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Condensed Consolidated Statement of Financial Position
(after appropriation of result for the period)
| Notes | June 30, 2017 | December 31, 2016 | ||||||||||
| (euros in thousands) | ||||||||||||
| Non-current assets | ||||||||||||
| Property, plant and equipment | 1,057 | 648 | ||||||||||
| Intangible assets | 343 | 374 | ||||||||||
| Restricted cash | 167 | |||||||||||
| Other assets | 109 | 109 | ||||||||||
| 1,509 | 1,298 | |||||||||||
| Current assets | ||||||||||||
| Financial asset | 5 | 11,847 | ||||||||||
| Taxes and social security receivables | 6 | 2,024 | ||||||||||
| Trade receivables and other current assets | 7 | 4,308 | 2,248 | |||||||||
| Cash and cash equivalents | 2 | 215,788 | 56,917 | |||||||||
| 222,120 | 71,012 | |||||||||||
| Total assets | 223,629 | 72,310 | ||||||||||
| Shareholders equity | 11 | |||||||||||
| Issued and paid-in capital | 1,746 | 1,448 | ||||||||||
| Share premium account | 213,541 | 139,878 | ||||||||||
| Accumulated loss | (142,529 | ) | (107,295 | ) | ||||||||
| Total equity | 72,758 | 34,031 | ||||||||||
| Non-current liabilities | ||||||||||||
| Borrowings | 9 | 319 | ||||||||||
| Deferred revenue, net of current portion | 10 | 133,666 | 30,206 | |||||||||
| Current liabilities | ||||||||||||
| Borrowings | 9 | 167 | ||||||||||
| Trade payables | 3,971 | 2,298 | ||||||||||
| Taxes and social security liabilities | 748 | 29 | ||||||||||
| Deferred revenue | 10 | 7,052 | 1,610 | |||||||||
| Other liabilities and accruals | 8 | 5,434 | 3,650 | |||||||||
| 17,205 | 7,754 | |||||||||||
| Total liabilities | 150,871 | 38,279 | ||||||||||
| Total equity and liabilities | 223,629 | 72,310 |
The footnotes are an integral part of these condensed consolidated interim financial statements
Unaudited Condensed Consolidated Statement of Profit or Loss and Comprehensive Loss
| Note | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||
| (euros in thousands, except per share data) | ||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Revenue | 12 | 4,027 | 1,098 | 6,313 | 1,945 | |||||||||||||||
| Research and development costs | 13 | (8,420 | ) | (3,822 | ) | (15,427 | ) | (8,028 | ) | |||||||||||
| Management and administration costs | 13 | (3,492 | ) | (496 | ) | (7,694 | ) | (1,014 | ) | |||||||||||
| Other expenses | 13 | (2,277 | ) | (1,664 | ) | (4,120 | ) | (3,277 | ) | |||||||||||
| Total operating expenses | (14,189 | ) | (5,982 | ) | (27,241 | ) | (12,319 | ) | ||||||||||||
| Operating result | (10,162 | ) | (4,884 | ) | (20,928 | ) | (10,374 | ) | ||||||||||||
| Finance income | 420 | 23 | 610 | 56 | ||||||||||||||||
| Finance costs | (11,962 | ) | (13 | ) | (22,696 | ) | (18 | ) | ||||||||||||
| Net finance (expense) / income | 15 | (11,542 | ) | 10 | (22,086 | ) | 38 | |||||||||||||
| Result before taxation | (21,704 | ) | (4,874 | ) | (43,014 | ) | (10,336 | ) | ||||||||||||
| Income tax expense | (107 | ) | (118 | ) | ||||||||||||||||
| Result after taxation | (21,811 | ) | (4,874 | ) | (43,132 | ) | (10,336 | ) | ||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Exchange differences on the translation of foreign operations | 13 | 18 | 3 | |||||||||||||||||
| Total other comprehensive income for the period | 13 | 18 | 3 | |||||||||||||||||
| Total comprehensive loss for the period | (21,798 | ) | (4,874 | ) | (43,114 | ) | (10,333 | ) | ||||||||||||
| Basic (and diluted) loss per share* | (1.12 | ) | (0.40 | ) | (2.27 | ) | (1.00 | ) | ||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||
| Basic (and diluted)* | 19,392,495 | 12,133,195 | 18,976,446 | 10,365,753 |
The footnotes are an integral part of these condensed consolidated interim financial
Unaudited Condensed Consolidated Statement of Changes in Equity
| 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 | Accumulated loss | Total equity | ||||||||||||||||||||||||||||||||||
| (euros in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2016 | 30 | 21 | 351 | 373 | 1,564 | 1,334 | 38,906 | 49,105 | (63,382 | ) | 28,302 | |||||||||||||||||||||||||||||||||
| Result after taxation | (10,336 | ) | (10,336 | ) | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 3 | 3 | ||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | (10,333 | ) | (10,333 | ) | ||||||||||||||||||||||||||||||||||||||||
| Transactions with owners of the Company: | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares (net) | 11 | 673 | 50,478 | 51,151 | ||||||||||||||||||||||||||||||||||||||||
| IPO Expense | (1,406 | ) | (1,406 | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred shares | 745 | (21 | ) | (351 | ) | (373 | ) | 89,345 | (1,334 | ) | (38,906 | ) | (49,105 | ) | ||||||||||||||||||||||||||||||
| Equity settled share-based payments | 11 | 648 | 648 | |||||||||||||||||||||||||||||||||||||||||
| Total contributions by and distributions to owners | 1,418 | (21 | ) | (351 | ) | (373 | ) | 138,417 | (1,334 | ) | (38,906 | ) | (49,105 | ) | 648 | 50,393 | ||||||||||||||||||||||||||||
| Balance at June 30, 2016 | 1,448 | 139,981 | (73,067 | ) | 68,362 | |||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2017 | 1,448 | 139,878 | (107,295 | ) | 34,031 | |||||||||||||||||||||||||||||||||||||||
| Result after taxation | (43,132 | ) | (43,132 | ) | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 18 | 18 | ||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | (43,114 | ) | (43,114 | ) | ||||||||||||||||||||||||||||||||||||||||
| Transactions with owners of the Company: | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares (net) | 11 | 298 | 73,663 | 73,961 | ||||||||||||||||||||||||||||||||||||||||
| Equity settled share-based payments | 11 | 7,880 | 7,880 | |||||||||||||||||||||||||||||||||||||||||
| Total contributions by owners | 298 | 73,663 | 7,880 | 81,841 | ||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2017 | 1,746 | 213,541 | (142,529 | ) | 72,758 |
The footnotes are an integral part of these condensed consolidated interim financial statements
Unaudited Condensed Consolidated Statement of Cash flows
| Six month period ended June 30, | ||||||||
| 2017 | 2016 | |||||||
| (euros in thousands) | ||||||||
| Cash flows from operating activities | ||||||||
| Result after taxation | (43,132 | ) | (10,336 | ) | ||||
| Adjustments for: | ||||||||
| Changes in fair value derivative | 10,667 | |||||||
| Unrealized foreign exchange results | 12,357 | |||||||
| Depreciation and amortization | 147 | 105 | ||||||
| Share option expenses | 7,880 | 648 | ||||||
| Net finance income | (593 | ) | (38 | ) | ||||
| (12,674 | ) | (9,621 | ) | |||||
| Changes in working capital: | ||||||||
| Taxes and social security assets | (2,024 | ) | ||||||
| Trade receivables and other current assets | (1,946 | ) | (678 | ) | ||||
| Trade payables | 1,673 | (708 | ) | |||||
| Other liabilities and accruals | 1,784 | (1,096 | ) | |||||
| Deferred revenue | (3,091 | ) | (111 | ) | ||||
| Taxes and social security liabilities | 719 | (77 | ) | |||||
| Cash used in operations | (15,559 | ) | (12,291 | ) | ||||
| Interest paid | (5 | ) | (18 | ) | ||||
| Taxes paid | (12 | ) | ||||||
| Net cash used in operating activities | (15,576 | ) | (12,309 | ) | ||||
| Cash flows from investing activities | ||||||||
| Acquisition of property, plant and equipment | (525 | ) | (176 | ) | ||||
| Interest received | 496 | 60 | ||||||
| Net cash used in investing activities | (29 | ) | (116 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuing shares, net of issuance costs | 74,431 | 50,770 | ||||||
| Proceeds from stock option exercises | 227 | |||||||
| Proceeds from collaboration and license agreement | 111,993 | |||||||
| Repayment of borrowings | (486 | ) | (69 | ) | ||||
| Decrease in restricted cash | 167 | 23 | ||||||
| Net cash provided by financing activities | 186,332 | 50,724 | ||||||
| Net increase in cash and cash equivalents | 170,727 | 38,299 | ||||||
| Effects of exchange rate changes on cash and cash equivalents | (11,856 | ) | (1 | ) | ||||
| Cash and cash equivalents at beginning of period | 56,917 | 32,851 | ||||||
| Cash and cash equivalents at end of period | 215,788 | 71,149 |
The footnotes are an integral part of these condensed consolidated interim financial statements
Notes to the Unaudited Condensed Consolidated Financial Statements
Merus N.V. is a clinical-stage immuno-oncology company developing innovative
bispecific antibody therapeutics (Biclonics), headquartered in Utrecht, the Netherlands. Merus US, Inc. is a wholly-owned subsidiary of Merus N.V. located in Cambridge, Massachusetts, United States. These condensed consolidated interim financial
statements as at and for the three and six month periods ended June 30, 2017 comprise Merus N.V. and Merus US, Inc. (collectively, the Company ).
On May 24, 2016, the Company closed the initial public offering of 5,500,000 of its common shares and, on May 26, 2016, of an additional 639,926 of
its common shares, at a price to the public of US $10 per share (the IPO ). Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were US $53.3 million. On May 19, 2016, the
Company s common shares were listed on the NASDAQ Global Market ( NASDAQ ) and all of the Company 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, also on May 19, 2016, 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) and Merus N.V. s name changed from Merus B.V. to Merus N.V. The address of the Company s registered office is Yalelaan
62, 3584 CM Utrecht, The Netherlands.
On May 29, 2017, the Company changed its governance structure from a
two-tier model consisting of a Management Board acting under the supervision of a separate Supervisory Board to a one-tier board model with a unitary Board of Directors
consisting of Executive Directors and Non-Executive Directors. In the one-tier board model, the Board of Directors as a collective (i.e., the Executive Directors and the
Non-Executive Directors) are charged with both the management and monitoring functions of the Company s general course of affairs inclusive of the Company s overall business strategy and financial
policies. The Executive Directors manage the day to-day business and operations of the Company and implement the Company s strategy. The Non-Executive directors
focus on the supervision of policy and the performance of the duties of all directors, as well as the Company s general state of affairs.
June 1, 2017, the Company filed with the U.S. Securities and Exchange Commission a registration statement on Form F-3 (Registration Number 333-218432) (the F-3 Registration Statement ), under which it registered up to $250 million of its securities and 3,200,000 shares sold to Incyte Corporation ( Incyte ). The
F-3 Registration Statement became effective on June 16, 2017. On June 1, 2017, the Company also entered into a sales agreement with Cowen and Company, LLC ( Cowen ), under which the Company
may issue and sell from time to time up to $50.0 million of its common shares registered under the F-3 Registration Statement through Cowen as its sales agent. Sales of common shares, if any, will be made
at market prices by any method that is deemed to be an at the market offering. The aggregate compensation payable to Cowen as sales agent equals 3.0% of the gross sales price of the shares sold through it pursuant to the sales agreement.
No sales have been made by the Company under the sales agreement.
There have been no significant changes to the Company s accounting
policies that were previously disclosed in its Annual Report on Form 20-F for its fiscal year ended December 31, 2016 or in the methodology used in formulating these significant judgments
and estimates that affect the application of these policies.
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 December 31, 2016. 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. All intercompany balances are eliminated in consolidation.
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 six month period ended June 30, 2017 are not necessarily indicative of operations to be expected
for the full fiscal year ending December 31, 2017.
Items included in each of the Company s entities are measured using the currency of the
primary economic environment in which the respective entity operates (the functional currency ). The interim financial statements are presented in euros, which is Merus N.V. s functional and presentation currency. The functional
currency of Merus US, Inc. is the U.S. dollar. 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.
The Company operates in one reportable
segment, which comprises the discovery and development of innovative bispecific therapeutics.
For the purpose of presentation in the statement of cash
flows as well as the statement of financial position, cash and cash equivalents includes deposits held with financial institutions with original or remaining maturities of less than three months. Cash and cash equivalents include
171.0 million of short-term investments with a one month maturity, callable on demand. These cash equivalents are primarily the result of proceeds received from Incyte.
On December 20, 2016, the Company entered into a collaboration and license agreement (the collaboration and license agreement ) and a share
subscription agreement (the share subscription agreement ) with Incyte (collectively, the Incyte Agreements ). Under the collaboration and license agreement, Incyte agreed to pay the Company a $120 million non-refundable upfront payment, and under the share subscription agreement, Incyte agreed to purchase 3.2 million common shares of the Company at price per share of $25, for an aggregate purchase price of
$80 million. In January 2017, the Company completed the sale of its common shares under the subscription agreement and received the $80 million aggregate purchase price. In February 2017, the Company received the $120 million non-refundable upfront payment.
For the six month period ended June 30, 2017, the Company has continued to incur losses from its operations. In addition, the Company expects to continue
to incur significant expenses and operating losses for the foreseeable future as its bispecific antibody candidates advance through discovery, preclinical development and clinical trials, and as it seeks regulatory approval and pursues
commercialization of any approved bispecific antibody candidate. Further, the Company may incur expenses in connection with the licensing or acquisition of additional bispecific antibody candidates.
As a result of these factors, the Company may 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 its financial condition and ability to pursue its business strategy. The Company will need to generate
significant revenues to achieve profitability and may never do so.
Based on its current operating plan, the Company expects that existing cash and cash
equivalents of 215.8 million as of June 30, 2017 will fund its upcoming operating expenses and capital expenditure requirements well into 2019.
Certain amounts were reclassified in
the prior period condensed consolidated interim financial statements for consistency with the current period presentation. These changes in classification do not materially affect the previously reported Condensed Consolidated Statement of Profit or
Loss and Comprehensive Loss for any period.
Except as otherwise indicated,
the accounting policies adopted in the preparation of these interim financial statements are consistent with those applied in the preparation of the Company s annual financial statements for the year ended December 31, 2016. The Company
does not plan to adopt new standards early.
Recent Accounting Pronouncements
IFRS 9 Financial Instruments is effective for annual periods beginning on or after January 1, 2018, with early application permitted. IFRS 9
specifies how an entity should classify and measure financial assets, financial liabilities, and some contracts to buy or sell non-financial items. IFRS 9 requires an entity to recognize a financial asset or a
financial liability in its statement of financial position when it becomes party to the contractual provisions of the instrument. At initial recognition, an entity measures a financial asset or a financial liability at its fair value plus or minus,
in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability.
The Company is currently evaluating the impact that IFRS 9 will have on its financial statements, and has not yet
determined what effect, if any, the impact of adoption will be.
IFRS 15 Revenue from Contracts with Customers is effective for annual
reporting periods beginning on or after January 1, 2018, with early application permitted. IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash
flows from a contract with a customer. Applying IFRS 15, an entity recognizes revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. The Company is currently evaluating the impact that IFRS 15 will have on its financial statements, and has not yet determined what effect the impact of adoption will be.
IFRS 16 Leases is effective for annual reporting periods beginning on or after January 1, 2019, with earlier application permitted (as long
as IFRS 15 is also applied). The objective of IFRS 16 is to report information that (a) faithfully represents lease transactions and (b) provides a basis for users of financial statements to assess the amount, timing and uncertainty of
cash flows arising from leases. To meet that objective, a lessee should recognize assets and liabilities arising from a lease. The Company is currently evaluating the impact that IFRS 16 will have on its financial statements, and has not yet
determined what effect, if any, the impact of adoption will be.
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.
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 binomial option pricing model is the most appropriate method for determining the fair value of the Company s share options considering the terms and conditions attached to the grants made and to reflect
The result of the share option valuations and the related compensation expense that is recognized for the respective vesting periods