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Condensed Consolidated Statement of Financial Position
(after appropriation of result for the period)
| Note | September 30, 2016 | December 31, 2015 | ||||||||||
| (euros in thousands) | ||||||||||||
| Non-current assets | ||||||||||||
| Property, plant and equipment | 442 | 325 | ||||||||||
| Intangible assets | 389 | 435 | ||||||||||
| Restricted cash | 181 | 218 | ||||||||||
| Total non-current assets | 1,012 | 978 | ||||||||||
| Current assets | ||||||||||||
| Trade and other receivables | 5 | 1,713 | 1,665 | |||||||||
| Cash and cash equivalents | 66,274 | 32,851 | ||||||||||
| Total current assets | 67,987 | 34,516 | ||||||||||
| Total assets | 68,999 | 35,494 | ||||||||||
| Shareholders equity | ||||||||||||
| Issued and paid-in capital | 1,448 | 775 | ||||||||||
| Share premium account | 139,878 | 90,909 | ||||||||||
| Accumulated loss | (77,588 | ) | (63,382 | ) | ||||||||
| Total equity | 9 | 63,738 | 28,302 | |||||||||
| Non-current liabilities | ||||||||||||
| Borrowings | 7 | 375 | 486 | |||||||||
| Deferred revenue | 8 | 223 | 390 | |||||||||
| Current liabilities | ||||||||||||
| Borrowings | 167 | 167 | ||||||||||
| Trade payables | 1,984 | 2,419 | ||||||||||
| Taxes and social security liabilities | 59 | 142 | ||||||||||
| Deferred revenue | 8 | 223 | 223 | |||||||||
| Other liabilities and accruals | 6 | 2,230 | 3,365 | |||||||||
| Total current liabilities | 4,663 | 6,316 | ||||||||||
| Total liabilities | 5,261 | 7,192 | ||||||||||
| Total equity and liabilities | 68,999 | 35,494 |
Unaudited Condensed Consolidated Statement of Profit or Loss and Comprehensive Loss
| Note | Three month period ended September 30, | |||||||||||
| 2016 | 2015 | |||||||||||
| (euros in thousands, except per share data) | ||||||||||||
| Revenue | 10 | 1,182 | 341 | |||||||||
| Research and development costs | 11 | (4,416 | ) | (4,272 | ) | |||||||
| Management and administration costs | 11 | (400 | ) | (59 | ) | |||||||
| Other expenses | 11 | (1,326 | ) | (1,993 | ) | |||||||
| Total operating expenses | (6,142 | ) | (6,324 | ) | ||||||||
| Operating result | (4,960 | ) | (5,983 | ) | ||||||||
| Finance income | 25 | 13 | ||||||||||
| Finance costs | (10 | ) | (169 | ) | ||||||||
| Total finance income / (expenses) | 15 | (156 | ) | |||||||||
| Result before tax | (4,945 | ) | (6,139 | ) | ||||||||
| Income tax expense | ||||||||||||
| Result after taxation | (4,945 | ) | (6,139 | ) | ||||||||
| Other comprehensive income | ||||||||||||
| Exchange differences on the translation of foreign operations | 3 | |||||||||||
| Total other comprehensive loss for the period | 3 | |||||||||||
| Total comprehensive loss for the period | (4,942 | ) | (6,139 | ) | ||||||||
| Basic (and diluted) loss per share* | (0.31 | ) | (0.74 | ) |
Unaudited Condensed Consolidated Statement of Profit or Loss and Comprehensive Loss
| Note | Nine month period ended September 30, | |||||||||||
| 2016 | 2015 | |||||||||||
| (euros in thousands, except per share data) | ||||||||||||
| Revenue | 10 | 3,127 | 1,604 | |||||||||
| Research and development costs | 11 | (12,723 | ) | (11,506 | ) | |||||||
| Management and administration costs | 11 | (1,135 | ) | (400 | ) | |||||||
| Other expenses | 11 | (4,603 | ) | (6,063 | ) | |||||||
| Total operating expenses | (18,461 | ) | (17,969 | ) | ||||||||
| Operating result | (15,334 | ) | (16,364 | ) | ||||||||
| Finance income | 74 | 14 | ||||||||||
| Finance costs | (21 | ) | (187 | ) | ||||||||
| Total finance income / (expenses) | 53 | (173 | ) | |||||||||
| Result before tax | (15,281 | ) | (16,537 | ) | ||||||||
| Income tax expense | ||||||||||||
| Result after taxation | (15,281 | ) | (16,537 | ) | ||||||||
| Other comprehensive income | ||||||||||||
| Exchange differences on the translation of foreign operations | 3 | |||||||||||
| Total other comprehensive loss for the period | 3 | |||||||||||
| Total comprehensive loss for the period | (15,278 | ) | (16,537 | ) | ||||||||
| Basic (and diluted) loss per share | (1.24 | ) | (3.34 | ) |
The results for the period and the comprehensive loss for the period are fully attributable to the owners of the Company.
Unaudited Condensed Consolidated Statement of Changes in Equity
| (euros in thousands) | Note | Common share capital | Class A Pref. share capital | Class B Pref. share capital | Class C Pref. share capital | Common share premium | Class A Pref. share premium | Class B Pref. share premium | Class C Pref. share premium | Accumul ated loss | Total equity | |||||||||||||||||||||||||||||||||
| Balance at January 1, 2015 | 30 | 21 | 231 | 1,564 | 1,334 | 34,026 | (40,765 | ) | (3,559 | ) | ||||||||||||||||||||||||||||||||||
| Result | (16,537 | ) | (16,537 | ) | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | (16,537 | ) | (16,537 | ) | ||||||||||||||||||||||||||||||||||||||||
| Transactions with owners of the Company: | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares (net) | 9 | 120 | 373 | 4,866 | 49,180 | 54,539 | ||||||||||||||||||||||||||||||||||||||
| Equity settled shared-based payments | 12 | 249 | 249 | |||||||||||||||||||||||||||||||||||||||||
| Total contributions by and distributions to owners of the Company | 120 | 373 | 4,866 | 49,180 | 249 | 54,788 | ||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2015 | 30 | 21 | 351 | 373 | 1,564 | 1,334 | 38,892 | 49,180 | (57,053 | ) | 34,692 | |||||||||||||||||||||||||||||||||
| Balance at January 1, 2016 | 30 | 21 | 351 | 373 | 1,564 | 1,334 | 38,906 | 49,105 | (63,382 | ) | 28,302 | |||||||||||||||||||||||||||||||||
| Result | (15,281 | ) | (15,281 | ) | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | 3 | 3 | ||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | (15,278 | ) | (15,278 | ) | ||||||||||||||||||||||||||||||||||||||||
| Transactions with owners of the Company: | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares (net) | 9 | 673 | 50,478 | 51,151 | ||||||||||||||||||||||||||||||||||||||||
| IPO Expenses | (1,509 | ) | (1,509 | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion preference shares | 9 | 745 | (21 | ) | (351 | ) | (373 | ) | 89,345 | (1,334 | ) | (38,906 | ) | (49,105 | ) | |||||||||||||||||||||||||||||
| Equity settled shared-based payments | 12 | 1,072 | 1,072 | |||||||||||||||||||||||||||||||||||||||||
| Total contributions by and distributions to owners of the Company | 1,418 | (21 | ) | (351 | ) | (373 | ) | 138,314 | (1,334 | ) | (38,906 | ) | (49,105 | ) | 1,072 | 50,714 | ||||||||||||||||||||||||||||
| Balance at September 30, 2016 | 1,448 | 139,878 | (77,588 | ) | 63,738 |
Unaudited Condensed Consolidated Statement of Cash flows
| Nine month period ended September 30, | ||||||||||||
| 2016 | 2015 | |||||||||||
| (euros in thousands) | ||||||||||||
| Cash flows from operating activities | ||||||||||||
| Result after taxation | (15,281 | ) | (16,537 | ) | ||||||||
| Adjustments for: | ||||||||||||
| Depreciation and amortization | 161 | 145 | ||||||||||
| Share option expenses | 1,072 | 249 | ||||||||||
| Net finance (income) costs | (64 | ) | 172 | |||||||||
| (14,112 | ) | (15,971 | ) | |||||||||
| Changes in working capital: | ||||||||||||
| Trade and other receivables | (951 | ) | 459 | |||||||||
| Trade payables | (435 | ) | 211 | |||||||||
| Other liabilities and accruals | (1,135 | ) | 73 | |||||||||
| Deferred revenue | (167 | ) | (167 | ) | ||||||||
| Taxes and social security liabilities | (83 | ) | (12 | ) | ||||||||
| Cash used in operations | (16,883 | ) | (15,406 | ) | ||||||||
| Interest paid | (16 | ) | (187 | ) | ||||||||
| Tax paid | ||||||||||||
| Net cash used in operating activities | (16,899 | ) | (15,594 | ) | ||||||||
| Cash flow from investing activities | ||||||||||||
| Acquisition of property, plant and equipment | (232 | ) | (32 | ) | ||||||||
| Interest received | 80 | 14 | ||||||||||
| Net cash used in investing activities | (152 | ) | (18 | ) | ||||||||
| Cash flow from financing activities | ||||||||||||
| Proceeds from issuing shares, net | 9 | 50,545 | 45,984 | |||||||||
| Proceeds from borrowings | 8,000 | |||||||||||
| Repayment of borrowings | (111 | ) | (110 | ) | ||||||||
| Movement in restricted cash | 37 | 37 | ||||||||||
| Net cash from financing activities | 50,471 | 53,910 | ||||||||||
| Net (decrease)/increase in cash and cash equivalents | 33,420 | 38,299 | ||||||||||
| Cash and cash equivalents as at January 1 | 32,851 | 1,568 | ||||||||||
| Effects of exchange rate changes on cash and cash equivalents | 3 | |||||||||||
| Cash and cash equivalents as at September 30 | 66,274 | 39,867 |
Notes to the Unaudited Condensed Consolidated Financial Statements
Merus N.V. is a clinical-stage immuno-oncology company developing innovative
bispecific antibody therapeutics, headquartered in Utrecht, the Netherlands. Merus US, Inc. is a wholly-owned subsidiary of Merus N.V. located in Boston, Massachusetts, United States. These unaudited condensed consolidated interim financial
statements as at and for the three month and nine month period ended 30 September 2016 comprise Merus N.V. and Merus US, Inc. (together, the Company ).
On 24 May 2016, Merus N.V. closed its initial public offering of 5,500,000 common shares and, upon the underwriters exercise of their option to
purchase additional shares on 26 May 2016, issued an additional 639,926 of its common shares, at a price to the public of US$10.00 per share (the IPO ). Net proceeds to Merus N.V. after deducting underwriting discounts and
commissions and offering expenses were US$53.3 million. On 19 May 2016, Merus N.V. s common shares were listed on The NASDAQ Global Market ( NASDAQ ). In connection with the IPO, Merus N.V. s legal structure under Dutch law
was changed from a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) to a public company with limited liability (naamloze vennootschap). In addition, in connection with the IPO, all of Merus
N.V. s preferred shares converted into common shares.
Merus N.V. was incorporated in the Netherlands, with its statutory seat in Utrecht. In
connection with becoming a public company, on 19 May 2016, Merus N.V. s name changed from Merus B.V. to Merus N.V. The address of Merus N.V. s registered office is Padualaan 8, 3584CH Utrecht, the Netherlands.
These unaudited interim condensed consolidated financial statements
(the interim financial statements ) have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board. Certain information and
disclosures normally included in financial statements prepared in accordance with International Financial Reporting Standards ( IFRS ) have been condensed or omitted. Accordingly, these interim financial statements should be read in
conjunction with the Company s annual financial statements for the year ended 31 December 2015. In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for a fair presentation have been
included in the interim financial statements.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment on the process of applying the Company s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are
significant to these interim financial statements are disclosed in Note 4. The results of operations for the nine month period ended 30 September 2016 are not necessarily indicative of operations to be expected for the full fiscal year ending
Items included in each of the group s entities are measured using the currency of the primary economic
environment in which the entity operates ( the functional currency ). The interim financial statements are presented in euros, which is Merus N.V. s functional and presentation currency. All amounts are rounded to the nearest
thousands of euros, except where otherwise indicated.
The Company s financial results have varied substantially, and are expected to continue to
vary, from period to period. The Company believes that its ordinary activities are not linked to any particular seasonal factors per International Accounting Standard 34.16.
The Company operates in one reportable segment, which comprises the discovery and development of innovative bispecific therapeutics.
Except as otherwise indicated,
the accounting policies adopted in the preparation of the interim financial statements are consistent with those applied in the preparation of the Company s annual financial statements for the year ended 31 December 2015. A number of new
standards, amendments to standards and interpretations will be effective for periods beginning on or after 1 January 2018 or 2019 and may be relevant to the Company. The Company does not plan to adopt new standards early.
In the application of the Company s accounting
policies, management is required to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses that are not readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively. No changes were identified compared to previous financial statements.
The following are the critical judgments and assumptions that management has made in the process of applying the Company s accounting policies and that
have the most significant effect on the amounts recognized in the interim financial statements.
(a) Equity settled share-based payments
Share options granted to employees and consultants providing similar services are measured at the grant date fair value of the equity instruments granted. The
grant date fair value is determined through the use of an option-pricing model considering the following variables:
For the Company s share option plans,
management s judgment is that the Black-Scholes valuation formula and the binomial option pricing model are the most appropriate methods for determining the fair value of the Company s share options considering the terms and conditions
attached to the grants made and to reflect exercise behaviour. Since the Company was not listed on a national securities exchange until 19 May 2016, there was no published share price information available until 19 May 2016, for the nine
month period ended 30 September 2016. Consequently, the Company estimated the fair value of its shares and the expected volatility of that share value for the period up to 19 May 2016. Since 19 May 2016, the Company uses the public
share information as a basis to determine the current value of the underlying shares.
The result of the share option valuations and the related
compensation expense that is recognized for the respective vesting periods during which services are received, is dependent on the model and input parameters used. Even though management considers the fair values reasonable and defensible based on
the methodologies applied and the information available, others might apply a different fair value for the Company s share options.
Deferred tax assets in
respect of tax losses have not been recognized, because the Company has no history of generating taxable profits and at the balance sheet date, there is no convincing evidence that sufficient taxable profit will be available in the foreseeable
future against which the tax losses can be utilized.
(c) Capitalization of development costs
The criteria for capitalization of development costs have been considered by management and determined not to have been met in the nine month period ended
30 September 2016. Therefore, all development expenditures relating to internally generated intangible assets in the nine month period ended 30 September 2016 were expensed as incurred.
(d) Accounting for upfront license fees
The Company entered into a research and license agreement with ONO Pharmaceuticals Co., Ltd ( ONO ) in April 2014. In connection with this
arrangement, the Company received an upfront fee, which relates to the integrated package of deliverables under the contract (one single performance obligation). The applicable period over which to recognize the upfront payment is a significant
judgment. Revenue related to this upfront fee is deferred and amortized on a straight-line basis over the contract period, as that is the period over which the Company provides its integrated service activities to ONO.
(e) Treatment of expenses relating to an equity transaction
The Company incurred costs, relating to the preparation of the IPO. The costs of the IPO, which involved both issuing new common shares and listing on NASDAQ,
have been accounted for as follows:
During the year ended
31 December 2015 and the nine month period ended 30 September 2016, the Company suffered losses from its operations, which further weakened the shareholders equity (not considering the impact of the IPO).
The Company expects to incur significant expenses and operating losses for the foreseeable future as its bispecific antibody candidates advance from discovery
through preclinical development and into clinical trials, and it seeks regulatory approval and pursues commercialization of any approved bispecific antibody candidate. In addition, the Company may incur expenses in connection with the licensing or
acquisition of additional bispecific antibody candidates.
As a result, the Company will need additional financing to support its continuing operations.
Until the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through public equity or debt financings or other sources, which may include collaborations with third parties. Adequate
additional financing may not be available to the Company on acceptable terms, or at all. The Company s inability to raise capital as and when needed would have a negative impact on the financial condition and ability to pursue its business
strategy. The Company will need to generate significant revenue to achieve profitability and may never do so.
The Company expects that its existing cash and cash equivalents, together with funds raised from the IPO which
closed in May 2016, will enable the Company to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the date of these interim financial statements.
(g) Foreign currency translation
currency transactions are translated using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at the exchange rate at the reporting date are generally recognized in profit or loss.
The results and financial
position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
All trade and other receivables are short-term and due within one year.
| September 30, 2016 | December 31, 2015 | |||||||
| (euros in thousands) | ||||||||
| Trade receivable | 94 | |||||||
| Grant receivable | 744 | |||||||
| Taxation and social security premiums | 327 | 296 | ||||||
| Prepaid general expenses | 475 | 500 | ||||||
| Prepaid IPO costs | 814 | |||||||
| Interest receivable | 32 | 45 | ||||||
| Other receivables | 41 | 10 | ||||||
| 1,713 | 1,665 |
The grant receivable relates to the final payment of the FP7 grant from the European Commission granted to the Company in May
2013. The final payment will be received for the full amount after the closing of the grant period in November 2016.
All amounts are short-term and payable within one year.
| September 30, 2016 | December 31, 2015 | |||||||
| (euros in thousands) | ||||||||
| Accrued auditor s fee | 304 | 335 | ||||||
| Accrual for holiday expenses | 37 | 50 | ||||||
| Personnel | 99 | 141 | ||||||
| R&D studies | 742 | 741 | ||||||
| IP Legal fee | 191 | 170 | ||||||
| Bonuses | 522 | 391 | ||||||
| Subsidy advance received | 207 | 1,294 | ||||||
| Other accruals | 128 | 243 | ||||||
| 2,230 | 3,365 |
The Company entered into a financing agreement with Rabobank Utrechtse Heuvelrug U.A.
( Rabobank ) on 29 December 2005, which provided for total borrowings of 1.5 million for the financing of its business activities. The duration of this agreement is 12 years.
Under the agreement, the loans are to be repaid in monthly instalments of 14 thousand, beginning on 31 January 2009. Repayments were deferred
in January 2010 for a period of two years. Repayment recommenced in January 2012. The loans bear interest at an annual rate equal to 4.45% and were fixed until 1 April 2016. From that date the interest rate has been fixed at 3.55% until
In connection with the financing agreement, the following securities have been issued:
The pledged amount decreases in relation to the outstanding balance. At 30 September 2016, an amount of 181 thousand (at 30 September
2015: 236 thousand) related to the abovementioned pledge, has been included as non-current assets on the balance sheet.
in the Company s borrowings with Rabobank were as follows: