers
Jim Healy
Rafaèle Tordjman.
Jacky Vonderscher.
Total
Cash-based comp.
Social charges(1)
Pension contrib.
Equity granted(2)
Total comp.
76
54
54
47
47
47
39
27
22
25
25
25
25
24
364
173
-
-
-
-
-
-
-
-
240
240
240
240
240
240
240
343
316
319
312
312
312
303
1,680
2,217
(1) Include social charges on cash-based compensation and fair value of equity instruments granted
(2) Fair value of equity instruments granted during the period, as determined under IFRS2
Ernest Loumaye, who serves as Chief Executive Officer, was employee during the financial years 2018 and
2019 and received no additional compensation for his services as member of the Board.
The compensation of USD 0.4 million received by the Board Members in business year 2019 was made of
fixed elements, and decreased by USD 1.9 million compared to the business year 2018 due to the absence of
grant of stock-options to the Board Members during business year 2019.
The total compensation received by the Board Members during the period from the AGM 2018 until the AGM
2019 amounted to USD 2.3 million, and was within the maximum aggregate compensation of USD 2.5 million
approved for the period by the AGM 2018.
Compensation of the Executive Committee for the financial years 2019 and 2018
The following table sets forth the name, position, year of appointment and term of office, of each Executive Officer:
Name
Ernest Loumaye
Tim Adams
Elizabeth Garner
Function
Chief Executive Officer
Chief Financial Officer
Chief Medical Officer
Jean-Pierre Gotteland
Chief Scientific Officer and Head of R&D
Wim Souverijns
Chief Commercial Officer
Elke Bestel
Ben T.G. Tan
V.P. Head of Drug Safety & P.V.
V.P. Commercial & B.D.
Fabien de Ladonchamps
V.P. Corporate Affairs & Finance
Appointment
Term
2013
2017
2019
2015
2018
2015
2014
2013
-
-
-
-
-
2019 (1)
2019 (1)
2019 (1)
(1) On September 11, 2019, the company announced changes to the composition of its executive committee with the step-down of
Elke Bestel, Vice-President, Head of Drug Safety and Pharmacovigilance, Ben Tan, Vice-President Commercial and Business
Development and Fabien de Ladonchamps, Vice-President Corporate Affairs and Finance.
The compensation received by the Executive Officers for the financial year 2019 in U.S. dollars, the functional
currency of the Company, and as converted in Swiss francs according to an USD/CHF exchange rate of 0.99338
corresponding to the average USD/CHF exchange rate for the year 2019, was as follows:
(in USD thousands)
Name
Ernest Loumaye
Other executives(3)
Total
Cash-based comp.
Social charges(1)
Pension contrib.
Equity granted(2)
Total comp.
722
2,431
3,153
198
663
861
24
126
150
1,781
4,134
5,915
2,725
7,354
10,079
151ObsEva Annual Report 2019Compensation Report of ObsEva SA (in CHF thousands)
Name
Ernest Loumaye
Other executives(3)
Total
Cash-based comp.
717
2,416
3,133
Social charges(1)
197
658
855
Pension contrib.
Equity granted(2)
Total comp.
24
126
150
1,770
4,108
5,878
2,708
7,308
10,016
(1) Include social charges on cash-based compensation and fair value of equity instruments granted
(2) Fair value of equity instruments granted during the period, as determined under IFRS2
(3) Include the compensation received by the Executive Officers who stepped down from the Executive Committee during the year
2019 until their end of office, as well as an amount of USD 109 thousands, respectively CHF 108 thousands, of bonuses paid in
2020 to such officers in relation with their function of Executive Officers in 2019.
The compensation received by the Executive Officers for the financial year 2018 in U.S. dollars, the functional
currency of the Company, and as converted in Swiss francs according to an USD/CHF exchange rate of
0.977892 corresponding to the average USD/CHF exchange rate for the year 2018, was as follows:
(in USD thousands)
Name
Ernest Loumaye
Other executives
Total
(in CHF thousands)
Name
Ernest Loumaye
Other executives
Total
Cash-based comp.
Social charges(1)
Pension contrib.
Equity granted(2)
Total comp.
843
2,251
3,094
295
653
948
22
111
133
3,028
5,496
8,524
4,188
8,511
12,699
Cash-based comp.
Social charges(1)
Pension contrib.
Equity granted(2)
Total comp.
824
2,201
3,025
288
640
928
22
107
129
2,961
5,375
8,336
4,095
8,323
12,418
(1) Include social charges on cash-based compensation and fair value of equity instruments granted
(2) Fair value of equity instruments granted during the period, as determined under IFRS2
The compensation of USD 10.1 million received by the Executive Officers in business year 2019 was made of
approximately 70% of variable elements and 30% of fixed elements, and decreased by USD 2.6 million
compared to business year 2018, mainly due to a 60% cap applied to bonuses accrued for the Executive
Officers for the business year 2019 as a result of the Company’s general performance and due to the changes
made to the composition of the Executive Committee in September 2019.
The total compensation of USD 10.1 million received by the Executive Officers for the year ended December
31, 2019 was within the maximum aggregate compensation of USD 13.0 million approved for the year by the
AGM 2018.
152ObsEva Annual Report 2019Compensation Report of ObsEva SA E.
SHARE OWNERSHIP INFORMATION (audited)
Board of Directors
The Board Members held the following equity instruments as of December 31, 2019 (1):
Name
Frank Verwiel
Annette Clancy
Barbara Duncan
Ed Mathers (2)
Jim Healy (2)
Rafaèle Tordjman.
Common Shares
Unvested
Vested
37,375
92,083
-
4,586,563
4,749,623
-
8,125
5,417
-
-
-
-
Total
45,500
97,500
Stock-options
Vested Unvested
Total
39,322
23,818
63,140
33,003
23,637
56,640
-
58,281
24,359
82,640
4,586,563
4,749,623
53,420
24,220
77,640
53,420
24,220
77,640
-
49,253
28,387
77,640
Jacky Vonderscher
33,692
2,708
36,400
40,781
23,859
64,640
Total
9,499,336
16,250
9,515,586
327,480
172,500
499,980
(1) excluding Ernest Loumaye, CEO, whose holdings are listed under Executive Committee
(2) includes shares held directly and indirectly through vehicles controlled by the Director
The Board Members held the following equity instruments as of December 31, 2018 (1):
Name
Frank Verwiel
Annette Clancy
Barbara Duncan
Ed Mathers (2)
Jim Healy (2)
Rafaèle Tordjman
Vested
26,000
83,958
-
4,586,563
4,749,623
-
Common Shares
Unvested
19,500
13,542
-
-
-
-
Total
45,500
97,500
-
4,586,563
4,749,623
-
Jacky Vonderscher
30,442
5,958
36,400
Stock-options
Unvested
Total
44,864
63,140
42,517
56,640
51,906
82,640
50,100
77,640
50,100
77,640
54,267
77,640
45,406
64,640
Vested
18,276
14,123
30,734
27,540
27,540
23,373
19,234
Total
9,476,586
39,000
9,515,586
160,820
339,160
499,980
(1) excluding Ernest Loumaye, CEO, whose holdings are listed under Executive Committee
(2) includes shares held directly and indirectly through vehicles controlled by the Director
153ObsEva Annual Report 2019Compensation Report of ObsEva SA Executive Committee
The Executive Officers held the following equity instruments as of December 31, 2019:
Name
Vested
Unvested
Total
Vested
Common Shares
Stock-options
Unvested
Total
Ernest Loumaye
3,038,919
60,179
3,099,098
215,971
665,049
881,020
Tim Adams
Elizabeth Garner
120,833
-
-
-
120,833
121,495
312,612
434,107
-
-
359,343
359,343
Jean-Pierre Gotteland
121,604
14,896
136,500
73,703
216,387
290,090
Wim Souverijns
Elke Bestel (1)
Ben T.G. Tan (1)
Fabien de
Ladonchamps (1)
Total
4,150
117,813
100,008
-
4,150
54,167
234,173
288,340
12,187
130,000
13,542
113,550
35,141
20,396
82,219
117,360
48,994
69,390
124,448
12,052
136,500
36,365
87,715
124,080
3,627,775
112,856
3,740,631
557,238
2,006,492
2,563,730
(1) Elke Bestel, Ben T.G. Tan and Fabien de Ladonchamps stepped down from the Executive Committee on September 11, 2019.
The Executive Officers held the following equity instruments as of December 31, 2018:
Common Shares
Stock-options
Name
Vested
Unvested
Total
Vested
Unvested
Total
Ernest Loumaye
2,930,703
132,395
3,063,098
66,818
504,462
571,280
Tim Adams
106,458
-
106,458
27,782
314,620
342,402
Jean-Pierre Gotteland
91,542
44,958
136,500
20,795
180,955
201,750
Wim Souverijns
Elke Bestel (1)
Ben T.G. Tan (1)
Fabien de
Ladonchamps (1)
Total
1,600
88,021
80,238
-
1,600
-
200,000
200,000
41,979
130,000
33,312
113,550
13,370
7,575
71,130
42,095
84,500
49,670
105,923
30,577
136,500
13,370
75,650
89,020
3,404,485
283,221
3,687,706
149,710
1,388,912
1,538,622
(1) Elke Bestel, Ben T.G. Tan and Fabien de Ladonchamps stepped down from the Executive Committee on September 11, 2019.
154ObsEva Annual Report 2019Compensation Report of ObsEva SA Report from the
Auditor on the
Compensation
Report of
ObsEva SA
Report of the statutory auditor
to the General Meeting of ObsEva SA
Plan-les-Ouates
We have audited the accompanying remuneration report of ObsEva SA for the year ended 31 December 2019.
The audit was limited to the information according to articles 14–16 of the Ordinance against Excessive
Compensation in Stock Exchange Listed Companies (Ordinance) contained in the sections labeled ‘audited’
on pages 149 to 154 of the remuneration report.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration
report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange
Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration
system and defining individual remuneration packages.
Auditor’s responsibility
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit
in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration
report complies with Swiss law and articles 14–16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration
report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating
the reasonableness of the methods applied to value components of remuneration, as well as assessing the
overall presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Opinion
In our opinion, the remuneration report of ObsEva SA for the year ended 31 December 2019 complies with
Swiss law and articles 14–16 of the Ordinance.
PricewaterhouseCoopers SA
Michael Foley
Audit expert
Auditor in charge
Florent Rossetto
Audit expert
Genève, 5 March 2020
156ObsEva Annual Report 2019 Forward-Looking Statements
This Annual Report contains forward-looking statements that are based on our management’s beliefs and
assumptions and on information currently available to our management. All statements other than present and
historical facts and conditions contained in this Annual Report, including statements regarding our future results
of operations and financial positions, business strategy, plans and our objectives for future operations, are
forward-looking statements. When used in this Annual Report, the words “anticipate,” “believe,” “continue”
“could,” “estimate,” “expect,” “intend,” “may,” “might,” “ongoing,” “objective,” “plan,” “potential,” “predict,”
“should,” “will” and “would,” or the negative of these and similar expressions identify forward-looking statements.
Forward-looking statements include, but are not limited to, statements about:
•
the success, cost, timing and potential indications of our product candidates’ development activities and
clinical trials, including our ongoing and future trials of linzagolix, OBE022 and nolasiban;
• our ability to obtain and maintain regulatory approval of our product candidates, including linzagolix,
OBE022 and nolasiban, in any of the indications for which we plan to develop them, and any related
restrictions, limitations or warnings in the label of an approved product;
•
the results of ongoing or future clinical trials, including of linzagolix, OBE022 and nolasiban;
• our ability to obtain funding for our operations, including funding necessary to complete the clinical trials
of any of our product candidates, and the terms on which we are able to raise that additional capital;
• our plans to research, develop and commercialize our product candidates;
•
•
•
the timing of our regulatory filings for our product candidates;
the clinical utility of our product candidates;
the size and growth potential of the markets for our product candidates;
• our commercialization, marketing and manufacturing capabilities and strategy;
• our expectations regarding our ability to obtain and maintain intellectual property protection for our
product candidates and our ability to operate our business without infringing on the intellectual property
rights of others;
•
the timing and amount of milestone and royalty payments we are required to make under our license agreements;
• our ability to attract and retain qualified employees and key personnel;
• our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
•
the activities of our competitors and the success of competing therapies that are or become available;
• our plans to in-license or acquire additional product candidates;
• how long we will qualify as an emerging growth company or a foreign private issuer;
• our estimates regarding future revenue, expenses and needs for additional financing;
•
regulatory developments in the United States and foreign countries; and
• other risks and uncertainties, including those listed in this section of this Annual Report.
We cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate.
Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In
light of the significant uncertainties in these forward-looking statements, you should not regard these
statements as a representation or warranty by us or any other person that we will achieve our objectives and
plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise, except as required by law.
You should read this Annual Report and the documents that we reference in this Annual Report completely
and with the understanding that our actual future results may be materially different from what we expect.
We qualify all of our forward-looking statements by these cautionary statements.
157ObsEva Annual Report 2019 This Annual Report contains market data and industry forecasts that were obtained from industry publications.
These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight
to such estimates. We have not independently verified any third-party information. While we believe the market
position, market opportunity and market size information included in this Annual Report is generally reliable,
such information is inherently imprecise.
158ObsEva Annual Report 2019Forward-Looking Statements Contact
CEO Office Contact:
Shauna Dillon
Shauna.dillon@obseva.ch
+41 22 552 1550 Office
Investor Contact:
Mario Corso
Senior Director, Investor Relations
mario.corso@obseva.com
+1 857 972 9347 Office
+1 781 366 5726 Mobile
159ObsEva Annual Report 2019 www.obseva.com