0001558370-18-008553.txt : 20181106 0001558370-18-008553.hdr.sgml : 20181106 20181106062128 ACCESSION NUMBER: 0001558370-18-008553 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 67 CONFORMED PERIOD OF REPORT: 20180930 FILED AS OF DATE: 20181106 DATE AS OF CHANGE: 20181106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: uniQure N.V. CENTRAL INDEX KEY: 0001590560 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36294 FILM NUMBER: 181161422 BUSINESS ADDRESS: STREET 1: PAASHEUVELWEG 25A CITY: AMSTERDAM STATE: P7 ZIP: 1105 BP BUSINESS PHONE: 1-339-970-7000 MAIL ADDRESS: STREET 1: PAASHEUVELWEG 25A CITY: AMSTERDAM STATE: P7 ZIP: 1105 BP FORMER COMPANY: FORMER CONFORMED NAME: uniQure B.V. DATE OF NAME CHANGE: 20131030 10-Q 1 qure-20180930x10q.htm 10-Q qure_Current_Folio_10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended September 30, 2018

 

 

 

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from _______ to _______

 

 

 

Commission file number: 001-36294

 

uniQure N.V.

(Exact name of Registrant as specified in its charter)

 

 The Netherlands

(State or other jurisdiction of incorporation or organization)

Not applicable

(I.R.S. Employer Identification No.)

 

Paasheuvelweg 25a,

1105 BP Amsterdam, The Netherlands

(Address of principal executive offices) (Zip Code)

 

+31-20-240-6000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐. 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒ No ☐. 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐

Accelerated filer  ☒

Non-accelerated filer  ☐

 

Smaller reporting company  ☐

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes ☐ No ☒

 

As of November 1, 2018, the registrant had 37,278,686 ordinary shares, par value €0.05, outstanding.


 

 

 


 

TABLE OF CONTENTS

 

 

    

 

    

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1 

 

Financial Statements

 

4

 

 

 

 

 

Item 2 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

Item 3 

 

Quantitative and Qualitative Disclosures About Market Risk

 

35

 

 

 

 

 

Item 4 

 

Controls and Procedures

 

35

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1 

 

Legal Proceedings

 

36

 

 

 

 

 

Item 1A 

 

Risk Factors

 

36

 

 

 

 

 

Item 2 

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

56

 

 

 

 

 

Item 3 

 

Defaults Upon Senior Securities

 

56

 

 

 

 

 

Item 4 

 

Mine Safety Disclosures

 

56

 

 

 

 

 

Item 5 

 

Other Information

 

56

 

 

 

 

 

Item 6 

 

Exhibits

 

56

 

 

2


 

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD‑LOOKING STATEMENTS

This Quarterly Report on Form 10‑Q contains “forward‑looking statements” as defined under federal securities laws. Forward-looking statements are based on our current expectations of future event and many of these statements can be identified using terminology such as “believes,” “expects,” “anticipates,” “plans,” “may,” “will,” “projects,” “continues,” “estimates,” “potential,” “opportunity” and similar expressions. These forward‑looking statements may be found in Part II, Item 1A “Risk Factors,” Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this Quarterly Report on Form 10‑Q.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied. The most significant factors known to us that could materially adversely affect our business, operations, industry, financial position or future financial performance include those discussed in Part II, Item 1A “Risk Factors,” as well as those discussed in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as other factors which may be identified from time to time in our other filings with the Securities and Exchange Commission (“SEC”), including our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2018, or in the documents where such forward‑looking statements appear. You should carefully consider that information before you make an investment decision.

You should not place undue reliance on these statements, which speak only as of the date that they were made. Our actual results or experience could differ significantly from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, and in our Annual Report on Form 10-K for the year ended December 31, 2017, including in “Part I, Item 1A. Risk Factors,” as well as others that we may consider immaterial or do not anticipate at this time. These cautionary statements should be considered in connection with any written or oral forward‑looking statements that we may make in the future or may file or furnish with the SEC. We do not undertake any obligation to release publicly any revisions to these forward‑looking statements after completion of the filing of this Quarterly Report on Form 10‑Q to reflect later events or circumstances or to reflect the occurrence of unanticipated events. All forward‑looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.

In addition, with respect to all our forward‑looking statements, we claim the protection of the safe harbor for forward‑looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

 

 

3


 

Part I – FINANCIAL INFORMATION

 

Item 1.        Financial Statements

uniQure N.V.

 

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

   

2018

    

2017

 

 

in thousands, except share and per share amounts

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

239,546

 

$

159,371

Accounts receivable and accrued income from related party

 

 

552

 

 

1,586

Prepaid expenses

 

 

1,670

 

 

1,139

Other current assets

 

 

312

 

 

687

Total current assets

 

 

242,080

 

 

162,783

Non-current assets

 

 

 

 

 

 

Property, plant and equipment, net

 

 

30,802

 

 

34,281

Intangible assets, net

 

 

5,211

 

 

9,570

Goodwill

 

 

513

 

 

530

Restricted cash

 

 

2,454

 

 

2,480

Total non-current assets

 

 

38,980

 

 

46,861

Total assets

 

$

281,060

 

$

209,644

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

4,115

 

$

2,908

Accrued expenses and other current liabilities

 

 

7,098

 

 

8,838

Current portion of long-term debt

 

 

11,111

 

 

1,050

Current portion of deferred rent

 

 

1,093

 

 

737

Current portion of deferred revenue

 

 

8,594

 

 

4,613

Current portion of contingent consideration

 

 

 —

 

 

1,084

Total current liabilities

 

 

32,011

 

 

19,230

Non-current liabilities

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

9,597

 

 

19,741

Deferred rent, net of current portion

 

 

8,156

 

 

9,114

Deferred revenue, net of current portion

 

 

29,849

 

 

67,408

Contingent consideration, net of current portion

 

 

 —

 

 

2,880

Derivative financial instruments related party

 

 

1,085

 

 

1,298

Other non-current liabilities

 

 

510

 

 

614

Total non-current liabilities

 

 

49,197

 

 

101,055

Total liabilities

 

 

81,208

 

 

120,285

Commitments and contingencies (see note 13)

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

Ordinary shares, €0.05 par value: 60,000,000 shares authorized at September 30, 2018 and December 31, 2017 and 37,275,199 and 31,339,040 ordinary shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively.

 

 

2,294

 

 

1,947

Additional paid-in-capital

 

 

716,663

 

 

566,530

Accumulated other comprehensive loss

 

 

(5,487)

 

 

(3,800)

Accumulated deficit

 

 

(513,618)

 

 

(475,318)

Total shareholders' equity

 

 

199,852

 

 

89,359

Total liabilities and shareholders' equity

 

$

281,060

 

$

209,644

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4


 

uniQure N.V.

 

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 

 

Nine months ended September 30, 

 

    

2018

    

2017

    

2018

    

2017

 

 

in thousands, except share and per share amounts

 

in thousands, except share and per share amounts

License revenues

 

$

 —

 

$

 —

 

$

 —

 

$

 8

License revenues from related party

 

 

2,518

 

 

1,124

 

 

7,092

 

 

3,060

Collaboration revenues

 

 

 —

 

 

 —

 

 

 —

 

 

4,638

Collaboration revenues from related party

 

 

630

 

 

1,136

 

 

2,584

 

 

2,817

Total revenues

 

 

3,148

 

 

2,260

 

 

9,676

 

 

10,523

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

(20,541)

 

 

(20,103)

 

 

(56,092)

 

 

(53,963)

Selling, general and administrative expenses

 

 

(5,898)

 

 

(5,584)

 

 

(18,095)

 

 

(17,352)

Total operating expenses

 

 

(26,439)

 

 

(25,687)

 

 

(74,187)

 

 

(71,315)

Other income

 

 

557

 

 

14,413

 

 

1,737

 

 

14,995

Other expense

 

 

(490)

 

 

(261)

 

 

(1,252)

 

 

(2,901)

Loss from operations

 

 

(23,224)

 

 

(9,275)

 

 

(64,026)

 

 

(48,698)

Interest income

 

 

949

 

 

10

 

 

1,785

 

 

33

Interest expense

 

 

(515)

 

 

(577)

 

 

(1,496)

 

 

(1,583)

Foreign currency gains / (losses), net

 

 

455

 

 

(681)

 

 

2,888

 

 

(1,845)

Other non-operating income / (loss), net

 

 

268

 

 

 —

 

 

(330)

 

 

29

Loss before income tax expense

 

 

(22,067)

 

 

(10,523)

 

 

(61,179)

 

 

(52,064)

Income tax benefit / (expense)

 

 

32

 

 

278

 

 

(237)

 

 

278

Net loss

 

$

(22,035)

 

$

(10,245)

 

$

(61,416)

 

$

(51,786)

Other comprehensive income / (loss), net of income tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments net of tax impact of $0.0 million and $0.3 million for the three months ended September 30, 2018 and 2017, respectively, and $(0.2) million and $0.3 million for the nine months ended September 30, 2018 and 2017, respectively.

 

 

(799)

 

 

22

 

 

(3,491)

 

 

748

Total comprehensive loss

 

$

(22,834)

 

$

(10,223)

 

$

(64,907)

 

$

(51,038)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per ordinary share

 

$

(0.59)

 

 

(0.40)

 

$

(1.75)

 

$

(2.03)

Weighted average shares used in computing basic and diluted net loss per ordinary share

 

 

37,247,193

 

 

25,632,642

 

 

35,074,531

 

 

25,546,225

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5


 

uniQure N.V.

 

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

other

 

 

 

 

Total

 

 

Ordinary shares

 

paid-in

 

comprehensive

 

 Accumulated 

 

shareholders’

 

    

   No. of shares   

    

   Amount   

    

      capital      

    

income/(loss)

    

deficit

    

equity

 

 

in thousands, except share and per share amounts

Balance at December 31, 2017

 

31,339,040

 

$

1,947

 

$

566,530

 

$

(3,800)

 

$

(475,318)

 

$

89,359

Cumulative effect of retroactive implementation of ASC 606 Revenue recognition

 

 —

 

 

 —

 

 

 —

 

 

1,802

 

 

23,116

 

 

24,918

Loss for the period

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(61,416)

 

 

(61,416)

Other comprehensive loss

 

 —

 

 

 —

 

 

 —

 

 

(3,489)

 

 

 —

 

 

(3,489)

Follow-on public offering

 

5,175,000

 

 

309

 

 

138,182

 

 

 —

 

 

 —

 

 

138,491

Exercise of share options

 

416,211

 

 

18

 

 

4,619

 

 

 —

 

 

 —

 

 

4,637

Restricted and performance share units distributed during the period

 

344,948

 

 

20

 

 

(20)

 

 

 —

 

 

 —

 

 

 —

Share-based compensation expense

 

 —

 

 

 —

 

 

7,352

 

 

 —

 

 

 —

 

 

7,352

Balance at September 30, 2018

 

37,275,199

 

 

2,294

 

 

716,663

 

 

(5,487)

 

 

(513,618)

 

 

199,852

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

6


 

uniQure N.V.

 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 

 

    

2018

    

2017

 

 

 

in thousands

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(61,416)

 

$

(51,786)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation, amortization and impairment losses

 

 

10,447

 

 

6,036

Share-based compensation expense

 

 

7,352

 

 

5,978

Change in fair value of derivative financial instruments and contingent consideration

 

 

(3,516)

 

 

2,704

Unrealized foreign exchange (gains) / losses

 

 

(4,210)

 

 

1,821

Change in deferred taxes

 

 

237

 

 

 -

Change in lease incentives

 

 

(284)

 

 

1,938

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable and accrued income, prepaid expenses and other current assets

 

 

768

 

 

9,477

Accounts payable

 

 

1,289

 

 

(1,440)

Accrued expenses and other liabilities

 

 

(1,559)

 

 

(1,331)

Deferred revenue

 

 

(7,142)

 

 

(19,620)

Net cash used in operating activities

 

 

(58,034)

 

 

(46,223)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of intangible assets

 

 

(1,698)

 

 

(1,124)

Purchase of property, plant and equipment

 

 

(1,805)

 

 

(3,244)

Net cash used in investing activities

 

 

(3,503)

 

 

(4,368)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of shares related to employee stock option plans

 

 

4,637

 

 

1,036

Proceeds from public offering of shares, net of issuance costs

 

 

138,480

 

 

 -

Net cash generated from financing activities

 

 

143,117

 

 

1,036

Currency effect cash, cash equivalents and restricted cash

 

 

(1,431)

 

 

6,634

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

80,149

 

 

(42,921)

Cash, cash equivalents and restricted cash at beginning of period

 

 

161,851

 

 

134,324

Cash, cash equivalents and restricted cash at the end of period

 

$

242,000

 

$

91,403

Supplemental cash flow disclosures:

 

 

 

 

 

 

Cash and cash equivalents

 

$

239,546

 

$

88,934

Restricted cash related to leasehold and other deposits

 

$

2,454

 

$

2,469

Total cash, cash equivalents and restricted cash

 

$

242,000

 

$

91,403

Cash paid for interest

 

$

(1,498)

 

$

(1,130)

Non-cash increases / (decreases) in accounts payables related to purchases of intangible assets and property, plant and equipment

 

$

12

 

$

(1,635)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

7


 

1General business information

 

uniQure (the “Company”) was incorporated on January 9, 2012 as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under the laws of the Netherlands. The Company is a leader in the field of gene therapy and seeks to deliver to patients suffering from rare and other devastating diseases single treatments with potentially curative results. The Company’s business was founded in 1998 and was initially operated through its predecessor company, Amsterdam Molecular Therapeutics (AMT) Holding N.V (“AMT”). In 2012, AMT undertook a corporate reorganization, pursuant to which uniQure B.V. acquired the entire business and assets of AMT and completed a share-for-share exchange with the shareholders of AMT. Effective February 10, 2014, in connection with its initial public offering, the Company converted into a public company with limited liability (naamloze vennootschap) and changed its legal name from uniQure B.V. to uniQure N.V.

 

The Company is registered in the trade register of the Chamber of Commerce (Kamer van Koophandel) in Amsterdam, the Netherlands under number 54385229. The Company’s headquarters are in Amsterdam, the Netherlands, and its registered office is located at Paasheuvelweg 25a, Amsterdam 1105 BP, the Netherlands and its telephone number is +31 20 240 6000. The Company’s website address is www.uniqure.com.

 

The Company’s ordinary shares are listed on the NASDAQ Global Select Market and trades under the symbol “QURE”.

 

2Summary of significant accounting policies

 

2.1Basis of preparation

 

The Company prepared these unaudited consolidated financial statements in compliance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Any reference in these notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

 

The unaudited consolidated financial statements are presented in U.S. dollars, except where otherwise indicated. Transactions denominated in currencies other than U.S. dollars are presented in the transaction currency with the U.S. dollar amount included in parenthesis, converted at the foreign exchange rate as of the transaction date.

 

2.2Unaudited interim financial information

 

The interim financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and changes in financial position for the period presented.

 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted. The results of operations for the nine months ended September 30, 2018, are not necessarily indicative of the results to be expected for the full year ending December 31, 2018, or for any other future year or interim period. The accompanying financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 14, 2018.

 

2.3Use of estimates

 

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

8


 

2.4Accounting policies

 

The principal accounting policies applied in the preparation of these unaudited consolidated financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2017, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 14, 2018. There have been no material changes in the Company’s significant accounting policies during the nine months ended September 30, 2018, other than the recent adoption of accounting pronouncements discussed below and changing the description of the line item “other non-current assets” to “restricted cash” in the unaudited consolidated balance sheets.

 

2.5Recent accounting pronouncements

 

Recently Adopted Accounting Pronouncements

 

Effective January 1, 2018 the Company adopted new revenue recognition policies in accordance with ASC 606. The new revenue recognition policies replace the existing policies in accordance with ASC 605. The Company elected to implement ASC 606 by applying it to active collaboration arrangements as of January 1, 2018 and to record a cumulative adjustment of revenue previously recognized to the accumulated loss as of December 31, 2017. The impact of implementing ASC 606 is summarized below:

 

-

Recognized $2.5 million and $7.1 million of license revenue during the three and nine months ended September 30, 2018, respectively related to the collaboration with BMS compared to $1.0 million and $3.2 million, respectively, that would have been recognized in accordance with the previous revenue recognition policies;

-

Continued to present revenue recognized during the three and nine months ended September 30, 2017, in accordance with the previous revenue recognition policies;

-

Decreased the accumulated loss by $24.9 million as of January 1, 2018 and decreased deferred revenue as of the same date by $24.9 million.

In accordance with the previous revenue recognition policies the Company had concluded that the BMS collaboration agreement consisted of three performance obligations, (i) technology (license and target selections), know‑how and manufacturing in the field of gene therapy and development and active contribution to the development through the joint steering committee participations, (ii) provision of employees, goods and services for research, and (iii) clinical and commercial manufacturing. The Company determined that these three performance obligations are substantially identical with the performance obligations in accordance with its new revenue recognition policies:

(i)

Providing access to its technology and know-how in the field of gene therapy as well as actively contributing to the target selection, the collaboration as a whole, the development during the target selection, the pre-clinical and the clinical phase through participating in joint steering committee and other governing bodies (“License Revenue”);

(ii)

Providing pre-clinical research activities (“Collaboration Revenue”); and

(iii)

Providing clinical and commercial manufacturing services for products (“Manufacturing Revenue”).

License Revenue

The Company previously recognized License Revenue over the expected performance period on a straight-line basis commencing on May 21, 2015. The Company now recognizes License Revenue over the expected performance period based on its progress toward the completion of its services (see note 4 for a detailed discussion).

Collaboration and Manufacturing Revenue

The adoption of the new revenue recognition policies did not materially impact the recognition of Collaboration or Manufacturing Revenue.

ASU 2017-09: Compensation (topic 718)- scope of modification accounting

In May 2017, the FASB issued ASU 2017-09, Compensation-stock compensation (topic 718) -- scope of modification accounting (“ASU 2017-09”), which provides clarity regarding the applicability of modification accounting in relation to share-based payment awards. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The standard became effective on January 1, 2018 and needs to be applied

9


 

prospectively. Application of ASU 2017-09 did not have a material impact on the Company’s consolidated financial statements in the three or nine month period ended September 30, 2018.

ASU 2016-05: Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships

 

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (“ASU 2016-05”) and ASU 2016-06, Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments. Both ASUs address issues regarding hedge accounting. Application of the standard was effective on January 1, 2018 and did not have a material impact on the Company’s consolidated financial statements in the three or nine month period ended September 30, 2018.

 

Recent Accounting Pronouncements Not Yet Effective

 

There have been no new accounting pronouncements or changes to accounting pronouncements during the nine months ended September 30, 2018, as compared to the recent accounting pronouncements described in Note 2.3.23 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which could be expected to materially impact the Company’s unaudited condensed consolidated financial statements except the one discussed below:

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 will be effective for the Company beginning in the first quarter of 2019 and early application is permitted. The Company does expect ASU 2016-02 to have a material impact on its consolidated financial statements, primarily from recognition of a right-of-use asset and lease liability in the balance sheet and a shift of cash outflows from operating activities to financing activities.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which modifies the disclosure requirements on fair value measurements. The effective date for the standard is fiscal years beginning after December 15, 2019, which for the Company is January 1, 2020. Early adoption is permitted. The new disclosure requirements for changes in unrealized gains and losses in other comprehensive income for recurring Level 3 measurements, the range and weighted average of significant unobservable inputs and the amended requirements for the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively. The Company does not expect ASU 2018-13 to have a material impact on its consolidated financial statements.

 

3             Fair value measurement

 

The Company measures certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. U.S. GAAP, requires disclosure of methodologies used in determining the reported fair values, and establishes a hierarchy of inputs used when available. The three levels of the fair value hierarchy are described below:

·

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

·

Level 2 - Valuations based on quoted prices for similar assets or liabilities in markets that are not active or models for which the inputs are observable, either directly or indirectly.

·

Level 3 - Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and are unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

10


 

Items measured at fair value on a recurring basis include financial instruments and contingent consideration. The carrying amount of cash and cash equivalents, accrued income from related parties, prepaid expenses, other assets, accounts payable, accrued expenses and other current liabilities reflected in the consolidated balance sheets approximate their fair values due to their short-term maturities.

 

The following table sets forth the Company’s assets and liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2018, and December 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted prices
in active
markets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Total

 

Classification in consolidated
balance sheets

 

 

 

in thousands

 

 

At December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

161,851

 

$

 —

 

$

 —

 

$

161,851

 

 

Total assets

 

 

161,851

 

 

 —

 

 

 —

 

 

161,851

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments - debt

 

 

 —

 

 

 —

 

 

337

 

 

337

 

Accrued expenses and other current liabilities

Derivative financial instruments - related party

 

 

 —

 

 

 —

 

 

1,298

 

 

1,298

 

 

Contingent consideration

 

 

 —

 

 

 —

 

 

3,964

 

 

3,964

 

 

Total liabilities

 

$

 —

 

$

 —

 

$

5,599

 

$

5,599

 

 

At September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

242,000

 

$

 —

 

$

 —

 

$

242,000

 

 

Total assets

 

 

242,000

 

 

 —

 

 

 —

 

 

242,000

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments - debt

 

 

 —

 

 

 —

 

 

857

 

 

857

 

Accrued expenses and other current liabilities

Derivative financial instruments - related party

 

 

 —

 

 

 —

 

 

1,085

 

 

1,085

 

 

Contingent consideration

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

Total liabilities

 

$

 —

 

$

 —

 

$

1,942

 

$

1,942

 

 

 

Changes in Level 3 items during the nine months ended September 30, 2018, are as follows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative

 

 

 

 

 

Contingent

 

financial

 

 

 

 

    

consideration

    

instruments

    

Total

 

 

in thousands

Balance at December 31, 2017

 

$

3,964

 

$

1,635

 

$

5,599

(Gains) / losses recognized in profit or loss

 

 

(3,846)

 

 

330

 

 

(3,516)

Currency translation effects

 

 

(118)

 

 

(23)

 

 

(141)

Balance at September 30, 2018

 

$

 —

 

$

1,942

 

$

1,942

 

Contingent consideration

 

In connection with the Company’s acquisition of the InoCard business (“InoCard”) in 2014, the Company recorded contingent consideration related to amounts potentially payable to InoCard’s former shareholders. The amounts payable in accordance with the sale and purchase agreement (as amended in August 2017) are contingent upon realization of milestones associated with our S100A1 protein research program and, as of October 2018, we do not expect to realize those milestones.

 

 

 

 

 

Derivative financial instruments

 

The Company issued derivative financial instruments related to its collaboration with Bristol-Meyers Squibb Company (“BMS”) and in relation to the issuance of the Hercules Technology Growth Corp. (“Hercules”) loan facility. The fair value of these derivative financial instruments as of September 30, 2018, was $1.9 million (December 31, 2017: $1.6 million), and these derivative financial instruments are described in more detail below.

 

11


 

BMS collaboration

 

On April 6, 2015, the Company entered into several agreements with BMS (the “BMS Agreements”). Pursuant to the terms of the BMS Agreements the Company granted BMS two warrants:

 

·

A warrant allowing BMS to purchase a specific number of uniQure ordinary shares such that its ownership will equal 14.9% immediately after such purchase. The warrant can be exercised on the later of (i) the date on which the Company receives from BMS the Target Designation Fees (as defined in the collaboration agreements) associated with the first six New Targets (as defined in the BMS Agreements); and (ii) the date on which BMS designates the sixth New Target.

 

·

A warrant allowing BMS to purchase a specific number of uniQure ordinary shares such that its ownership will equal 19.9% immediately after such purchase. The warrant can be exercised on the later of (i) the date on which uniQure receives from BMS the Target Designation Fees associated with the first nine New Targets; and (ii) the date on which BMS designates the ninth New Target.

Pursuant to the terms of the BMS Agreements the exercise price, in respect of each warrant, is equal to the greater of (i) the product of (A) $33.84, multiplied by (B) a compounded annual growth rate of 10% and (ii) the product of (A) 1.10 multiplied by (B) the VWAP for the 20 trading days ending on the date that is five trading days prior to the date of a notice of exercise delivered by BMS.

 

In March 2018, the Company reduced the probability of the warrants being exercised resulting in a reduction of the warrants fair value by $1.1 million.

 

The Company conducted a sensitivity analysis to assess the impact on changes in assumptions on the fair value. Specifically, the Company examined the impact on the fair market of the warrants by increasing the volatility by 10% to 82.5%. A further sensitivity analysis was performed assuming the exercise date of the warrants would occur one year later than what was assumed in the initial valuation. The table below illustrates the impact on the fair market valuation associated with these changes in assumptions as of September 30, 2018.

 

 

 

 

 

 

 

 

Total warrants

 

 

in thousands

Base case

 

$

1,085

Increase volatility by 10% to 82.5%

 

 

291

Extend exercise dates by one year

 

 

36

 

Hercules loan facility

 

On June 14, 2013, the Company entered into a venture debt loan facility with (the “Original Facility”) with Hercules Technology Growth Capital, Inc. (“Hercules”) pursuant to a Loan and Security Agreement (the “Loan Agreement”) which included a warrant. The warrant was not closely related to the host contract and was accounted for separately as a derivative financial liability measured at fair value though profit or loss. The warrant included in the Original Facility remained in place following the 2014 and 2016 amendments of the loan.

 

There were no significant changes in the sensitivity of the fair value from (un)observable inputs as of September 30, 2018, compared to December 31, 2017.

 

4            Collaboration arrangements and concentration of credit risk

 

In the three and nine months ended September 30, 2018, the Company generated all collaboration and license revenues from its Collaboration and License Agreement with BMS.

 

The Company and Chiesi Farmaceutici S.p.A. (“Chiesi”) terminated their collaboration in 2017.

 

12


 

Services to BMS are rendered through the Dutch operating entity. Total collaboration and license revenue generated from these partners are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 

 

Nine months ended September 30, 

 

    

2018

    

2017

 

2018

    

2017

 

 

in thousands

Bristol Myers Squibb

 

$

3,148

 

$

2,260

 

$

9,676

 

$

5,877

Chiesi Farmaceutici S.p.A (terminated in 2017)

 

 

 —

 

 

 —

 

 

 —

 

 

4,646

Total

 

$

3,148

 

$

2,260

 

$

9,676

 

$

10,523

 

Amounts owed by BMS in relation to the collaboration services are as follows:

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

    

2018

    

2017

 

 

in thousands

Bristol Myers Squibb

 

$

552

 

$

1,586

 

BMS collaboration 

 

In May 2015, the Company closed a Collaboration and License Agreement with BMS (the “BMS Collaboration Agreement”) that provides exclusive access to the Company’s gene therapy technology platform for multiple targets in cardiovascular (and other target-specific) diseases. In total, the companies may collaborate on ten targets.

 

The Company is conducting the discovery, non-clinical, analytical and process development activities and is responsible for manufacturing of clinical and commercial supplies using the Company’s vector technologies and industrial, proprietary insect-cell based manufacturing platform. BMS reimburses the Company for all its research and development efforts in support of the Collaboration, and will lead the clinical development and regulatory activities across all programs. BMS will also be solely responsible for commercialization of all products from the collaboration.

 

The Company evaluated the BMS Collaboration Agreement and determined that its performance obligations according with its new revenue recognition adopted on January 1, 2018, are as follows:

(i)

Providing access to its technology and know-how in the field of gene therapy as well as actively contributing to the target selection, the collaboration as a whole, the development during the target selection, the pre-clinical and the clinical phase through participating in joint steering committee and other governing bodies (“License Revenue”);

(ii)

Providing pre-clinical research activities (“Collaboration Revenue”); and

(iii)

Providing clinical and commercial manufacturing services for products (“Manufacturing Revenue”).

 

License revenue – BMS

The Company recognized $2.5 million and $7.1 million of license revenue for the three and nine months ended September 30, 2018, respectively, compared to $1.1 million and $3.1 million during the same periods in 2017 in relation to a $60.1 million upfront payment recorded on May 21, 2015, as well as $15.0 million received in relation to the designation of the second, third and fourth collaboration target in August 2015 (together “Consideration”).

The Company also is entitled to an aggregate $16.5 million in target designation payments upon the selection of the fifth to tenth collaboration target. The Company will also be eligible to receive research, development and regulatory milestone payments of up to $254.0 million for a lead target (which has been AMT-126) and up to $217.0 million for each of the other selected targets, if milestones are achieved. The Company will include the variable consideration related to the selection of the fifth to tenth collaboration target, or any of the milestones, in the transaction price once it is considered probable that including these payments in the transaction price would not result in the reversal of cumulative revenue recognized. The Company will recognize significant amounts of License Revenue for services performed in prior periods if and when the Company considers this probable. Due to the significant uncertainty surrounding the development of gene-therapy product candidates and the dependence on BMS’s performance and decisions the Company does not currently consider this probable.

13


 

Additionally, the Company is eligible to receive net sales-based milestone payments and tiered mid-single to low double-digit royalties on product sales. The royalty term is determined on a licensed-product-by-licensed-product and country-by-country basis and begins on the first commercial sale of a licensed product in a country and ends on the expiration of the last to expire of specified patents or regulatory exclusivity covering such licensed product in such country or, with a customary royalty reduction, ten years after the first commercial sale if there is no such exclusivity. These revenues will be recognized when earned.

Under the previous revenue standard, the Company recognized License Revenue over the expected performance period on a straight-line basis commencing on May 21, 2015. In accordance with the new revenue recognition standards, the Company recognizes License Revenue over the expected performance period based on its measure of progress towards the completion of certain activities related to its services. The Company determines such progress by comparing activities performed at the end of each reporting period with total activities expected to be performed. The Company estimates total expected activities using a number of unobservable inputs, such as the probability of BMS designating additional targets, the probability of successfully completing each phase and estimated time required to provide services during the various development stages. If available, the Company uses product candidate-specific research and development plans. Alternatively, the Company assumes that completion of the pre-clinical phase requires an average of four years and that clinical development and commercial launch on average require 8.5 years.

The estimation of total services at the end of each reporting period involves considerable judgement. The estimated number of product candidates that BMS will pursue significantly impacts the amount of License Revenue the Company recognizes. For example, if the Company would increase the probability of all additional targets being designated by 10% then the revenue for the nine months ended September 30, 2018 would have decreased by approximately $1.8 million to $5.3 million, as the Company would be required to render more services in relation to the Consideration received.

 

Collaboration Revenue – BMS

The Company provides research and development services to BMS. Collaboration revenue related to these contracted services is recognized when earned.

The Company generated $0.6 million and $2.6 million of collaboration revenue during the three and nine months ended September 30, 2018, respectively, compared to $1.1 million and $2.8 million during the same periods in 2017.

 

Manufacturing Revenue – BMS

 

BMS and the Company also entered into Master Clinical Supply Agreement in April 2017 for the Company to supply gene therapy products during the clinical as well as into a binding term sheet to supply gene therapy products during the commercial phase to BMS. Revenues from product sales will be recognized when earned. To date the Company has not supplied any clinical and commercial gene therapy product to BMS.

 

5            Property, plant and equipment

 

The following table presents the Company’s property, plant and equipment as of September 30, 2018, and December 31, 2017:

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31,

 

    

2018

    

2017

 

 

in thousands

Leasehold improvements

 

$

32,328

 

$

32,297

Laboratory equipment

 

 

16,598

 

 

15,976

Office equipment

 

 

2,273

 

 

2,304

Construction-in-progress

 

 

901

 

 

745

Total property, plant, and equipment

 

 

52,100

 

 

51,322

Less accumulated depreciation

 

 

(21,298)

 

 

(17,041)

Property, plant and equipment, net

 

$

30,802

 

$

34,281

 

Total depreciation expense was $1.7 million and $4.7 million during the three and nine months ended September 30, 2018, respectively, compared to $1.7 million and $5.1 million during the same periods in 2017.

 

14


 

 

6            Intangible assets

 

The following table presents the Company’s acquired licenses:

 

 

 

 

 

 

 

 

 

    

September 30, 

    

December 31, 

 

 

2018

 

2017

 

 

in thousands

Licenses

 

$

7,454

 

$

9,551

Less accumulated amortization and impairment

 

 

(2,243)

 

 

(5,575)

Licenses, net

 

$

5,211

 

$

3,976

Acquired research and development

 

 

 —

 

 

5,594

Intangible assets, net

 

$

5,211

 

$

9,570

 

Amortization expense was $0.1 million and $0.3 million for the three and nine months ended September 30, 2018, respectively, compared to $0.1 million and $0.9 million during the same periods in 2017.

 

During the nine months ended September 30, 2018, the Company capitalized $1.7 million of expenditures related to contractual milestone payments under existing license agreements as well as costs incurred in relation to entering into new license agreements. During the same period the Company disposed a number of fully amortized, expired licenses.

 

The Company acquired research and development assets as part of its acquisition of InoCard in July 2014. Based on the review of pre-clinical data associated with those assets in October 2018, the Company does not expect that it will pursue further research related to those assets. Accordingly, the Company recorded a $5.4 million impairment loss within research and development expenses to reduce the asset’s carrying amount to its fair value of nil. The carrying amount as at December 31, 2017 was $5.6 million.

 

7             Accrued expenses and other current liabilities, other non-current expenses

 

Accrued expenses and other current liabilities include the following items:

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31,

 

    

2018

    

2017

 

 

in thousands

Accruals for services provided by vendors-not yet billed

 

$

2,404

 

$

2,348

Personnel related accruals and liabilities

 

 

3,858

 

 

5,646

Other current liabilities

 

 

836

 

 

844

Total

 

$

7,098

 

$

8,838

 

Restructuring plan

 

In November 2016, the Company announced a plan to restructure its activities resulting from a company-wide strategic review with the aim of refocusing its pipeline, consolidating its manufacturing capabilities into its Lexington, Massachusetts site, reducing operating costs and enhancing overall execution. At various dates between December 2016 and February 2018, the Company entered into termination agreements with certain employees. Depending on the circumstances surrounding an employee’s departure, the Company accrued the related termination costs over the service period or at the date of communication to the employee. Changes in accrued termination benefits (included in research and development expenses) for the nine months ended September 30, 2018, are detailed in the table below.

 

 

 

 

 

 

 

Accrued

 

 

termination

 

 

benefits

 

    

in thousands

Balance at December 31, 2017

 

$

625

Accrued through operations

 

 

96

Payments

 

 

(704)

Currency translation effects

 

 

 3

Balance at September 30, 2018

 

$

20

 

15


 

 

8           Long-term debt

 

On June 14, 2013, the Company entered into a venture debt loan facility with Hercules, which was amended and restated on June 26, 2014, and again on May 6, 2016 (“2016 Amended Facility”). The 2016 Amended Facility extended the maturity date from June 30, 2018, to May 1, 2020. As at September 30, 2018, and December 31, 2017, $20.0 million was outstanding. The interest rate is adjustable and is the greater of (i) 8.25% or (ii) 8.25% plus the prime rate less 5.25%. Under the 2016 Amended Facility, the interest rate was initially 8.25% per annum with a back-end fee of 4.85% and a facility fee of 0.75% of the outstanding loan amounts. The interest-only payment period was extended by 12 months to November 30, 2018 as a result of raising more than $50.0 million in equity financing in October 2017.

The amortized cost of the 2016 Amended Facility was $20.7 million as September 30, 2018, compared to $20.8 million as of December 31, 2017, and is recorded net of discount and debt issuance costs. The foreign currency loss on the loan in the three and nine months ended September 30, 2018, was $0.2 million and $0.7 million, respectively, compared to a foreign currency gain of $0.7 million and $2.3 million during the same periods in 2017. The fair value of the loan approximates its carrying amount.

Interest expense associated with the 2016 Amended Facility during the three and nine months ended September 30, 2018 was $0.5 million and $1.4 million, respectively, compared to $0.6 million and $1.6 million during the same periods in 2017.

Pursuant to a covenant in the 2016 Amended Facility, the Company has periodic reporting requirements and is required to keep a minimum cash balance deposited in bank accounts in the United States, equivalent to the lesser of the outstanding balance of principal due and 50% of worldwide cash reserves. This restriction on the cash reserves only relates to the deposit location of the cash reserves, and such cash reserves can be used at the discretion of the Company. In combination with other covenants, the 2016 Amended Facility restricts the Company’s ability to, among other things, incur future indebtedness and obtain additional debt financing, to make investments in securities or in other companies, to transfer assets, to perform certain corporate changes, to make loans to employees, officers and directors, and to make dividend payments and other distributions. The Company secured the facilities by pledging the shares in its subsidiaries, substantially all its receivables, moveable assets as well as the equipment, fixtures, inventory and cash of uniQure Inc.

 

9             Shareholders’ Equity

 

On May 7, 2018, the Company completed a follow-on public offering of 5,175,000 ordinary shares at $28.50 per ordinary share, resulting in gross proceeds to the Company of approximately $147.5 million. The net proceeds to the Company from this offering were approximately $138.5 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. The Company capitalized $0.2 million of expenses related to this offering (which were deducted from additional paid-in capital in the accompanying consolidated balance sheet).

 

On May 2, 2018, the Company and Leerink mutually terminated with immediate effect the September 2017 Sales Agreement with Leerink for an at-the-market offering program (“ATM program”). The ATM program allowed for the offer and sale of up to 5 million ordinary shares at prevailing market prices from time to time. The Company did not offer or sell any ordinary shares under the ATM program.

 

10             Share-based compensation

 

Share-based compensation expense recognized by classification included in the consolidated statements of operations and comprehensive loss was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

Three months ended September 30, 

 

Nine months ended September 30, 

 

    

2018

    

2017

 

2018

 

2017

 

 

in thousands

Research and development

 

$

895

 

$

1,131

 

$

2,694

 

$

2,612

Selling, general and administrative

 

 

1,724

 

 

1,316

 

 

4,657

 

 

3,366

Total

 

$

2,619

 

$

2,447

 

$

7,351

 

$

5,978

16


 

Share-based compensation expense recognized by award type was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 

 

Nine months ended September 30, 

 

    

2018

    

2017

 

2018

 

2017

 

 

in thousands

Award type

 

 

 

 

 

 

 

 

 

 

 

 

Share options

 

$

1,160

 

$

638

 

$

3,315

 

$

2,347

Restricted share units (“RSUs”)

 

 

667

 

 

728

 

 

1,953

 

 

1,960

Performance share units (“PSUs”)

 

 

792

 

 

1,081

 

 

2,083

 

 

1,671

Total

 

$

2,619

 

$

2,447

 

$

7,351

 

$

5,978

 

As of September 30, 2018, the unrecognized compensation costs related to unvested awards under the various share-based compensation plans were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average

 

    

Unrecognized

    

remaining

 

 

compensation

 

period for

 

 

costs

 

     recognition     

Award type

 

in thousands

 

in years

Share options

 

$

15,651

 

3.29

Restricted share units

 

 

4,994

 

1.15

Performance share units

 

 

5,472

 

1.84

Total

 

$

26,117

 

2.58

 

The Company satisfies the exercise of share options and vesting of RSUs and PSUs through newly issued shares.

 

The Company’s share-based compensation plans include the 2014 Amended and Restated Share Option Plan (the “2014 Plan”) and inducement grants under Rule 5653(c)(4) of the NASDAQ Global Select Market with terms similar to the 2014 Plan. At the annual general meeting of shareholders in June 2018, the Company’s shareholders approved amendments of the 2014 Plan, increasing the shares authorized for issuance by 3,000,0000 to a total of 8,601,471. The Company previously had a 2012 Equity Incentive Plan (“2012 Plan”). As of September 30, 2018, 32,567 fully vested share options are outstanding (December 31, 2017: 72,818) under the 2012 Plan.

 

Share options

 

The following table summarizes option activity for the nine months ended September 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average

 

    

Options

    

exercise price

 

 

 

 

 

 

Outstanding at December 31, 2017

 

2,456,433

 

$

10.06

Granted

 

906,582

 

$

26.05

Forfeited

 

(266,222)

 

$

13.18

Expired

 

(9,915)

 

$

13.49

Exercised

 

(379,340)

 

$

11.42

Outstanding at September 30, 2018

 

2,707,538

 

$

14.91

 

 

 

 

 

 

Fully vested and exercisable at September 30, 2018

 

977,409

 

$

11.03

Outstanding and expected to vest at September 30, 2018

 

1,730,129

 

$

17.10

 

 

 

 

 

 

Total weighted average grant date fair value of options issued during the period (in $ millions)

 

 

 

$

15.8

Granted to directors and officers during the period (options, $ in millions)

 

315,156

 

$

4.7

Proceeds from option sales (in $ millions)

 

 

 

$

4.6

 

17


 

Share options are granted on the date of grant and, except for certain grants made to non-executive directors, vest over a period of four years, the first 25% vests after one year from the initial grant date and the remainder vests in equal quarterly installments, straight-line over years two, three and four. Any options that vest must be exercised by the tenth anniversary of the initial grant date.

The fair value of each option issued was estimated at the date of grant using the Hull & White option pricing model with the following weighted-average assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 

 

Nine months ended September 30, 

Assumptions

    

2018

    

2017

    

2018

    

2017

Expected volatility

 

80%

 

80%

 

80%

 

75%-80%

Expected terms (in years)

 

10 years

 

10 years

 

10 years

 

10 years

Risk-free interest rate

 

3.10%

 

2.40% - 2.48%

 

2.67% - 3.10%

 

2.40% - 2.81%

Expected dividends

 

0%

 

0%

 

0%

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted Share Units

 

The following table summarizes the RSUs activity for the nine months ended September 30, 2018:

 

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