ANNUAL
REPORT
2016
Acting in the interest of patients
ProQR Therapeutics N.V.
T : +31 88 166 7000
W : www.proqr.com
E : info@proqr.com
Headquarters Leiden:
Zernikedreef 9, 2333 CK Leiden,
the Netherlands
Office Palo Alto:
543 Bryant Street, Palo Alto,
CA 94301, USA
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ANNUAL REPORT 2016
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ANNUAL RE PORT 2016
FINDING TREATMENTS FOR RARE GENETIC DISEASES TO
CHANGE
THE
LIVES OF
PATIENTS
ProQR develops drugs to improve the lives of patients around the world.
Our scientific staff pioneer in the development of RNA medicines that fight
rare genetic diseases. Almost five years after we founded ProQR, it has
moved far beyond the status of being a very promising start-up company.
And with the positive outcome of our proof-of-concept clinical trial in
CF patients we see the first results of our efforts, which encourage and
inspire us to keep pushing the envelope.
This is a
company
in which
NEW IDEAS
emerge on
a daily base
At ProQR, we are in the business
of developing RNA medicines for
New solutions, real medicines
It is this constant thinking of the
patients that suffer from severe
need of patients that keeps us at
genetic rare diseases. The business
ProQR on our toes. Our approach
itself is not what makes us try hard-
leads to results, thanks to the appli-
er every day. What is?
cation of highly specific and elegant
RNA approaches that have been de-
It is the belief that our company can
veloped building on the science that
truly make a difference in the lives
was done over the last 20 years.
of patients. We are convinced that,
Our in-house research team in what
when we target all our knowledge,
we call ‘the innovation unit’, has
creative thinking and perseverance
discovered many new molecules
to the same goal, we can truly make
that we aim to develop to become
a meaningful impact on the lives of
real medicines.
patients and their loved ones.
Programs and ideas
To this end, we started our lead
The RNA technologies have helped
us build an extensive and what we
believe is a valuable pipeline. Over
program in CF that entered the
time it will give us the opportunity
clinical trial phase in 2015. But
to help patients that are in need of
from the start, we have strived to
new therapies and build a sustain-
go beyond that. We now have two
able independent business.
other programs in development for
inherited blindness and a debili-
tating skin disease. And we won’t
Progress in 2016
During 2016 we made true progress.
stop there; we have numerous
programs in various stages of early
First of all, we announced the
development. This is a company in
encouraging results from our
which new ideas emerge on a daily
proof-of-concept clinical trial in
basis. Ideas get challenged, some
CF patients. Furthermore, we estab-
rejected, some selected for further
lished a new group that focuses on
investigation. Some make it to
inherited blindness; the group now
projects that one day may become
works on the development of sev-
programs and – who knows – real
eral products, the most advanced
medicines that can help patients.
one is for LCA 10 (Leber’s congenital
amaurosis Type 10).
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ANNUAL REPORT 2016
A bright
future
beckons in
which DNA
errors can
be targeted
at the
RNA LEVEL
Also, we brought our first program
milestones and significant successes
Valerio, the founding CEO of the very
for debilitating skin diseases from
in the next few years. To help our
successful Dutch biotech Crucell.
the idea phase into development.
company grow stronger in this area
in 2016, James Shannon, former
Where will our quest bring ProQR?
As said, we won’t stop there. We are
Chief Medical Officer at GSK, joined
A bright future beckons in which DNA
moving on, beyond the phase of
the supervisory board. We already
defects can be targeted at the RNA
‘promising’. We have grown into a
had a very strong team including
level. We will put the latest advance-
team that can bring ProQR to real
people like Henri Termeer, long-
ments to use, to changes the lives of
term CEO at Genzyme and Dinko
patients and their loved ones.
RESEARCH AND DEVELOPMENT PIPELINE
QRX-704
Huntington’s
disease
QRX-411
Usher syndrome
QRX-504
Fuchs (FECD)
QRX-421
Usher syndrome
QR-313
Dystrophic EB
~2,000 patients
QRX-021
Undisclosed
CF target
QRX-604
Friedreich's
ataxia
QRX-323
Dystrophic EB
QRX-203
Amyloid beta
related disorders
QR-110
LCA10
~2,000 patients
QR-010
cystic fibrosis
>65,000 patients
Innovation
Pre-clin
development
Phase 1 &
clinical PoC
Pivotal
studies
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ANNUA L REPORT 2016
140
ProQRians
Average age
37yrs
Gender
44%
56%
Nationalities
30
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ANNUAL RE PORT 2016
ProQR – WHO WE ARE, WHAT WE DO
IT’S IN
OUR RNA
ProQR is building. Initially, the company was founded to beat cystic
fibrosis in just one child. Today, ProQR’s quest leads far beyond, as its
mission is to develop treatments for all patients with rare genetic diseases.
With a pipeline across 5 different therapeutics area’s progressing well,
the company’s activities gain momentum. ProQR is proud to have
expanded its one-vessel enterprise into a fleet.
Yes, we
aim high,
as we are
not afraid to
THINK BIG
the CF program that led to the gen-
and gene therapy approaches. This
– we are moving fast in building a
eration of strong biomarker data in
is a truly powerful technology, as it
sustainable future for the company.
patients with CF early in the develop-
offers ProQR’s scientists – and, in a
ment process.
Pipeline built on RNA
Based on the company’s strong
later stage: doctors – the potential
to treat severe genetic diseases,
Infrastructure for growth
As it all starts with people, ProQR
including Leber’s congenital
builds its infrastructure and its
amaurosis, Usher syndrome, Fuchs
development power with a strong
foundation a diversified pipeline has
endothelial corneal dystrophy,
focus on finding the ProQRians with
been constructed with programs
dystrophic epidermolysis bullosa
the professionalism and spirit. With
that target diseases in which a signif-
and Amyloid beta related disorders.
our 140 strong staff we are proud
icant impact can be made to
individual patient’s lives. All of
ProQR’s programs are based on
Aim high, think big
At ProQR, we aim to play a deci-
of our team culture, based on the
shared belief that, together, we can
make a difference.
innovative and promising RNA
sive role in all of these rare genetic
technologies including one licensed
diseases. Yes, we aim high, as we
Also, ProQR has built its facilities
from Massachusetts General Hos-
are not afraid to think big. It is in our
to make this happen. In 2016 the
pital in Boston, USA. An obvious
RNA! Our founder and CEO Daniel
new company headquarters were
choice since an RNA molecule can
de Boer has a track record in the
opened, according to the ‘science-
be designed specifically for a certain
IT industry with its ever-ambitious
at-our-core’ model. At the new
defect that causes the disease.
timelines; he is therefore not afraid
ProQR location, the labs are the
to challenge the pharma & drug
core of the building.
ProQR is building on the over 20
development paradigm to keep a
years of experience in the RNA field.
high pace of development.
And, last but not least, ProQR fur-
With the different technologies
ther builds its relationship with both
developed a wide range of genetic
ProQR’s deep-rooted urge to
patients and medical professionals.
disease can now be targeted at
generate tangible and meaningful
As the company strongly believes
the underlying cause, the mutated
progress has led to some unconven-
in patient-centric development,
mRNA that leads to a defective
tional steps, like listing the company
a patient and medical community
protein and disease symptoms.
on Nasdaq only two years after its
engagement (PMCE) team has been
With several approved products,
foundation. The same motto applies
installed in 2016. It shows ProQR’s
ProQR’s strong development in 2016
built methodically. The founding
were set up to drive the most prom-
RNA is becoming an established
to starting a proof-of-concept study,
dedication to maintaining close rela-
underlines the company’s remark-
team put together a strong manage-
ising science to patients in need.
approach. Our programs take this
showing us very early in the devel-
tionships with the communities we
able execution power, based on the
ment team as well as a supervisory
to the next level and aim to restore
opment process the drug activity
serve. The support ProQR received
firm belief that there is a future in
board with exceptional biotech ex-
The execution power was also
the function of these defective
of our lead molecule for CF. The
from them is crucial in reaching our
targeting DNA defects at the RNA
perts and a team of motivated RNA
extended to the scientific level of
proteins without changing the DNA
decision to invest in the discovery of
goals – in 2016, in 2017 and in the
level. Since ProQRs inception, the
and CF experts. Collaborations with
ProQR. An aggressive and innovative
of the cells. This has advantages
new programs and technologies also
years to come – finding treatments
foundation of the company has been
top-notch academic collaborators
development plan was executed for
over for example a small molecule,
shows this typical quality of ProQR
for severe rare genetic diseases.
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ANNUAL RE PORT 2016
This is the story of twin sisters Myrthe and Rosanne, 29, living in
Amsterdam. Not long ago, Myrthe has successfully finished a 150-kilometre
skating race. Rosanne, currently working on a three-month project in South
Africa as part of a job that involves lots of international travel, ran the half
marathon of Amsterdam. Twin sisters, in great shape? Certainly, but there
is one minor detail: both Myrthe and Rosanne suffer from cystic fibrosis,
also known as CF.
“We despe-
rately hope
for A REAL
TREATMENT,
one that
changes
lives”
Myrthe
Two women, almost in their thirties.
familiar with occasional health
After studying Business Administra-
setbacks, leading to a decline in
tion, Rosanne found employment
pulmonary function.
with an international consulting
firm. Her sister Myrthe studied
Myrthe and Rosanne both found
Economics and currently works as
jobs with an employer that is very
a business controller for a large
sympathetic to their situation.
retail organisation.
Rosanne: “I did not beat around
the bush during the job interview,
So far, nothing out of the ordinary.
stating that CF is a serious disease.
However, both start their working
I know how to control it, I said, and
day on similar routines, familiar
how to stay healthy. My boss is
to anyone with CF. “I switch on the
very understanding. After I was in
nebulizer”, Rosanne explains, “to
hospital for two months following
get my daily shots of medication in
an infection, we decided that a four-
about 40 minutes, including antibi-
day contract would better suit me.
otics. It takes about 30 minutes to
I work on Monday, Tuesday, Thurs-
get ready for a new working day,
day and Friday. On Wednesday,
eating and applying make-up not
I rest and recharge. I think I have
included.” Her sister adds that the
found my ideal work-life balance.”
evening routine is slightly shorter.
“We both have to take pills with
pancreatic enzymes whenever
Ticking clock
Meanwhile, there is this nasty
we eat any fatty foods to support
disease, CF. Myrthe: “From a young
digestion. It requires quite a num-
age I knew that my health would
ber of pills to get us through the
deteriorate over time. For many
day, especially since our doctors
years, I thought I was to lose this
insist we consume at least 3,000 to
battle eventually. My lung function
3,500 calories per day.” Rosanne,
declined and I even got lung haem-
giggling: “Fortunately, we both like
orrhages.” To make things worse,
fastfood, haha!”
Health setbacks
Three months after they were born
both Rosanne and Myrthe were
diagnosed with Cystic Fibrosis
Related Diabetes. Myrthe: “We
accept it as it is; we take the insulin
Rosanne was hospitalized with
and go on with our lives.”
severe lung infections. Despite the
diagnosis of CF, they had a fairly
normal childhood. Both became
PUSHING
THE BOUN-
DARIES OF
CYSTIC
FIBROSIS
Rosanne (left) and Myrthe (right)
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ANNUAL RE PORT 2016
CF BASICS
Cystic Fibrosis
Other
mutations
65,000
CF patients with
F508del mutation
worldwide
Lungs and
other organs
Median age of death is
30 years or less
Genetic
No therapy
available
Fortunately, the big picture of CF
Myrthe: “Any advancement in
since this year also as treasurer) of
has changed for the better. Over
science may help stop the clock
the Skate4AIR project. “This year,
the years, scientific advancements
from ticking for a longer period
my aim was to skate the 150-kilo-
and new treatments have resulted
– or even indefinitely. When we
meter race. Not only did
in a much higher life expectancy for
were born, life expectancy was
I finish well with 167 kilometres,
CF patients. Myrthe and Rosanne
low at about 20. During our lives,
I also reached my goal of collecting
have also benefitted from the trend
scientific developments raised life
€10,000 to support CF research!
– their long function is now stable
expectancy, but we hope for more.
In fact, I raised over €16,000!”
at around 70 percent. Rosanne:
All we can do it lead a sensible life,
Rosanne has adopted a similarly
“Without successful research,
with as much sports as possible.”
sport-minded lifestyle. She ran
the clock would be ticking louder
every day for us, counting back
from 70, 60 and 50 to, eventually,
Living like athletes
Hence, both Rosanne and Myrthe
the half marathon of Amsterdam
1 hour and 59 minutes. A formi-
dable achievement.
zero. Today, I am happy with my
live like athletes to stay in shape.
“By staying
in shape,
we try to
BUY TIME”
Rosanne
situation. Fortunately, medical care
that area, having a child one day
for CF patients in Johannesburg
definitely is an option.”
is quite advanced, and there is no
need to worry.”
The future
What about the future? How do
The twins come across as opti-
mistic, smiling, confident women.
“We’re not there yet”, Rosanne
insists. “We are still waiting for the
these CF patients deal with relation-
real breakthrough. Current drugs
ships, possibly even with the idea
do not work for every patient.
of one day becoming a mother?
There is still much research need-
Rosanne: “We both have been in
ed to provide a better future for
relationships, in which we chose
CF patients. We don’t know how
Rosanne left for Johannesburg
to be honest and open about our
our disease will develop later on.
to work in a three-month project
situation. Our doctors told us that
By staying in shape, we try to buy
lung function as it is. I will try to do
in 2014, Myrthe skated a 100-
Pushing boundaries is what the
for one of her employer’s clients.
childbirth is possible for CF patients
time.” Myrthe: “We desperately
everything in my power to stay at
kilometer race on the Weissensee
twins keeps doing, in different ways.
“Though I am a CF patient, I am
with a lung function of over 50
hope for a real treatment, one that
this level.”
in Austria, as a participant (and
One day after our conversation,
confident about my current health
percent. Since we both do well in
changes lives.”
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ANNUAL REPORT 2016
WORKING
ON THE
“POTENTIAL
TO CHANGE
THE LIFE
OF CF-
PATIENTS”
Nicolas Lamontagne, QR‑010 captain
at ProQR, about clinical trials
In just four years, ProQR has advanced QR-010 – an innovative inhaled
therapy for cystic fibrosis based on RNA – from an idea to two clinical trials.
To Nicolas Lamontagne, QR-010 captain at ProQR, the clinical trial results
are a clear step forward. “Most companies that develop drugs have to go
from multiple failures to a positive clinical trial result. We obtained a
positive first trial very quickly. In the industry, that is an amazing result.”
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ANNUAL RE PORT 2016
ABOUT QR-010 & CF
NPD – an important signal
“This NPD test”, Nicolas Lamontagne
show activity. In the cells of CF pa-
tients, it does what it should be
says with a smile, “was developed
doing. This is the best result we
Cystic fibrosis (CF) is one of the
more than thirty years ago as a
could have hoped for, as failure in
genetic diseases that ProQR is
diagnostics tool. It was a quick way
phase 1 is very common in the in-
hoping to find a treatment for.
to show that an important protein is
dustry.” Nicolas adds that the results
QR‑010, the molecule that ProQR
not working, indicating the patient
for the safety and tolerability study
has discovered and is developing,
may have CF. We used the tool the
are expected to become available
specifically targets the most
other way around, to show that a
later in 2017. “We are excited. I can’t
common mutation in cystic fibrosis,
treatment has a positive effect on
wait to see the results.”
called the F508del mutation,
this protein function. Hence, the
affecting ~65,000 CF patients in
NPD test provided an important
the western world.
signal of the therapeutic potential of
More and bigger studies
Next on the menu will be more and
QR-010 in people with cystic fibrosis.
bigger – phase 2 – studies in 2018,
QR‑010 targets the disease at the
It is a first but promising signal of
with more patients, focusing on the
RNA level with the aim to restore
drug activity. As we all know, drug
safety and efficacy of the molecule,
the function of the defective CFTR
development is a long process. The
over longer periods. “We plan for
protein that causes CF. The goal of
NPD trial is a clear ‘go ahead’ signal.”
success!”, Nicolas smiles. Thinking
ProQR’s QR‑010 is to address the
this over, he adds: “This company
underlying defect and stop the
Nicolas adds that ‘quick’ does not
has a way of operating that I have
progression of cystic fibrosis.
necessarily mean ‘easy’. “The test
not seen before. We don’t lose time
is viable, but difficult to perform.
in lengthy discussions, but focus on
We took no chances – we wanted
key actions leading to results. I tell
a top-quality trial. To get it right –
my team all the time – ‘there is no
of QR-010 in approximately 64 CF
‘fit to purpose’ - we decided to
time to waste’. There are patients
patients, by inhalation in the lung.
partner with the lead five doctors
waiting for treatment. There is a
Nicolas Lamontagne: “The study
in this area.”
is on-going, we expect to see final
results in mid-2017. So far, the data
seem to indicate that QR-010 is
Reassuring outcomes
What does the good news really
safe and well tolerated.”
mean? The outcomes are, in Lamon-
sense of urgency at ProQR – we are
always seeking opportunities to
move faster and to bring this drug
to patients in less time!”
tagne’s words, “reassuring”. “It helps
There is still a lot more to know
The second trial, performed with
to reassure people that we are work-
about how the drug works., Nicolas
the nasal potential difference
ing on something that has a poten-
insists. “We know the clinical mode
method, better known as NPD,
tial to change the life of CF patients.
of action very well - people are sick
aimed to find evidence of efficacy.
The sooner we know that, the better
because their CFTR protein does
NPD is a well-accepted diagnostic
it is for all people involved in this
not work. We are looking further
From ProQR’s founding in 2012, the
translated to actual cystic fibrosis
test that has been used before to
huge effort. It builds confidence that
into the molecular mode of action,
company has embraced the RNA
(CF) patients? The first clinical tests
confirm the diagnosis of cystic
QR-010 is actually going to work.”
e.g. what QR-010 does in the cell to
technology that was discovered
of ProQR’s molecule QR-010 seem
fibrosis and more recently to
make CFTR work better. The NPD
by a scientist from Massachusetts
to indicate it does.
assess the therapeutic benefit of
Nicolas Lamontagne is eager to put
study tells us that QR-010 does what
General Hospital. The technology
that was specifically designed for
CF is based on the finding that the
The trials: safety and efficacy
In 2015, ProQR’s QR-010 molecule,
investigational agents in clinical
the results in perspective. “Does the
patients need. It improves their
trials. In laboratory models of CF,
drug reach the target? Yes. Does
CFTR function.”
QR-010 has shown the ability to
it engage the target? Yes. Does it
function of a defective protein can
based on RNA technology, has
restore NPD toward normal levels.
produce the effect you want to see?
The ProQR’s QR-010 captain is
be restored through an interven-
been put to the test in humans
In this clinical study the effect has
Yes. Those three answers made the
convinced that ProQR is betting on
tion at the RNA level. The big ques-
for the first time. The first clini-
been repeated in humans, to find
results positive – it proves that the
the RNA technology for the right
tion is then: can the effects that
cal (phase 1b) trial of QR-010 is
similar signs of efficacy.
fundamentals are there.” Possibly,
reasons. “The results strengthen
were shown in the laboratory be
assessing the safety and tolerability
QR-010 works? “The tests clearly
my belief in an RNA approach.
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ANNUAL REPORT 2016
“The results
strengthen
MY BELIEF
in the RNA
approach”
Other companies have decided to
follow our track in developing RNA
Bringing QR‑010 to the finish line
With all the knowledge and ex-
technologies to treat CF and other
perience – and creativity – that
diseases. But we are definitely
was involved in finding the mole-
operating in the forefront.”
cule, other qualities are essential
to get this therapy to patients.
Nicolas is convinced that, with
“Determination is what it takes”,
ProQR maturing, the company has
says Nicolas. “There are dozens of
definitely passed the age of a start-
challenges ahead. Fortunately, we
up company. “Testing our drug on
have many different qualities – like
patients involves new responsibili-
scientific excellence – and a diverse
ties and a different way of thinking.
team at ProQR. We aim to do
This is the time to prove that ProQR
things right, fast and well from the
is patient-centric, and that we care
beginning.. Bringing QR-010 to the
about their future and well-being.”
finish line is what we will do.”
ABOUT NASAL
POTENTIAL
DIFFERENCE
(homozygous). This indicates that the
CFTR channels where more active
after treatment with QR‑010. This
effect was not observed in patients
The CFTR protein functions as a
with only one copy of the F508del
salt channel in – for example –
mutation (compound heterozygous).
the cells in lungs and the nose.
When someone has CF, this CFTR
Determining the fact that QR‑010
protein isn’t there or doesn’t
restored the function of CFTR is
function properly. Therefore, salts
important because CF patients feel
cannot move in and out of the cells
better when the CFTR channels in
the way they normally do. Doctors
their lungs are more active. That
can measure how well the channels
is what QR‑010 needs to do! It was
work as the movement of salts
shown that QR‑010 does this in
creates an electric current that can
the noses of F508del homozygous
be picked up with certain equipment
patients and this is important
(electrodes) in the nose. This
because it’s known that the lung
measurement procedure is called the
cells respond very similar to cells in
nasal potential difference (NPD) test.
the nose.
In ProQR’s clinical trial, investigators
Nicolas Lamontagne, QR‑010
used the NPD test to study whether
captain at ProQR adds: “We are
QR‑010 can improve the function of
doing another study where we
the CFTR channels in CF patients
administered the drug in the
with the F508del mutation. They
lungs of 64 F508del homozygous
measured NPD before and after
CF patients with QR‑010 to prove
treating the insides of CF patient’s
that this is safe. Secondly, we will
noses with QR‑010. After treatment,
look at whether patients have
the electric current was more normal
any benefit from inhaling QR‑010
in the noses of patients that have
into their lungs. Results from this
two copies of the F508del mutation
study are expected this year.”`
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ANNUAL RE PORT 2016
“TOP-NOTCH
SCIENCE THAT
LEADS TO A
TREATMENT”
Patricia Biasutto,
QR‑110 captain at ProQR
2017 may become a very exciting year for Patricia Biasutto, QR-110 captain.
The work of her department, aimed at developing a novel drug for Leber’s
congenital amaurosis Type 10 (LCA 10) patients, has progressed steadily.
The team is expecting to start a first clinical trial in patients this year.
Patricia Biasutto, born and raised
centres we have made tremendous
in Venezuela and now heading
progress and in 2017 we will take
“A clinical
trial SAVED
MY LIFE.
That event
strengthens
my personal
motivation”
Until now, every one of these steps,
ProQR was founded, Patricia was
every new test produces another
among the first to join. “There were
‘green light’. “Seeing the molecule
only five people working here.
perform well in the ‘optic cup’ mod-
At the time, I was working in Paris.
el is truly exciting. It is the sensation
Taking the job interview by Skype
that scientists, like me, flourish on”.
did not feel right, so I volunteered
to pay for my roundtrip to come
Patricia calls the process of becom-
over to Leiden to have it in person.
ing aware of the molecule’s poten-
Looking back at it, it was the right
tial “a very fulfilling experience” and
decision. It was like love at first
“an amazing feeling”. “But as much
sight with the team. There was this
as I celebrate it, the life-changing
immediate connection with the
moment has yet to come. That will
founder and CEO, Daniel de Boer,
have to come when the molecule
who’s initial motivation to start this
actually proves to be effective in a
business was to find a cure for his
patient. We took the first step – or
son’s disease, CF. In my four years
For LCA 10 we had no good models
hurdle. There is a green light, but
at ProQR, I never once doubted
to test this in and you cannot just
we need more of them.”
my decision.”
take an eye from a patient! We
worked together with the Uni-
versity College London (UCL) that
A personal angle
In Patricia Biasutto’s mind, there
What defines this connection, this
common goal? “It is the shared
recently developed this amazing
is no doubt that the molecule will
awareness that, in this profession
technique where you can take a
reach the all-important phase of
and at this company, we truly have
bit of skin from an LCA 10 patient
clinical trials. Her optimism is purely
the potential to change patients’
and turn the cells into stem cells
scientifically-based, but there is
lives. This is not just a job. I am
and basically grow retinas in the
also a more personal angle to this.
thrilled that soon, we may be able
laboratory. We were one of the
“In short, a clinical trial saved my
to offer patients the opportunity
first companies to use this 3D
life. That life event strengthens my
that saved and shaped me. To
organoid model and with it show
personal motivation to get QR-110
anyone else, clinical testing is just
that QR-110 does exactly what we
to the clinical trial phase ASAP.”
a technical term. To me, it is much
hoped it does in the closest repre-
more than that. It is hope.”
sentation of a patient’s retina.”
She explains: “When I was a child,
The key to patient benefit
In the laboratory, the team found
I suffered from cancer. It was a se-
vere, life-threatening type of cancer.
“It is all about people”
ProQR may not be the largest bio-
My future was very uncertain, the
tech company in the world today,
ProQR’s QR-110 research and
development to the next phase:
confirmation that the QR-110 mole-
doctors had very limited options to
not by far. To Patricia, the size is
development team in Leiden
clinical trials.”
cule restores the RNA sequence of
treat the cancer which unfortunately
irrelevant, as even the smallest of
(The Netherlands), has multiple
reasons for being optimistic.
Obviously, as a biotech scientist
Change the lives of patients
In search for the one molecule that
the CEP290 protein that has a very
did not work to stop the disease.
biotech firms can achieve great
important role in keeping photo-
At that time, a new combination of
results. “It is all about people, their
receptor cells (rods and cones) alive
drugs just reached the clinical trial
knowledge and their experience.
looking for a treatment for LCA 10,
may change the lives of the 2,000
in the retina. In LCA 10 patients, this
phase. My very caring and com-
It is about putting the right teams
she cannot confirm that there is a
patients (see text box) that suffer
protein is not formed. Hence, the
mitted doctors with my parent’s
together, to find the right entrepre-
breakthrough. Not yet.
from LCA 10, Biasutto and her col-
photoreceptor cells in the retina
support managed to get me on the
neurial and scientific chemistry”.
“We have definitely found some-
as “the amazing innovative model
see. “Restoring production of this
I am here today.”
leagues applied what she describes
die and – with that – the ability to
program. That is the reason why
thing. ProQR’s team has developed
of ‘optic cups’.” She explains, in a
a molecule that shows promising
short lecture: “Before we can test
results in laboratory tests. In col-
our molecule in patients we first
protein may be the key to keep the
retinas intact and prevent blind-
ness. The next, exciting step will be
A scientific connection
It was this event that eventually
out boundaries, where scientists
feel they can unleash their creativ-
laboration with various academic
need to find out whether it works.
clinical testing in patients.”
brought Patricia to ProQR. When
ity. “It can only happen when you
Patricia insists that innovation can
only be born in environments with-
PAGE XVII
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ANNUAL REPORT 2016
OPTIC CUP
have recreated this special tissue in
These stem cells were then grown
the laboratory. In order to do this we
in presence of special chemicals that
Human retina is a highly complex
took skin cells from a LCA 10 patient
trick them into developing retina
tissue that helps us to see things.
and reprogrammed them into stem
like structure called optic cup.
In order to properly test QR‑110 we
cells by expressing some key genes.
PAGE XVIII
Ma ga zine
ANNUAL RE PORT 2016
LCA 10 BASICS
Leber’s congenital amaurosis Type 10
Other
mutations
LCA 2 due to
RPE65 mutations
~2,000
patients with
p.Cys998X in CEP290
in Western world
Eye
Lose sight in first
years of life
Genetic
No therapy
available
feel free to challenge your co-work-
ing RNA technologies – tested or
patient-centric approach. “We
There are over 300 genetic diseases that can cause
In a healthy eye, the outer segment of light detecting
ers in a professional way and
not – to genetic diseases. You need
want QR-110 to be administered in
blindness and we have chosen to make these
cells (rods and cones) in the retina are constantly
when you know your efforts are
strong partnerships with the best
the most comfortable and effec-
important targets for our quest for treatments. Our
renewed, a process in which the CEP290 protein plays a
valued. I think ProQR does perform
academic centres, their research
tive way. To ensure this we are
lead program is for Leber’s congenital amaurosis (LCA),
major part. It facilitates the transport of new ‘building
exceptionally well in this area – it is
and their tools. I guess that when
always looking to communicate
a rare genetic eye disease characterized by progressive
materials’ to the outer segments to keep them alive. Due
a particularly nourishing environ-
a company has all that – and this
with patient groups to tap into
loss of vision. Depending on the genetic mutation
to a defect in the DNA of LCA 10 patients, this crucial
ment, especially when you need to
applies to ProQR – there is a great
their expertise. There is also a
patients usually become completely blind during the
protein is not produced. As a result, the light detecting
work long hours and weekends to
chance of success.”
practical aspect in designing a trial
time between birth and the age of 8. As such, LCA is
cells are not maintained and the cells die, leading to poor
find solutions to tough problems.”
Creativity and perseverance
To Patricia Biasutto, success in
Next steps
What are the next steps to bring
QR-110 to patients? “In our
and providing information that
is accessible for people who are
visually impaired.”
biotech research comes from
upcoming trial we aim to make
For LCA 10 patients, 2017 could be
the leading cause of genetic blindness in children.
vision and – eventually – blindness.
We also develop programs for other inherited
blindness called Usher syndrome and Fuchs
ProQR is developing a novel RNA therapy for LCA 10
endothelial corneal dystrophy.
patients, called QR‑110. The molecule is specifically
designed to exclude the p.Cys998X mutation that is
mixing creativity and persever-
sure our molecule is safe, but the
a year of promise. “And of hope”,
The key player in LCA 10 – the most severe form of LCA,
present in the CEP290 mRNA of some LCA 10 patients.
ance – and a little bit of luck. “You
trial will also tell us much about
Patricia adds. What is the ultimate
affecting approximately 2,000 patients in the Western
This mRNA is the ‘blueprint’ of the CEP290 protein. By
need to have a vision of what you
the efficacy.”
want to achieve, as you need some
dream? “Repairing sight for all
patients with inherited blindness.
world – is the CEP290 protein. This protein helps the
fixing this blueprint a normal healthy CEP290 protein
development of cilia in the photoreceptor cells (rods and
will be formed that is expected to have normal function.
sense of direction. You need to be
Patricia stresses the importance of
Or at least to stop the progression of
cones) in the retina. A non-functioning CEP290 protein
The goal of QR-110 is to stop the progression of or
curious to find new ways of apply-
involving patients, as part ProQR’s
these diseases in young patients.”
causes subsequent retinal degeneration in
LCA 10 patients.
potentially even reverse some of the effects of LCA 10
caused by the p.Cys998X mutation.
PAGE XIX
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ANNUAL REPORT 2016
PAGE XX
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ANNUA L REPORT 2016
DYSTROPHIC EPIDERMOLYSIS BULLOSA
A LIFE
OF
PAIN
AND
ITCH
Prof. dr. Jonkman, Dermatologist
Universitair Medisch Centrum Groningen (UMCG)
Skin diseases are one of ProQR’s key therapeutic areas for RNA-based
therapies. The lead program for dystrophic epidermolysis bullosa (DEB)
focuses on a rare genetic disease that causes blisters, itching and severe
pains. “Patients lead a life of pain and itch”, says Prof. dr. Marcel F. Jonkman,
one of the top EB experts in The Netherlands. “The disease’s serious
complications often result in skin cancer and, eventually, death.”
“I am often
amazed by
the POSITIVE
ENERGY
and MENTAL
RESILIENCE
that RDEB
patients
show”
Prof. dr. Jonkman
Prof. dr. Jonkman is the leading
large body surfaces, as well as
dermatologist at the UMCG Uni-
inside the body amongst many
versity Medical Center Groningen
other symptoms.”
in The Netherlands. His depart-
ment runs The Netherlands’ Cen-
In daily life, any bump or rubbing
ter for Blistering Diseases. Of the
against the skin causes blisters
500 patients that visit the center
filled with fluid. Drs. J. Duipmans:
regularly, recessive dystrophic EB
“The blisters heal slowly and cause
(RDEB) patients suffer the most
scars in weeks and months. We
severe symptoms. Many of them
help RDEB patients deal with the
don’t reach the age of 40. Although
pain and the itching; these symp-
the disease itself is not life threat-
tomatic treatments are aimed at
ening, the damages caused often
reducing the pain and itch and
are. Prof. dr. Jonkman: “Most RDEB
help the wounds heal. We teach
patients die of squamous cell
patients and their families how to
carcinoma, a form of skin cancer.
deal with infection.”
Other patients may die of heart
and kidney problems.”
Missing adhesion molecule
Technically, the problem is the
Recurring problem
“Caregivers know the drill. The
recurring everyday problem of
the RDEB patient is the wound
absence of an adhesion molecule
dressing changes that can take
– type VII collagen – that functions
many hours, sometimes using a
as a velcro in the skin, sticking
disinfecting chloride bath. To most
the skin layers together. Healthy
patients, this procedure comes
people have this molecule that
with excruciating pain, as dress-
grows adherence structures, but
ings tend to stick to the wounds.
in RDEB, this molecule is missing.
The patients live a life of pain and
This absence causes a wide range
of itch that disturbs their rest at
of effects. “Patients have a skin so
night, leading to more blisters and
fragile that even minor trauma like
more pain and itch.”
rubbing may cause blistering. The
skin disadheres in its lower layers”,
Prof. dr. Jonkman explains.
Blisters and scars
“What we see among RDEB
Beyond the skin
But RDEB reaches far beyond
problems of the skin. The damag-
ing effects of RDEB like the fusing
of fingers and toes eventually lead
patients”, says Nurse practitioner
to loss of mobility. Prof. dr. Jonk-
drs. J. Duipmans, “is blisters over
man: “To treat range of symptoms
PAGE XXI
Magazi ne
ANNUAL REPORT 2016
“It is a
LIFE-LONG
NIGHTMARE
for patients
and their
caretakers”
Nurse practitioner
drs. J. Duipmans
in RDEB, we work closely together
with many specialists in the UMCG.
Major effect on lives
Drs. J. Duipmans: “I must admit
Under the coordination of myself
that novice – and even professional
and the nurse, we work together in
– nurses sometimes find it hard to
a team of 20 scientific disciplines,
witness the pain and anxiety that
from pediatricians, surgeons,
comes with RDEB, specifically among
orthopedists, gastroenterologists,
young children. No matter how well
dieticians and plastic surgeons to
we take care of the wounds and
rehabilitation doctors, physio-
blisters, there will always be new
therapists and others. To make
ones. This skin disease has a major
the periodical checkups as com-
effect on the lives of patients as well
fortable as possible, RDEB patients
as of their families. Witnessing your
can be seen by these specialists in
child grow up in pain, with limited
one single visit. For any issue that
opportunities in school and work
cannot wait until the next visit to
and in developing relationships
Groningen, we offer consulting
is tough for a parent – and to the
via video-conferencing and other
people that love and care about him
means of communication.”
or her. It is a lifelong nightmare for
PAGE XXII
Ma ga zine
ANNUAL RE PORT 2016
DEB BASICS
Dystrophic Epidermolysis Bullosa
Other
mutations
~2,000
DEB patients with exon 73
mutation (in COL7A1) in
Western world
Skin &
other organs
Blistering of
skin from birth
Genetic
No therapy
available
QR-313 FOR DEB
skin layers together. Absence of
aim to restore the anchoring fibrils
anchoring fibrils make the skin very
in patients that have a mutation in
DEB patients miss functional struc‑
fragile. It blisters with the slightest
exon 73 of the COL7A1 gene. The
tures in their skin called anchoring
friction, for example from wearing
goal is to increase the quality of life
patients and their caretakers.”
fibrils (see illustration) that are im‑
clothes, resulting in wounds that
for patients by normalizing wound
Prof. dr. Jonkman expresses a
strong hope for a treatment for
“Having said that, I am often
RDEB. “RDEB is a very rare disease
amazed and touched by the posi-
but probably the most severe
tive energy and mental resilience
disease in dermatology. The
that RDEB patients show. These
multi-organ involvement makes
patients deserve a cure or a treat-
it, as they say, ‘the worst disease
ment that improves their quality
you never heard of’. I am keeping
of life or at least makes their lives
my fingers crossed for a treatment
bearable. Ask any patient and he
that reduces the blister formation
or she will say that reducing the
and the itching, being the primary
formation of blister by half would
problems of RDEB patients.”
immensely change their lives.”
portant for binding the different
do not easily heal. With QR‑313 we
healing and reducing blistering.
Anchoring
fibrils
Interstitial
collagen fibers
Keratinocytes
Healthy skin
DEB skin
DEB skin + QR-313
PAGE XXIII
PAGE XXII I
Magazi ne
Magazi ne
ANNUAL REPORT 2016
ANNUAL REPORT 2016
“CREATIVITY,
PERSISTENCE
AND DRIVE.
IT ALL COMES
TOGETHER
IN ProQR”
Smital Shah, CFO ProQR
Smital Shah, Chief Financial Officer at ProQR, is excited about how the
company has progressed. With three programs in full development and
one with clinical data, ProQR has moved into the next phase of its existence.
“In under five years, ProQR has evolved into a strong, emerging biotech
company with great potential.”
Smital Shah has a 13-year track
record of management and leader-
Clear progress in programs
After ProQR embarked on its jour-
ship in biopharma companies and
ney less than five years ago with its
PAGE XXIV
Ma ga zine
ANNUAL RE PORT 2016
“We will
soon have
a SECOND
PROGRAM
in clinical
trials”
analysts on a regular basis. “They
Before Smital Shah joined ProQR
understand and acknowledge we
in 2014, she was in awe when the
are making good progress. However,
facts about ProQR were presented
I don’t think that what we believe is
to her. “ProQR wanted to make a
phenomenal data on QR-010
difference, but I was impressed by
– presented in October 2016 – is
how they executed this. Two years
reflected in the ProQR stock price
before that, the founder – with no
yet. With the strong clinical data
biotech background – had ‘an idea’.
along with our promising pipeline,
In such a short time, ProQR had
in my mind, this company is under-
advanced this idea into something
valued; but biotech is an industry
viable, with the help of visionary
where intrinsic value is not always
scientists and proven biotech
reflected at all times, so we believe
entrepreneurs like Dinko Valerio
that this may change over time.
and Henri Termeer. I was impressed
environment of knowledge sharing
and saw that determination, in com-
but maintain the laser focus that
Shah insists that ProQR has shed off
bination with professionalism and
comes with small dedicated teams.”
its initial label of ‘start-up company’
knowledge, can lead to great things.
Three promising tracks –
more concepts developing
ProQR is financially in good shape
with a single idea. “Biotech happens
in a series of jumps. Most companies
are born out of a good idea, and
Innovation incentives
Smital Shah smiles at the idea of
then it’s about executing and achiev-
ProQR being a Dutch company.
and is making great progress in its
ing proof-of-concept on that idea.
“From a fiscal point of view, having
programs. Shah: “What distinguishes
We have matured and accomplished
The Netherlands as a base makes
ProQR from most other biotech
this for QR-010 in patients and are
good sense, as this country offers
companies is that in its very short
now evolving to the next stage.
many tax advantages and innova-
history, it has not just one but
We will soon have a second program
tion incentives for a company like
three promising tracks and more
in clinical trials and possibly a third
ours. Also, the low cost of operating
concepts in early stage of develop-
next year. Ultimately we are look-
a business makes The Netherlands
ment, along with the strong drive to
ing forward and building towards
very attractive, as compared to the
make a difference for patients with
developing ProQR as a commercial
U.S. Every time I fly over to Amster-
severe genetic rare diseases. That is
company in the future and truly have
dam from Palo Alto, I notice how
pretty unique.”
an impact on patient lives.”
tall people are, haha, but also their
According to ProQR’s CFO, knowing
that after QR-010, the QR-110 &
Building on the success of RNA
To investors, Shah pitches ProQR as
easy, up front and refreshing way
of expressing opinions and ideas.
That, in combination with the
investment banking, with particular
QR-010 program for cystic fibro-
QR-313 programs came from the
a strong, patient-focused company
access to biotech talents that
experience in financial strategy and
sis, the contours of our final goal
company’s in-house innovation unit
that is successful in applying RNA
ProQR has in this market, is an
capital markets. Looking back on
are beginning to show. Two more
is an important trust-builder among
therapeutics. “Interfering in a disease
important advantage.”
her first two and a half years with
programs have entered the devel-
ProQR’s several stakeholders – im-
at the RNA level has come a long way
ProQR, she says: “This is a compa-
opment stage. QR-110 for Leber’s
portantly, the patients, the scientific
with 5 approved RNA products that
“It is part of ProQR’s DNA, just like
ny that has moved from exploring
congenital amaurosis Type 10 and
community, our employees as well
have come before us. We have built
qualities such as creativity, per-
one ‘promising’ idea to executing
QR-313 for dystrophic epidermoly-
as others like investors and busi-
on this success and believe that
sistence and drive. They all come
on a global clinical program from
sis bullosa.
that idea and then advancing
ness partners. “This shows we are
ProQR is a front runner in the next
together in ProQR, in this unique
serious about targeting unmet med-
wave of advancement in RNA thera-
way of looking at the world and at
other programs in the pipeline
With the CF program as its shining
ical needs in rare genetic diseases.”
peutics. We are grateful that so much
the job at hand – being prepared to
in just 4 short years. With three
example of what you can do with a
programs in development we are
strong focus, ProQR wants to create
heading in the right direction,
the same dynamics for the other
Strong data, promising pipeline
Being the CFO of ProQR, Smital
us. We are building on their evidence
this one goal.”
and results, to achieve our own goals
work has been done by others before
give everything you have to get to
with more to come.”
programs. “We wanted to create an
Shah meets investors and industry
in our patient-focused strategy.”
ANNUAL
REPORT
2016
ANNUAL
REPORT
2016
Acting in the interest of patients
PAGE 1 / 91
Table of Contents
ANNUAL REPORT 2016
Table of Contents
Message from the CEO
Key Figures
Management Board
Supervisory Board
Management Board Report
Supervisory Board Report
Corporate Governance
Risk Management
Financial Statements 2016
2
3
4
5
5
32
35
45
47
PAGE 2 / 91
Message from the CEO
ANNUAL REPORT 2016
Message from the CEO
2016 was an important year for ProQR in which we made significant progress on our
mission to bring life changing therapies to patients in need. We advanced our pipeline of
RNA therapies targeting severe genetic rare diseases and further enforced our strong team
of dedicated ProQRians to bring our company past exciting milestones in the upcoming
years. First of all we completed the first clinical trial of OR-010 in patients with cystic fibrosis,
a major achievement for a young company like ProQR. The results from this early trial told
us that QR-010 has potential to become a meaningful therapy for patients. A second clinical
trial is ongoing. The first part of the study was completed and showed that QR-010 was safe
and well tolerated. During 2016 the FDA granted the QR-010 program Fast Track
designation. These important events have encouraged us and the medical community in
the further development of QR-010 and our quest to help CF patients.
The second leg of our company is developing therapies for genetic blindness. The first
program in this is called QR-110 and targets subtype 10 of the most common genetic
blindness in children, Leber’s congenital amaurosis (LCA). We are currently doing all the
preparations to start a clinical trial of QR-110 in the first half of 2017. During several
scientific conferences in 2016 we have published very promising pre-clinical results showing
this second molecule can target and restore the underlying defect causing LCA 10. In the
same year both the FDA and the EMA have granted QR-110 Orphan Drug designation.
During 2016 we initiated a first development program for a debilitating skin disease, an
area with a high unmet medical need. Our first investigational product in this area is QR-
313, and is targeting a disorder called dystrophic epidermolysis bullosa. We are planning to
rapidly move the program through the first stages of development in 2017 to start and
complete a clinical trial in 2018.
The advancement of this third development program shows the exceptional productivity of
the innovation unit since its inception in 2014. The goal of the innovation unit is to expand
our pipeline by discovering promising new therapeutics and RNA technologies. During our
first Research & Development day in 2016 we revealed some of the other programs that
are being pursued in the innovation unit including additional programs for inherited
blindness, Usher syndrome and Fuchs endothelial corneal dystrophy (FECD), and a program
for beta-amyloid related disorders.
We could not have achieved any of these results without the support from the patients and
medical research teams that participated in our clinical trials, our academic partners, our
shareholders, and of course the tireless efforts of all ProQRians. Thank you for making this
another meaningful year.
Daniel de Boer
PAGE 3 / 91
Key Figures
ANNUAL REPORT 2016
Key Figures
dsssds
2016
2015
Result from continued operations (in € 1,000)
Net revenue
Other income
Research and development costs
General and administrative costs
Operating result
Net result
Balance sheet information (in € 1,000)
Non-current assets
Current assets
Total assets
Shareholders’ equity
Non-current liabilities
Current liabilities
Cash flows (in € 1,000)
Net cash used in operating activities
Net cash used in investing activities
Net cash generated by financing activities
Ratio’s (in %)
Current ratio
Solvency
Figures per share
Weighted average number of shares outstanding
Basic and diluted earnings per share (in €)
Cash flow per share (in €)
Employees
Average number of staff for the period
--
1,828
(31,923)
(9,478)
(39,573)
(39,103)
3,528
62,015
65,543
53,136
5,697
6,710
(34,221)
(2,539)
357
--
3,235
(23,401)
(6,837)
(27,003)
(20,832)
2,340
97,769
100,109
89,799
4,824
5,486
(24,232)
(1,324)
1,620
9.2
81.1
17.8
89.7
23,346,507
23,343,262
(1.68)
(1.56)
(0.89)
(1.03)
133.4
86.1
PAGE 4 / 91
Management Board
ANNUAL REPORT 2016
Management Board
We have a two-tier board structure consisting of our Management Board (raad van bestuur) and a separate
Supervisory Board (raad van commissarissen). The Management Board operates under the chairmanship of
the Chief Executive Officer and shares responsibility for the deployment of ProQR’s strategy and policies, and
the achievement of its objectives and results.
Under Dutch Law, the Management Board has ultimate responsibility for the management and external
reporting of the Company and is answerable to shareholders at the General Meeting of Shareholders.
Pursuant to the two-tier corporate structure, the Management Board is accountable for its performance to a
separate and independent Supervisory Board.
The following table sets out information with respect to each of our Management Board members, their
respective ages and their positions at the Company as of the date of this annual report.
Name
Gender
Date of Birth
Position
Date of
Appointment
Term
expires
Daniel de Boer
Male
April 12, 1983
Chief Executive Officer
February 21, 2012
René Beukema
Male March 26, 1964
Chief Corporate
Development Officer and
General Counsel
April 17, 2014
2018
2018
The following sets forth biographical information regarding our management board members.
Daniel de Boer is our founding Chief Executive Officer and has served as such since our incorporation in
February 2012. Mr. de Boer is a passionate and driven entrepreneur and advocate for CF patients, and has
assembled an experienced team of successful biotech executives as co-founders and early investors. As a
serial entrepreneur in IT, he founded and led a number of tech companies through phases of growth,
initiating development and launch of several IT related products in several European countries. Prior to
founding ProQR, Mr. de Boer served as a founder and Chief Executive Officer of RNA Systems, founder and
Chief Executive Officer of PC Basic, and founder and Chief Executive Officer of Running IT. Mr. de Boer is
responsible for the overall strategy and general business in the company.
René Beukema has served as our Chief Corporate Development Officer and General Counsel since April 2014.
Mr. Beukema joined us in September 2013 and is a seasoned in-house corporate lawyer in the Dutch
biotechnology arena. Prior to joining us, Mr. Beukema served as general counsel and corporate secretary of
Crucell N.V. for twelve years, following his experience as a senior legal counsel at GE Capital / TIP Europe and
legal counsel at TNT Express Worldwide. Mr. Beukema was also a venture partner of Aescap Venture, a life
sciences venture capital firm. Mr. Beukema is the co-founder and advisor of Mytomorrows, a Dutch life
sciences company, and a member of the VU Medical Cancer Center children in Amsterdam. He holds a post-
doctoral degree in corporate law from the University of Nijmegen in co-operation with the Dutch Association
of In-house Counsel (Nederlands Genootschap van Bedrijfsjuristen) and a Master’s degree in Dutch law from
the University of Amsterdam.
PAGE 5 / 91
Supervisory Board
ANNUAL REPORT 2016
Supervisory Board
The Supervisory Board supervises the policies of the Management Board and the general course of affairs of
ProQR and advises the Management Board thereon. The Supervisory Board, in the two-tier corporate
structure under Dutch law, is a separate and independent corporate body.
The following table sets forth information with respect to each of our supervisory board members and their
respective ages as of the date of this annual report. The terms of office of all our supervisory board members
expire according to a rotation schedule drawn up by our supervisory board.
Our supervisory board is currently composed of the following members, all of whom are independent under
applicable NASDAQ standards and all of whom, with the exception of Mr. Antoine Papiernik are independent
under the Dutch Corporate Governance Code (DCGC):
Name
Gender Nationality
Date of Birth
Position Date of Appointment
Term expires
Dinko Valerio
Male
NL
August 3, 1956
Chairman
January 1, 2014
Alison Lawton
Female
US September 26, 1961
Member
September 17, 2014
Antoine Papiernik
Henri Termeer
James Shannon
Paul Baart
Male
Male
Male
Male
FR
NL
GB
NL
July 21, 1966
Member
January 1, 2014
February 28, 1946
Member
January 1, 2014
June 5, 1956
Member
November 9, 1950
Member
June 21, 2016
June 10, 2015
2020
2018
2017
2020
2020
2019
The following sets forth biographical information regarding our supervisory board members.
Dinko Valerio is one of our founders and currently serves as the chairman of our supervisory board. Mr.
Valerio has served on our supervisory board since January 2014. Mr. Valerio is a scientist and an experienced
biotech entrepreneur with experience in both public and private companies as CEO and board member. Mr.
Valerio is founder and former CEO of Crucell N.V., a Dutch biotech company, and founder and general
partner of Aescap Venture, a life sciences venture capital firm. In 1999, Mr. Valerio was one of the founders of
Galapagos Genomics N.V., a spinout from Crucell N.V. which develops novel mode of action medicines.
Adding to his corporate experience, Mr. Valerio is a professor in the field of gene therapy of the
hematopoietic system at the University of Leiden. He received his Master of Science degree in Biology from
the University of Amsterdam in 1982 and completed his Ph.D. in Molecular Genetics with Honors at the
University of Leiden in 1986. Mr. Valerio also was a visiting scientific specialist at Genentech Inc., San
Francisco in 1985 and a postdoctoral fellow at the Salk Institute, San Diego from 1986 to 1987. He is an
author on more than 100 articles in peer-reviewed journals and an inventor on 11 patent-families.
Alison Lawton has served on our supervisory board since September 2014. Ms. Lawton is currently the Chief
Operating officer of Aura Biosciences Inc. From January 2013 to January 2014, Ms. Lawton served as Chief
Operating Officer of OvaScience, Inc., a public life sciences company. From 1991 to 2013, Ms. Lawton worked
at various positions of increasing responsibility at Genzyme Corporation, or Genzyme, and subsequently at
Sanofi-Aventis, following its 2011 acquisition of Genzyme, each a global biopharmaceutical company. Ms.
Lawton served as head of Genzyme Biosurgery, where she was responsible for Genzyme’s global orthopedics,
surgical and cell therapy and regenerative medicine businesses. Prior to that, Ms. Lawton oversaw Global
Market Access at Genzyme, which included Regulatory Affairs, Global Health Outcomes and Strategic Pricing,
Global Public Policy, and Global Product Safety & Risk Management. Before joining Genzyme, Ms. Lawton
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worked for seven years in the United Kingdom at Parke-Davis, a pharmaceutical company. Ms. Lawton serves
on the board of directors of Verastem, Inc., a public biopharmaceutical company. In 2016 she joined the
board of directors of CoLucid Pharmaceuticals. She also served on the board of directors of Cubist
Pharmaceuticals for three years until its acquisition by Merck &Co., Inc. in 2015. She is member of the
Corporate Advisory Board of X4 Pharmaceuticals. She is past President and Chair of the Board of Regulatory
Affairs Professional Society and past FDA Advisory Committee member for Cell and Gene Therapy
Committee. She earned her BSc in Pharmacology, with honors, from King’s College London.
Antoine Papiernik has served on our supervisory board since January 2014. Mr. Papiernik is managing partner
at Sofinnova Partners, which he joined in 1997. Mr. Papiernik has been an initial investor and active board
member in public companies like Actelion, Addex, Auris Medical, Orexo, NovusPharma (then sold to CTI),
Movetis (then sold to Shire), Mainstay, Pixium and Stentys, which went public respectively on the Zurich Stock
Exchange, the NASDAQ Global Market, the Stockholm Stock Exchange, the Milan Nuovo Mercato, the Belgium
Stock Exchange, the Dublin Stock Exchange and EuroNext Paris, in Cotherix (initially NASDAQ listed, then sold
to Actelion), Core Valve (sold to Medtronic), Fovea (sold to Sanofi Aventis) and Ethical Oncology Science (EOS,
sold to ClovisOncology). Mr. Papiernik has also invested in and is a board member of private companies MD
Start, ReCor, Shockwave Medical and Reflexion Medical, Gecko Biomedical and Rgenix. Mr. Papiernik has an
MBA degree from the Wharton School of Business, University of Pennsylvania.
Henri Termeer is vice chairman and has served on our supervisory board since January 2014. From October
1983 to June 2011, Mr. Termeer served as chairman, president and chief executive officer of Genzyme
Corporation. For ten years prior to joining Genzyme, Mr. Termeer worked for Baxter International
Laboratories, Inc., a manufacturer of human health care products. Mr. Termeer resigned from Genzyme in
June 2011 following the acquisition of Genzyme by Sanofi. Widely acknowledged for his contributions to the
biotechnology industry and health care field, Mr. Termeer is active in the areas of humanitarian assistance,
policy issues, and innovation in providing access to health care. He is a member of the board of each of
Massachusetts General Hospital and Partners HealthCare and a member of the board of fellows of Harvard
Medical School. Mr. Termeer is also a member of the board of the Massachusetts Institute of Technology and
serves on its Executive Committee and a board member of the Biotechnology Industry Organization (BIO). He
is a board member of the New England Healthcare Institute, a nonprofit, applied research health policy
organization he was instrumental in founding and on the boards of Boston Ballet, Museum of Science, WGBH
and Project Hope. Mr. Termeer is also currently a board member of Abiomed Inc., Aveo Pharmaceuticals,
Moderna Therapeutics and was a board member of Allergan, Inc. from 2014 through its acquisition by Actavis
in March 2015. Mr. Termeer was chairman of the Federal Reserve Bank of Boston’s board of directors from
2010-2011. Mr. Termeer studied economics at the Economische Hogeschool (Erasmus University, the
Netherlands) and earned an MBA from the Darden School at the University of Virginia.
James Shannon, MD has served on our Supervisory Board since June 2016. Mr. Shannon has had an extensive
career in drug development and pharma. From 2012 until his retirement in 2015, Mr. Shannon was Chief
Medical Officer at GlaxoSmithKline. Prior to that he was Global Head of Pharma Development at Novartis and
Senior Vice-President, Clinical Development at Sterling Winthrop Pharmaceuticals. He held board positions at
companies including Biotie, Circassia, Crucell, Endocyte, MannKind and Cerimon Pharmaceuticals. He
received his undergraduate and postgraduate degrees at Queen's University of Belfast and is a Member of
the Royal College of Physicians (UK). Mr. Shannon currently holds board positions at Mannkind Corp (USA),
myTomonows (NL) and lmmodulon (UK).
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Paul Baart has served on our supervisory board since June 2015. Mr. Baart made his career in public
accounting in both the Netherlands and the USA. At PwC the Netherlands he served on the management
board and the supervisory board. He was also a member of the global board of PwC International. He has
served many large (listed) and international clients in various industries. He held professional qualifications
both in the Netherlands and in the USA. He was chairman of Royal NIVRA, the Dutch Institute of Registered
Accountants (now NBA), member of the Dutch Council on Annual Reporting (RJ) and supervisory board
member of Nyenrode Business University. Present roles include outside member Enterprise Chamber
Amsterdam Court of Appeal (Ondernemingskamer) and chairman Supervisory Board Grant Thornton the
Netherlands. He studied business economics at the Vrije Universiteit in Amsterdam, where he also passed the
Registeraccountantsexam.
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Management Board Report
The Company
ProQR Therapeutics N.V., or “ProQR” or the “Company”, is dedicated to changing lives through the creation of
transformative RNA medicines for the treatment of severe genetic rare diseases (sometimes called orphan
diseases) such as cystic fibrosis, Leber’s congenital amaurosis Type 10 and dystrophic epidermolysis bullosa.
Based on our unique proprietary RNA platform technologies we are growing our pipeline with patients and
loved ones in mind.
We were incorporated in the Netherlands, on February 21, 2012 and reorganized from a private company
with limited liability to a public company with limited liability on September 23, 2014. Legal demerger of our
Company was effectuated as per June 30, 2015. Our Company has its statutory seat in Leiden, the
Netherlands. The address of its headquarters and registered office is Zernikedreef 9, 2333 CK Leiden, the
Netherlands.
Since September 18, 2014, our ordinary shares have been listed on the NASDAQ Global Market under the
ticker symbol PRQR.
Operations
We are an innovative biopharmaceutical company that discovers and develops RNA therapeutics for a better
future for patients with severe genetic rare diseases. Our team of dedicated ProQRians works closely with
patient groups and our academic partners and this has led to many successes in the short life-span of the
company. Our lead program targets the most common mutation in CF and because of an aggressive and
innovative development strategy positive data from a biomarker study in CF patients was presented in 2016.
A second clinical trial in CF patients is ongoing and is expected to read out in mid-2017. Our first program
targeting an inherited blindness is expected to enter clinical trials during the first half of 2017 and more
programs in this therapeutic area are being advanced. The third area that we focus on are debilitating skin
diseases, for which we are developing several programs. The first of these is expected to enter clinical trials in
2018. Our diversified pipeline that we presented during a Research & Development Day in 2016 is the result
of our in-house discovery engine that we call the innovation unit. This group has been very productive in
discovering new programs based upon our toolbox of RNA technologies that we have in-licensed or
developed in-house. We currently have discovery programs including programs in Usher syndrome, Fuchs
endothelial corneal dystrophy (FECD), Huntington’s disease, amyloid beta related disorders and Friedreich’s
ataxia. We believe our strong team, excellent partners and our extensive pipeline will lead to a sustainable
future for our company and to accomplish our quest to make a meaningful impact on the lives of patients in
need.
QR-010 and Cystic Fibrosis (CF)
CF is a genetic disease that causes early morbidity and mortality. CF currently has no cure. The median age of
death for CF patients is 30 years or less, and more than 90% of CF patients die from respiratory failure. To
date, all but two of the therapies approved to treat CF patients are designed to treat the symptoms of CF
rather than address the underlying cause. CF is caused by mutations in the gene that encodes for a protein
called cystic fibrosis transmembrane conductance regulator, or CFTR. Although there are more than 1,900
different genetic mutations that cause CF, the F508del mutation that we are targeting is the most prevalent
and is present in approximately 85% of all CF patients in the Western world and approximately 65,000
patients worldwide. In CF patients, this mutated gene and the resulting defective protein lead to the
dysfunction of multiple organ systems, including the lungs, pancreas and gastrointestinal tract. In the lung
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airways, absence of functional CFTR protein leads to unusually thick, sticky mucus that clogs the lungs and
increases vulnerability to chronic, lung-damaging infections.
Our lead product candidate in the CF space, QR-010, a first-in-class RNA-based oligonucleotide, is designed to
address the underlying cause of the disease by targeting the mRNA defect encoded by the F508del mutation
in the CFTR gene of CF patients and restoring CFTR function. QR-010 is designed to be self-administered
through a small, handheld aerosol delivery device, or nebulizer, in the form of a mist inhaled into the lungs. In
pre-clinical studies we have shown this method could allow maximum exposure of QR-010 to the primary
target organ, the lung, as well as significant exposure to other affected organs through systemic absorption
into the blood. Based on our extensive pre-clinical studies on safety, delivery and efficacy in relevant cell and
animal models we started two global clinical studies of QR-010 in 2015. During the North American Cystic
Fibrosis conference (NACFC) from October 26 – 29, 2016 we presented positive results from PQ-010-002, a
proof-of-concept trial demonstrating that QR-010 restores CFTR function in the nasal linings of patients that
are homozygous (who carry two allelic copies) of the F508del mutation. CFTR is the protein channel that is
defective in patients with CF, and presence or absence of function of CFTR can be measured by an important
biomarker called the nasal potential difference, or NPD, assay. Following four weeks of topical therapy, QR-
010 improved the CFTR-mediated total chloride response, a direct measure of CFTR function. This was
confirmed by the restoration of other indicators of CFTR function, such as the sodium channel activity. In
subjects that were compound heterozygous (who carry one copy of the F508del mutation and one other
disease causing mutation), no meaningful difference was measured. QR-010 was observed to be well-
tolerated in all subjects.
Besides the completed NPD trial, we are running a second clinical trial. This Phase 1b clinical trial, which we
refer to as PQ-010-001, is a randomized, double-blind, placebo-controlled, 28-day dose-escalation trial that is
being conducted in 27 sites in North America and Europe. The primary endpoint of the trial is to evaluate the
safety, tolerability and pharmacokinetics, of single and multiple ascending doses of inhaled QR-010 in
approximately 64 CF patients carrying two copies (homozygotes) of the F508del mutation. This trial will also
assess a number of exploratory efficacy endpoints, although the trial is not powered for statistical
significance on these endpoints. The single dose portion of the trial has been completed. No dose-limiting
toxicity was observed up to the highest dose tested. We expect to report top-line data from the full trial in
mid-2017.
In July 2016, QR-010 received Fast Track designation from the FDA for the treatment of patients with CF due
to the F508del mutation. Fast Track designation is granted by the FDA to drugs that are under development
for serious conditions and have the potential to fulfill an unmet medical need. It was established with the
intention to bring promising drugs to patients sooner by facilitating the development with more frequent FDA
interactions and expediting the review process.
QR-010 has been granted orphan drug designation in the United States and the European Union for CF.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval
for the indication for which it has such designation, the product is entitled to a period of market exclusivity.
This exclusivity precludes the U.S. Food and Drug Administration, or FDA, or the European Medicines Agency,
or EMA, as applicable, from approving another marketing application for the same or, in the European Union,
a similar drug for the same indication for that time period, unless the later product is clinically superior.
Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review
and approval process.
QR-110 and Leber’s Congenital Amaurosis Type 10 (LCA 10)
LCA is the most common genetic cause of blindness in childhood. LCA is caused by a genetic defect in 19 or
more associated genes. Classification of LCA is based on the disease causing gene. The most frequently
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mutated LCA gene in LCA patients in North America and Europe is CEP290 that is associated with LCA Type 10
(LCA 10). The most common mutation is the p.Cys998X (also known as c.2991+1655A>G) in the CEP290
(Centrosomal protein of 290 kDa) gene. Although diagnosis rates vary, based on our estimations we believe
this mutation occurs in approximately 2,000 patients in the Western world. Most patients affected by this
mutation lose sight in the first few years of life. There is currently no disease modifying therapy available on
the market or being tested in clinical development for this specific subtype of the disease. In LCA 10 patients,
this mutation leads to significant decrease of active CEP290 protein in the photoreceptor cells in the retina in
the eye. The absence of this essential protein causes blindness.
Our lead product candidate in the LCA 10 space, QR-110, a first-in-class oligonucleotide, is designed to treat
the disease by repairing the underlying cause in the mRNA, which results in the production of wild-type
CEP290 protein. The p.Cys998X mutation is a substitution of one nucleotide in the pre-mRNA that leads to a
defective mRNA and non-functional CEP290 protein. QR-110 is designed to bind to the mutated location in
the pre-mRNA, thereby leading to normally spliced or wild-type mRNA, which could produce wild-type or
normal protein. QR-110 is designed to be administered through intravitreal injections in the eye. We believe
the activity in pre-clinical models of LCA 10 provides support for the clinical development and therapeutic
potential of QR-110. In studies conducted with QR-110 using relevant pre-clinical LCA 10 models, QR-110 was
observed to restore CEP290 wild-type mRNA and protein levels. It was observed that QR-110 restored CEP290
mRNA and protein levels in primary LCA 10 fibroblasts from patients that are homozygous for the p.Cys998X
mutation to approximately 100% of wild-type and to approximately 50% of wild-type in cells from compound
heterozygous patients. It was also observed that QR-110 reaches the correct layer of the retina (the outer
nuclear layer) after administration by intravitreal injections. In a 3D optic cup organoid model QR-110 showed
restoration of CEP290 wild-type mRNA in a dose dependent manner. In the first half of 2017 we intend to
start our first clinical trial directly in LCA 10 patients. There is recent precedent for an accelerated
development path in another LCA mutation, and we believe this accelerated development pathway can also
be applied to QR-110.
QR-110 has been granted orphan drug designation in the United States and the European Union for LCA.
QR-313 and Dystrophic Epidermolysis Bullosa (DEB)
Dystrophic epidermolysis bullosa (DEB) is a genetic orphan disease of the skin and other mucosal
membranes. The hallmark of the disease is severe blistering and poorly healing wounds that result from
minimal pressure. Patients with the recessive form of DEB (RDEB) have a limited life expectancy and low
quality of life. Patients with the dominant form (DDEB) have variable expression of the disease but is also
associated with significant morbidity. There is currently no treatment for DEB. Aggressive and costly palliative
care provided to these patients does not address the underlying cause of the disease. DEB is caused by
mutations in the COL7A1 gene which leads to an absence of functional collagen type VII (C7) protein which is
essential for formation of anchoring fibrils that link the epidermis to the dermis.
We are developing a single-stranded oligonucleotide, QR-313, for patients with DEB caused by mutations in a
specific part of the COL7A1 gene called exon 73. QR-313 is designed to exclude exon 73 from the COL7A1
mRNA. Skipping of exon 73 leads to an mRNA that is translated into a truncated, but functional COL7A1
protein that is able to form anchoring fibrils that should improve the stability of the skin. There are multiple
mutations associated with DEB, several of which lie within exon 73.
QR-313 is being formulated in a hydrogel that will be applied topically to existing wounds in patients with
DEB. QR-313 is designed to restore functional COL7A1 protein with the aim to facilitate wound healing and
protect against future blistering. In pre-clinical models skipping of exon 73 by QR-313 has been observed in a
3D human full thickness skin model. If this exon skipping approach is proven to be of benefit for DEB
patients, there may be other COL7A1 mutations that can be targeted with an approach similar to QR-313.
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Innovation pipeline
The innovation unit is our internal discovery engine, which we use to discover additional molecules through
internal research and external collaborators. These pipeline programs are based on our multiple RNA
technologies that were discovered internally or in-licensed. We have a rigorous evaluation process in
identifying programs that are ready to leave the innovation unit and move into development. The criteria
include established genetic causality, ability to deliver to the target organ, intellectual property protection,
strong pre-clinical proof of concept, and a high unmet need. Our early stage programs are in various stages
of discovery and target different severe genetic disorders where we believe our technologies have the
potential to make a life altering impact for affected patients. These include programs for Usher syndrome
and Fuchs endothelial corneal dystrophy (FECD) both areas of ophthalmology with high unmet medical need.
We further have programs in our central nervous system, or CNS, franchise for Huntington’s disease and
amyloid beta related disorders. In our neuromuscular franchise we have a program for Friedreich’s ataxia.
Our Strategy
We are dedicated to improving the lives of patients and their loved ones through the development of RNA-
therapies for severe genetic orphan diseases. We have an initial focus on patients with CF, LCA 10 and DEB.
Key elements of our strategy include:
Develop drugs for patients in need. Through our patient-centric approach we work to develop best-in-
class therapies and to advance the understanding of conditions that we target. As RNA Therapies have
become an established modality we are translating new applications in a pipeline of products for
patients suffering from rare diseases. We believe this strategy enables us to build a sustainable
independent business.
Independently develop and commercialize QR-010 for the treatment of CF. Our lead product candidate
in the CF space, QR-010, has generated compelling data in pre-clinical studies and a first clinical trial in
CF patients. We believe these data support the potential of QR-010 as a disease-modifying therapy for
CF patients. We are currently running a second global clinical trial of QR-010 that will enroll
approximately 64 CF patients with two copies of the F508del mutation. Top-line data is expected in mid-
2017. We are studying applications of RNA technologies for CF mutations other than F508del. We intend
to commercialize QR-010 ourselves, if approved, and retain all commercial rights in major markets.
Rapidly advance our ophthalmology franchise, including QR-110 for the treatment of LCA 10. We
recognize the great opportunity for oligonucleotides in the ophthalmology space and therefore have
established an ophthalmology franchise that now has one program in development and several in the
discovery pipeline. These include LCA 10, Usher syndrome and Fuchs endothelial corneal dystrophy
(FECD). We are developing QR-110 to treat patients with the most common mutation causing LCA, the
leading genetic cause of blindness in childhood. We conducted further pre-clinical studies during 2016
and expect to start our first clinical trial in LCA 10 patients in the first half of 2017.
Utilize our proprietary RNA technologies and know-how to develop additional product candidates
targeting genetic diseases with high unmet medical need. We are developing a product pipeline
targeting severe genetic diseases that have significant unmet need and are caused by mutations that we
believe can be treated with our RNA technologies. We are currently working on approximately 100
potential target indications in several therapeutic areas and have organized our discovery effort in
franchises such as respiratory, ophthalmology, dermatology, CNS and neuromuscular disorders.
Leverage our pipeline through considering out-licensing, spinouts or collaborative partnerships. We
plan to continue to advance the programs and technologies in our discovery pipeline and ensure that
these programs have the potential to make an impact for patients in these areas of unmet need, we will
consider strategic alternatives that include spinouts, out-licensing or collaborative partnerships with
pharmaceutical companies. These partnerships may provide us with further validation of our approach,
funding to advance our product candidates and access to development, manufacturing and commercial
expertise and capabilities.
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Our RNA Technologies
Genes are the specific sequences of DNA that provide the blueprint used by the human body’s cells to make
proteins, which are enzymes or other molecules in cells that serve a functional purpose. Each gene consists of
a specific sequence of nucleotides that leads to the production of a specific protein. The gene’s coding DNA
sequence is transcribed into mRNA, which is subsequently translated into the specific protein. A mutation, or
defect, in a specific gene can result in the transcription of abnormal mRNA, which then can produce a
defective, misfolded or truncated protein that is unable to carry out its normal function.
In the maturing RNA therapeutics space and the developments in understanding their potential, we have
gathered a toolbox of different novel RNA technologies with which we believe we target defective mRNA in
order to restore protein functionality. Our goal to restore translation of functional proteins is unlike other
approaches in the RNA therapeutics field, such as RNAi and antisense that use RNA molecules to
downregulate genes. Our molecules are single-stranded RNA-based oligonucleotides that are chemically
modified (phosphorothioate backbone and 2’ O-methyl modifications) so that no vector or envelope is
needed for delivery. We believe these RNA approaches will allow us to develop novel therapies for genetic
disorders that are currently untreatable or have limited effective treatment options.
Our product candidates
In selection of discovery programs to bring into our development pipeline we apply a rigorous process of
review by a committee of internal and external scientific experts and thought leaders to all key aspects of a
program. Among others we look at the following criteria:
High unmet medical need
A pre-clinical proof-of-concept that shows strong promise for translation to the clinic
Well understood relationship between the genetic defect and the disease manifestations
Feasibility of delivery to target organ(s)
Strong IP position and initial freedom to operate established
We believe our current pipeline represents a mix of high-value indications where we can make a big impact to
the lives of patients.
Program pipeline
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Patient Centric Approach
ProQR aims to develop best-in-class therapies as well as to improve patient care through awareness,
education, and advancing the understanding of conditions that we target. In order to achieve this goal, ProQR
strives to integrate the patient voice into our decision-making throughout the drug development process.
Because we believe that a patient-centric strategy is crucial to our success, we have established the Patient
and Medical Community Engagement (PMCE) team. This dedicated team’s purpose is to listen to and
represent the patient voice internally as well as to collaborate externally with the communities we serve.
Cystic Fibrosis
Cystic Fibrosis Background
CF is the most common fatal inherited disease in the Western world and affects an approximately 65,000
patients worldwide. There is no cure for CF. CF patients require lifelong treatment with multiple daily
medications, frequent hospitalizations and ultimately lung transplants, which can extend life for five years on
average. The quality of life for CF patients is compromised by approximately four hours of self-care per day
and frequent outpatient doctor visits and hospitalizations.
CF is caused by mutations in a gene that encodes the CFTR protein. The CFTR protein channel regulates the
movement, or efflux, of specific ions in and out of the cells of organs like the lungs, pancreas and
gastrointestinal tract. Through regulation of these ions, the amount of salts in the fluid both inside and
outside the cell remains balanced. In CF patients, however, the CFTR protein is defective and cannot perform
its normal function of transporting ions across the cell membrane, and this results in an environment
characterized by thick mucus in vital organs such as the lung, the pancreas and the gastrointestinal tract. The
figure below illustrates a defective CFTR protein hampering the efflux of chloride in lung epithelial cells.
Chloride ion flow by wild-type CFTR and F508del CFTR
Wild-type
F508del
The lack of functional CFTR in CF
patients is particularly problematic in
the lungs, where the build-up of
thick mucus obstructs parts of the
lung, allows bacteria to grow
unfettered and impairs the
functionality of the local immune
system. Of all the manifestations of
CF, lung disease is the most critical
and is characterized by a
combination of airway obstruction,
infection and inflammation such that
more than 90% of all CF patients die
of respiratory failure. In the
pancreas, the buildup of mucus
prevents the release of digestive
enzymes that help the body break down food and absorb important nutrients. In the GI tract, the thick mucus
leads to impaired ability to absorb nutrients. The median age of death for all CF patients is 30 years or less.
According to the medical literature, restoration of as little as approximately 15% of wild-type CFTR function in
CF patients should result in a therapeutic benefit.
Cystic Fibrosis Genetics
CF is an autosomal recessive disease. A normal, healthy gene has two alleles that encode for a given protein.
In an autosomal recessive disease such as CF, a patient has a mutation in both alleles. Non-affected carriers
have a mutation in only one of the alleles. CF patients have a defect in the gene encoding for the CFTR
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protein, and they either have two copies of the same mutation, referred to as homozygotes, or one copy of
two different mutations, referred to as compound heterozygotes. Although over 1,900 CF-causing gene
mutations have been identified, approximately 85% of CF patients in the Western world are affected by the
F508del mutation. Of which approximately 45% are homozygous for the F508del mutation and approximately
40% are compound heterozygous for the F508del mutation.
In the F508del mutation, the genetic defect is a deletion of three of the coding base pairs, or nucleotides, in
the CFTR gene that results in the transcription of defective mRNA, which results in the production of CFTR
protein that is misfolded and can neither migrate to its normal location on the surface of epithelial cells nor
perform its normal function.
Cystic Fibrosis Incidence and Diagnosis
CF affects one out of 3,500 live births in the United States and one out of 2,500 live births in Western Europe.
Many individuals are also non-affected carriers of a mutated CFTR gene. Carrier results across ethnic groups
in the United States are well established, and reports from the American College of Obstetricians and
Gynecologists indicate rates of one out of 25 in non-Hispanic Caucasians, one out of 58 in Hispanic
Caucasians, one out of 61 in African Americans, and one out of 94 in Asian Americans. While the life
expectancy of CF patients has improved over the last three decades, the median age of death is still only 30
years or less in the U.S.
Most CF patients in the United States, the European Union, Canada and Australia are now diagnosed at birth
through newborn screening, and more than 75% of CF patients are diagnosed by the age of two. CF can be
diagnosed by conducting a Nasal Potential Difference, or NPD, test that measures CFTR activity in the nose, or
a pilocarpine iontophoretic sweat chloride test, which measures the amount of salt in a person’s sweat. A
genetic test is also often used to confirm a CF diagnosis and/or identify the disease-causing mutations. In a
genetic test, a blood sample or cells from the inside of the cheek are taken and sent to a laboratory that
specializes in genetic testing.
Approaches to the Treatment of Cystic Fibrosis
Treatment overview
There is no cure for CF, and to date, all but one of the therapies approved to treat CF patients have been
designed to treat the symptoms rather than address the underlying cause. CF patients require lifelong
treatment with multiple daily medications, frequent hospitalizations and ultimately lung transplant, which is
life-extending but not curative. In the United States, the average CF patient incurs approximately $50,000 per
year in expenses for outpatient medications and services and substantial additional costs for frequent
hospitalizations. As the median age of death for CF patients is 30 years or less, this results in an average
lifetime cost per CF patient in the U.S. of $1,350,000 in outpatient expenses alone. CF patients who can be
treated with Vertex’s Kalydeco or Orkambi have additional annual costs of approximately $300,000.
Standards of care are generally similar across Western European nations.
Palliative treatments
The current standard of care for CF patients includes palliative treatment to manage the symptoms of the
disease. In CF patients, the thick mucus that builds up in the lungs and other vital organs such as the
pancreas and gastrointestinal tract hampers mucus clearance and leads to airway obstruction and difficulty
absorbing nutrients, leading to poor growth and development. Primary treatment options include inhaled
therapies such as rhDNase, marketed as Pulmozyme, which thins the mucus in the lungs, as well as
pancreatic enzyme replacement therapy, which improves absorption of nutrients. Due to the proliferation of
bacteria on the mucus build-up, CF patients often develop chronic lung infections that require inhaled
antibiotics treatments, such as TOBI or Cayston, to suppress the infections. CF patients also take a number of
other prescribed and over-the-counter medications to alleviate the symptoms of CF and reduce
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complications, including bronchodilators, inhaled corticosteroids, and ursodeoxycholic acid for biliary tree
dysfunction.
Potentiators for certain non-F508del mutations
For a subset of patients who suffer from the G551D and other gating mutations of the CFTR gene, Vertex
Pharmaceuticals has developed a so-called “potentiator” molecule marketed under the trade name Kalydeco
(ivacaftor). This product was approved by the FDA in 2012 to treat patients with the G551D CFTR mutation
and, in 2014, the label was expanded to include eight additional gating mutations. In 2015, the label was
further expanded to include a total of ten gating mutations and children as young as two years old. Vertex
has estimated that approximately 2,400 CF patients in the U.S., Europe and Australia have a G551D or a non-
G551D gating mutation. Gating mutations are characterized by the presence of CFTR at the cell surface that
does not open and close the ion channels properly. Kalydeco is believed to keep the ion channels open for
longer. For this population of CF patients, medication costs are approximately $300,000 per year for Kalydeco
prescriptions. Kalydeco is an exciting development as it provides a proof of concept that it is possible to
target the defective CFTR protein that causes CF and improve key symptoms of the disease.
The F508del mutation affects approximately 85% of CF patients in the Western world. Unlike the “gating”
mutations, F508del is a “processing” mutation, and as such, CFTR with the F508del mutation is not expressed
at the cell surface and cannot be potentiated by small potentiating molecules like Kalydeco.
Potentiator/corrector combination for F508del mutations
For patients aged 6 years and above and homozygous for the F508del mutation, Vertex Pharmaceuticals has
received regulatory approval for Orkambi. Orkambi is a fixed-dose combination of lumacaftor and ivacaftor
(Kalydeco). Lumacaftor is a new molecular entity also referred to as a CFTR “corrector” that is purported to
work by stabilizing and promoting the folding of the defective F508del CFTR and thereby increasing the
likelihood that the CFTR channel will be found at the cell membrane. Kalydeco purportedly potentiates the
activity of CFTR channel at the cell surface. We believe the clinical benefit of Orkambi for many homozygous
F508del patients is not commensurate with the benefit demonstrated by Kalydeco in the G551D population,
but is comparable to some of the symptom relief medications approved for use with CF. Approximately
12,000 US patients could be treated with Orkambi at an estimated annual cost of approximately $260,000 in
addition to the cost of standard of care. We believe these studies validate that F508del CFTR is a treatable
target and indicate there is need for more efficacious therapies.
Gene therapy
Gene therapy is a process in which a functional gene is introduced into a cell to override the effects of a
defective gene. The CFTR gene was first identified in 1989. Since that time, several academic consortia and
drug-development companies have attempted to develop gene therapies targeting mutations in the CFTR
gene. These companies aimed to permanently correct the CFTR gene at the DNA level by delivering full-length
CFTR genes to lung epithelial cells to express wild-type CFTR protein. However, these programs encountered
limitations faced by gene therapy in general as well as limitations specific to the CFTR gene. These barriers
included safety concerns, challenges in delivery of the gene therapy constructs to target cells in the lungs,
challenges of both delivery and incorporation into the genome given the size and complexity of the CFTR
gene, and immunologic responses to the gene therapy vectors. The most advanced effort in gene therapy for
CF is with an academic consortium in the U.K. In 2015, the Gene Therapy Consortium presented results of a
136-patient trial using a CFTR gene delivered in a liposome envelope. While the trial showed no overall
efficacy, specific subgroups did show a modest benefit in lung function compared to the placebo group. The
Gene Therapy Consortium has announced that they will conduct a follow-up trial of gene therapy in the
future but that a different vector will be needed for delivery of the gene.
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Our RNA Approach
QR-010 is a first-in-class RNA oligonucleotide designed to address the underlying cause of the disease by
targeting the mRNA in CF patients that have the F508del mutation. QR-010 is designed to bind to the
defective CFTR mRNA and restore CFTR function. We believe we are currently the only company pursuing this
novel approach for CF patients.
QR-010 for Treatment of CF
We are developing QR-010 as an inhaled treatment for CF patients. QR-010 is a single stranded RNA
oligonucleotide designed to restore CFTR function in CF patients with the F508del gene mutation. QR-010 is
33 nucleotides long and is designed to bind to the CFTR mRNA sequences that are adjacent to the deleted
F508del region of the mRNA.
The figure represents an F508del mutated cell treated with QR-010, which would be expected to result in
restoration of chloride efflux.
Chloride ion flow: restoration
through QR-010 treatment
F508del + QR-010
Clinical Development for QR-010
We conducted two clinical trials of QR-010 in parallel. Study
PQ-010-002 is a proof-of-concept trial evaluating topical
administration of QR-010 and its effect on the nasal potential
difference (NPD), a biomarker of CFTR function. This trial
opened for enrollment in September 2015 and was completed
in September 2016. Study PQ-010-001 is a Phase 1b safety and
tolerability trial. This trial opened for enrollment in June 2015
and is currently enrolling.
PQ-010-002 Proof-of Concept NPD study
The NPD assay is a standard test for detection and
quantification of CFTR function in the airways in CF patients.
The NPD test is a well-accepted diagnostic tool and has been
used in multiple therapeutic intervention trials to demonstrate
the restoration of CFTR mediated ion transport in pre-clinical
animal models and in CF patients. Our trial was designed to
investigate the ability of QR-010 to restore CFTR function in
patients. Restoration of CFTR function has been observed in
pre-clinical NPD studies using mouse models. The primary outcome measure was to determine the effect of
topical administration of QR-010 to the nasal mucosa on the restoration of CFTR-mediated chloride transport
as measured by NPD in CF patients with the F508del CFTR mutation. Secondary endpoints included maximal
basal potential difference reflecting sodium channel activity. Nasal administration is not the intended route of
administration for QR-010. However, the nasal epithelium is the most accessible site for measuring CFTR
function in humans and provides a human model of epithelial cell uptake and restoration of CFTR function.
All subjects were adults over 18 years old with CF either homozygous for the F508del mutation or compound
heterozygotes with one copy of the F508del mutation and one copy of another disease causing mutation. The
trial was conducted in five sites in the U.S., France and Belgium. QR-010 was administered intranasal 5 mg in
each nostril 3 times weekly for 4 weeks (12 doses). The NPD measurements were done at baseline, after 6
doses (Day 15), after 11 doses (Day 26) and 21 days after the last dose (Day 47).
Topline results were reported at the North American CF Conference (Sermet-Gaudulus, Pediatr Pulmonol
2016 Suppl 45:485) in October 2016. In the per-protocol population of subjects homozygous for the F508del
mutation meeting the pre-specified inclusion criteria (n=7), the average change from baseline in NPD at day
26 was statistically significant, -4.1 mV (p=0.0389). This finding was supported by a change in sodium channel
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activity (specifically, a measure called max basal potential difference, or PD) and other sensitivity analyses of
the NPD measurements, all pointing to strong evidence of restoration of CFTR activity. In subjects compound
heterozygous for the F508del mutation, the average change from baseline in NPD was not significantly
different at day 26. A responder analysis of individual subjects assessing the impact of the second mutation is
currently ongoing. QR-010 administered via the intranasal route was observed to be well tolerated.
QR-010 improves CFTR function in F508del homozygous
CF patients as measured by NPD
N= 7 (per protocol population). Parameter = within subject change from baseline in Cl-free+iso. Average
both nostrils. Baseline = average of 2 most recent pre-dose assessments. P = one-sided 5% paired t-test.
We observed from the results of this trial that QR-010 improved CFTR function in homozygous F508del
patients as evidenced by both the increase in CFTR activity measured in the CFTR-mediated total chloride
response and the decrease in sodium channel activity as measured by the max basal potential difference.
The magnitude of the change observed in this trial is similar to that published for other commercially
available treatment in CF patients with the G551D mutation and superior to data published for lumacaftor in
patients with the F508del mutation.
Putting QR-010 clinical NPD results in perspective
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PQ-010-001 Phase 1b Safety and Tolerability Trial
This clinical trial with QR-010 is a Phase 1b, randomized, double-blind, placebo-controlled, 28-day dose-
escalation trial to evaluate the safety, tolerability and pharmacokinetics of QR-010. The trial includes CF
patients that are homozygous for F508del and age 18 years and above. The trial is being conducted at 27
sites in North America and select EU countries and will enroll approximately 64 patients. The trial consists of
4 cohorts of ascending single dosed and 4 cohorts of ascending multiples doses (12 doses over 4 weeks). In
each cohort, randomization is 3:1, meaning that 6 patients will receive QR-010 and 2 patients will receive
placebo.
QR-010 is given as a nebulized solution to the lower airways after chest physiotherapy, which is a standard
procedure used with other currently administered inhaled medications. This method of drug administration
is common in CF patients. The primary outcome measures are to characterize safety, tolerability and
pharmacokinetics of QR-010 in CF patients. Pharmacokinetics will be assessed in serum, urine and sputum.
These measurements will allow us to establish the safety for QR-010 as well as give indications of uptake into
the lung and systemic circulation in order to provide PK/PD information to design our future trials. We are
also assessing exploratory efficacy outcome measures, including lung functionality, chloride levels in sweat,
weight gain and other quality-of-life measures specific to CF. In October 2016, we reported that the single
dose portion of the trial consisting of 4 cohorts has been completed. No dose-limiting toxicity was observed
up to the highest dose tested. The dose escalating multiple-dose trial (12 doses administered over 4 weeks) is
currently enrolling cohort 7 and topline results are expected to be available in mid-2017. Further update on
enrollment will be provided at the European Cystic Fibrosis Conference (ECFS).
PQ-010-003 Phase 2 Trial
PQ-001-003 is currently planned as a Phase 2 multicenter, randomized, double-blind, placebo-controlled 12-
week trial to evaluate the safety, efficacy, and pharmacokinetics of QR-010 in cystic fibrosis subjects with the
F508del mutation. The trial will be conducted at clinical centers in North America, EU and possibly other
countries. We anticipate to begin recruitment for this trial in 2018.
Inhaled administration of QR-010
To achieve broad distribution to CF-affected organs, we deliver QR-010 through inhalation by means of a
small handheld nebulizer, a method of drug delivery used to administer medication in the form of a mist
inhaled into the lungs. On October 8, 2014 we entered into an agreement with PARI Pharma GmbH, pursuant
to which the Company is granted an exclusive license to the use of PARI’s eFlow technology for the
administration of oligonucleotide-based drugs in the F508del mutation in cystic fibrosis. The nebulizer device
rapidly and efficiently processes a therapeutic agent through the microscopic holes of a mesh and creates a
mist to provide rapid and consistent delivery to the lungs. Commercially-available nebulizers are currently
used for other CF therapies and in other clinical studies involving inhaled oligonucleotides.
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Bio-distribution of QR-010 to organs in wild-type
and CF-like lung phenotype
Pre-clinical evidence for QR-010
As shown in the figure, after
orotracheal delivery of QR-010 to the
lungs of wild-type mice and mice
specifically engineered to have a CF-
like lung phenotype, called the
betaENaC overexpressing mouse, we
observed significant exposure of QR-
010 to the lungs as well as to other CF-
affected organs with no significant
difference between wild-type and
betaENaC overexpressing mice. We
believe this beneficial bio-distribution
pattern may potentially allow us to treat not just the lung but also other organs affected by CF and shows that
the thick mucus layer that is present in the lungs of CF patients is unlikely to be a barrier for uptake of QR-
010. We believe this method will allow maximum exposure of QR-010 to the primary target organ, the lung, as
well as significant exposure to other affected organs through systemic absorption into the blood.
We have conducted extensive in vitro and in vivo pre-clinical studies that support the development and
therapeutic potential of QR-010. QR-010 has been shown to increase the function of CFTR as demonstrated
by enhancing chloride efflux in vitro and in vivo models that carry the same mutation as F508del patients. In
vitro QR-010 demonstrated improved chloride ion efflux in a fluorescent chloride ion indicator, or MQAE,
assay and in a well-accepted model, the Ussing Chamber assay using human bronchial epithelial cells with
the F508del mutation. Most notably, and distinct from other molecules in development for CFTR mutation
specific molecules, in two independent in vivo activity assays in F508del-CFTR mice that are similar to human
diagnostic tests, QR-010 restored CFTR function up to wild-type levels. The first was a study of Nasal Potential
Difference, or NPD, in F508del-CFTR mice in which QR-010 restored NPD in response to specific stimuli to
normal levels. The second was a saliva secretion assay, a mouse equivalent of the sweat chloride test, in
which QR-010 restored saliva secretion to normal levels in female mice.
Research Grants
In August 2014, we entered into an agreement with Cystic Fibrosis Foundation Therapeutics, Inc., or CFFT, a
subsidiary of the Cystic Fibrosis Foundation, pursuant to which CFFT agreed to provide us with up to $ 3
million to support the clinical development of QR-010. In 2015, the Company and its academic partners
received a grant from the European Union under the Horizon 2020 research and innovation programme
under grant agreement No. 633545. The maximum amount of € 6.0 million was granted to support the
clinical development of QR-010. In 2016, ProQR also received additional tranches totaling €0.4 million under
the Innovation credit program or “Innovatiekrediet” by the Dutch government, through its agency RVO
(previously: “AgentschapNL”) of the Ministry of Economic Affairs, for the cystic fibrosis development program.
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Leber’s Congenital Amaurosis
LCA Background
LCA is the most common genetic cause of blindness in childhood. We believe that the p.Cys998X mutation
(also known as c.2991+1655A>G) in the CEP290 (Centrosomal protein of 290 kDa) gene is the most prevalent
mutation which generally accounts for the most severe disease phenotype (LCA 10). Patients affected by this
mutation typically lose sight in the first years of life. In LCA 10 patients, this mutation leads to significant
decrease in CEP290 protein within the photoreceptor cells in the retina. Clinical features of CEP290-mediated
LCA include loss of vision, involuntary eye movement or nystagmus, abnormalities of pupil reactions and no
detectable photoreceptor electrical signals on electroretinography (ERG).
LCA Genetics
The p.Cys998X mutation is a single nucleotide substitution in the CEP290 gene that creates a new splice site,
also called a cryptic splice site, between exon 26 and 27. During the splicing of the pre-mRNA this causes a
part of the intron, or pseudoexon, to be included in the mRNA. The pseudoexon contains a premature stop
Representation of the p.Cys998X
mutation causing LCA 10
Wild-type
Leber’s congenital amaurosis type 10
codon thus the mRNA is not translated into the
full length CEP290 protein. The CEP290 protein is
involved in the formation and stability of the
connecting cilium in photoreceptor cells, which
facilitates the transport of proteins from the inner
segment to the outer segment of the cell. When
CEP290 is absent, there is a disturbance in normal
protein transport to the outer segments which
provokes the shortening of the outer segment
and its inability to perform its light transducing
function.
LCA Prevalence and Diagnosis
LCA is caused by a genetic defect in 20 or more
associated genes. The most common mutation is
the p.Cys998X in the CEP290 gene causing LCA 10.
Although diagnosis rates vary, our estimations
indicate this mutation to occur in approximately
2,000 patients in the Western world.
Patients are initially diagnosed through the
presence of clinical symptoms. Nystagmus, rapid
involuntary movements of the eyes, tends to be the first symptom visible as well as oculo-digital signs
comprising eye poking, pressing, and rubbing, in the most severe cases; vision impairment or blindness
becomes obvious as age increases. After ophthalmological examination, LCA is diagnosed. A genetic
screening including all known mutations causing LCA is performed to confirm the diagnosis and determine
the type of LCA in order to give the patient the most accurate prognosis possible (approximately 30% of all
patients carry a mutation that has not been described to date).
Approaches for the Treatment of LCA 10
There are currently no disease modifying treatments approved or potential treatments in clinical trials for
patients with p.Cys998X associated LCA 10, a form of LCA. There are other approaches in pre-clinical
development for the p.Cys998X mutation that target the disease at the DNA level. The eye is highly suitable
for oligonucleotide therapies as it is a contained organ with physical cellular barriers (i.e. efficient blood-
retina barrier and lack of efferent lymphatics) which strongly limits the free entry and exit of cells and larger
molecules in and out of the eye therefore limiting the systemic exposure of locally administered therapies.
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QR-110 for the treatment of LCA 10
Our lead product candidate in the LCA 10 space, QR-110, is a first-in-class single stranded RNA
oligonucleotide of 17 nucleotides long. It is designed to treat the disease by binding to the pre-mRNA and
thereby silencing the cryptic splice site caused by the p.Cys998X mutation. The splicing machinery can thus
splice the pre-mRNA correctly resulting in normal mRNA and we expect the production of full-length
functional wild-type CEP290 protein. The intended route of delivery is through intravitreal injection.
QR-110 for LCA 10, splice correction for
p.Cys998X CEP290 mRNA
QR-110 binds to pre-mRNA and silences the cryptic splice site leading to
production of normal mRNA
Clinical Development for QR-110
We believe the activity seen in our
pre-clinical models of LCA 10
provides strong support for the
clinical development and
therapeutic potential of QR-110.
Currently, we are finalizing pre-
clinical good laboratory practice, or
GLP, safety studies and other work
to start our first clinical trial in LCA
10 patients.
We expect to commence clinical
development of QR-110 in the first
half of 2017 with the initiation of a
Phase 1b/2 clinical trial. This trial is an open label trial evaluating multiple doses of QR-110 at different dose
levels. Eligible subjects will be LCA 10 patients that are homozygous or compound heterozygous for the
p.Cys998X mutation. The primary objective will be to evaluate the safety and tolerability of QR-110
administered via intravitreal injection in subjects with LCA 10 due to the p.Cys998X mutation. Secondary
objectives will include the assessment of pharmacokinetics and efficacy as assessed by specialized
ophthalmic tests.
Pre-clinical evidence for QR-110
We have conducted in vitro and in vivo pre-clinical studies that we believe support the clinical development to
explore the therapeutic potential of QR-110.
QR-110 assessment in patient fibroblasts
Since QR-110 targets the splicing process, the most direct measurable outcome of activity is the profiling and
quantification of CEP290 transcripts (wild-type and mutant) and protein before and after treatment. In pre-
clinical studies to date, QR-110 has demonstrated restoration of CEP290 wild-type (correctly spliced) mRNA
and protein in cultured fibroblast cells of LCA 10 patients homozygous and compound heterozygous for the
p.Cys998X mutation.
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Homozygous cells (p.Cys998X/p.Cys998X; LFB-3) (figure A)
Compound heterozygous cells (p.Cys998X/p.Lys1575X; LFB-6) (figure B)
Effect of QR-110 at the mRNA and protein level in fibroblast cells from LCA 10 patients that are A) homozygous and B)
compound heterozygous for the p.Cys998X mutation. Normalized wild-type and mutant CEP290 mRNA expression
(copies/ng) after transfection of LCA 10 fibroblasts with QR-110, analyzed with one-step ddPCR. For protein data (Western
Blot), expression is shown relative to control cells without the mutation. Error bars show mean with SEM. *p<0.05,
**p<0.01, ***p<0.001, vs. mock treated cells, Student’s t-test.
The figure above summarizes the observations from our pre-clinical data that treatment with QR-110 may be
able to increase the expression of wild-type CEP290 mRNA and protein in fibroblast cells from LCA 10 patient
that are homozygous for the p.Cys998X mutation. Furthermore, we observed that treatment with QR-110
resulted in a decrease in levels of mutant mRNA (figure A, left and center). The mRNA and protein profile
restoration trend is also observed in LCA 10 fibroblasts that are compound heterozygous for the p.Cys998X
mutation (figure B, left and center).
Changes in the mRNA profile are supported by a wild-type CEP290 protein increase illustrated by Western
blot. Results demonstrate that in LCA 10 fibroblasts that are homozygous for the p.Cys998X mutation, in vitro
treatment with QR-110 restored CEP290 protein levels to that of control cells (figure A, right panel). In LCA 10
fibroblast that are compound heterozygous for the p.Cys998X mutation, QR-110 treatment in vitro restored
CEP290 protein levels to ~50% of control cells (figure B, right panel). This is expected since in these compound
heterozygous cells only one mutated allele carries the p.Cys998X mutation and therefore only one allele can
be targeted by QR-110 treatment. It is worth it to point out that patients that are heterozygous for the
p.Cys998X mutation, with one normal allele and one allele carrying the p.Cys998X mutation, are
asymptomatic. This indicates that correction of one diseased allele could be enough to prevent or stop
progression of the disease.
QR-110 activity in optic cup model
Optic cups are a retinal organoid model derived from fibroblasts of a LCA 10 patient harvested through skin
biopsies. The cells are reprogrammed into induced pluripotent stem cells, or iPSC, and later differentiated
into retinal pigmented epithelium cells and neural retinal cells, also known as three-dimensional optic cups.
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Optic cups constitute a convenient and clinically relevant model system to thoroughly study the mechanisms
of inherited retinal degeneration since, unlike the classic cell models, these 3D organoids simulate the
disease phenotype and provide an appropriate cellular model with the genetic mutations in genomic context.
The clinical and molecular relevance of the optic cup model, coupled with the absence of an animal model,
makes the optic cup the best model in which to simulate the mechanisms of CEP290 LCA and effectively test
the potential of QR-110.
LCA 10 patient derived optic cups were exposed to QR-110. First, we observed from the results that QR-110 is
able to enter the cells without use of any transfection agents. Second, QR-110 elicited a dose-dependent
restoration of CEP290 wild-type mRNA expression. And third, increased CEP290 mRNA expression was also
associated with a commensurate decrease in mutant CEP290 mRNA.
Generation of LCA 10 patient iPSC-derived optic cups
QR-110 increases wild-type CEP290 mRNA levels in a
dose-dependent manner in LCA 10 optic cups
LCA 10 homozygous optic cups
LCA 10 p.Cys998X homozygous patient fibroblasts were reprogrammed into iPSC which were
differentiated into optic cups for 96 days and treated with different amounts of QR-110 for
another 28 days (Parfitt et al. 2016) and analyzed using end-point PCR.
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Retinal Distribution of QR-110
Labelled QR-110 (green) administered via intravitreal injection into wild-type mice eyes. We demonstrated
that QR-110 enters the target cells of the retina, including the photoreceptor cells. QR-110 was detected 60
days (the maximum time point tested) following a single injection.
QR-110 reaches target cells after intravitreal injection
Retinal distribution of 6FAM-labelled QR-110 following single intravitreal injection of
100 µg in wild-type mice.
Dystrophic Epidermolysis Bullosa
DEB Background
Epidermolysis bullosa (EB) is a rare genetic disorder, primarily manifesting as a debilitating disease of the skin
and mucosal membranes. It is characterized by mechanical fragility of epithelial tissues, blister formation,
scarring and, in some subtypes, involvement of multiple other organs. EB is classified into four main
subtypes, namely EB simplex (EBS), junctional EB (JEB), dystrophic epidermolysis bullosa (DEB), and Kindler
Syndrome (KS). The four main EB subtypes are distinguished by the level of the skin at which blisters develop.
In DEB the outer layer of the skin, the epidermis, separates from the inner layer, the dermis. This separation
renders the skin fragile and causes severe blistering and scarring. All mucosal membranes are affected in
DEB, therefore blistering is not limited to the skin, but is also present in the mouth, esophagus and
downstream intestines.
DEB is usually a chronic, seriously debilitating disease with a shortened life expectancy due to malnutrition,
infections, and malignancies.
DEB Genetics
The disease is caused by mutations in the COL7A1 gene. This gene is responsible for the production of a
protein called collagen type VII (also referred to as C7), which is a major component of the anchoring fibril
located below the basement membrane in the upper dermis that normally links the epidermis and the
dermis together. DEB causing mutations occur more often in certain parts of the gene. One of those parts is
exon 73.
DEB Prevalence and Diagnosis
DEB is a genetic disease that in some cases is inherited as an autosomal dominant (DDEB) and in others as an
autosomal recessive trait (RDEB). The prevalence of DEB could differ across countries due to founder effects
and differences in ethnic composition. While spatial variations, compounded with the scarcity of available
data, make accurate calculations difficult, the estimated number of DEB patients in the western world is
approximately 6,000 of which approximately 2,000 have mutations in exon 73.
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Diagnostic testing for DEB is based the identification of the level of skin cleavage via immunofluorescence
antigen mapping with C7 specific antibodies and/or determination of anchoring fibrils using transmission
electron microscopy on, preferably, newly formed blisters.
Approaches for the Treatment of DEB
Currently no disease modifying treatment is available for DEB. Palliative treatment is the only treatment
available for DEB patients and constitutes a time-consuming daily activity. Palliative treatment primarily
consists of 1) treatment of (new) blisters by puncturing and draining blisters to prevent further spread from
fluid pressure, 2) wound management to prevent infections, 3) prevention of skin trauma to avoid new blister
formation, and 4) pain and itch relief.
QR-313 for the treatment of DEB
QR-313 is designed to specifically target mutations in exon 73 of the COL7A1 gene. QR-313 binds to a specific
sequence in the COL7A1 pre-mRNA, thereby excluding exon 73 from the mature mRNA. This leads to a
shortened version of the C7 protein that is functional in the formation of anchoring fibrils.
Because of the exon skipping approach, QR-313 is not specific to a single mutation but instead targets any
mutation contained in exon 73.
Functional C7 protein: Restoration through QR-313 Treatment
Schematic shows pathway for generation of C7 protein in the healthy and disease situations (left and center diagrams,
respectively). Hybridization of QR-313 to a specific sequence in COL7A1 pre-mRNA results in the exclusion of exon 73 from
the mRNA, which leads to the production of a truncated but still functional C7 protein (right diagram).
Pre-clinical evidence for QR-313
Clinical development of QR-313 focusses on topical delivery in the wounded skin of patients, with the aim of
improved wound healing and reduced skin fragility. Therefore we aim to formulate QR-313 into a hydrogel for
wound application that can be incorporated in the standard of care of patients.
Activity of QR-313 after topical application on human skin equivalents
In order to investigate topical delivery and exon skip potential of QR-313 we used Human Skin Equivalents, or
HSEs. HSEs are an often used model to mimic the human skin. They are composed of both a dermal layer
containing fibroblasts and an epidermal layer containing keratinocytes. The keratinocytes are fully
differentiated to form all the different layers in the epidermis, including the stratum corneum. The culturing
of HSEs is done at the air-liquid interface and therefore mimics the human situation. Moreover, by removing
the epidermis from a portion of the skin equivalent, the blister phenotype of DEB can be modeled.
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Cy5-labeled QR-313 in a hydrogel formulation was used in HSEs where a DEB blister was mimicked by
removal of part of the epidermis. The figure below shows that diffusion of QR-313 into the dermis was
observed both in the middle of the blister (blister bed) and at the edge of the blister (blister edge). QR-313 is
not able to penetrate intact HSEs, and ex vivo skin (not shown).
Delivery of Cy5-labeled QR-313 formulated in a hydrogel
After 24 hour treatment (indicated at left of picture rows), HSE pieces
(indicated at top of picture columns) were analyzed. QR-313 is
depicted in red, nuclei are depicted in blue. White dotted line
represents border between epidermis and dermis.
QR-313 induced Skipping of Exon 73 in C7 mRNA
Splicing products of COL7A1 mRNA either untreated or following
treatment with Cy5-labeled QR-313 formulated in a hydrogel. RNA was
isolated from treated HSEs (indicated at top of columns) and RT-PCR
analysis was performed. The different COL7A1 mRNA products were
analyzed for length. The 350 bp fragment represents the wild-type, full
length amplicon including exon 73 mRNA while the 150 bp nucleotide
fragment represents the modified Δ73 mRNA product.
To examine the ability of QR-313 to
induce exon skipping in dermal
fibroblasts, we separated the
epidermis from the dermis from the
24-hours incubated HSEs. RNA
isolation was performed and analyzed
for exclusion of exon 73 using RT-PCR.
Exon 73 exclusion from the COL7A1
mRNA was observed in dermal cells
treated with QR-313 formulated in a
hydrogel. This shows that upon local
application QR-313 is active in this
model that mimics blistered EB skin.
Other Research and Development
Our internal discovery engine that we
call the innovation unit, is a dedicated
group in our company that focuses on
the discovery and early development
of RNA therapeutics in genetic
indications with a high unmet medical
need. Leveraging our experience with
RNA therapeutics, we are screening for
therapeutic molecules that can be used
to treat severe genetic disorders
beyond CF, LCA 10 and DEB. We have
built a diverse toolbox of RNA
technologies that we believe can
address underlying genetic defects in a
novel way. We have grouped the
different programs in franchises by
therapeutic area so that we can
leverage our expertise in the different
fields and create synergies between
programs. We have identified five therapeutic areas that show high potential for RNA based oligonucleotides:
respiratory, ophthalmology, dermatology, CNS and neuromuscular disorders. We go through a thorough
selection process prior to advancing programs into development, and consider criteria including: high unmet
medical need, a pre-clinical proof-of-concept that shows strong promise for translation to the clinic, well
understood relationship between the genetic defect and disease manifestations, feasibility of delivery to
target organ(s), and strong IP position and initial freedom to operate.
Respiratory
Besides our program for CF caused by the F508del mutation we are working on other CFTR mutations that
can potentially be treated using our RNA technologies. We could potentially target an additional 5% of the CF
population with these programs.
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Ophthalmology
Our ophthalmology group was founded on the basis that the eye is a well validated target for
oligonucleotides. Given the long half-life of these molecules and the lower risk of systemic exposure, we
believe oligonucleotide based therapies have the potential to be an important class of drugs for ophthalmic
indications. Besides our LCA 10 program that we intend to take into clinical development in 2017, we have
several discovery stage programs, including two programs targeting Usher syndrome and a program
targeting Fuchs endothelial corneal dystrophy (FECD).
Usher syndrome is a genetic orphan disease that is the leading cause of combined deafness and blindness.
Usher syndrome type II is most commonly caused by mutations in the USH2A gene. Patients with this
syndrome generally progress to a stage in which they have severely limited central vision and moderate to
severe deafness. The moderate to severe deafness that patients experience with this subtype of the disease
is manageable with cochlear implants. However, there are currently no available treatment options for the
vision loss associated with this disease. The disease is caused by a genetic defect that results in the lack of a
functional USH2A protein. Similar to CEP290, this protein is responsible for the maintenance of the
connecting cilium in photoreceptor cells and lack of a fully functional USH2A protein results in reduced
protein trafficking to the photoreceptor outer segments with a consequent impact on photo-transduction.
With our two programs, called QRX-411 & QRX-421, we aim to target genetic alterations in the USH2A gene
that lead to this vision loss. QRX-411 targets the frequent deep-intronic c.7595-2144A>G mutation that causes
the inclusion of a pseudoexon in the mRNA disrupting the function of the protein. QRX-411 is designed to
target the pre-mRNA and restore a wild-type sequence in the mRNA leading to wild-type mRNA and
functional USH2A protein. QRX-421 targets mutations in exon 13 of the USH2A gene by skipping exon 13
from the mRNA restoring the reading frame and producing a truncated but functional protein. Both QRX-411
and QRX-421 are single-stranded RNA oligonucleotides intended to be administered by intravitreal injections.
FECD is a common inherited condition characterized by the dysfunction and degeneration of the corneal
endothelium. The disease segregates into early-onset and age-related FECD that are caused by different
mutations. Early signs of FECD are the presence of corneal guttae and a large proportion of patients over 40
years old have evident corneal guttae. A portion of these patients develop advanced disease with corneal
edema and corneal clouding. These symptoms can worsen leading to complete vision loss and the
requirement for surgical intervention and a corneal transplant. There are currently no other treatment
options for any form of FECD patients with vision loss, apart from corneal transplantation. However,
transplantation has several limitations, including the availability of donors, risk of rejection, the inherent risk
of an invasive procedure and is only available to patients with advanced FECD. The majority of age-related
FECD is caused by a repeat expansion mutation in the TCF4 gene. Such expansions result in toxic RNA species
which aggregate as nuclear foci and sequester important splicing proteins rendering the cell devoid of the
splicing proteins for other important genes. The impact of acquired splicing defects in these other genes are
thought to result in corneal endothelial dysfunction and Fuchs. Our program, called QRX-504, is a single-
stranded RNA oligonucleotide that aims to prevent the buildup of RNA-protein foci that cause the corneal
dystrophy in patients with expansion repeat mutation in the TCF4 gene.
Dermatology
Our product candidate, QR-313 targeting DEB caused by mutations in exon 73 has been moved into clinical
development. If the exon skipping approach is proven to be of benefit for DEB patients, there may be other
COL7A1 mutations that can be targeted with an exon skipping approach similar to QR-313.
CNS
In our CNS group we are working on product candidates for several disease targets, including a wide range of
neuronal and cerebrovascular related amyloid beta disorders and Huntington’s disease, or HD.
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Amyloid beta, or Aβ is a highly toxic and aggregate-prone family of peptides that are appears crucially
involved in Alzheimer’s disease, or AD, cerebral amyloid angiopathy, or CAA, and its familial form hereditary
cerebral hemorrhage with amyloidosis of the Dutch type (HCHWA-D). We are developing QRX-203, a RNA
modulation therapy for Aβ-induced amyloidosis. Using antisense oligonucleotide mediated exon skipping, we
believe QRX-203 may prevent the translation of the amyloid region into its precursor protein APP. We believe
this approach renders the release and aggregation of Aβ impossible and may ultimately prevent the onset
and/or or slow the progression of disease.
HD is an inherited progressive neurodegenerative disease, and one of the most common genetic disorders,
with symptoms including involuntary movements, incoordination, impaired speech, cognitive decline, and
depression. Individuals with HD have shortened life expectancy, and there is currently no disease-modifying
treatment available. The disease is caused by an expanded repeat of CAG nucleotides in the Huntingtin, or
HTT, gene, resulting in a mutated Huntingtin protein. When the mutated protein is present in the cells, small
polyglutamine-containing protein fragments are formed. These fragments stick to each other, and
accumulate in nerve cells, interfering with normal cellular functions, eventually leading to cell death. QRX-704
is an oligonucleotide based approach that is aimed to modify the HTT mRNA to prevent the formation of the
toxic fragments, while the Huntingtin protein remains functional.
Neuromuscular
Friedreich's ataxia, or FA, is the most common inherited ataxia that causes progressive damage to the
nervous system. The disease is caused by GAA repeat expansion mutations in the gene that codes for the
Frataxin protein. The expanded repeat mutations cause silencing of the gene leading to decreased levels of
the Frataxin protein. Symptoms range from muscle weakness and speech problems to heart disease. With
only palliative treatments available, most patients are wheelchair bound within 10–15 years after diagnosis
and do not live beyond early adulthood. Frataxin is an essential mitochondrial protein involved in the
regulation of energy production in cells and enzymes that contain an iron-sulfur cluster. We have identified a
potential treatment, called QRX-604, with the aim to increase Frataxin levels.
Human resources
At ProQR we have set ourselves the immense task of developing drugs that will potentially transform the lives
of patients suffering from severe genetic diseases like cystic fibrosis, Leber’s congenital amaurosis, and
epidermolysis bullosa. To make this happen we demand the utmost of ourselves. We actively create a caring
atmosphere filled with fun and joy, in which we love to work and maintain productive and happy lives. At
ProQR we foster empowerment, self development, creativity and a sense of community.
We are a supportive, ingenious and persistent team that does things different. We're passionate and driven
to change the lives of patients and their loved ones.
Corporate social responsibility
It is required by regulatory authorities to demonstrate the safety and efficacy of a new drug in both animals
and humans, before the authorities can approve the new product and will provide Marketing Authorization.
ProQR attaches great importance to the welfare of animals and humans participating in our pre-clinical and
clinical studies for reasons of ethics, quality, reliability and applicability of scientific studies. For conducting
high quality (scientific) animal research, animal welfare is a prerequisite. By actively pursuing the 3R principles
(Reduce, Refine and Replace), we are committed to minimalizing the number of animals needed, minimizing
discomfort and pain of animals used and to using alternatives to animal research whenever possible in
research and in the obligatory animal studies. All our current studies are approved by the (institutional or
national) animal care and use committees.
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Our aim is to monitor continually that animal experiments will be performed only if there are no viable or
legal alternatives. Additionally, case by case, it will be evaluated if advances can be made in study designs
(such as by ex-vivo studies or by conduction of small pilot studies first), or by using new technologies to
achieve adequate statistical power without increasing the number of animals, combining studies, and
improving use of TK data to optimize dose selection.
External collaborators contracted for the execution of our in-vivo pre-clinical studies (contract research
organizations, CROs) are selected based on their expertise, quality and accreditations for laboratory animal
care and welfare. CRO facilities are audited in person prior contracting. The housing, husbandry and animal
welfare must comply with the highest international standards. Personnel responsible for housing, husbandry
and care of the animals must have received adequate and relevant documented education.
We strive for welfare improvements to be implemented in CRO policies. An important achievement in 2014
was that on our request our preferred CRO has replaced the housing which was compliant with their national
legislations and installed new group housings with significantly more living space that to a larger extent take
in consideration the physiological and behavioral needs of the laboratory animals concerned. This will also
contribute to higher welfare standards in the studies for other (future) clients.
In 2015 we became part of an interdisciplinary consortium with Utrecht University (Faculty of Veterinary
medicine and Ethics Institute), Radboud University (Medical Center, SYRCLE) and another private company,
partly financed by The Netherlands Organization for Scientific Research, Responsible Innovation grant. The
project proposes a more integrated approach towards innovation in the field of animal testing and focuses
on translational strategies. ProQR is involved in the part of the project that aims to deliver step stones for
practical guidelines to build robust translational strategies, to design innovative experiments (including
animal models) for cystic fibrosis and develop a translational strategy for CF as a showcase.
Main financial developments
Financial position
In 2016, we successfully expanded our operating activities. Operating costs went up significantly while our
liquidity and solvency went down. ProQR’s cash and cash equivalents at December 31, 2016 amounted to
€ 59,200,000 compared to € 94,865,000 at December 31, 2015. During the year 2015, operating cash used
amounted to € 34,221,000, compared to € 24,232,000 in 2015. Shareholders’ equity decreased to
€ 53,136,000.
As at December 31, 2016, we had non-current liabilities of € 5,697,000, which fully consisted of borrowings
from a government body.
Income statement
We have generated losses since our formation in February 2012. For the years ended December 31, 2015 and
2016, we incurred net losses of € 20,832,000 and € 39,103,000, respectively. As at December 31, 2016, we had
an accumulated deficit of € 75,733,000. We expect to continue incurring losses for the foreseeable future as
we continue our pre-clinical studies of our product candidates, continue clinical development of our product
candidate QR-010, advance QR-110 and QR-313 into clinical development, increase investments in our other
research programs, apply for marketing approval of our product candidates and, if approved, build a sales
and marketing infrastructure for the commercialization of our product candidates. To date, we have not
generated any revenues from royalties or product sales. Based on our current plans, we do not expect to
generate royalty or product revenues for the foreseeable future.
Other income is incidental by nature. In August 2014, we entered into an agreement with Cystic Fibrosis
Foundation Therapeutics, Inc., or CFFT, a subsidiary of the Cystic Fibrosis Foundation, pursuant to which CFFT
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agreed to provide us with up to $ 3 million to support the clinical development of QR-010. In 2015, the QR-010
project has received funding of € 6 million from the European Union’s Horizon 2020 research and innovation
programme under grant agreement No 633545. Other income amounted to € 1,828,000 in 2016, compared
to € 3,235,000 in 2015. We expect to continue generating other income from CFFT and Horizon 2020 in 2017.
Research and development costs increased to € 31,923,000 from € 23,401,000 in 2015. These research and
development costs comprise allocated employee costs including share-based payments, the costs of
materials and laboratory consumables, outsourced activities, license and intellectual property costs and other
allocated costs. These costs were primarily related to our product candidates, QR-010, QR-110 and QR-313,
and our innovation unit. Our research and development expense is highly dependent on the development
phases of our product candidates and is expected to continue to increase at a moderate level, although it
fluctuates significantly from period to period.
The increase in expenses was primarily due to the advancement of our pipeline, which included clinical
development of QR-010, preclinical development of QR-110 and QR-313 and progress of our innovation
programs in ophthalmology, neuromuscular and central nervous system (CNS) diseases. The variances in
research and development costs between the years ended December 31, 2016 and 2015 are mainly due to:
costs we incurred on clinical trials for QR-010;
increased staff costs as a result of increased staff working on (pre-)clinical development of our product
candidates and the growth of our innovation unit. The number of full-time equivalent employees
working on research and development increased from 72 at December 31, 2015 to 100 at December 31,
2016;
increased costs for externally conducted studies, including various in vivo studies, proof of concept
studies and dose ranging and toxicity studies conducted in connection with the development of our
product candidates;
costs for the production of QR-010 and QR-110 compounds, including the costs of GMP batches in
preparation of our clinical studies;
increased laboratory costs including purchases of compounds and laboratory materials used by the
research and development staff in proportion to the increase in the number of employees, and
increased costs for the use of laboratories;
increased project-related consultancy costs, including regulatory and intellectual property support; and
increased share-based compensation, reflecting grants of share options to research and development
staff made after we adopted our Option Plan in September 2013.
General and administrative costs increased to € 9,478,000 in 2016 from € 6,837,000 in 2015. These general
and administrative costs comprise employee costs, office costs, general consultancy costs and other costs. As
a public company, we face increased legal, accounting, administrative and other costs and expenses. The
increase was primarily related to:
increased staff costs associated with the increase of our general and administrative staff from 27 full-
time equivalent employees at December 31, 2015 to 33 full-time equivalent employees at December 31,
2016;
increased office and general costs, including office rent, information technology and communication
costs, travel costs and office consumables, as well as costs to improve our internal control environment;
increased costs for legal support, accounting and other consultancy costs; and
increased share-based compensation, reflecting grants of share options to non-research and
development staff made after we adopted our Option Plan in September 2013.
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In 2016 share-based compensation amounted to € 2,454,000, compared to € 1,212,000 in 2015. Net financial
income amounted to € 470,000, compared to € 6,171,000 in 2015. Financial income mainly results from
foreign exchange differences on cash denominated in U.S. dollars and can fluctuate significantly.
Outlook
In 2017, we continue to invest in our organization, while we continue our pre-clinical studies and clinical
development of our product candidates and increase investments in our other research programs. Our goal
is to realise this at our current operational level. A significant increase in headcount is not expected. We
believe we have sufficient cash to fund these expenses and to prepare the Company for future growth. Given
the development stage of the Company, we do not anticipate revenues in the foreseeable future.
Leiden, March 31, 2017
On behalf of the Management Board,
Daniel de Boer
CEO
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Supervisory Board Report
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Supervisory Board Report
ProQR Therapeutics has chosen for its governance structure to be a so-called two-tier system. In such a
setting the Supervisory Board supervises and advises the Management Board in performing their
management tasks and setting the strategy of the Company. The Supervisory Board as well as its individual
members act in the interests of ProQR, its business and development and all its stakeholders.
In 2016, James Shannon was formally appointed as a Board member. James is a seasoned pharma executive
with ample know-how in drug development from his previous positions as Chief Medical Officer at Glaxo
SmithKline and Global Head Pharma Development at Novartis. The Supervisory Board and its sub-
committees held frequent and productive interactions with the Executive Board. Where appropriate, decision
taking was endorsed by the Supervisory Board and matters of both short term as well as long term strategic
importance were discussed in a constructive and transparent manner.
Below is a more specific description of the Supervisory Board’s activities during the financial year 2016 and
other relevant information on its functioning.
Activities of the Supervisory Board
The Supervisory Board and the Board of Directors met 5 times during 2016, and have held various additional
informal meetings and telephone conferences, both collectively and individually. During these meetings, the
progress of the various projects, the main risks of the business, the funding and the strategic direction of the
Company were discussed. In addition, a two-day off-site was held during which the long-term strategy of the
company was discussed. The Supervisory Board meetings were very well attended (100%) and the
Committees reported back on their activities to the full Supervisory Board on a regular basis.
Committees of the Supervisory Board
We have an audit committee, a compensation committee and a nominating and corporate governance
committee. We have adopted a charter for each of these committees.
Compensation Committee
The Compensation Committee has met 2 times in 2016.
Compensation report 2016
In September 2014, the supervisory board adopted our Compensation Policy. This Compensation Policy also
applied to the financial year 2016 and will apply to subsequent years. Attraction and retention of world class
talent is a prerequisite for the success of ProQR and competitive compensation plays a vital role in our ability
to achieve this. The Compensation Committee have elected to offer compensation for all employees including
the Management Board into a fixed annual salary and a variable, performance related, short and long term
incentive element. The Compensation Policy is designed based on the following principles:
Three compensation pillars consisting of:
Annual Base Salary;
Short Term Incentive (annual cash bonus);
Long Term Incentive (Stock Option Plan);
Flexibility: The Compensation Policy should provide flexibility to allow the Supervisory Board, acting on
the recommendation of the Compensation Committee, to reward the Management Board in a fair and
equitable manner;
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This Compensation Policy should drive the right kind of management behaviour, discourage unjustified
risk taking and minimise any gaming opportunity;
This Compensation Policy should pay for performance, considering not only the measurable financial
performance of / or milestones achieved by the Company, but also, where appropriate, the efforts
made by the Management Board, individually and as a group, in managing the Company. For the
variable components, the Compensation Committee performs an analysis of the possible outcomes
under different scenarios;
Design of the Compensation Policy shall be based on current legislation applicable in the Netherlands;
This Compensation Policy shall foster alignment of interests with shareholders;
The pension of the Management Board shall be based on the defined contribution system; and
Pay differentials and position within the Company are considered and evaluated regularly.
Annual Base Salary
The Compensation Committee reviewed the annual base salary of the Management Board taking into
consideration the Compensation Reference Group as contained in the Compensation Policy. Based on this
review the annual base salary levels for 2016 have been set at € 285,000 for the CEO, Daniel de Boer and at
€ 255,000 for the chief corporate development officer and general counsel, René Beukema.
Short Term Incentive
The Compensation Committee reviewed the performance of the Company during 2016 in comparison to the
objectives and reviewed the achievements of the members of the Management Board versus their personal
objectives.
Based on the recommendation of the Compensation Committee, the Supervisory Board decided early 2017
that the CEO Daniel de Boer has achieved 88.5% and the chief corporate development officer and general
counsel, René Beukema has achieved 88.5% of the objectives that had been set to determine their individual
bonus awards for the year 2016. For 2016 the individual bonuses have been set at € 130,927 for Daniel de
Boer and € 76,430 for René Beukema. These bonuses will be paid in cash in the first quarter of 2017.
Long Term Incentive
Based on the recommendation of the Compensation Committee, the Supervisory Board decided to grant
stock options in 2016 to the CEO, Daniel de Boer and the chief corporate development officer and general
counsel, René Beukema. Based on this decision stock options with an exercise price of $ 7.23 have been
granted with respect to 129,727 shares to the CEO, Daniel de Boer and 50,608 shares to the chief corporate
development officer and general counsel, René Beukema.
Pensions
The pension contributions paid during 2016 amount to € 7,050 for the CEO, Daniel de Boer and € 12,926 for
the chief corporate development officer and general counsel, René Beukema.
Supervisory board remuneration
In June 2016, our shareholders approved an amended compensation policy whereby members of our
supervisory board will receive board fees of € 25,000 per year and the chairperson will receive board fees of
€ 30,000 per year. In addition, each board committee chairperson will receive € 5,000 per year for service on
such committee (except for the chairperson for the nominating committee who will receive € 3,000), and each
other member of a board committee will receive € 3,000 per year for service on such committee. On top of
that, several supervisory board members were granted options as set out in Note 23 to the financial
statements or $ 55,000 in cash.
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Nominating and Corporate Governance Committee
The chairman of the Nominating and Corporate Governance Committee elected to involve the entire
Supervisory Board in the selection process of additional Supervisory Board members. Hence no formal
nomination committee meeting was held. Based on discussions held, it was concluded that the Supervisory
Board is complete. Currently, no new nominations are considered necessary.
Audit Committee
The audit committee met 5 times in 2016. Main topics addressed were the quarterly results, financial risk
management, compliance and SOx implementation, the audit plan and management letter of the external
auditor, cash management and corporate governance.
The audit committee also reviewed ProQR’s annual financial statements, including non-financial information,
prior to publication thereof. These financial statements for 2016 have been audited and provided with an
unqualified opinion by our external auditor, Deloitte Accountants B.V., and were extensively discussed with
the auditors in the meetings of the Supervisory Board, Audit Committee and Management Board on March
27, 2017. The Supervisory Board is of the opinion that the Financial Statements 2016 meet all requirements
and recommends that the Annual General Meeting of Shareholders adopts the financial statements and the
appropriation of net result proposed by the Management Board.
The Company’s external auditor attended all Audit Committee meetings. The Audit Committee evaluates the
performance of Deloitte as independent external auditor annually. Due to the limited size of the Company, it
was concluded that there was currently no need to appoint an internal auditor.
The Supervisory Board is responsible for the quality of its own performance and it discusses, once a year on
its own, without the members of the Management Board present, both its own functioning and that of the
individual members, and the functioning of the Management Board and that of its individual members. The
Supervisory Board discussed its composition and competencies and concluded no changes are necessary
based on this review. We feel the additional efforts of all staff at ProQR form a strong foundation for the
success and growth of the Company and all milestones reached this past year. Therefore, we would like to
express our thanks to the members of the Management Board, senior management and all other employees
for their contribution and performance during the year. We thank our shareholders for their continued
support.
Leiden, March 31, 2017
On behalf of the Supervisory Board,
Dinko Valerio
Chairman
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Corporate Governance
ProQR values the importance of complying with Corporate Governance regulations. At the same time, the
Board of Directors is of the opinion that certain deviations from the provisions of the Dutch Corporate
Governance Code 2008 (“DCGC” or “the Code”) are justified, in view of our activities, our size and the specific
circumstances in which we operate. In such cases, which are mentioned in this corporate governance
statement, we apply the “comply or explain” principle.
Deviations from certain aspects of the Code, when deemed necessary in the interests of the Company, will be
disclosed in the Annual Report. Deviations are due to our Company being listed in the United States with
most of our investors being outside of the Netherlands, as well as to the international business focus of our
Company. As a Company listed on NASDAQ, we comply with NASDAQ’s corporate governance listing
standards, except for instances where we follow our home country’s corporate governance practices in lieu of
certain NASDAQ’s standards as explained below, as NASDAQ investors are more familiar with NASDAQ’s rules
than with the Code.
In this report, the Company addresses its overall corporate governance structure and states to what extent
and how it applies the principles and best practice provisions of the Code. This report also includes the
information which the Company is required to disclose pursuant to the Dutch governmental decree on Article
10 Takeover Directive and the governmental decree on Corporate Governance.
Substantial changes in the Company’s corporate governance structure and in the Company’s compliance with
the DCGC, if any, will be submitted to the General Meeting of Shareholders for discussion under a separate
agenda item. The Supervisory Board and the Management Board, which are responsible for the corporate
governance structure of the Company, are of the opinion that the principles and best practice provisions of
the DCGC that are addressed to the management board and the supervisory board, interpreted and
implemented in line with the best practices followed by the Company, are being applied.
The full text of the DCGC can be found at the website of the Monitoring Commission Corporate Governance
Code (www.commissiecorporategovernance.nl) and for an overview of our conformity with the Code the
following documents are available at our website (www.ProQR.com): audit committee charter, compensation
committee charter, nominating and corporate governance committee charter and our code of business
conduct and ethics.
Management Board
The Management Board’s role is setting and achieving the operational and financial objectives of the
company in order to pursue the long-term success of ProQR. The Board does so by assuming the authority
and responsibilities assigned to it by Dutch corporate law and by combining expertise and experience with
entrepreneurial leadership. The management Board operates under the supervision of the supervisory
board. The management board is required to:
keep the supervisory board informed in a timely manner in order to allow the supervisory board to
carry out its responsibilities;
consult with the supervisory board on important matters; and
submit important decisions to the supervisory board for its approval.
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Our management board may perform all acts necessary or useful for achieving our corporate purposes,
other than those acts that are prohibited by law or by our articles of association. The management board as a
whole and any management board member individually, are authorized to represent us in dealings with third
parties.
Under our articles of association, the number of management board members is determined by the
supervisory board, and the management board must consist of at least one member. The supervisory board
elects a CEO from among the members of the management board.
Members of the management board are appointed by the general meeting of shareholders upon a binding
nomination of the supervisory board. Our general meeting of shareholders may at all times deprive such a
nomination of its binding character by a resolution passed by at least two-thirds of the votes cast
representing more than 50% of our issued share capital, following which our supervisory board shall draw up
a new binding nomination.
Our management board rules provide that, unless the resolution appointing a management board member
provides otherwise, members of our management board will serve for a maximum term of four years. Our
articles of association provide that the management board members must retire periodically in accordance
with a rotation schedule adopted by the management board. A management board member who retires in
accordance with the rotation schedule may be reappointed immediately for a term of not more than four
years at a time.
Supervisory Board
Our supervisory board is responsible for the supervision of the activities of our management board and our
Company’s general affairs and business. Our supervisory board may, also on its own initiative, provide the
management board with advice and may request any information from the management board that it deems
appropriate. In performing its duties, the supervisory board is required to act in the interests of our Company
(including its stakeholders) and its associated business as a whole. The members of the supervisory board
are not authorized to represent us in dealings with third parties.
Pursuant to Dutch law, members of the supervisory board must be natural persons. Under our articles of
association, the number of supervisory board members is determined by our supervisory board itself,
provided there will be at least three supervisory board members. Our articles of association provide that
members of the supervisory board are appointed by the general meeting of shareholders upon a binding
nomination by the supervisory board. Our general meeting of shareholders may at all times deprive such a
nomination of its binding character by a resolution passed by at least two-thirds of the votes cast
representing more than 50% of our issued share capital, following which our supervisory board shall draw up
a new binding nomination.
Our supervisory board rules provide that members of our supervisory board will serve for a maximum
duration of three terms of four years. Our articles of association provide that the supervisory board members
must retire periodically in accordance with a rotation schedule adopted by the supervisory board. A
supervisory board member who retires in accordance with the rotation schedule can be reappointed
immediately. The supervisory board appoints a chairman from among its members.
With the exception of Antoine Papiernik, each member of our supervisory board has been and remains fully
independent within the meaning of best practice provision III.2.2 of the DCGC. Mr. Papiernik is affiliated with
Sofinnova which holds 11.9 % of our shares and is therefore not independent within the meaning of best
practice provision III.2.2.f of the Code. We feel this deviation is justified by his specific knowledge and
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experience of our business. Based on the above, we comply with best practice provision III.2.1 of the DCGC,
according to which not more than one supervisory board member is allowed not to be independent.
Under our articles of association, the general meeting of shareholders may suspend or remove supervisory
board members at any time. A resolution of our general meeting of shareholders to suspend or remove a
supervisory board member may be passed by a simple majority of the votes cast, provided that the
resolution is based on a proposal by our supervisory board. In the absence of a proposal by our supervisory
board, a resolution of our general meeting of shareholders to suspend or remove a supervisory board
member shall require a majority of at least two-thirds of the votes cast representing more than 50% of our
issued share capital.
In a meeting of the supervisory board, each supervisory board member is entitled to cast one vote. A
supervisory board member may grant a written proxy to another supervisory board member to represent
him at a meeting of the supervisory board. All resolutions by our supervisory board are adopted by a simple
majority of the votes cast unless our supervisory board rules provide otherwise. In case of a tie in any vote of
the supervisory board, the chairman of the supervisory board shall have the casting vote. Our supervisory
board may also adopt resolutions outside a meeting, provided that such resolutions are adopted in writing,
all supervisory board members are familiar with the resolution to be passed and provided that no
supervisory board member objects to such decision-making process.
Committees of the Supervisory Board
We have an audit committee, a compensation committee and a nominating and corporate governance
committee. We have adopted a charter for each of these committees.
Audit Committee
Our audit committee consists of Paul Baart (chairman), Alison Lawton and James Shannon. James Shannon
was appointed at our AGM on June 21, 2016. Until that date, Antoine Papiernik was member of the audit
committee. Each member satisfies the independence requirements of the NASDAQ listing standards / Rule
10A-3(b)(1) under the Exchange Act, and each member meets the criteria for independence set forth in best
practice III.2.2 of the DCGC. Paul Baart qualifies as an “audit committee financial expert,” as defined by the
SEC in Item 16A: “Audit Committee Financial Expert” and as determined by our supervisory board. The audit
committee oversees our accounting and financial reporting processes and the audits of our financial
statements. The audit committee is responsible for, among other things:
the operation of the internal risk management and control systems, including supervision of the
enforcement of relevant primary and secondary legislation, and supervising the operation of codes of
conduct;
the provision of financial information by the company (choice of accounting policies, application and
assessment of the effects of new rules, information about the handling of estimated items in the
financial statements, forecasts, work of internal and external auditors, etc.);
compliance with recommendations and observations of internal and external auditors;
reviewing the need for an internal audit function;
the policy of the company on tax planning;
relations with the external auditor, including, in particular, his independence, remuneration and any
non-audit services for the company;
the financing of the company; and
the applications of information and communication technology.
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Compensation Committee
Our compensation committee consists of James Shannon (chairman), Dinko Valerio and Alison Lawton. Each
member satisfies the independence requirements of the NASDAQ listing standards / Rule 10A-3(b)(1) under
the Exchange Act, and each member meets the criteria for independence set forth in best practice III.2.2 of
the DCGC. The compensation committee assists our supervisory board in reviewing and approving or
recommending our compensation structure, including all forms of compensation relating to our supervisory
board members, our management board members and our officers. Members of our management board
may not be present at any compensation committee meeting while their compensation is deliberated.
Subject to and in accordance with the terms of the compensation policy approved by our general meeting of
shareholders from time to time, as required by Dutch law, the compensation committee is responsible for,
among other things:
making a proposal to the supervisory board for the remuneration policy to be pursued;
making a proposal for the remuneration of the individual members of the management board, for
adoption by the supervisory board; such proposal shall, in any event, deal with: (i) the remuneration
structure and (ii) the amount of the fixed remuneration, the shares and/or options to be granted and/or
other variable remuneration components, pension rights, redundancy pay and other forms of
compensation to be awarded, as well as the performance criteria and their application; and
preparing the remuneration report as referred to in best practice provision II.2.12.
Our supervisory board may also delegate certain tasks and powers under our Option Plan to the
compensation committee.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Dinko Valerio (chairman), Henri Termeer
and Paul Baart. Each member satisfies the independence requirements of the NASDAQ listing standards as
well as the criteria for independence set forth in best practice III.2.2 of the DCGC. The nominating and
corporate governance committee assists our supervisory board in selecting individuals qualified to become
our supervisory board members and management board members and in determining the composition of
the management board, supervisory board and its committees and our officers. The nominating and
corporate governance committee is responsible for, among other things:
drawing up selection criteria and appointment procedures for supervisory board members and
management board members;
periodically assessing the size and composition of the supervisory board and the management board,
and making a proposal for a composition profile of the supervisory board;
periodically assessing the functioning of individual supervisory board members and management board
members, and reporting on this to the supervisory board;
making proposals for appointments and reappointments; and
supervising the policy of the management board on the selection criteria and appointment procedures
for senior management.
Insurance and Indemnification of Management Board and Supervisory Board Members
Under Dutch law, management board members, supervisory board members and certain other
representatives may be held liable for damages in the event of improper or negligent performance of their
duties. They may be held jointly and severally liable for damages to the Company for infringement of the
articles of association or of certain provisions of the Dutch Civil Code. They may also be liable towards third
parties for infringement of certain provisions of the Dutch Civil Code. In certain circumstances they may also
incur additional specific civil and criminal liabilities.
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Corporate Governance
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Our articles of association provide that we will indemnify our management board members, supervisory
board members, former management board members and former supervisory board members (each an
“Indemnified Person”) against (i) any financial losses or damages incurred by such Indemnified Person and
(ii) any expense reasonably paid or incurred by such Indemnified Person in connection with any threatened,
pending or completed suit, claim, action or legal proceedings, whether civil, criminal, administrative or
investigative and whether formal or informal, in which he becomes involved, to the extent this relates to his
position with the Company, in each case to the fullest extent permitted by applicable law. No indemnification
shall be given to an Indemnified Person (a) if a Dutch court has established, without possibility for appeal,
that the acts or omissions of such Indemnified Person that led to the financial losses, damages, suit, claim,
action or legal proceedings result from either an improper performance of his duties as an officer of the
Company or an unlawful or illegal act and (b) to the extent that his financial losses, damages and expenses
are covered by an insurance and the insurer has settled these financial losses, damages and expenses (or has
indicated that it would do so). Our supervisory board may stipulate additional terms, conditions and
restrictions in relation to such indemnification.
Board composition and diversity
Our management board comprised two persons in 2015, both of whom are male. Our supervisory board has
five male members and one female member. As a Company, we support diversity of culture, gender and age
in our Company. Our current management board and supervisory board members were selected based on
the required profile and talent and abilities of the members without positive or negative bias on gender,
culture or age. In the future, this will continue to be our basis for selection of new board members.
Controls and procedures
Our managing board and our chief financial officer, after evaluating the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2015, have
concluded that based on the evaluation of these controls and procedures required by Rule 13a-15(b) of the
Exchange Act, our disclosure controls and procedures were effective. The internal risk management and
control systems provide reasonable assurance that the financial reporting does not contain any errors of
material importance and that the risk management and control systems worked properly in the year under
review.
Risk factors and the risk management approach, as well as the sensitivity of our results to external factors
and variables are described in more detail in ”Risk Management”. Our internal control system has been
discussed with the Audit Committee and the external auditors.
In view of the requirements of the U.S. Securities Exchange Act, procedures are in place to enable the CEO
(chief executive officer) and the CFO (chief financial officer) to provide certifications with respect to the
Annual Report on Form 20F.
General Meeting of Shareholders
General meetings of shareholders are held in Leiden, Oegstgeest, Leidschendam, Katwijk, Noordwijk,
Wassenaar, Amsterdam, Rotterdam, The Hague, or Schiphol Airport (municipality of Haarlemmermeer)
(Schiphol Airport), the Netherlands. All shareholders and others entitled to attend general meetings of
shareholders are authorized to attend the general meeting of shareholders, to address the meeting and, in
so far as they have such right, to vote, either in person or by proxy.
Annually, at least one general meeting of shareholders shall be held, within six months after the end of our
financial year. A general meeting of shareholders shall also be held within three months after our
management board has considered it to be likely that the Company’s equity has decreased to an amount
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Corporate Governance
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equal to or lower than half of its paid up and called up capital. If the management board and supervisory
board have failed to ensure that such general meetings of shareholders as referred to in the preceding
sentences are held in a timely fashion, each shareholder and other person entitled to attend shareholders’
meetings may be authorized by the Dutch court to convene the general meeting of shareholders.
Our management board and our supervisory board may convene additional extraordinary general meetings
of shareholders whenever they so decide. Pursuant to Dutch law, one or more shareholders and/or others
entitled to attend general meetings of shareholders, alone or jointly representing at least ten percent of our
issued share capital may on their application, be authorized by the Dutch court to convene a general meeting
of shareholders. The Dutch court will disallow the application if it does not appear to it that the applicants
have previously requested that the management board or supervisory board convenes a shareholders’
meeting and neither the management board nor the supervisory board has taken the necessary steps so that
the shareholders’ meeting could be held within six weeks after the request.
General meetings of shareholders are convened by a notice which includes an agenda stating the items to be
discussed. For the annual general meeting of shareholders the agenda will include, among other things, the
adoption of our annual accounts, the appropriation of our profits or losses, discharge of the members of the
Management Board for their management, discharge of the members of the Supervisory Board for their
supervision on the management and proposals relating to the composition and filling of any vacancies of the
management board or supervisory board. In addition, the agenda for a general meeting of shareholders
includes such items as have been included therein by our management board or our supervisory board.
Pursuant to Dutch law, one or more shareholders and/or others entitled to attend general meetings of
shareholders, alone or jointly representing at least 3% of the issued share capital have the right to request
the inclusion of additional items on the agenda of shareholders’ meetings. Such requests must be made in
writing, substantiated, or by a proposal for a resolution and received by us no later than the sixtieth day
before the day the relevant general meeting is held. No resolutions will be adopted on items other than those
which have been included in the agenda.
We will give notice of each general meeting of shareholders by publication on our website and, to the extent
required by applicable law, in a Dutch daily newspaper with national distribution, and in any other manner
that we may be required to follow in order to comply with Dutch law, applicable stock exchange and SEC
requirements. We will observe the statutory minimum convening notice period for a general meeting of
shareholders.
Pursuant to our articles of association, our management board may determine a record date
(registratiedatum) of 28 calendar days prior to a general meeting of shareholders to establish which
shareholders and others with meeting rights are entitled to attend and, if applicable, vote in the general
meeting of shareholders. The record date, if any, and the manner in which shareholders can register and
exercise their rights will be set out in the convocation notice of the general meeting. Our articles of
association provide that a shareholder must notify the Company in writing of his identity and his intention to
attend (or be represented at) the general meeting of shareholders, such notice to be received by us ultimately
on the seventh day prior to the general meeting. If this requirement is not complied with or if upon direction
of the Company to that effect no proper identification is provided by any person wishing to enter the general
meeting of shareholders, the chairman of the general meeting of shareholders may, in his sole discretion,
refuse entry to the shareholder or his proxy holder.
Pursuant to our articles of association, our general meeting of shareholders is chaired by the chairman of our
supervisory board. If the chairman of our supervisory board is absent and has not charged another person to
chair the meeting in his place, the supervisory board members present at the meeting shall appoint one of
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them to be chairman. If no supervisory board members are present at the general meeting of shareholders,
the general meeting of shareholders will be chaired by our CEO or, if our CEO is absent, another managing
board member present at the meeting and, if none of them is present, the general meeting shall appoint its
own chairman. The person who should chair the meeting may appoint another person in his stead.
The chairman of the general meeting may decide at his discretion to admit other persons to the meeting. The
chairman of the general meeting shall appoint another person present at the shareholders’ meeting to act as
secretary and to minute the proceedings at the meeting. The chairman of the general meeting may instruct a
civil law notary to draw up a notarial report of the proceedings at the Company’s expense, in which case no
minutes need to be taken. The chairman of the general meeting is authorized to eject any person from the
general meeting of shareholders if the chairman considers that person to disrupt the orderly proceedings.
The general meeting of shareholders shall be conducted in the English language.
Voting Rights and Quorum Requirements
In accordance with Dutch law and our articles of association, each issued ordinary share and preferred share
confers the right on the holder thereof to cast one vote at the general meeting of shareholders. The voting
rights attached to any shares held by us or our direct or indirect subsidiaries are suspended as long as they
are held in treasury. Dutch law does not permit cumulative voting for the election of management board
members or supervisory board members.
Voting rights may be exercised by shareholders or by a duly appointed proxy holder (the written proxy being
acceptable to the chairman of the general meeting of shareholders) of a shareholder, which proxy holder
need not be a shareholder. Our articles of association do not limit the number of shares that may be voted by
a single shareholder.
Under our articles of association, blank votes, abstentions and invalid votes shall not be counted as votes
cast. Further, shares in respect of which a blank or invalid vote has been cast and shares in respect of which
the person with meeting rights who is present or represented at the meeting has abstained from voting are
counted when determining the part of the issued share capital that is present or represented at a general
meeting of shareholders. The chairman of the general meeting shall determine the manner of voting and
whether voting may take place by acclamation.
In accordance with Dutch law and generally accepted business practices, our articles of association do not
provide quorum requirements generally applicable to general meetings of shareholders. To this extent, our
practice varies from the requirement of NASDAQ Listing Rule 5620(c), which requires an issuer to provide in
its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the
outstanding voting shares.
Resolutions of the general meeting of shareholders are adopted by a simple majority of votes cast without
quorum requirement, except where Dutch law or our articles of association provide for a special majority
and/or quorum in relation to specified resolutions.
Anti-takeover provisions
We have adopted several provisions that may have the effect of making a takeover of our Company more
difficult or less attractive, including:
granting a perpetual and repeatedly exercisable call option to a protection foundation, which confers
upon the protection foundation the right to acquire, under certain conditions, the number of preferred
shares in the capital of the Company. The issuance of such preferred shares will occur upon the
protection foundation’s exercise of the call option and will not require shareholder consent;
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Corporate Governance
ANNUAL REPORT 2016
the staggered four-year terms of our supervisory board members, as a result of which only
approximately one-fourth of our supervisory board members will be subject to election in any one year;
a provision that our management board members and supervisory board members may only be
appointed upon a binding nomination by our supervisory board, which can be set aside by a two-thirds
majority of our shareholders representing more than half of our issued share capital;
a provision that our management board members and supervisory board members may only be
removed by our general meeting of shareholders by a two-thirds majority of votes cast representing
more than 50% of our issued share capital (unless the removal was proposed by the supervisory board);
and
a requirement that certain matters, including an amendment of our articles of association, may only be
brought to our shareholders for a vote upon a proposal by our management board that has been
approved by our supervisory board.
Deviations from the Dutch Corporate Governance Code
The Code contains a “comply-or-explain” principle, offering the possibility to deviate from the Code as long as
any such deviations are explained. We acknowledge the importance of good corporate governance. However,
at this stage, we do not comply with all the provisions of the DCGC for specific reasons. The main deviations
from best practice provisions are listed below.
Pursuant to the best practice provisions II.2.4 and II.2.5 of the DCGC, options granted to our
management board members should not be exercisable during the first three years after the date of
grant; shares granted to our management board members for no financial consideration should be
retained by them for a period of at least five years or until they cease to hold office, whichever is the
shorter period; and the number of options and/or shares granted to our management board members
should be dependent on the achievement of pre-determined performance criteria. We do not intend to
comply with all of the above requirements as we believe it is in the best interest of the company to
attract and retain highly skilled management board members on conditions based on market practice,
as we believe these are.
Pursuant to best practice provision II.2.8 the remuneration of the management board in the event of
dismissal may not exceed one year’s salary. The management services agreements with our
management board members provide for a lump-sum equal to 24 months of the individual’s monthly
gross fixed salary. Based on the risk profile of the Company and to be able to attract highly skilled
management, we assumed this period to be appropriate.
Best practice provision III.7.1 prohibits the granting of shares or rights to shares to members of the
supervisory board as compensation. It is common practice for companies listed on the NASDAQ Global
Market to grant shares to the members of the supervisory board as compensation, in order to align the
interests of the members of the supervisory board with our interests and those of our shareholders,
and we have granted and expect to grant options to acquire ordinary shares to some of our supervisory
board members.
Pursuant to best practice provision III.7.2, any shares held by supervisory board members are long-term
investments. We do not request our supervisory board members to comply with this provision. We
believe it is in the best interest of the Company not to apply this provision in order to be able to attract
and retain highly skilled supervisory board members on internationally competitive terms.
Best practice provision IV.1.1 provides that the general meeting of shareholders may pass a resolution
to cancel the binding nature of a nomination for the appointment of a member of the management
board or of the supervisory board or a resolution to dismiss such member by an absolute majority of
the votes cast. It may be provided that such majority should represent a given proportion of the issued
capital, but this proportion may not exceed one third. In addition, best practice IV.1.1. provides that if
such proportion of the share capital is not represented at the meeting, but an absolute majority of the
votes cast is in favor of a resolution to cancel the binding nature of the nomination, a new general
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Corporate Governance
ANNUAL REPORT 2016
meeting of shareholders will be convened where the resolution may be adopted by absolute majority,
regardless of the proportion of the share capital represented at the meeting. Our articles of association
provide that these resolutions can only be adopted with at least a 2/3 majority which must represent
more than 50% of our issued capital, and that no such second meeting will be convened, because we
believe that the decision to overrule a nomination by the management board or the supervisory board
for the appointment or dismissal of a member of our management board or of our supervisory board
must be widely supported by our shareholders.
Best practice provision IV.3.1 stipulates that meetings with analysts, presentations to analysts,
presentations to investors and institutional investors and press conferences must be announced in
advance on the Company’s website and by means of press releases. Provision must be made for all
shareholders to follow these meetings and presentations in real time, for example by means of
webcasting or telephone. After the meetings, the presentations must be posted on the Company’s
website. We believe that enabling shareholders to follow in real time all the meetings with analysts,
presentations to analysts and presentations to investors, would create an excessive burden on our
resources and therefore, we do not intend to comply with all of the above requirements.
Best practice provision IV.3.13 stipulates that an outline policy on bilateral contacts with the
shareholders shall be formulated and published on the Company’s website. The Company has not
formulated such policy as it believes this is already covered by our regular process for public disclosure
of information.
Summary of significant corporate governance differences from NASDAQ Listing Standards
Our ordinary shares are listed on NASDAQ. The Sarbanes-Oxley Act of 2002, as well as related rules
subsequently implemented by the SEC, requires foreign private issuers, including our Company, to comply
with various corporate governance practices. As a foreign private issuer, subject to certain exceptions, the
NASDAQ listing standards permit a foreign private issuer to follow its home country practice in lieu of the
NASDAQ listing standards. Our corporate governance practices differ in certain respects from those that U.S.
companies must adopt in order to maintain a NASDAQ listing. The home country practices followed by our
Company in lieu of NASDAQ rules are described below:
We do not intend to follow NASDAQ’s quorum requirements applicable to meetings of shareholders. In
accordance with Dutch law and generally accepted business practice, our articles of association do not
provide quorum requirements generally applicable to general meetings of shareholders.
We do not intend to follow NASDAQ’s requirements regarding the provision of proxy statements for
general meetings of shareholders. Dutch law does not have a regulatory regime for the solicitation of
proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands.
We do intend to provide shareholders with an agenda and other relevant documents for the general
meeting of shareholders and shareholders will be entitled to give proxies and voting instructions to us
and/or third parties.
We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the
applicable corporate governance requirements of the Sarbanes-Oxley Act of 2002, the rules adopted by the
SEC and NASDAQ’s listing standards.
New Dutch Corporate Governance Code
A new DCGC has been issued by the DCGC Monitoring Committee as per December 8, 2016 and will replace
the DCGC 2008 from financial year 2017 and onwards. During 2017 the DCGC will be formally approved by
the Dutch Authoritities and incorporated in Dutch law.
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Corporate Governance
ANNUAL REPORT 2016
The amendments will focus on the following topics:
More focus on long term value creation by management board and supervisory board;
Importance of risk management and strengthening of internal control;
Company culture should be an explicit part of the corporate governance structure;
A number of provisions with respect to remuneration will be revised;
Deviations should be more carefully explained. The new code will include a number of requirements for
reporting of deviations.
Based on our initial assessment, we expect no major impact on ProQR Corporate Governance.
PAGE 45 / 91
Risk Management
ANNUAL REPORT 2016
Risk Management
Our business is subject to numerous risks and uncertainties. In the table below, we focus on the key risks and
uncertainties the Company currently faces. For the avoidance of doubt, this does not mean that the risks
which were previously signaled and not described here are no longer relevant. For a complete understanding
of the risks that we face you should also read the full list of risks and uncertainties as disclosed in item 3.D
Risk Factors of the annual report on Form 20-F. Some of these risks and uncertainties are outside the control
of the Company, others may be influenced or mitigated. In 2015, we have implemented a Risk & Control
framework, based on the COSO 2013 internal control framework, for enhancing our control environment as
well as compliance with the U.S. SEC’s Sarbanes Oxley (SOx) Act of 2002, which we are required to as a
company listed on the NASDAQ. As part of the SOx implementation program, our Risk & Control framework
was further enhanced in 2016, focusing on IT and entity level controls. Improvement of our Risk & Control
framework is an ongoing effort for the Company.
Our main risks are those that threaten the achievement of the Company’s corporate objectives, including
compliance. If any of these risks actually occurs, our business, prospects, operating results and financial
condition could suffer materially. These risks include, but are not limited to, the following:
Risk related to
Risk area
Development and
Regulatory Approval of
our Product Candidates
Our products will not be able to
demonstrate safety and efficacy
in the preclinical studies and
clinical trials that are needed to
obtain product approval.
Expected impact upon
materialization
The Company will be unable to
commercialize the product and
therefore generate revenues.
The regulatory approval process
is lengthy, time-consuming and
unpredictable and products
developed may ultimately not
lead to regulatory approval of
the product.
Failure to comply with the
requirements in the regulatory
process could result in delays,
suspension, refusals and
withdrawal of approvals as well
as fines.
We may not able to maintain
orphan product status for QR-
010 and QR-110 or obtain such
status for QR-313.
We may not benefit from
rewards including fee
reductions and market
exclusivity. Sales could be
impacted if other products are
granted authorization for the
same indications as QR-010 and
QR-110.
Risk-mitigating actions
This is an inherent risk with drug
development as the safety and
efficacy of products can only be
assessed when these studies
are conducted. However, the
Company has multiple products
in the pipeline and therefore is
diversified. The Company also
monitors the progress of the
programs and aims to make
decisions that mitigate safety
and efficacy related risks.
Although the Company
monitors the regulatory
landscape and engages with the
authorities when it deems that
necessary, this is an inherent
risk in biotech drug
development and therefore has
limited mitigation abilities.
We take orphan drug
requirements into consideration
in the design of our clinical
development plans.
We may be precluded from
obtaining marketing
authorization for our products
when our competitors have
We may encounter delays in
marketing our products for a
significant period of time.
We take orphan drug
requirements into consideration
in the design of our clinical
development plans.
PAGE 46 / 91
Risk Management
ANNUAL REPORT 2016
obtained market exclusivity
before we do.
Risk related to
Risk area
Capital Needs and
Financial Position
The Company depends largely
on equity financing and
financing through third party
collaboration agreements and
government subsidies.
Dependence on Third
Parties
Intellectual Property
The Company relies upon third-
party contractors and service
providers for the execution of
several aspects of its preclinical
and clinical development
programs, which include CRO’s,
third party manufacturers and
other service providers.
The Company is highly
dependent on its portfolio of
patents and other intellectual
property, proprietary
information and knowhow and
its ability to protect and enforce
these assets.
The Company is subject to the
risk of infringing third party
intellectual property rights.
Commercialization of Our
Product Candidates
We face competition from
entities that have developed or
may develop product
candidates for our target
indications.
Expected impact upon
materialization
Risk-mitigating actions
Volatility of the Company’s
share price, failure to deliver
under collaboration agreements
and/or the reevaluation or
withdrawal of government
subsidies may have a negative
impact on the Company's ability
to obtain future financing.
The ability of third party
financing is dependent on
external factors and is therefore
not entirely in the Company’s
control. The Company monitors
the market conditions for
opportunities to add additional
capital.
Failure of third parties to
provide services of a suitable
quality and within acceptable
timeframes may cause delay or
failure of the Company's
development programs.
The Company reviews and
monitors the activities of the
third parties. These include
setting contractual deliverables,
quality assurance audits and
performance reports, among
other activities.
Inadequate intellectual property
protection or enforcement may
impede the Company’s ability to
compete effectively. If the
Company is not able to protect
its trade secrets, know-how or
other proprietary information,
the value of its technology and
product candidates could be
significantly diminished.
Intellectual property rights
conflicts may result in costly
litigation and could result in the
Company having to pay
substantial damages or limit the
Company’s ability to
commercialize its product
candidates.
If our competitors develop
technologies or product
candidates more rapidly than
we do or their technologies,
including delivery technologies,
are more effective, our ability to
develop and successfully
commercialize our product
candidates may be adversely
affected.
The Company files and
prosecutes patent applications
to protect its products and
technologies to the best of its
knowledge and with assistance
from internal and external
counsel. Prior to disclosing any
confidential information to third
parties, the Company maintains
strict confidentiality standards
and agreements for
collaborating parties.
Competition is an inherent risk
for any industry including drug
development. Through our IP
strategy and orphan drug
designation application, we
attempt to have data exclusivity
for our products. Development
in other companies is essentially
out of our control but we
monitor the competitive
landscape and incorporate that
into our business strategy.
In addition to the above key risks, the Company’s activities expose it to a variety of financial risks: market risk
(including currency risk, interest rate risk and price risk), credit risk and liquidity risk. Unfavorable exchange
rate developments and historically low interest rates may impact the financial income of the Company. The
Company has a cash management policy in place to minimize potential adverse effects resulting from
unpredictability of financial markets on the Company’s financial performance.
PAGE 47 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Financial Statements 2016
Consolidated statement of financial position at December 31, 2016
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Social securities and other taxes
Prepayments and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Shareholders' equity
Share capital
Share premium reserve
Equity settled employee benefits reserve
Translation reserve
Accumulated deficit
LIABILITIES
Non-current liabilities
Finance lease liabilities
Borrowings
Current liabilities
Finance lease liabilities
Trade payables
Social securities and other taxes
Pension premiums
Deferred income
Other current liabilities
Note
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
7
8
9
10
11
12
13
14
90
3,438
3,528
395
2,420
59,200
62,015
141
2,199
2,340
956
1,948
94,865
97,769
65,543
100,109
934
123,597
4,353
(15)
(75,733)
53,136
--
5,697
5,697
--
328
312
13
--
6,057
6,710
934
123,595
1,899
1
(36,630)
89,799
--
4,824
4,824
15
885
235
16
144
4,191
5,486
TOTAL EQUITY AND LIABILITIES
65,543
100,109
The accompanying notes are an integral part of these financial statements.
PAGE 48 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Consolidated statement of profit or loss and comprehensive income for the year ended
December 31, 2016
Other income
Research and development costs
General and administrative costs
Total operating costs
Operating result
Financial income and expense
Result before corporate income taxes
Corporate income taxes
Note
2016
€ 1,000
2015
€ 1,000
15
16
18
19
1,828
3,235
(31,923)
(9,478)
(23,401)
(6,837)
(41,401)
(30,238)
(39,573)
470
(27,003)
6,171
(39,103)
(20,832)
--
--
Result for the year (attributable to equity holders of the Company)
(39,103)
(20,832)
Other comprehensive income
Items that will never be reclassified to profit or loss
Items that are or may be reclassified to profit or loss
Foreign operations – foreign currency translation differences
(16)
1
Total comprehensive income for the year
(attributable to equity holders of the Company)
(39,119)
(20,831)
Share information
20
Weighted average number of shares outstanding1
23,346,507
23,343,262
Earnings per share attributable to the equity holders
of the Company (expressed in Euro per share)
Basic earnings per share1
Diluted earnings per share1
The accompanying notes are an integral part of these financial statements.
(1.68)
(1.68)
(0.89)
(0.89)
1 Basic and diluted earnings are equal due to the anti-dilutive nature of the options outstanding since the Company is loss-
making.
PAGE 49 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Consolidated statement of changes in equity for the year ended December 31, 2016
Share
Capital
Share
Premium
Equity
Settled
Employee
Benefit
Reserve
Translation
Reserve
Accumulated
Deficit
Total
Equity
€ 1,000
€ 1,000
€ 1,000
€ 1,000
€ 1,000
€ 1,000
Balance at January 1, 2015
934
123,581
687
Result for the year
Other comprehensive income
Recognition of share-based
payments
Share options exercised
--
--
--
0
--
--
--
14
--
--
1,212
--
Balance at December 31, 2015
934
123,595
1,899
Result for the year
Other comprehensive income
Recognition of share-based
payments
Share options exercised
--
--
--
0
--
--
--
2
--
--
2,454
--
--
--
1
--
--
1
--
(16)
--
--
(15,798)
109,404
(20,832)
(20,832)
--
--
--
1
1,212
14
(36,630)
89,799
(39,103)
(39,103)
--
--
--
(16)
2,454
2
Balance at December 31, 2016
934
123,597
4,353
(15)
(75,733)
53,136
The accompanying notes are an integral part of these financial statements.
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Financial Statements 2016
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Consolidated statement of cash flows for the year ended December 31, 2016
Cash flow from operating activities
Result for the year
Adjustments for:
— Depreciation
— Share-based compensation
— Financial income and expense
Changes in working capital
Cash used in operations
Corporate income tax paid
Interest received/(paid)
Note
2016
€ 1,000
2015
€ 1,000
(39,119)
(20,831)
7, 8
12
18
1,245
2,454
(470)
1,433
(34,457)
--
236
480
1,212
(6,171)
637
(24,673)
--
441
Net cash used in operating activities
(34,221)
(24,232)
Cash flow from investing activities
Purchases of intangible assets
Purchases of property, plant and equipment
--
(2,539)
(28)
(1,296)
Net cash used in investing activities
(2,539)
(1,324)
Cash flow from financing activities
Proceeds from exercise of share options
Proceeds from borrowings
Redemption of financial lease
Net cash generated by financing activities
Net increase/(decrease) in cash and cash equivalents
Currency effect cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The accompanying notes are an integral part of these financial statements.
13
13
11
11
2
370
(15)
357
14
1,640
(34)
1,620
(36,403)
(23,936)
738
94,865
6,065
112,736
59,200
94,865
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Financial Statements 2016
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Notes to the consolidated financial statements for the year ended December 31, 2016
1. General Information
ProQR Therapeutics N.V., or “ProQR” or the “Company”, is a development stage company domiciled in the
Netherlands that primarily focuses on the development and commercialization of novel therapeutic
medicines.
Since September 18, 2014, the Company’s ordinary shares are listed on the NASDAQ Global Market under
ticker symbol PRQR.
The Company was incorporated in the Netherlands, on February 21, 2012 (Chamber of Commerce no.
54600790) and was reorganized from a private company with limited liability to a public company with limited
liability on September 23, 2014. The Company has its statutory seat in Leiden, the Netherlands. The address
of its headquarters and registered office is Zernikedreef 9, 2333 CK Leiden, the Netherlands.
At December 31, 2016, ProQR Therapeutics N.V. is the ultimate parent company of the following entities:
ProQR Therapeutics Holding B.V. (the Netherlands, 100%);
ProQR Therapeutics I B.V. (the Netherlands, 100%);
ProQR Therapeutics II B.V. (the Netherlands, 100%);
ProQR Therapeutics III B.V. (the Netherlands, 100%);
ProQR Therapeutics IV B.V. (the Netherlands, 100%);
ProQR Therapeutics VI B.V. (the Netherlands, 100%);
ProQR Therapeutics VII B.V. (the Netherlands, 100%);
ProQR Therapeutics VIII B.V. (the Netherlands, 100%);
ProQR Therapeutics IX B.V. (the Netherlands, 100%);
ProQR Therapeutics I Inc. (United States, 100%).
As used in these consolidated financial statements, unless the context indicates otherwise, all references to
“ProQR”, the “Company” or the “Group” refer to ProQR Therapeutics N.V. including its subsidiaries.
2. Basis of preparation
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards, or IFRS, as adopted by the European Union (“EU”).
With reference to the income statement of the Company, use has been made of the exemption pursuant to
Section 402 of Book 2 of the Netherlands Civil Code.
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis except for financial instruments and
share-based payment obligations which have been based on fair value. Historical cost is generally based on
the fair value of the consideration given in exchange for assets.
(c) Functional and presentation currency
These consolidated financial statements are presented in euro, which is the Company’s functional currency.
All amounts have been rounded to the nearest thousand, unless otherwise indicated.
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(d) Going Concern
The management board of ProQR has, upon preparing and finalizing the 2016 financial statements, assessed
the Company’s ability to fund its operations for a period of at least one year after the date of signing these
financial statements.
The management board of the Company is confident about the continuity of the Company based on its
existing funding, taking into account the Company’s current cash position and the projected cash flows based
on the activities under execution on the basis of ProQR’s business plan and budget.
(e) Use of estimates and judgements
In preparing these consolidated financial statements, management has made judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimate is revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current and future periods.
Information about assumptions and estimation uncertainties that may have a significant risk of resulting in a
material adjustment is included below.
(i) Share-based payments
Share options granted to employees and consultants are measured at the fair value of the equity instruments
granted. Fair value is determined through the use of an option-pricing model considering, among others, the
following variables:
the exercise price of the option;
the expected life of the option;
the current value of the underlying shares;
the expected volatility of the share price;
the dividends expected on the shares; and
the risk-free interest rate for the life of the option.
For the Company’s share option plans, management’s judgment is that the Black-Scholes valuation method is
the most appropriate for determining the fair value of the Company’s share options.
Initially, the Company’s ordinary shares were not publicly traded and consequently the Company needed to
estimate the fair value of its share and the expected volatility of that value. The expected volatility of all
options granted was therefore based on the average historical volatility of the Company’s peers over a period
that agrees with the expected option life. All assumptions and estimates are further discussed in Note 12(d)
to the financial statements. The value of the underlying shares was determined on the basis of the prior sale
of company stock method. As such, the Company has benchmarked the value per share to external
transactions of Company shares and external financing rounds.
For options granted from the moment of listing, the Company uses the closing price of the ordinary shares
on the previous business day as exercise price of the options granted.
The result of the share option valuations and the related compensation expense is dependent on the model
and input parameters used. Even though Management considers the fair values reasonable and defensible
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Financial Statements 2016
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based on the methodologies applied and the information available, others might derive a different fair value
for the Company’s share options.
(ii) Corporate income taxes
The Company recognizes deferred tax assets arising from unused tax losses or tax credits only to the extent
that the Company has sufficient taxable temporary differences or there is convincing evidence that sufficient
taxable profit will be available against which the unused tax losses or unused tax credits can be utilized.
Management’s judgment is that such convincing evidence is currently not sufficiently available and a deferred
tax asset is therefore only recognized to the extent that the Company has sufficient taxable temporary
differences.
(iii) Grant income
Grants (to be) received are reflected in the balance sheet as other receivables or deferred income. At each
balance sheet date, for grants approved, the Company estimates the associated costs incurred, the level of
service performed and the progress of the associated projects. Based on this analysis grant income is
recognized.
(iv) Research and development expenditures
Research expenditures are currently not capitalized but are reflected in the income statement because the
criteria for capitalization are not met. At each balance sheet date, the Company estimates the level of service
performed by the vendors and the associated costs incurred for the services performed.
Although we do not expect the estimates to be materially different from amounts actually incurred, the
understanding of the status and timing of services performed relative to the actual status and timing of
services performed may vary and could result in reporting amounts that are too high or too low in any
particular period.
(f) Changes in accounting policies
The financial statements have been prepared on the basis of International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board (“IASB”). New Standards and
Interpretations, which became effective as of January 1, 2016, did not have a material impact on our financial
statements.
3. Significant Accounting Policies
The Company has consistently applied the following accounting policies to all periods presented in these
consolidated financial statements.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until the date on which control ceases.
(ii) Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary,
and any non-controlling interests and other components of equity. Any resulting gain or loss is recognised in
profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
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Financial Statements 2016
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(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are
eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of
impairment.
(b) Classes of financial instruments
Financial instruments are both primary financial instruments, such as receivables and payables, and financial
derivatives. For primary financial instruments, reference is made to the treatment per the corresponding
balance sheet item.
Financial derivatives are valued at fair value. Upon first recognition, financial derivatives are recognized at fair
value and then revalued as at balance sheet date.
(c) Foreign currencies
(i) Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency
at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are translated into the functional currency at the exchange rate
when the fair value was determined. Foreign currency differences are generally recognized in profit or loss.
Non-monetary items that are measured based on historical cost in a foreign currency are not translated.
(ii) Foreign operations
The assets and liabilities of foreign operations are translated into euro at exchange rates at the reporting
date. The income and expenses of foreign operations are translated into euros at the exchange rates at the
dates of the transactions. Foreign currency differences are recognized in OCI and accumulated in the
translation reserve, except to the extent that the translation difference is allocated to NCI.
(d) Recognition of other income
Other income includes amounts earned from third parties and are recognized when earned in accordance
with the substance and under the terms of the related agreements and when it is probable that the economic
benefits associated with the transaction will flow to the entity and the amount of the income can be
measured reliably. The grants are recognized in other income in the same period in which the related R&D
costs are recognized.
(e) Government grants—WBSO
The WBSO (“afdrachtvermindering speur- en ontwikkelingswerk”) is a Dutch fiscal facility that provides
subsidies to companies, knowledge centers and self-employed people who perform research and
development activities (as defined in the WBSO Act). Under this Act, a contribution is paid towards the labor
costs of employees directly involved in research and development. The contribution is in the form of a
reduction of payroll taxes and social security contributions. Subsidies relating to labor costs are deferred and
recognized in the income statement as negative labor costs over the period necessary to match them with
the labor costs that they are intended to compensate.
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Financial Statements 2016
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(f) Employee benefits
(i) Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the
amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as
a result of past service provided by the employee and the obligation can be estimated reliably.
(ii) Share-based payment transactions
The grant-date fair value of equity-settled share-based payment awards granted to employees is generally
recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The
amount recognized as an expense is adjusted to reflect the number of awards for which the related service
and non-market performance conditions are expected to be met, such that the amount ultimately recognized
is based on the number of awards that meet the related service and non-market performance conditions at
the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of
the share-based payment is measured to reflect such conditions and there is no true-up for differences
between expected and actual outcomes.
(iii) Pension obligations
The Company operates defined contribution pension plans for all employees funded through payments to
insurance companies. The Company has no legal or constructive obligation to pay further contributions once
the contributions have been paid. The contributions are recognized as employee benefit expense when they
are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in
the future payments is available.
(g) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. It is recognized in
profit or loss except to the extent that it relates to a business combination, or items recognized directly in
equity or in OCI.
(i) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported
in the income statement because of items of income or expense that are taxable or deductible in other years
and items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of the reporting period.
(ii) Deferred tax
Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the
asset to be recovered. Since the Company does not expect to be profitable in the foreseeable future, its
deferred tax assets are valued at nil.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and
assets reflects the tax consequences that would follow from the manner in which the Company expects, at
the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
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Financial Statements 2016
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(h) Intangible assets
(i) Licenses
Acquired patents have a finite useful life and are carried at cost less accumulated amortization and
impairment losses. Amortization is calculated using the straight-line method to allocate the cost of patents
over their estimated useful lives (generally 10 years unless a patent expires prior to that date). Amortization
begins when an asset is available for its intended use.
(ii) Research and development
Research expenditures are recognized as expenses as incurred. Costs incurred on development projects are
recognized as intangible assets as of the date that it can be established that it is probable that future
economic benefits that are attributable to the asset will flow to the Company considering its commercial and
technological feasibility, generally when filed for regulatory approval for commercial production, and when
costs can be measured reliably. Given the current stage of the development of the Company’s products no
development expenditures have yet been capitalized.
Registration costs for patents are part of the expenditures for the research and development project.
Therefore, registration costs for patents are expensed as incurred as long as the research and development
project concerned does not yet meet the criteria for capitalization.
(iii) Other intangible assets
Other intangible assets, including software, that are acquired by the Company and have finite useful lives are
measured at cost less accumulated amortization and accumulated impairment losses.
(iv) Amortization
Amortization is calculated to write off the cost of intangible assets less their estimated residual values using
the straight-line method over their estimated useful lives, and is recognized in profit or loss.
The estimated useful lives for current and comparative periods are as follows:
software:
3 years.
Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
(i) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and any
accumulated impairment losses. If significant parts of an item of property, plant and equipment have
different useful lives, then they are accounted for as separate items (major components) of property, plant
and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognized in
profit or loss.
(ii) Depreciation
Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated
residual values using the straight-line method over their estimated useful lives, and is recognized in profit or
loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is
reasonably certain that the Company will obtain ownership by the end of the lease term.
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Financial Statements 2016
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The estimated useful lives of property, plant and equipment for current and comparative periods are as
follows:
leasehold improvements:
5 - 10 years.
laboratory equipment:
5 years.
other:
3 - 5 years.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
(j) Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset
belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-
generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit)
is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a revaluation increase.
(k) Financial assets
All financial assets are recognized and derecognized on the trade date where the purchase or sale of a
financial asset is under a contract whose terms require delivery of the financial asset within the timeframe
established by the market concerned, and are initially measured at fair value, plus transaction costs, except
for those financial assets classified as at fair value through profit or loss, which are initially measured at fair
value.
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Financial Statements 2016
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(i) Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted
in an active market are classified as “loans and receivables”. Loans and receivables are measured at
amortized cost using the effective interest method, less any impairment.
An allowance for doubtful accounts is established when there is objective evidence that the Company will not
be able to collect all amounts due according to the original terms of receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and
default or delinquency in payments are considered indicators that the trade receivable is impaired. Loans
and receivables are included in ‘current assets’, except for maturities greater than 12 months after the
balance sheet date, which are classified as ‘non-current assets’.
For all financial assets, the fair value approximates its carrying value.
(l) Cash and cash equivalents
Cash and cash equivalents include cash on hand and all highly liquid investments with original maturities of
three months or less that are convertible to a known amount of cash and bear an insignificant risk of change
in value.
(m) Financial liabilities and equity instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.
(i) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds
received, net of direct issue costs.
(ii) Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs
incurred, and are subsequently measured at amortized cost using the effective interest method, with interest
expense recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period.
Borrowings and other financial liabilities are classified as ‘non-current liabilities,’ other than liabilities with
maturities up to one year, which are classified as “current liabilities”.
The Company derecognizes financial liabilities when the liability is discharged, cancelled or expired. For all
financial liabilities, the fair value approximates its carrying amount.
(n) Leases
(i) Determining whether an arrangement contains a lease
At inception of an arrangement, the Company determines whether such an arrangement is or contains a
lease.
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Financial Statements 2016
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At inception or on reassessment of an arrangement that contains a lease, the Company separates payments
and other consideration required by such an arrangement into those for the lease and those for other
elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is
impracticable to separate the payments reliably, then an asset and a liability are recognized at an amount
equal to the fair value of the underlying asset. Subsequently, the liability is reduced as payments are made
and an imputed finance cost on the liability is recognized using the Company’s incremental borrowing rate.
(ii) Leased assets
Assets held by the Company under leases that transfer to the Company substantially all of the risks and
rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount
equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to
initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that
asset.
Assets held under other leases are classified as operating leases and are not recognized in the Company’s
statement of financial position.
(iii) Lease payments
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term
of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the
term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense is allocated to each period during the lease term
so as to produce a constant periodic rate of interest on the remaining balance of the liability.
4. New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning after 1 January 2017, and have not been applied in preparing these consolidated financial
statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt
these standards early.
IFRS 9 Financial Instruments
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial
instruments, including a new expected credit loss model for calculating impairment on financial assets, and
the new general hedge accounting requirements. It also carries forward the guidance on recognition and
derecognition of financial instruments from IAS 39.
IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption
permitted.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction
Contracts and IFRIC 13 Customer Loyalty Programmes.
IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption
permitted.
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Financial Statements 2016
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IFRS 16 Leases
IFRS 16 specifies how a company will recognise, measure, present and disclose leases. The standard provides
a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the
lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as
operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its
predecessor, IAS 17.
IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019, with early adoption
permitted.
The adoption of these Standards and Interpretations are not expected to have a material effect on the
financial statements.
5. Financial Risk Management
5.1. Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest
rate risk and price risk), credit risk and liquidity risk. The Company’s overall financial risk management seeks
to minimize potential adverse effects resulting from unpredictability of financial markets on the Company’s
financial performance.
Financial risk management is carried out by the finance department. The finance department identifies and
evaluates financial risks and proposes mitigating actions if deemed appropriate.
(a) Market risk
Market risk is the risk that changes in market prices – such as foreign exchange rates, interest rates and
equity prices – will affect the Company’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimizing the return.
Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities in
foreign currencies, primarily with respect to the U.S. Dollar. The Company has an exposure associated with
the time delay between entering into a contract, budget or forecast and the realization thereof. The Company
operates a foreign exchange policy to manage the foreign exchange risk against the functional currency
based on the Company’s cash balances and the projected future spend per major currency.
At December 31, 2016 there was a net liability in U.S. Dollars of € 2.4 million (2015: € 1.1 million). Foreign
currency denominated receivables and trade payables are short term in nature (generally 30 to 45 days). As a
result foreign exchange rate movements on receivables and trade payables, during the years presented had
an immaterial effect on the financial statements.
At year-end, a substantial amount of our cash balances are denominated in U.S. Dollars. This amount reflects
our current expectation of future expenditure in U.S. dollars.
A reasonably possible strengthening (weakening) of the U.S. Dollar by 10% against all other currencies at
December 31, 2016 would have affected the measurement of our cash balances denominated in a U.S. Dollar
and affected equity and profit or loss by € 2.5 million (2015: € 5.2 million). The analysis assumes that all other
variables, in particular interest rates, remain constant.
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Financial Statements 2016
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Price risk
The market prices for the production of preclinical and clinical materials and services as well as external
contracted research may vary over time. Currently, the commercial prices of any of the Company’s product
candidates is uncertain. When the development products near the regulatory approval date or potential
regulatory approval date, the uncertainty of the potential sales price decreases. The Company is not exposed
to commodity price risk.
Furthermore the Company does not hold investments classified as available-for-sale or at fair value through
profit or loss, therefore are not exposed to equity securities price risk.
Cash flow and fair value Interest rate risk
The Company’s exposure to interest rate risks is limited due to the use of loans with fixed rates. The
Company has one loan with a fixed interest, amounting to € 5,697,000 at December 31, 2016 (2015: €
4,824,000). Details on the interest rates and maturities of these loans are provided in Note 13.
(b) Credit risk
Credit risk represents the risk of financial loss caused by default of the counterparty. The Company has no
large receivables balances with external parties. The Company’s principal financial assets are cash and cash
equivalents which are placed at ABN Amro, Rabobank and Wells Fargo. Our cash management policy is
focused on preserving capital, providing liquidity for operations and optimizing yield while accepting limited
risk (Short-term credit ratings must be rated A-1/P-1/F1 at a minimum by at least one of the Nationally
Recognized Statistical Rating Organizations (NRSROs) specifically Moody’s, Standard & Poor’s or Fitch. Long-
term credit rating must be rated A- or A3 at a minimum by at least one NRSRO).
At December 31, 2016 and December 31, 2015, substantially all of our cash and cash equivalents were placed
at two large institutions, Rabobank and ABN Amro. In 2016, this also included Wells Fargo. All institutions are
highly rated (ratings of Aa2, A1 and A2 for Rabobank, ABN Amro and Wells Fargo respectively) with sufficient
capital adequacy and liquidity metrics.
There are no financial assets past due date or impaired. No credit limits were exceeded during the reporting
period.
(c) Liquidity risk
Liquidity risk represents the risk that an entity will encounter difficulty in meeting obligations associated with
its financial liabilities. Prudent liquidity risk management implies ensuring sufficient availability of cash
resources for funding of operations and planning to raise cash if and when needed, either through issue of
shares or through credit facilities. Management monitors rolling forecasts of the Company’s liquidity reserve
on the basis of expected cash flow.
The table below analyzes ProQR’s undiscounted liabilities into relevant maturity groupings based on the
remaining period at year-end until the contractual maturity date:
dsssds
At December 31, 2016
Borrowings
Trade payables and other payables
Less than
1 year
Between
1 and 2 years
Between
2 and 5 years
€ 1,000
€ 1,000
€ 1,000
--
6,710
6,710
1,839
--
1,839
4,860
--
4,860
Over
5 years
€ 1,000
--
--
--
PAGE 62 / 91
Financial Statements 2016
ANNUAL REPORT 2016
At December 31, 2015
Borrowings
Finance lease liabilities
Trade payables and other payables
Less than
1 year
Between
1 and 2 years
Between
2 and 5 years
€ 1,000
€ 1,000
€ 1,000
--
15
5,471
5,486
1,691
4,712
--
--
--
--
1,691
4,712
Over
5 years
€ 1,000
--
--
--
--
5.2. Capital risk management
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a
going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to
shareholders (although at this time the Company does not have retained earnings and is therefore currently
unable to pay dividends), return capital to shareholders, issue new shares or sell assets to reduce debt.
The total amount of equity as recorded on the balance sheet is managed as capital by the Company.
5.3. Fair value measurement
For financial instruments that are measured on the balance sheet at fair value, IFRS 13 requires disclosure of
fair value measurements by level of the following fair value measurement hierarchy:
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (level 3).
The Company has no assets and liabilities that are measured at fair value at December 31, 2016 and 2015.
The carrying amount of all financial assets and financial liabilities is a reasonable approximation of the fair
value and therefore information about the fair values of each class has not been disclosed.
6. Segment Information
The Company operates in one reportable segment, which comprises the discovery and development of
innovative, RNA based therapeutics. The management board is identified as the chief operating decision
maker. The management board reviews the operating results regularly to make decisions about resources
and to assess overall performance.
The Company has not generated any sales revenues since inception.
All non-current assets of the Company are located in the Netherlands. The amounts provided to the
management board with respect to total assets and liabilities are measured in a manner consistent with that
of the financial statements.
7. Intangible Assets
dsssds
Balance at January 1, 2015
Cost
Accumulated amortization
Carrying amount
Additions
Amortization
Movement for the period
Balance at December 31, 2015
Cost
Accumulated amortization
Carrying amount
Additions
Amortization
Movement for the period
Balance at December 31, 2016
Cost
Accumulated amortization
Carrying amount
PAGE 63 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Licenses
Software
€ 1,000
€ 1,000
Total
€ 1,000
39
--
39
--
--
--
39
--
39
--
--
--
39
--
39
124
--
124
28
(50)
(22)
152
(50)
102
--
(51)
(51)
152
(101)
51
163
--
163
28
(50)
(22)
191
(50)
141
--
(51)
(51)
191
(101)
90
In 2012, the Company acquired an exclusive license from the Massachusetts General Hospital. The initial
payment in respect of the license, in the amount of € 39,000, will be amortized over the commercial life of
products based on the license during the patent-life.
The amortization charge for 2016 is included in the general and administrative costs for an amount of
€ 51,000 (2015: € 50,000).
PAGE 64 / 91
Financial Statements 2016
ANNUAL REPORT 2016
8. Property, Plant and Equipment (‘PP&E’)
dsssds
Balance at January 1, 2015
Cost
Accumulated depreciation
Carrying amount
Additions
Depreciation
Disposals
Movement for the period
Balance at December 31, 2015
Cost
Accumulated depreciation
Carrying amount
Additions
Depreciation
Transfer
Disposals
Movement for the period
Balance at December 31, 2016
Cost
Accumulated depreciation
Carrying amount
Leasehold
improvements
Laboratory
equipment
Other
Total
€ 1,000
€ 1,000
€ 1,000
€ 1,000
326
(17)
309
659
(77)
--
582
985
(94)
891
1,166
(499)
(196)
(23)
448
1,847
(508)
1,339
769
(104)
665
367
(201)
--
166
1,136
(305)
831
806
(340)
--
--
466
1,957
(660)
1,297
242
(29)
213
415
(145)
(6)
264
651
(174)
477
461
(332)
196
--
325
1,283
(481)
802
1,337
(150)
1,187
1,441
(423)
(6)
1,012
2,772
(573)
2,199
2,433
(1,171)
--
(23)
1,239
5,087
(1,649)
3,438
The depreciation charge for 2016 is included in the research and development costs for an amount of
€ 907,000 (2015: € 361,000) and in the general and administrative costs for an amount of € 264,000
(2015: € 62,000).
9. Social Security and Other Taxes
dsssds
Value added tax
Wage tax
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
395
--
395
953
3
956
All receivables are considered short-term and due within one year.
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Financial Statements 2016
ANNUAL REPORT 2016
10. Prepayments and Other Receivables
dsssds
Prepayments
Other receivables
All receivables are considered short-term and due within one year.
11. Cash and Cash Equivalents
dsssds
Cash at banks
Bank deposits
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
1,250
1,170
2,420
1,401
547
1,948
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
56,354
2,846
59,200
94,865
--
94,865
The cash at banks is at full disposal of the Company. Bank deposits are convertible into cash upon request of
the Company.
12. Shareholders’ Equity
(a) Share capital
dsssds
In issue at January 1
Issued for cash
Exercise of share options
In issue at December 31 – fully paid
Number of ordinary shares
2016
2015
23,345,965
23,338,154
--
891
--
7,811
23,346,856
23,345,965
The authorized share capital of the Company amounting to € 3,000,000 consists of 37,500,000 ordinary
shares and 37,500,000 preference shares with a par value of € 0.04 per share. At December 31, 2016,
24,520,814 ordinary shares were issued and fully paid in cash, of which 1,173,958 were held by the Company
as treasury shares (2015: 1,174,849).
On October 2, 2015, the Company filed a shelf registration statement, which permitted: (a) the offering,
issuance and sale by the Company of up to a maximum aggregate offering price of $ 200,000,000 of its
ordinary shares, warrants and/or units; and (b) as part of the $ 200,000,000, the offering, issuance and sale by
PAGE 66 / 91
Financial Statements 2016
ANNUAL REPORT 2016
us of up to a maximum aggregate offering price of $ 60,000,000 of its ordinary shares that may be issued and
sold under a sales agreement with Cantor Fitzgerald & Co in one or more at-the-market offerings. At
December 31, 2016, no shares had been sold pursuant to its current at-the-market offering program.
(b) Equity settled employee benefit reserve
The costs of share options for employees, members of the supervisory board and members of the
management board are recognized in the income statement, together with a corresponding increase in
equity during the vesting period, taking into account (deferral of) corporate income taxes. The accumulated
expense of share options recognized in the income statement is shown separately in the equity category
‘equity settled employee benefit reserve’ in the ‘statement of changes in equity’.
(c) Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial
statements of foreign operations.
(d) Share options
The Company operates an equity-settled share-based compensation plan which was introduced in 2013.
Options may be granted to employees, members of the supervisory board, members of the management
board and consultants. The compensation expenses included in operating costs for this plan were
€ 2,454,000 in 2016 (2015: € 1,212,000), of which € 1,480,000 (2015: € 801,000) was recorded in general and
administrative costs and € 974,000 (2015: € 411,000) was recorded in research and development costs.
Options granted under this stock option plan are exercisable once vested. Any vesting schedule may be
attached to the granted options, however the typical vesting period is four years (25% after every year). The
options expire ten years after date of grant. Options granted under the stock option plan are granted at
exercise prices which equal the fair value of the ordinary shares of the Company at the date of the grant.
The Company accounts for its employee stock options under the fair value method. The fair value of the
options is estimated at the date of grant using the Black-Scholes option-pricing model, with on average the
following assumptions:
dsssds
Risk-free interest rate
Expected dividend yield
Expected volatility
Expected life in years
Options
granted in 2016
Options
granted in 2015
1.467%
0%
86.3%
5 years
1.497%
0%
86.8%
5 years
The resulting weighted average grant date fair value of the options amounted to € 3.72 in 2016 (2015:
€ 10.35). The stock options granted have a 10 year life following the grant date and are assumed to be
exercised five years from date of grant for all awards.
Movements in the number of options outstanding and their related weighted average exercise prices are as
PAGE 67 / 91
Financial Statements 2016
ANNUAL REPORT 2016
follows:
dsssds
Balance at January 1
Granted
Forfeited
Exercised
Lapsed
2016
2015
Number of
options
Average
exercise price
Number of
options
Average
exercise price
1,108,935
1,214,126
(116,181)
(891)
--
€ 4.19
€ 5.49
€ 4.64
€ 2.38
--
998,765
125,798
(7,817)
(7,811)
--
€ 2.78
€ 15.27
€ 4.64
€ 1.78
--
€ 4.19
Balance at December 31
2,205,989
€ 4.88
1,108,935
Exercisable
615,246
339,352
The options outstanding at December 31, 2016 had an exercise price in the range of € 1.11 to € 20.34
(2015: € 1.11 to € 20.34) and a weighted-average contractual life of 8.3 years (2015: 8.3 years).
The weighted-average share price at the date of exercise for share options exercised in 2016 was € 4.23
(2015: € 19.30).
Please refer to Note 23 for the options granted to key management personnel.
13. Non-current liabilities
(a) Borrowings
dsssds
Innovation credit
Accrued interest on innovation credit
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
4,598
1,099
5,697
4,228
596
4,824
Innovation credit (“Innovatiekrediet”)
On June 1, 2012, ProQR was awarded an Innovation credit by the Dutch government, through its agency RVO
of the Ministry of Economic Affairs, for the Company’s cystic fibrosis program. Amounts were drawn under
this facility in the course of the years 2013 through 2016. The credit covers 35% of the costs incurred in
respect of the program up to an initial maximum of € 5.0 million.
The credit is interest-bearing at a rate of 10% per annum. The credit, including accrued interest, is repayable
in three installments on November 30, 2018, November 30, 2019 and November 30, 2020, depending on the
technical success of the program.
PAGE 68 / 91
Financial Statements 2016
ANNUAL REPORT 2016
The assets which are co-financed with the granted innovation credit are subject to a right of pledge for the
benefit of RVO.
(b) Finance lease liabilities
dsssds
Balance at January 1
Initial recognition new finance leases
Interest expense accrued
Payment of finance lease liabilities
Balance at December 31
Current portion at December 31
2016
€ 1,000
2015
€ 1,000
15
--
--
(15)
--
--
--
49
--
--
(34)
15
15
--
Certain of the Company’s property, plant and equipment items are subject to finance leases. These leases
relate to laboratory equipment. The net carrying amount of leased assets amounts to nil in 2016 (2015: €
48,000).
Future minimum lease payments under finance leases as at December 31 are as follows:
dsssds
2016
2015
Minimum
payments
Present value
of payments
Minimum
payments
Present value
of payments
Less than 1 year
Between 1 and 5 years
More than 5 years
--
--
--
--
--
--
15
--
--
15
--
--
The interest used for the present value of payments is 2%.
14. Current Liabilities
dsssds
Current portion finance lease liabilities
Trade payables
Social securities and other taxes
Pension premiums
Deferred income
Accrued expenses and other liabilities
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
--
328
312
13
--
6,057
6,710
15
885
235
16
144
4,191
5,486
PAGE 69 / 91
Financial Statements 2016
ANNUAL REPORT 2016
At December 31, 2015, current liabilities included deferred income resulting from receipt of the first
installment of the € 6 million grant from the European Commission (EC) under the Horizon 2020 program to
finance the clinical development of QR-010.
15. Other income
dsssds
Grant income
Rental income from property subleases
2016
€ 1,000
1,632
196
1,828
2015
€ 1,000
3,188
47
3,235
In August 2014, the Company entered into an agreement with Cystic Fibrosis Foundation Therapeutics, Inc.,
or CFFT, a subsidiary of the Cystic Fibrosis Foundation, pursuant to which CFFT agreed to provide the
Company with up to $ 3 million to support the clinical development of QR-010. The grant is recognized in
other income in the same period in which the related R&D costs are recognized.
In 2015, the European Commission (EC) through its Horizon 2020 program awarded ProQR and its academic
partners a grant of € 6 million (ProQR: € 4.4 million) to support the clinical development of QR-010 through
December 31, 2017. Horizon 2020 is one of the largest research and innovation programs in the European
Union with nearly € 80 billion in available funding for qualified projects from 2014 to 2020.
Both grants are recognized in other income in the same period in which the related R&D costs are
recognized.
16. Research and Development Costs
Research and development costs amounted to € 31,923,000 in 2016 (2015: € 23,401,000) and comprise
allocated employee costs, the costs of materials and laboratory consumables, the costs of external studies
including, amongst others, clinical studies and toxicology studies and external research, license- and IP-costs
and allocated other costs.
17. Employee Benefits
dsssds
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Equity-settled share based payments
2016
€ 1,000
10,184
1,093
764
2,454
14,495
2015
€ 1,000
7,128
596
478
1,212
9,414
Average number of employees for the period
133.4
86.1
PAGE 70 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Employees per activity at December 31 (converted to FTE):
dsssds
Research and Development
General and Administrative
December 31,
2016
December 31,
2015
100.4
32.9
133.3
72.4
27.1
99.5
Of all employees 128.3 FTE are employed in the Netherlands (2015: 94.5 FTE).
Included in the wages and salaries for 2016 is a credit of € 807,000 (2015: € 372,000) with respect to WBSO
subsidies.
18. Financial Income and Expense
dsssds
Interest income
Current accounts and deposits
Interest costs
Interest on loans and borrowings
Foreign exchange result
Net foreign exchange benefit/(loss)
19. Income Taxes
The calculation of the tax charge is as follows:
dsssds
2016
€ 1,000
2015
€ 1,000
270
501
(538)
(395)
738
470
6,065
6,171
2015
€ 1,000
2015
€ 1,000
Income tax provision based on domestic rate (25%)
9,776
5,208
Tax effect of:
Non-deductible expenses
Tax incentives
Current year losses for which no deferred tax asset was recognized
Change in unrecognized deductible temporary differences
Income tax charge
Effective tax rate
(622)
(46)
(9,045)
(63)
--
0%
(309)
136
(5,035)
--
--
0%
PAGE 71 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Due to the operating losses incurred since inception the Company has no tax provisions as of the balance
sheet date. Furthermore, no significant temporary differences exist between accounting and tax results.
Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are
uncertain. Accordingly, the Company has not yet recognized any deferred tax asset related to operating
losses. As per December 31, 2016, the Company has a total amount of € 82.9 million (2015: € 46.9 million) tax
loss carry-forwards available for offset against future taxable profits. According to current tax regulations the
first amount of the tax loss carry-forwards will expire in 2021.
20. Earnings Per Share
(a) Basic and diluted earnings per share
Basic earnings per share are calculated by dividing the result attributable to equity holders of the Company
by the weighted average number of shares outstanding during the year.
dsssds
Result attributable to equity holders of the Company (€ 1,000)
Weighted average number of shares
Basic (and diluted) earnings per share (€ per share)
2016
2015
(39,103)
(20,832)
23,346,507
23,343,262
€ (1.68)
€ (0.89)
(b) Diluted earnings per share
For the periods included in these financial statements, the share options are not included in the diluted
earnings per share calculation as the Company was loss-making in all periods. Due to the anti-dilutive nature
of the outstanding options, basic and diluted earnings per share are equal.
(c) Dividends per share
The Company did not declare dividends for any of the years presented in these financial statements.
21. Operational Leases
Since 2012, the Company is domiciled in Leiden, the Netherlands where it currently has concluded rental
agreements for laboratory space and offices. In addition, the Company has one office in the US.
The lease expenditure charged to the income statement in 2016 amounts to € 1,849,000 (2015: € 703,000).
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
dsssds
Less than 1 year
Between 1 and 5 years
More than 5 years
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
1,775
5,508
--
7,283
1,938
7,212
--
9,150
PAGE 72 / 91
Financial Statements 2016
ANNUAL REPORT 2016
The Company leases out a part of its office in the US. In 2016, total sublease income amounted to € 196,000
(2015: € 47,000), which is recorded in other income. At 31 December, the future minimum lease payments
under non-cancellable leases are receivable as follows:
dsssds
Less than 1 year
Between 1 and 5 years
More than 5 years
December 31,
2016
December 31,
2015
€ 1,000
463
--
--
463
€ 1,000
185
--
--
185
22. Commitments and Contingencies
(a) Claims
There are no claims known to management related to the activities of the Company.
(b) Patent license agreement
The Company and the General Hospital Corporation (MGH) have entered into a Patent License Agreement
pursuant to which the Company may have certain royalty obligations. The Company is also obligated to pay
MGH up to $ 700,000 in milestone payments upon the achievement of certain development and regulatory
milestones and, beginning after its first commercial sale of a product covered by the licensed patent rights, a
$ 10,000 annual license fee which is creditable against royalties due to MGH in the same calendar year. In
addition, the Company is obligated to pay MGH 2% of any net sales by the Company, its affiliates or
sublicensees on licensed products made or sold in the United States, as well as a low double-digit percentage
of any payments the Company may receive from any sublicensee anywhere in the world.
The Company has entered into various other Patent License Agreements, including those with Radboud
University Medical Center, Leiden University Medical Centre and PARI Pharma GmbH, under which the
Company is granted world-wide exclusive licenses pursuant to which the Company may have certain royalty
obligations in relation to its product candidates. Pursuant to the terms of these agreements, the Company
has made upfront payments, is obligated to make milestone payments and has to make sales-based royalty
payments after market authorization. In specific cases, the Company has the option to make a one-time
payment to buy of royalty obligations or in case the Company terminates an agreement before or after
regulatory approval of the product. The Company may terminate an agreement for any reason.
(c) Clinical support agreement
In August 2014, the Company entered into an agreement with Cystic Fibrosis Foundation Therapeutics, Inc.,
or CFFT, a subsidiary of the Cystic Fibrosis Foundation, pursuant to which CFFT agreed to provide the
Company with up to $ 3 million to support the clinical development of QR-010.
Pursuant to the terms of the agreement, the Company is obligated to make a one-time milestone payment to
CFFT of up to approximately $ 80 million, payable in three equal annual installments following the first
commercial sale of QR-010, the first of which is due within 90 days following the first commercial sale. The
Company is also obligated to make a one-time milestone payment to CFFT of up to $ 3 million if net sales of
QR-010 exceed $ 500 million in a calendar year. Lastly, the Company is obligated to make a payment to CFFT
of up to approximately $ 6 million if it transfers, sells or licenses QR-010 other than for certain clinical or
development purposes, or if the Company enters into a change of control transaction. Either CFFT or the
PAGE 73 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Company may terminate the agreement for cause, which includes the Company’s material failure to achieve
certain commercialization and development milestones. The Company’s payment obligations survive the
termination of the agreement.
(d) Research and development commitments
The Company has research and development commitments, mainly with CRO's, amounting to € 8,856,000 at
December 31, 2016 (2015: € 9,481,000). Of these obligations an amount of € 6,258,000 is due in 2017, the
remainder is due in 1 to 5 years.
23. Related-Party Transactions
Details of transactions between the Company and related parties are disclosed below.
(a) Compensation of the Supervisory Board
On June 21, 2016, Mr. James Shannon was appointed to our supervisory board. The remuneration of the
supervisory board members in 2016 is set out in the table below:
dsssds
2016
Mr. Dinko Valerio
Mr. Henri Termeer
Mr. Antoine Papiernik
Ms. Alison Lawton
Mr. Paul Baart
Mr. James Shannon
Short term
employee
benefits
Post
employment
benefits
Share-based
payment
Total
€ 1,000
€ 1,000
€ 1,000
€ 1,000
36
31
78
31
82
29
287
--
--
--
--
--
--
--
52
51
--
74
--
27
204
88
82
78
105
82
56
491
The remuneration of the supervisory board members in 2015 is set out in the table below:
dsssds
2015
Mr. Dinko Valerio
Mr. Henri Termeer
Mr. Antoine Papiernik
Ms. Alison Lawton
Mr. Paul Baart
Short term
employee
benefits
Post
employment
benefits
Share-based
payment
Total
€ 1,000
€ 1,000
€ 1,000
€ 1,000
36
34
73
31
73
247
--
--
--
--
--
--
12
11
--
48
--
71
48
45
73
79
73
318
PAGE 74 / 91
Financial Statements 2016
ANNUAL REPORT 2016
As at December 31, 2016:
Mr. Valerio holds 1,043,420 ordinary shares in the Company, as well as 56,261 options. In 2014, Mr.
Valerio was granted 64,646 options under the Option Plan to acquire depositary receipts issued for
ordinary shares at an exercise price of € 1.11 per option. Under this option grant, 32,374 options were
exercisable immediately, while the remaining 32,272 options vest in four annual equal tranches of 25%
starting for the first time as of the first anniversary of the date of grant. Mr. Valerio exercised 32,374
options on June 30, 2014, for which he received 32,374 depositary receipts issued for ordinary shares
after payment of the exercise price. These depositary receipts have been included in his total number of
ordinary shares held. In 2016, Mr. Valerio was granted 23,989 options at an average exercise price of €
6.08 per option.
Mr. Termeer holds 1,730,714 ordinary shares in the Company as well as 52,698 options. In 2014,
Mr. Termeer was granted 57,520 options under the Option Plan to acquire depositary receipts issued
for ordinary shares at an exercise price of € 1.11 per option. Under this option grant 28,811 options
were exercisable immediately, while the remaining 28,709 options vest in four annual equal tranches of
25% starting for the first time as of the first anniversary of the date of grant. Mr. Termeer exercised
28,811 options on June 30, 2014, for which he received 28,811 depositary receipts issued for ordinary
shares after payment of the total exercise price. These depositary receipts have been included in his
total number of ordinary shares. In 2016, Mr. Termeer was granted 23,989 options at an average
exercise price of € 6.08 per option.
Mr. Antoine Papiernik does not hold any shares or options in the Company. As a managing partner of
Sofinnova Partners SAS, the management company of Sofinnova Capital VII FCPR, holder of 2,769,125
ordinary shares, Mr. Papiernik may be deemed to have share voting and investment power with respect
to such shares.
Ms. Lawton holds 36,809 options. In 2014, Ms. Lawton was granted 7,850 options under the Option Plan
to acquire depositary receipts issued for ordinary shares at an exercise price of € 10.03 per option. In
2015, she was granted 4,970 options with an exercise price of € 16.10 per option. In 2016, she was
granted 23,989 options with an average exercise price of € 6.08 per option. Under these option grants
options vest in four annual equal tranches of 25% starting for the first time as of the first anniversary of
the date of grant.
Mr. Paul Baart does not hold any shares or options in the Company.
Mr. James Shannon holds 33,069 options. In 2016, he was granted 33,069 options at an exercise price of
€ 4.32 per option. Under these option grants options vest in four annual equal tranches of 25% starting
for the first time as of the first anniversary of the date of grant.
(b) Compensation of key management personnel
Our management board is supported by our officers, or senior management. The total remuneration of the
management board and senior management in 2016 amounted to € 3,038,000 with the details set out in the
PAGE 75 / 91
Financial Statements 2016
ANNUAL REPORT 2016
table below:
dsssds
Mr. D.A. de Boer
Mr. R.K. Beukema
Management Board
Senior Management
2016
Short term
employee
benefits
Post
employment
benefits
Share-based
payment
Total
€ 1,000
€ 1,000
€ 1,000
€ 1,000
429
346
775
1,020
1,795
7
13
20
48
68
391
165
556
619
1,175
827
524
1,351
1,687
3,038
1
2
Short term employee benefits includes a bonus for Mr. Daniel de Boer of € 131,000 based on goals realised in 2016.
Short term employee benefits includes a bonus for Mr. René Beukema of € 76,000 based on goals realised in 2016.
The total remuneration of the management board and senior management in 2015 amounted to € 2,420,000
with the details set out in the table below:
dsssds
2015
Mr. D.A. de Boer
Mr. R.K. Beukema
Management Board
Senior Management
Short term
employee
benefits
Post
employment
benefits
Share-based
payment
Total
€ 1,000
€ 1,000
€ 1,000
€ 1,000
3971
3132
710
943
1,653
7
13
20
27
47
164
88
252
468
720
568
414
982
1,438
2,420
1
2
Short term employee benefits includes a bonus for Mr. Daniel de Boer of € 100,000 based on goals realised in 2015.
Short term employee benefits includes a bonus for Mr. René Beukema of € 46,000 based on goals realised in 2015.
As at December 31, 2016:
Mr. de Boer holds 1,171,208 ordinary shares in the Company as well as 209,621 options. In 2014, Mr. de
Boer was awarded a total number of 55,992 options to acquire ordinary shares at € 3.04 per option. In
2015, he was awarded 23,902 options at an exercise price of € 16.10 per option. In 2016, he was
awarded 129,727 options at an exercise price of € 6.64 per option. These options vest over four years in
equal annual installments and had a remaining weighted-average contractual life of 8.5 years at
December 31, 2016.
Mr. Beukema holds 300,000 ordinary shares in the Company as well as 197,673 options. In 2014,
Mr. Beukema was awarded 30,541 options to acquire ordinary shares at € 3.04 per option. In 2015, he
PAGE 76 / 91
Financial Statements 2016
ANNUAL REPORT 2016
was awarded 8,713 options at an exercise price of € 16.10 per option. In 2016, he was awarded 50,608
options at an exercise price of € 6.64 per option. These options vest over four years in equal annual
installments and had a remaining weighted-average contractual life of 7.5 years at December 31, 2016.
ProQR does not grant any loans, advanced payments and guarantees to members of the Management and
Supervisory Board.
24. Subsequent events
On March 27, 2017, the Company announced that it appointed David M. Rodman, MD as Chief Development
Strategy Officer. David will join ProQR in April 2017 having previously served in leadership roles with Novartis
Institutes for Biomedical Research (NIBR), Vertex Pharmaceuticals, miRagen Therapeutics and Nivalis
Therapeutics. Prior to moving to industry in 2005, David had a distinguished academic career, leading the
Center for Genetic Lung Diseases at the University of Colorado and directing the Cystic Fibrosis Care,
Teaching and Research efforts at the National Jewish Medical and Research Center in Denver, Colorado.
During 12 years in industry, David has had global responsibility for driving innovation in the translation of
cutting-edge science into transformational new therapies for rare diseases including CF, pulmonary fibrosis,
pulmonary artery hypertension and severe immunologic and inflammatory diseases. At Vertex
Pharmaceuticals he directed early- and late-stage CF clinical development programs including Kalydeco®,
Orkambi® and VX-661. David received a BA in Economics from Haverford College in 1976, an MD from the
University of Pennsylvania in 1980 and completed training in Internal Medicine, Pulmonary and Critical Care
Medicine at the University of Colorado. He has served as an advisor to the National Institutes of Health, was
elected to the American Society for Clinical Investigation and is a Fellow of the American Heart Association.
Company balance sheet at December 31, 2016
PAGE 77 / 91
Financial Statements 2016
ANNUAL REPORT 2016
(Before appropriation of result)
dsssds
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Financial fixed assets
Current assets
Social securities and other taxes
Prepayments and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Shareholders' equity
Share capital
Share premium reserve
Equity settled employee benefits reserve
Translation reserve
Accumulated deficit
Unappropriated result
LIABILITIES
Provisions
Non-current liabilities
Borrowings
Current liabilities
Trade payables
Social securities and other taxes
Pension premiums
Deferred income
Other current liabilities
Note
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
--
--
0
0
395
12,217
59,042
71,654
--
--
0
0
774
1,638
94,862
97,274
71,654
97,274
934
123,597
4,343
(15)
(36,630)
(39,103)
53,136
934
123,595
1,899
1
(15,798)
(20,832)
89,799
12,175
1,922
5,697
5,697
--
106
--
--
540
646
4,824
4,824
--
38
--
144
547
729
27
28
29
30
31
32
13
33
TOTAL EQUITY AND LIABILITIES
71,654
97,274
The accompanying notes are an integral part of these financial statements.
PAGE 78 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Company income statement for the year ended December 31, 2016
dsssds
Note
Share in results of participating interests, after taxation
27
Other result after taxation
Net result for the year
The accompanying notes are an integral part of these financial statements.
2016
€ 1,000
(37,537)
(1,566)
2015
€ 1,000
(14,104)
(6,728)
(39,103)
(20,832)
PAGE 79 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Notes to the Company financial statements for the year ended December 31, 2016
25. General
The company financial statements are part of the 2016 financial statements of ProQR Therapeutics N.V. (the
‘Company’) and have been prepared in accordance with the legal requirements of Part 9, Book 2 of the
Netherlands Civil Code.
With reference to the income statement of the company, use has been made of the exemption pursuant to
Section 402 of Book 2 of the Netherlands Civil Code.
26. Principles for the measurement of assets and liabilities and the determination of the
result
For setting the principles for the recognition and measurement of assets and liabilities and determination of
the result for its company financial statements, the Company makes use of the option provided in section
2:362(8) of the Netherlands Civil Code. This means that the principles for the recognition and measurement
of assets and liabilities and determination of the result (hereinafter referred to as principles for recognition
and measurement) of the company financial statements of the Company are the same as those applied for
the consolidated IFRS financial statements. See page 51 for a description of these principles.
Participating interests in group companies
Participating interests in group companies are accounted for in the company financial statements according
to the equity method. If the net asset value is negative, the participating interest is valued at nil. This likewise
takes into account other long-term interests that should effectively be considered part of the net investment
in the participating interest. If the company fully or partly guarantees the liabilities of the associated company
concerned, or has the effective obligation respectively to enable the associated company to pay its (share of
the) liabilities, a provision is formed. Upon determining this provision, provisions for doubtful debts already
deducted from the receivables from the associated company are taken into account. Refer to the basis of
consolidation accounting policy in the consolidated financial statements.
Result of participating interests
The share in the result of participating interests consists of the share of the Company in the result of these
participating interests. In so far as gains or losses on transactions involving the transfer of assets and
liabilities between the Company and its participating interests or between participating interests themselves
can be considered unrealised, they have not been recognised.
27. Financial fixed assets
dsssds
Participating interests in group companies
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
0
0
0
0
PAGE 80 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Movements in financial fixed assets were as follows:
dsssds
Net asset value as of January 1
Share in results of participating interests, after taxation
Exchange differences
Change in provisions for negative net asset value
Net asset value as of December 31
Participating
interests
in group
companies
Total
€ 1,000
€ 1,000
0
37,537
(16)
(37,553)
0
0
37,537
(16)
(37,553)
0
At December 31, 2016, the Company, having its statutory seat in Leiden, the Netherlands, is the ultimate
parent company of the following consolidated participating interests:
Name
ProQR Therapeutics Holding B.V.
ProQR Therapeutics I B.V.
ProQR Therapeutics II B.V.
ProQR Therapeutics III B.V.
ProQR Therapeutics IV B.V.
ProQR Therapeutics VI B.V.
ProQR Therapeutics VII B.V.
ProQR Therapeutics VIII B.V.
ProQR Therapeutics IX B.V.
ProQR Therapeutics I Inc.
Location
Share in issued capital
Leiden, the Netherlands
Leiden, the Netherlands
Leiden, the Netherlands
Leiden, the Netherlands
Leiden, the Netherlands
Leiden, the Netherlands
Leiden, the Netherlands
Leiden, the Netherlands
Leiden, the Netherlands
Delaware, United States
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
For details on the accounts receivable from participating interests and the other receivables, reference is
made to note 29.
28. Social Security and Other Taxes
dsssds
Value added tax
All receivables are considered short-term and due within one year.
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
395
395
774
774
PAGE 81 / 91
Financial Statements 2016
ANNUAL REPORT 2016
29. Prepayments and Other Receivables
dsssds
Accounts receivable from group companies
Prepayments
Other receivables
All receivables are considered short-term and due within one year.
30. Cash and Cash Equivalents
dsssds
Cash at banks
Bank deposits
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
10,854
235
1,128
12,217
855
270
513
1,638
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
56,196
2,846
59,042
94,862
--
94,862
The cash at banks is at full disposal of the Company. Bank deposits are convertible into cash upon request of
the Company.
PAGE 82 / 91
Financial Statements 2016
ANNUAL REPORT 2016
31. Shareholders’ equity
Share
Capital
Share
Premium
Equity
Settled
Employee
Benefit
Reserve
Trans-
lation
Reserve
Accumu-
lated
Deficit
Unappro-
priated
result
Total
Equity
€ 1,000
€ 1,000
€ 1,000
€ 1,000
€ 1,000
€ 1,000
€ 1,000
Balance at January 1, 2015
934
123,581
687
Retained result
Foreign exchange differences
Recognition of share-based
payments
Share options exercised
Result for the year
--
--
--
0
--
--
--
--
14
--
--
--
1,212
--
--
Balance at December 31,
2015
934
123,595
1,899
Retained result
Foreign exchange differences
Recognition of share-based
payments
Share options exercised
Result for the year
Balance at December 31,
2016
--
--
--
0
--
--
--
--
2
--
--
--
2,454
--
--
--
--
1
--
--
--
1
--
(16)
--
--
--
(3,671)
(12,127)
109,404
(12,127)
12,127
(20,832)
(20,832)
(15,798)
(20,832)
89,799
(20,832)
20,832
--
1
1,212
14
--
(16)
2,454
2
--
--
--
--
--
--
--
--
--
--
--
--
--
--
(39,103)
(39,103)
934
123,597
4,353
(15)
(36,630)
(39,103)
53,136
The 2015 result was added to the accumulated deficit in accordance with the resolution of the Annual
General Meeting of shareholders. At the upcoming Annual General Meeting of shareholders, it will be
proposed to add the 2016 result to the accumulated deficit. For more details we refer to note 12 to the
consolidated financial statements.
32. Provisions
dsssds
December 31,
2016
December 31,
2015
Provision for negative equity group companies
€ 1,000
€ 1,000
Balance at January 1
Provisions made during the year
Balance at December 31
1,922
10,253
--
1,922
12,175
1,922
33. Current Liabilities
dsssds
Trade payables
Social securities and other taxes
Pension premiums
Deferred income
Accrued expenses and other liabilities
PAGE 83 / 91
Financial Statements 2016
ANNUAL REPORT 2016
December 31,
2016
December 31,
2015
€ 1,000
€ 1,000
--
106
--
--
540
646
--
38
--
144
547
729
34. Commitments and Contingencies
(a) Claims
There are no claims known to management related to the activities of the Company.
(b) Clinical support agreement
In August 2014, the Company entered into an agreement with Cystic Fibrosis Foundation Therapeutics, Inc.,
or CFFT, a subsidiary of the Cystic Fibrosis Foundation, pursuant to which CFFT agreed to provide the
Company with up to $ 3 million to support the clinical development of QR-010.
Pursuant to the terms of the agreement, the Company is obligated to make a one-time milestone payment to
CFFT of up to approximately $ 80 million, payable in three equal annual installments following the first
commercial sale of QR-010, the first of which is due within 90 days following the first commercial sale. The
Company is also obligated to make a one-time milestone payment to CFFT of up to $ 3 million if net sales of
QR-010 exceed $ 500 million in a calendar year. Lastly, the Company is obligated to make a payment to CFFT
of up to approximately $ 6 million if it transfers, sells or licenses QR-010 other than for certain clinical or
development purposes, or if the Company enters into a change of control transaction. Either CFFT or the
Company may terminate the agreement for cause, which includes the Company’s material failure to achieve
certain commercialization and development milestones. The Company’s payment obligations survive the
termination of the agreement.
(c) Several liability and guarantees
The Company has issued declarations of joint and several liabilities for debts arising from the actions of
Dutch consolidated participating interests, as meant in article 2:403 of the Netherlands Civil Code.
The Company constitutes a tax entity with its Dutch subsidiaries for corporate income tax purposes; the
standard conditions prescribe that all companies of the tax entity are jointly and severally liable for the
corporate income tax payable.
PAGE 84 / 91
Financial Statements 2016
ANNUAL REPORT 2016
35. Auditor fees
The fees for services provided by our external auditor, Deloitte Accountants B.V., are specified below for each
of the financial years indicated:
dsssds
Audit fees
Audit-related fees
Tax fees
All other fees
Audit fees
2016
€ 1,000
2015
€ 1,000
165
39
--
--
204
193
--
--
--
193
Consist of aggregate fees for professional services provided in connection with the annual audit of our
financial statements, the review of our quarterly financial statements, consultations on accounting matters
directly related to the audit, and comfort letters, consents and assistance with and review of documents filed
with the SEC.
PAGE 85 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Signing of the Annual Report
Leiden, March 31, 2017,
D.A. de Boer
D. Valerio
R.K. Beukema
H.A. Termeer
A.B. Papiernik
A. Lawton
P.R. Baart
J.S.S. Shannon (as of June 21, 2016)
PAGE 86 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Other information
Independent auditor’s report
Reference is made to the independent auditor’s report as included hereinafter.
Statutory arrangement concerning the appropriation of the result
In Article 21 of the Company statutory regulations the following has been presented concerning the
appropriation of result:
1. The profit is at the free disposal of the General Meeting of Shareholders.
2. The Company may only distribute profits to shareholders and other recipients to distributable profits to
the extent that the equity exceeds the paid-up capital plus the reserves required by law.
3. Distribution of profits shall take place after adoption of the annual accounts from which it becomes clear
that distribution is permissible.
4. When calculating the distribution of profits shares held by the Company shall be disregarded, unless this
shares has been encumbered with usufruct or right of pledge or certificates thereof are issued as a result of
which the entitlement to profits accrue to the usufructuary, pledgee or holder of the certificates.
5. Certificates held by the Company or whereon the Company holds limited rights as a result of which the
Company is entitled to distribution of profits shall also be disregarded when calculating the distribution of
profits.
6. The Company may make interim distributions, only if the requirements in paragraph 2 are met.
PAGE 87 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Independent auditor’s report
To the Shareholders and the Supervisory Board of ProQR Therapeutics N.V.
Report on the financial statements 2016
Our Opinion
We have audited the financial statements 2016 of ProQR Therapeutics N.V., based in Leiden, the Netherlands.
The financial statements include the consolidated financial statements and the company financial
statements.
In our opinion:
The consolidated financial statements give a true and fair view of the financial position of ProQR
Therapeutics N.V. as at December 31, 2016, and of its result and its cash flows for 2016 in accordance
with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with
Part 9 of Book 2 of the Dutch Civil Code.
The company financial statements give a true and fair view of the financial position of ProQR
Therapeutics N.V. as at December 31, 2016, and of its result for 2016 in accordance with Part 9 of Book
2 of the Dutch Civil Code.
The consolidated financial statements comprise:
The consolidated statement of financial position as at December 31, 2016.
The following statements for 2016: the consolidated statement of profit or loss and comprehensive
income, changes in equity and cash flows.
The notes comprising a summary of the significant accounting policies and other explanatory
information.
The company financial statements comprise:
The company balance sheet as at December 31, 2016.
The company income statement for 2016.
The notes comprising a summary of the accounting policies and other explanatory information.
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our
responsibilities under those standards are further described in the “Our responsibilities for the audit of the
financial statements” section of our report.
We are independent of ProQR Therapeutics N.V. in accordance with the Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten (ViO) and other relevant independence
regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en
beroepsregels accountants (VGBA).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
PAGE 88 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Materiality
Based on our professional judgement we determined the materiality for the financial statements as a whole
at EUR 2.5 million. The materiality is based on 7.5% of normalized loss before tax. We have also taken into
account misstatements and/or possible misstatements that in our opinion are material for the users of the
financial statements for qualitative reasons.
We agreed with the Supervisory Board that misstatements in excess of EUR 125,000, which are identified
during the audit, would be reported to them, as well as smaller misstatements that in our view must be
reported on qualitative grounds.
Scope of the group audit
ProQR Therapeutics N.V. is at the head of a group of entities. The financial information of this group is
included in the consolidated financial statements of ProQR Therapeutics N.V..
The financial administration for all group entities is centralized in the Netherlands. Consequently, we have
centralized our audit approach and we have been able to obtain sufficient and appropriate audit evidence
about the group’s financial information to provide an opinion about the financial statements.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements. We have communicated the key audit matters to the Supervisory Board.
The key audit matters are not a comprehensive reflection of all matters discussed.
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.
Research and development expenses
The total research and development expenses for the year 2016 amounts to EUR 31.9 million. These research
and development expenses consists of payroll costs of employees as well as outsourced research and
development activities with third party suppliers. The research and development activities with these
suppliers are concluded in master service agreements and statements of work. These outsourced research
and development activities are typically performed over a period of time and allocation of expenses in each
reporting period based on the progress of the work involves judgement. Our audit procedures included,
amongst others, the review of the agreements with suppliers and the related accounting evaluation as well as
the timing of expenses recognized.
Significant contracts
ProQR Therapeutics N.V. concluded several significant contracts, amongst others, the agreements with
European Commission in relation to H2020 grant and the above mentioned research and development
agreements. These contracts contain terms and conditions that may require complex accounting and/or
significant long-term commitments that require disclosure in the financial statements. Our audit procedures
included, amongst others, the review of the contract register, review of the contract terms and related
accounting evaluation of the impact on the financial statements including disclosures of the commitments.
Cash and cash equivalents
The total cash and cash equivalents as per December 31, 2016 amounts to EUR 59.2 million. We focused on
this area as the cash and cash equivalents are material to the financial statements. We reconciled the bank
balances to bank confirmations, recalculated the foreign exchange result on these balances and reviewed the
bank confirmations and underlying agreements for deposit balances to assess the presentation and
disclosure in the financial statements.
PAGE 89 / 91
Financial Statements 2016
ANNUAL REPORT 2016
Report on the other information included in the annual accounts
In addition to the financial statements and our auditor’s report, the annual accounts contain other
information that consists of:
Management Board's Report.
Other Information as required by Part 9 of Book 2 of the Dutch Civil Code.
Based on the following procedures performed, we conclude that the other information:
Is consistent with the financial statements and does not contain material misstatements.
Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained through our audit
of the financial statements or otherwise, we have considered whether the other information contains
material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code
and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of
those performed in our audit of the financial statements.
Management is responsible for the preparation of other information, including the Management Board's
Report in accordance with Part 9 of Book 2 of the Dutch Civil Code, and the other information as required by
Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
Engagement
We were engaged by the Supervisory Board as auditor of ProQR Therapeutics N.V. as of the audit for year
2012 and have operated as statutory auditor ever since that date.
Description of responsibilities for the financial statements
Responsibilities of management and the Supervisory Board for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is
responsible for such internal control as management determines is necessary to enable the preparation of
the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, management is responsible for assessing the
company’s ability to continue as a going concern. Based on the financial reporting framework mentioned,
management should prepare the financial statements using the going concern basis of accounting unless
management either intends to liquidate the company or to cease operations, or has no realistic alternative
but to do so.
Management should disclose events and circumstances that may cast significant doubt on the company’s
ability to continue as a going concern in the financial statements.
PAGE 90 / 91
Financial Statements 2016
ANNUAL REPORT 2016
The Supervisory Board is responsible for overseeing the company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and
appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not
have detected all material errors and fraud.
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. The materiality affects the nature, timing and extent of our audit procedures and the
evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism throughout the audit,
in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our
audit included e.g.:
Identifying and assessing the risks of material misstatement of the financial statements, whether due to
fraud or error, designing and performing audit procedures responsive to those risks, and obtaining
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.
Obtaining 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 company’s internal control.
Evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Concluding on the appropriateness of management’s 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 company’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 company to cease to continue as a going
concern.
Evaluating the overall presentation, structure and content of the financial statements, including the
disclosures.
Evaluating whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and
performing the group audit. In this respect we have determined the nature and extent of the audit
procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group
entities or operations. On this basis, we selected group entities for which an audit or review had to be carried
out on the complete set of financial information or specific items.
PAGE 91 / 91
Financial Statements 2016
ANNUAL REPORT 2016
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant findings in internal control that we identify
during our audit.
We provide the Supervisory Board 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 Supervisory Board, 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, not communicating the matter is in
the public interest.
Amsterdam, March 31, 2017
Deloitte Accountants B.V.
P.J.M.A. van de Goor
ANNUAL
REPORT
2016
Acting in the interest of patients
ProQR Therapeutics N.V.
T : +31 88 166 7000
W : www.proqr.com
E : info@proqr.com
Headquarters Leiden:
Zernikedreef 9, 2333 CK Leiden,
the Netherlands
Office Palo Alto:
543 Bryant Street, Palo Alto,
CA 94301, USA