6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the Month of February 2020

Commission File Number: 001-38281

 

 

ERYTECH Pharma S.A.

(Translation of registrant’s name into English)

 

 

60 Avenue Rockefeller

69008 Lyon France

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

  ☒  Form 20-F            ☐  Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

 


INCORPORATION BY REFERENCE

This Report on Form 6-K and Exhibit 99.1 to this Report on Form 6-K shall be deemed to be incorporated by reference into the registration statement on Form F-3 (File No. 333-232669) and registration statements on Form S-8 (File Nos. 333-222673 and 333-232670), of ERYTECH Pharma S.A. (including any prospectuses forming a part of such registration statements) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.


INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K

ERYTECH Pharma S.A. today announced its unaudited financial results for the nine months ended September 30, 2019. Its financial report, including its condensed consolidated financial statements as of September 30, 2019, is attached to this Report on Form 6-K as Exhibit 99.1.

EXHIBITS

 

Exhibit

  

Description

99.1    Financial Report, including the Company’s condensed consolidated financial statements as of September 30, 2019.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    ERYTECH Pharma S.A.
Date: February 6, 2020     By:  

/s/ Eric Soyer

      Name  Eric Soyer
      Title:   Chief Financial Officer and Chief Operating Officer
EX-99.1

Exhibit 99.1

 

  I.

BUSINESS REPORT

1.1 COMPANY OVERVIEW

Erytech is a clinical-stage biopharmaceutical company developing innovative therapies for severe forms of cancer and orphan diseases. Leveraging its proprietary ERYCAPS® platform, which uses a novel technology to encapsulate therapeutic drug substances inside erythrocytes, or red blood cells, or RBCs, Erytech is developing a pipeline of product candidates for patients with high unmet medical needs. Erytech’s lead product candidate eryaspase, which is also referred to as GRASPA, targets the metabolism of cancer cells by depriving the cells of asparagine, an amino acid necessary for their survival and critical in maintaining the cells’ rapid growth rate. Erytech is currently developing eryaspase for the treatment of severe forms of cancer, including pancreatic cancer and triple-negative breast cancer, or TNBC.

In 2018, Erytech initiated a pivotal Phase 3 clinical trial of eryaspase for the treatment of second-line pancreatic cancer patients. Patient enrollment in this trial, referred to as the TRYbeCA-1 trial, began in September 2018 in Europe and Erytech received approval from the U.S. Food and Drug Administration, of its Investigational New Drug, or IND, application to extend the trial to the United States in May 2019. The first U.S. clinical sites were activated at the end of 2019 and the Company is now able to enroll the first U.S. patients in the TRYbeCA-1 trial. As of December 31, 2019, more than half of the targeted enrollment were enrolled in the trial. The Company expects to report interim data from the TRYbeCA-1 trial in the third quarter of 2020 and final data in the first half of 2021.

In 2018, the Company also launched a proof-of-concept Phase 2 clinical trial in TNBC in Europe, referred to as the TRYbeCA-2 trial. The first clinical sites were activated in 2019 and the trial is currently enrolling patients at sites in four European countries. The Company expects to report final data from the TRYbeCA-2 trial in 2021.

The Company is also supporting a Phase 2 clinical trial initiated and sponsored by investigators of the Nordic Society of Pediatric Hematology and Oncology (NOPHO). The trial is evaluating eryaspase in patients with acute lymphoblastic leukemia, or ALL, who experienced hypersensitivity reactions to pegylated L-asparaginase. The Company expects interim data to become available in the first half of 2020 and final results in the second half of 2020.

In addition to the encapsulation of L-asparaginase, Erytech believes that its ERYCAPS® platform has broad potential application and can be used to encapsulate a wide range of therapeutic agents for which long-circulating therapeutic activity or rapid and specific targeting is desired. For example, Erytech developed erymethionase, a preclinical product candidate which encapsulates methionine-g-lyase in red blood cells and is designed to target the amino acid metabolism of cancer cells and induce tumor starvation. The Company intends to continue to work on the development of erymethionase as well as potential other therapeutic strategies based on methionine depletion, depending on financial resources and business strategy. Erytech has also developed two preclinical programs aimed at maximizing the value creation potential of its ERYCAPS program: enzyme replacement (Eryzyme) and immune modulation (Erymmune). As part of its value creation strategy, in June 2019, Erytech entered into a collaboration with SQZ Biotechnologies, a cell therapy company developing novel treatments in multiple therapeutic areas, to focus on the development of novel red blood cell-based therapeutics for the treatment of immuno-oncology and tolerance induction and advance its Erymmune program.

 

 

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1.2 RESULTS 

Operating income

To date, Erytech has not generated any revenue from the sale of its products.

 

(Amounts in thousands of euros)    09/30/2018      09/30/2019  

Research Tax Credit

     2,672        2,853  

Revenues from licenses or other contracts

     (6      1,028  
  

 

 

    

 

 

 

Total operating income

     2,666        3,881  
  

 

 

    

 

 

 

Revenues from licenses or other contracts during the nine months ended September 30, 2019 was mainly comprised of revenues linked to the upfront payment of €880 thousand ($1 million) that Erytech received in connection with entry into a license agreement with SQZ Biotechnologies in June 2019.

Operating expenses

The research and development expenses are broken down as follows:

 

(Amounts in thousands of euros)    09/30/2018      09/30/2019  

ERYASPASE

     9,350        16,364  

ERYMETHIONASE / ERYMINASE

     1,730        1,547  

ERYMMUNE

     327        272  

ERYZYME

     246        —    
  

 

 

    

 

 

 

Total direct research and development expenses

     11,652        18,183  
  

 

 

    

 

 

 

Consumables

     1,709        2,005  

Rental and maintenance

     588        1,034  

Services, subcontracting and consulting fees

     3,632        3,262  

Personnel expenses

     7,938        11,052  

Depreciation and amortization expense

     168        1,393  

Other

     40        48  
  

 

 

    

 

 

 

Total indirect research and development expenses

     14,074        18,794  
  

 

 

    

 

 

 

Total research and development expenses

     25,726        36,977  
  

 

 

    

 

 

 

 

 

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The increase in research and development expenses was mainly due to:

 

   

An increase in costs related to eryaspase due to the launch of the Phase 3 clinical trial of second-line treatment of patients with metastatic pancreatic cancer, or TRYbeCA-1, in September 2018.

 

   

An increase in research and development personnel expenses of €3,114 thousand, mainly related to the increased headcount of the research and development workforce, particularly in the pharmaceutical operations and manufacturing departments. This increase is mainly due to the launch of the TRYbeCA-1 trial in September 2018. The weighted average full-time employees allocated to research and development was 148 during the nine months ended September 30, 2019 and 92 during the nine months ended September 30, 2018.

The general and administrative expenses are broken down as follows:

 

(Amounts in thousands of euros)    09/30/2018      09/30/2019  

Consumables

     130        421  

Rental and maintenance

     1,017        876  

Services, subcontracting and consulting fees

     3,970        6,638  

Personnel expenses

     4,317        4,796  

Depreciation and amortization expense

     438        590  

Other

     695        422  
  

 

 

    

 

 

 

Total general and administrative expenses

     10,566        13,743  
  

 

 

    

 

 

 

The increase in general and administrative expenses was mainly due to a €2,668 thousand increase in services and subcontracting, primarily due to costs related to the establishment of Erytech’s manufacturing facility in Princeton, New Jersey.

Financial income (loss)

 

(Amounts in thousands of euros)    09/30/2018      09/30/2019  

Financial income

     3,994        3,975  

Financial expenses

     (15      (392
  

 

 

    

 

 

 

Financial income (loss)

     3,979        3,582  
  

 

 

    

 

 

 

The financial income (loss) was mainly comprised of:

 

   

A foreign currency gain of €3,021 thousand generated by the conversion into euros of Erytech’s U.S. dollar bank account during each of the nine months ended September 30, 2019 and 2018.

 

   

A gain on investment currency transactions on swaps of €947 thousand during the nine months ended September 30, 2019 (€847 thousand during the nine months ended September 30, 2018).

 

   

Financial expenses related to lease liability as a result of IFRS16 in the amount of €251 thousand during the nine months ended September 30, 2019 (no corresponding charge during the nine months ended September 30, 2018).

Cash position and cash flows

Erytech’s cash and cash equivalents were €81.9 million as of September 30, 2019 as compared to €134.4 million as of December 31, 2018, representing a cash utilization of €52.5 million.

 

 

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Operating activities

 

(Amounts in thousands of euros)    09/30/2018      09/30/2019  

Operating cash flow before change in working capital

     (30,228      (42,704

Change in working capital

     (8,040      6,028  
  

 

 

    

 

 

 

Net cash flow used in operating activities

     (38,268      (36,676
  

 

 

    

 

 

 

Net cash flows used in operating activities were €38,268 thousand during the nine months ended September 30, 2018 and €36,676 thousand during the nine months ended September 30, 2019. The decrease of the cash used by operating activities is related to a positive impact of the working capital requirement.

Investing activities

 

(Amounts in thousands of euros)    09/30/2018      09/30/2019  

Acquisition of property, plant and equipment

     (2,254      (19,591

Acquisition of intangible assets

     (3      (2

Increase (net of decrease) in non-current & current financial assets

     (677      270  
  

 

 

    

 

 

 

Net cash flow used in investing activities

     (2,934      (19,323
  

 

 

    

 

 

 

Net cash flows used in investing activities were €2,934 thousand during the nine months ended September 30, 2018 and €19,323 thousand during the nine months ended September 30, 2019. The increase is mainly related to the payment of the suppliers involved in the construction of Erytech’s new manufacturing facility in Princeton, New Jersey.

Financing activities

 

(Amounts in thousands of euros)    09/30/2018      09/30/2019  

Proceeds from borrowings, net of repayment

     (610      (553

Repayment of lease debt, net of allowance received

     —          1,111  

Interest received (paid)

     113        (176
  

 

 

    

 

 

 

Net cash flow from (used in) financing activities

     (497      381  
  

 

 

    

 

 

 

Net cash flows from (used in) financing activities were €(497) thousand during the nine months ended September 30, 2018 and €381 thousand during the nine months ended September 30, 2019. The cash flow from financing activities during the nine months ended September 30, 2019 is primarily due to the allowance for the Erytech’s manufacturing facility in Princeton, New Jersey (€1,859 thousand).

 

 

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II. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2019

CONSOLIDATED STATEMENT OF INCOME (LOSS)

 

(Amounts in thousands of euros, except loss per share)    Notes      09/30/2018
(9 months)

Unaudited
    09/30/2019
(9 months)
Unaudited
    09/30/2018
(3 months)
Unaudited
    09/30/2019
(3 months)
Unaudited
 
                         

Revenues

        —         —         —         —    

Other income

     4.1        2,666       3,881       401       916  
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

        2,666       3,881       401       916  
     

 

 

   

 

 

   

 

 

   

 

 

 

Research and development

     4.2 , 4.3        (25,726     (36,977     (8,974     (14,259

General and administrative

     4.2 , 4.3        (10,566     (13,743     (3,173     (3,250
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        (36,292     (50,720     (12,147     (17,509
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

        (33,627     (46,839     (11,747     (16,593
     

 

 

   

 

 

   

 

 

   

 

 

 

Financial income

     4.5        3,994       3,975       1,028       2,709  

Financial expenses

     4.5        (15     (392     27       (87
     

 

 

   

 

 

   

 

 

   

 

 

 

Financial income (loss)

        3,979       3,582       1,055       2,622  
     

 

 

   

 

 

   

 

 

   

 

 

 

Income tax

        (1     1       13       2  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

        (29,649     (43,256     (10,679     (13,970
     

 

 

   

 

 

   

 

 

   

 

 

 

Basic / Diluted loss per share (€/share)

     4.6        (1.65     (2.41     (0.60     (0.78

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

 

(Amounts in thousands of euros)    09/30/2018
(9 months)
Unaudited
    09/30/2019
(9 months)
Unaudited
    09/30/2018
(3 months)
Unaudited
    09/30/2019
(3 months)
Unaudited
 
                  

Net loss

     (29,649     (43,256     (10,679     (13,970
  

 

 

   

 

 

   

 

 

   

 

 

 

Elements that may be reclassified subsequently to income (loss)

         —         —    

Currency translation adjustment

     30       835       16       866  
  

 

 

   

 

 

   

 

 

   

 

 

 

Elements that may not be reclassified subsequently to income (loss)

        

Remeasurement of defined benefit liabilities

     (71     (96     (25     (30

Tax effect

     3       —         (13     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     (38     740       (21     836  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     (29,688     (42,516     (10,701     (13,134
  

 

 

   

 

 

   

 

 

   

 

 

 

The Company applied IFRS 16 standard for the first time as of January 1, 2019, using the modified retrospective approach. Under this approach, the comparative information is not restated.

 

 

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

            As of  
(Amounts in thousands of euros)    Notes      December 31,
2018
     September 30,
2019

Unaudited
 
                  

ASSETS

        

Non-current assets

        

Intangible assets

        1,613        1,630  

Property, plant and equipment

     5.1        15,274        27,011  

Right of use

     5.2        —          10,530  

Other non-current financial assets

     5.3        1,046        736  
     

 

 

    

 

 

 

Total non-current assets

        17,933        39,908  
     

 

 

    

 

 

 

Current assets

        

Other current financial assets

     5.3        —          57  

Inventories

        1,396        170  

Trade and other receivables

        30        58  

Other current assets

     5.4        14,111        14,585  

Cash and cash equivalents

     5.5        134,371        81,927  
     

 

 

    

 

 

 

Total current assets

        149,907        96,798  
     

 

 

    

 

 

 

TOTAL ASSETS

        167,840        136,706  
     

 

 

    

 

 

 
            As of  
(Amounts in thousands of euros)    Notes      December 31,
2018
     September 30,
2019

Unaudited
 
                  

LIABILITIES AND SHAREHOLDERS’ EQUITY

        

Shareholders’ equity

        

Share capital

        1,794        1,794  

Premiums related to share capital

        281,745        281,685  

Reserves

        (99,524      (137,016

Translation reserve

        (188      943  

Net loss for the period

        (38,224      (43,256
     

 

 

    

 

 

 

Total shareholders’ equity

     5.6        145,602        104,150  
     

 

 

    

 

 

 

Non-current liabilities

        

Provisions—non-current portion

     5.7        347        533  

Financial liabilities – non-current portion

     5.8        1,243        1,312  

Lease liabilities—non-current portion

     5.9        —          11,880  
     

 

 

    

 

 

 

Total Non-current liabilities

        1,590        13,725  
     

 

 

    

 

 

 

Current liabilities

        

Financial liabilities – current portion

     5.8        776        285  

Lease liabilities—current portion

     5.9        —          1,142  

Trade and other payables

     5.10        16,655        12,662  

Other current liabilities

     5.11        3,217        4,741  
     

 

 

    

 

 

 

Total current liabilities

        20,648        18,831  
     

 

 

    

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

     167,840        136,706  
     

 

 

    

 

 

 

The Company applied IFRS 16 standard for the first time as of January 1, 2019, using the modified retrospective approach. Under this approach, the comparative information is not restated.

 

 

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CONSOLIDATED STATEMENT OF CASH FLOW

 

(Amounts in thousands of euros)    Notes      09/30/2018
(9 months)
Unaudited
     09/30/2019
(9 months)
Unaudited
 
                  

Cash flows from operating activities

        

Net loss

        (29,649      (43,256

Reconciliation of net loss and the cash used for operating activities

        

Gain or loss en exchange (calculated)

        (3,022      (3,021

Amortization and depreciation

     4.4        626        2,003  

Provision

     4.4        59        91  

Net booked value of scrapped fixed assets

        —          21  

Expenses related to share-based payments

     4.3        1,954        1,008  

Interest expense (income)

     4.5        (113      381  

Income tax expense (income)

        1        (1

Change in trade and payables in foreign currency

        (84      71  
     

 

 

    

 

 

 

Operating cash flow before change in working capital

        (30,228      (42,704
     

 

 

    

 

 

 

(Increase) decrease in inventories

        (36      1,225  

(Increase) decrease in trade and other receivables

        76        (28

(Increase) decrease in other current assets

     5.4        (8,238      (411

Increase (decrease) in trade and other payables

     5.10        121        4,853  

Increase (decrease) in other current liabilities

     5.11        36        389  
     

 

 

    

 

 

 

Change in working capital

        (8,040      6,028  
     

 

 

    

 

 

 

Net cash flow used in operating activities

        (38,268      (36,676
     

 

 

    

 

 

 

Cash flows from investing activities

        

Acquisition of property, plant and equipment

        (2,254      (19,591

Acquisition of intangible assets

        (3      (2

Increase in non-current & current financial assets

     5.3        (677      (119

Decrease in non-current & current financial assets

     5.3        —          389  
     

 

 

    

 

 

 

Net cash flow used in investing activities

        (2,934      (19,323
     

 

 

    

 

 

 

Cash flows from financing activities

        

Repayment of borrowings

     5.8        (610      (553

Allowance received from a lessor

     5.9        —          1,896  

Repayment of lease debt (IFRS 16)

     5.9        —          (786

Interests received (paid)

        113        (176
     

 

 

    

 

 

 

Net cash flow from (used in) financing activities

        (497      381  
     

 

 

    

 

 

 

Exchange rate effect on cash in foreign currency

        3,116        3,174  
     

 

 

    

 

 

 

Increase / Decrease in cash and cash equivalents

        (38,583      (52,443
     

 

 

    

 

 

 

Net cash and cash equivalents at the beginning of the period

     5.5        185,514        134,371  

Net cash and cash equivalents at the closing of the period

     5.5        146,931        81,927  
     

 

 

    

 

 

 

Supplemental disclosure of cash flows information

        

Cash paid for interest

        8        176  

Cash paid for income tax

        —          —    

The Company applied IFRS 16 standard for the first time as of January 1, 2019, using the modified retrospective approach. Under this approach, the comparative information is not restated.

 

 

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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

 

(Amount in thousands of euros, except number of shares)    Share
capital
     Premiums
related to
the share
capital
    Reserves     Translation
reserve
    Net
(income)
loss
    Total
shareholders’
equity
 

As of December 31, 2017

     1,794        281,745       (68,386     (203     (33,530     181,419  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss for the period

              (29,649     (29,649

Other comprehensive income

          (69     30         (38
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     —          —         (69     30       (29,649     (29,688

Allocation of prior period loss

          (33,530       33,530       —    

Share-based payment

          1,954           1,954  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2018

     1,794        281,745       (100,030     (173     (29,649     153,686  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2018

     1,794        281,745       (99,524     (188     (38,224     145,602  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss for the period

              (43,256     (43,256

Other comprehensive income

          (96     835         739  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     —          —         (96     835       (43,256     (42,516

Allocation of prior period loss

          (38,224       38,224       —    

Issue of warrants

        55             55  

Share-based payment

          1,008           1,008  

Reclassification

     0        (115     (180     295         —    
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2019

     1,794        281,685       (137,016     943       (43,256     104,150  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The Company applied IFRS 16 standard for the first time as of January 1, 2019, using the modified retrospective approach. Under this approach, the comparative information is not restated.

 

 

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The notes are an integral part of the accompanying condensed consolidated financial statements. The condensed consolidated financial statements were approved and authorized for issuance by the Board of Directors of the Company on January 27, 2020.

1. DESCRIPTION OF THE BUSINESS

ERYTECH Pharma S.A. (“ERYTECH,” and together with its subsidiary the “Company”) is incorporated in Lyon, France, and was founded in 2004 to develop and market innovative red blood cell-based therapeutics for cancer and orphan diseases. The Company’s most advanced product candidates are being developed for the treatment of pancreatic cancer.

The Company completed its initial public offering on Euronext Paris in May 2013, raising €17.7 million and a follow-on offering of €30.0 million (on a gross basis before deducting offering expenses), in October 2014. The initial public offering triggered the conversion of the totality of the convertible bonds previously issued. Two private placements of respectively 940,000 ordinary and 793,877 ordinary shares for €25.4 million and €9.9 million (on a gross basis before deducting offering expenses) were completed in December 2015 and 2016 with institutional investors in the United States and in Europe. In April 2017, the Company completed a follow-on offering of €70.5 million (on a gross basis before deducting offering expenses). The Company completed an initial public offering on the Nasdaq Global Select Market raising €124 million ($144 million on a gross basis before deducting offering expenses).

The Company has incurred losses and negative cash flows from operations since its inception and had shareholders’ equity of €104,150 thousand as of September 30, 2019 as a result of several financing rounds, including an initial public offering. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant revenue from its product candidates in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates.

The Company’s future operations are highly dependent on a combination of factors, including: (i) the success of its research and development; (ii) regulatory approval and market acceptance of the Company’s proposed future products; (iii) the timely and successful completion of additional financing; and (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies. As a result, the Company is and should continue, in the short to mid-term, to be financed through partnership agreements for the development and commercialization of its drug candidates and through the issuance of new debt or equity instruments.

The accompanying condensed consolidated financial statements and related notes (the “Condensed Consolidated Financial Statements”) present the operations of ERYTECH Pharma S.A. and its subsidiary, ERYTECH Pharma, Inc.

 

 

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Major events of the nine months ended September 30, 2019

Business

May 2019:

 

   

Acceptance by the U.S. Food and Drug Administration (FDA) of the Company’s Investigational New Drug (IND) application for eryaspase, consisting of the enzyme L-asparaginase encapsulated inside donor derived red blood cells. The acceptance of the IND will enable ERYTECH to initiate enrollment at U.S. clinical trial sites for its ongoing pivotal Phase 3 TRYbeCA-1 trial evaluating eryaspase in second-line pancreatic cancer.

June 2019:

 

   

Opening of a new U.S.-based GMP manufacturing facility in Princeton, New Jersey, United States. The facility will support production capacity needs for eryaspase, the Company’s lead product candidate, for patients in the United States. The Princeton facility is targeted to begin manufacturing eryaspase in the fourth quarter of 2019 to ensure supply for U.S. participants in the TRYbeCA-1 trial.

 

   

The Company signed an agreement with SQZ Biotechnologies (SQZ), a cell therapy company developing novel treatments in multiple therapeutic areas, to collaborate on the advancement of novel red blood cell-based therapeutics for immune modulation. The Company is eligible to receive up to $57 million in combined upfront and potential development, regulatory and commercial milestone payments for the first product successfully developed by SQZ under this agreement. The Company will also be eligible to receive sales royalties.

 

   

Enrollment of first patient in the Phase 2 clinical trial, named TRYbeCA-2, evaluating the Company’s lead product candidate, eryaspase, for the treatment of first line triple negative breast cancer (TNBC).

Management

January 2019:

 

   

Grant of 36,150 free shares and 38,025 stock-options to employees.

 

   

Eric Soyer is appointed as Deputy General Manager of the Company.

April 2019:

 

   

Grant of 94,200 free shares (of which 36,000 to executive officers and 58,200 to employees), 76,905 stock-options (of which 44,200 to executive officers and 32,705 to employees) and 25,998 warrants to members of the board of directors.

June 2019:

 

   

Dr. Jean-Paul Kress was appointed as Chairman of the Board of Directors by the Board of Directors following his appointment as board member at the Company’s Annual General Meeting of Shareholders held on June 21, 2019. Dr. Kress has over 25 years’ experience as a senior executive officer in international biotechnology and pharmaceutical groups. He was Chairman and Chief Executive Officer of Syntimmune (Cambridge, MA, US) until the end of 2018, when the company was acquired by Alexion Pharmaceuticals.

July 2019:

 

   

Grant of 59,123 stock-options to executive officers.

 

 

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2. STATEMENT OF COMPLIANCE

The Condensed Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”) and were approved and authorized for issuance by the Board of Directors of the Company on January 27, 2020.

Due to the listing of ordinary shares of the Company on Euronext Paris and in accordance with the European Union’s regulation No. 1606/2002 of July 19, 2002, the Condensed Consolidated Financial Statements of the Company are also prepared in accordance with IFRS, as adopted by the European Union (EU).

As of September 30, 2019, all IFRS that the IASB had published and that are mandatory are the same as those adopted by the EU and mandatory in the EU. As a result, the Condensed Consolidated Financial Statements comply with International Financial Reporting Standards as published by the IASB and as adopted by the EU.

The Condensed Consolidated Financial Statements as of September 30, 2019 have been prepared in accordance with the standard IAS 34, “Interim financial reporting.” As condensed financial statements, they do not include all information that would be required by the full IFRS standards. They must be read in conjunction with the consolidated financial statements for the year ended December 31, 2018.

Except for the standards applicable as of January 1, 2019 described below, the standards applied in the preparation of the Condensed Consolidated Financial Statements are the same as those applied to prepare the financial statements as of December 31, 2018.

The Company adopted the following standards, amendments and interpretations that are mandatory as of January 1, 2019:

 

   

IFRS 16—Leases;

 

   

IFRIC 23—Uncertainty over income tax treatments;

 

   

Amendments to IFRS 9—Prepayment features with negative compensation;

 

   

Amendments to IAS 28—Long term Interests in Associates and Joint Ventures;

 

   

Amendments to IAS 19—Plan Amendment, Curtailment or Settlement;

 

   

Annual Improvements to IFRS Standards 2015-2017 Cycle.

These new texts did not have any significant impact on the Company’s results or financial position with the exception of IFRS 16 (refer to note 3.4). The standards and interpretations that are optionally applicable to the Company as of September 30, 2019 were not applied in advance.

Recently issued accounting pronouncements that may be relevant to the Company’s operations but have not yet been adopted are as follows:

 

   

Amendments to References to the Conceptual Framework in IFRS Standards

 

   

Amendments to IFRS 3—Business Combinations

 

   

Amendments to IAS 1 and IAS 8: Definition of Material

 

 

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3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Scope of consolidation

Details of the Company’s subsidiary as of September 30, 2019 are as follows:

 

     Date of incorporation      Percent of ownership
interest
    Accounting method  

ERYTECH Pharma, Inc.

Registered office: Cambridge,

Massachusetts, United States

     April 2014        100     Fully consolidated  

3.2 Foreign currencies

Functional Currency and Translation of Financial Statements into Presentation Currency

The Condensed Consolidated Financial Statements are presented in euros, which is also the functional currency of the parent company, ERYTECH Pharma S.A.

The exchange rates used for the preparation for the translation of the financial statements of ERYTECH PHARMA, Inc. are as follows:

 

Exchange rate (USD per EUR)    September 30,
2018
     December 31,
2018
     September 30,
2019
 

Weighted average rate

     1.1949        1.1815        1.1237  

Closing rate

     1.1576        1.1450        1.0889  

3.3 Use of estimates and judgments

Preparation of the Condensed Consolidated Financial Statements in accordance with the rules prescribed by the IFRS requires the use of estimates and the formulation of assumptions having an impact on the financial statements. These estimates can be revised where the circumstances on which they are based change. The actual results may therefore differ from the estimates initially formulated. The main estimates are described in the annual consolidated financial statements, except new significant judgments linked to the accounting treatment of the leases in accordance with IFRS 16, as described in note 3.4.

3.4 Change in accounting policies

The Company applied IFRS 16—Leases for the first time as of January 1, 2019.

IFRS 16 eliminates the distinction between operating leases and finance leases and requires all leases to be recognized on the lessee’s balance sheet, in the form of an asset (representing the right to use the rented asset during the duration of the contract – see note 5.2) and of a liability (corresponding to the future lease payments – see note 5.9). The standard also impacts the presentation of the income statement (allocation of expense between operating loss and financial charges) and the cash flow statement (allocation of cash outflows between cash flow used in operating activities and cash flow used in financing activities).

The Company has applied the modified retrospective approach. Under this approach, the cumulative effect of initially applying IFRS 16 is recognized as an adjustment to equity at the transition date, i.e. January 1, 2019. Consequently, the comparative information disclosed for 2018 were not restated. There are disclosed as previously in accordance with IAS 17 standard and its interpretations. The consequence of this change in accounting policies are disclosed in detail below.

 

 

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Definition of a lease

Until the current period, the Company determined at the signing of the contract whether an agreement constituted or included a lease in accordance with the provisions of IFRIC 4, “Determining Whether an Arrangement Contains a Lease. As a lessee, the Company previously classified lease agreements as operating or finance leases by assessing whether the contract transferred substantially all the risks and benefits inherent in the ownership in accordance with IAS 17.

The Company now assesses whether a contract is or contains a lease in accordance with IFRS 16, i.e. whether it grants the right to control the use of an identified asset for a certain period in exchange for consideration.

At the transition date, the Company chose to apply the simplification measure of keeping past analyses for the identification of leases and applying IFRS 16 only to contracts previously classified as leases.

Significant accounting policies

In accordance with IFRS 16, the right of use and the lease liability are recognized on the lessee’s balance sheet when the asset linked to the lease agreement become available:

 

   

The right of use asset is measured at cost and comprises:

o the amount of the initial measurement of the lease liability,

o lease incentives, payments at or prior to commencement date,

o incremental costs which would not have been incurred if the contract had not been concluded.

 

   

The lease liability is recognized for an amount equal to the present value of the lease payments over the lease term.

The right of use is subsequently measured at cost less depreciation and any accumulated impairment loss. The amount can be adjusted based on certain revaluations of the lease liability.

The lease liability is then increased by the interest expense and decreased by the rents paid.

The lease liability may be remeasured in the following situations:

 

   

Modification related to the assessment of the exercise of an option to purchase or the extension or the non-exercise of a termination option (which become reasonably certain);

 

   

Rent adjustments based on rates and indices provided in the contracts.

The duration corresponds to the firm period of the commitment and takes into account the optional periods that are reasonably certain to be exercised.

The Company has used its judgment in determining the term of the lease agreements providing for an extension option. The fact that the Company has determined that it is reasonably certain to exercise such options affects the lease term and has a significant impact on the amount of the right of use and the lease liability.

Transition information

At the transition date, the lease liability linked to contracts classified as operating leases in accordance with IAS 17 (mainly real estate) was measured at the value of the remaining lease payments discounted at the marginal borrowing rate as of January 1, 2019. The right of use is measured at an amount equal to the lease liability, corrected with lease payments prior to the commencement date or remaining due in the statement of financial position.

For contracts previously classified as finance leases, the value of the right of use and the lease liability as of January 1, 2019 were determined as those of the underlying asset and the lease debt that were calculated in accordance with IAS 17.

The Company has applied simplification measures set out in IFRS 16 regarding:

 

   

Contracts with a lease term of 12 months or less at the transition date. These contracts have resulted in an expense of approximately €220 thousand during the nine months ended September 30, 2019.

 

   

Contracts for low value assets. These contracts have resulted in an expense of approximately €30 thousand during the nine months ended September 30, 2019.

 

 

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As part of the transition to IFRS 16 as of January 1, 2019, the Company recognized in liabilities a lease liability of €7,734 thousand (refer to note 5.9) and in assets a right of use of €7,443 thousand (refer to note 5.2) taking into account a liability of €291 thousand recognized in the statement of financial position as of December 31, 2018.

The discount rates applied for contracts previously classified as operating leases are based on the Company’s marginal borrowing rate, to which is added a spread which takes into account the total duration of the contract. The average marginal borrowing rate selected as of January 1, 2019 is 1.4% in France and 3.8% in the United States.

The gap between the off-balance sheet commitments disclosed in note 8 of the Consolidated financial statements as of December 31, 2018 and the lease liability recognized as of January 1, 2019 in accordance with IFRS 16 (see note 5.9) can be explained as follows:

 

(Amounts in thousands of euros)       

Operating lease commitment as lessee (December 31, 2018)

     8,268  
  

 

 

 

Unrecognized contracts in accordance with IFRS 16 exemptions

     (142

Differences in the durations used linked to termination and extension options that are reasonably certain to be exercised

     5,798  

Leases signed in 2018 for an asset available after January 1, 2019

     (2,593

Other (including the improvement allowance (Princeton lease))

     (2,045
  

 

 

 

Estimated non-discounted lease liability under IFRS 16 as of January 1, 2019

     9,285  
  

 

 

 

Discount effect

     (1,551
  

 

 

 

Estimated discounted lease liability under IFRS 16 as of January 1, 2019

     7,734  
  

 

 

 

Impact on the half-year financial statements

In accordance with IFRS 16, the Company recognized as of September 30, 2019:

 

   

A right of use (net value) of €10,530 thousand;

 

   

A lease liability of €13,023 thousand;

 

   

A depreciation expense of €973 thousand;

 

   

A financial expense of €251 thousand.

3.5 Presentation of the statement of income (loss)

The Company presents its statement of income (loss) by function. As of today, the main activity of the Company is research and development. Consequently, only research and development expenses and general administrative expenses functions are considered to be representative. This distinction reflects the analytical assignment of the personnel, external expenses and depreciation and amortization. The detail of the expenses by nature is disclosed in note 4.2.

3.6 Presentation of the statement of cash flow

For the financial year ended December 31, 2018, the line “acquisition of property, plant and equipment” in the consolidated statement of cash flow included an amount of fixed assets payables not yet paid of €8,587 thousand, which should not have been included in this line.

The net cash flows used in 2018 should have been as follows:

 

   

€6,450 thousand instead of €15,037 thousand presented for investing activities;

 

   

€47,857 thousand instead of €39,270 thousand presented for operating activities.

 

 

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From January 1, 2018 to September 30, 2019, the cumulative amount of cash flows used in the acquisition of property, plant and equipment amounted to €25.2 million and related mainly to the increase of the production capacity of the Company’s manufacturing facilities in Lyon and Princeton.

3.7 Segment reporting

In accordance with IFRS 8, “Operating Segments,” reporting by operating segment is derived from the internal organization of the Company’s activities; it reflects management’s viewpoint and is established based on internal reporting used by the chief operating decision maker (the Chief Executive Officer) to allocate resources and to assess performance.

The Company operates in a single operating segment: the conducting of research and development of innovative red blood cell-based therapeutics for cancer and orphan diseases in order to market them in the future.

3.8 Events after the close of the reporting period

October 2019:

 

   

Grant of 300,941 free shares, 347,250 stock-options and 75,000 warrants.

 

   

Collection of the 2017 Research Tax Credit (€2,819 thousands).

November 2019:

 

   

The Company achieves two important milestones for the TRYbeCA-1 Phase 3 clinical trial of eryaspase in second line metastatic pancreatic cancer. TRYbeCA-1 was opened for patient enrollment in the United States and the first site was activated. This marks an important step to expand the trial to approximately 100 sites across several European countries and the United States. The manufacturing of eryaspase for the patients to be treated in the United States will take place at the newly established manufacturing facility in Princeton, N.J.

 

   

Publication of the full results from the Phase 2b trial evaluating eryaspase in metastatic pancreatic in the European Journal of Cancer.

 

 

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4. NOTES RELATED TO THE CONSOLIDATED STATEMENT OF INCOME (LOSS)

4.1 Operating income

The Company does not generate any revenue from the sale of its products considering its stage of development.

 

(amounts in thousands of euros)    09/30/2018
(9 months)
     09/30/2019
(9 months)
     09/30/2018
(3 months)
     09/30/2019
(3 months)
 

Research Tax Credit

     2,672        2,853        425        837  

Other income

     (6      1,028        (24      79  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,666        3,881        401        916  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenues from licenses or other contracts

Revenues from licenses or other contracts in 2019 mainly comprised revenues linked to the upfront payment of €880 thousand ($1 million) provided by the license agreement entered into with SQZ Biotechnologies in June 2019 (refer to notes 1 and 7). In accordance with IFRS 15, this agreement grants to SQZ Biotechnologies a right to use the underlying intellectual property (“static license”). Consequently, the income is recognized when SQZ Biotechnologies can begin to use the licensed intellectual property.

4.2 Operating expenses by nature

4.2.1 Research and development expenses

 

For the nine months ended September 30, 2018

(amounts in thousands of euros)

   R&D      Clinical studies      Total  

Consumables

     567        1,558        2,125  

Rental and maintenance

     220        378        598  

Services, subcontracting and fees

     3,697        11,123        14,820  

Personnel expenses

     2,203        5,735        7,938  

Depreciation, amortization & provision

     48        140        188  

Other

     21        37        58  
  

 

 

    

 

 

    

 

 

 

Total

     6,756        18,970        25,726  
  

 

 

    

 

 

    

 

 

 

 

For the nine months ended September 30, 2019

(amounts in thousands of euros)

   R&D      Clinical studies      Total  

Consumables

     871        5,552        6,423  

Rental and maintenance

     161        878        1,039  

Services, subcontracting and fees

     2,067        14,893        16,960  

Personnel expenses

     2,344        8,708        11,052  

Depreciation, amortization & provision

     147        1,266        1,413  

Other

     43        46        90  
  

 

 

    

 

 

    

 

 

 

Total

     5,633        31,344        36,977  
  

 

 

    

 

 

    

 

 

 

 

 

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For the three months ended September 30, 2018

(amounts in thousands of euros)

   R&D      Clinical studies      Total  

Consumables

     120        1,303        1,423  

Rental and maintenance

     60        114        174  

Services, subcontracting and fees

     1,195        3,698        4,893  

Personnel expenses

     657        1,756        2,413  

Depreciation, amortization & provision

     18        51        69  

Other

     0        1        2  
  

 

 

    

 

 

    

 

 

 

Total

     2,051        6,923        8,974  
  

 

 

    

 

 

    

 

 

 

 

For the three months ended September 30, 2019

(amounts in thousands of euros)

   R&D      Clinical studies      Total  

Consumables

     85        2,185        2,269  

Rental and maintenance

     54        656        710  

Services, subcontracting and fees

     457        5,891        6,348  

Personnel expenses

     721        3,051        3,772  

Depreciation, amortization & provision

     85        1,038        1,123  

Other

     13        22        36  
  

 

 

    

 

 

    

 

 

 

Total

     1,415        12,843        14,259  
  

 

 

    

 

 

    

 

 

 

The increase in research and development expenses is mainly due to:

 

   

The increase in consumables (in the amount of €4,298 thousand for the nine month period and €846 thousand for the three month period) and the increase in external services (in the amount of €2,140 thousand for the nine month period and €1,455 thousand for the three month period), mainly linked to the ongoing clinical trials of eryaspase for the treatment of solid tumors, particularly related to the commencement of the Phase 3 clinical trial for the treatment of pancreatic cancer in September 2018;

 

   

The increase in research and development personnel expenses of €3,114 thousand for the nine month period and €1,359 thousand for the three month period (see note 4.3.1).

4.2.2 General and administrative expenses

 

General and administrative expenses

(amounts in thousands of euros)

   09/30/2018
(9 months)
     09/30/2019
(9 months)
     09/30/2018
(3 months)
     09/30/2019
(3 months)
 

Consumables

     130        421        60        119  

Rental and maintenance

     1,017        876        580        134  

Services, subcontracting and fees

     3,970        6,638        1,217        1,691  

Personnel expenses

     4,317        4,796        1,234        1,463  

Depreciation and amortization

     438        590        98        (265

Other

     695        422        (15      110  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     10,566        13,743        3,173        3,250  
  

 

 

    

 

 

    

 

 

    

 

 

 

The increase in general and administrative expenses for the nine month period is mainly due to a €2,668 thousand increase in services and subcontracting, primarily related to costs related to the establishment of the Princeton manufacturing facility during the first half of 2019.

 

 

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4.3 Personnel expenses

4.3.1 Research and development expenses

 

Research and development expenses

For the nine months ended September 30, 2018

(amounts in thousands of euros)

   R&D      Clinical studies      Total  

Wages and salaries

     1,346        3,844        5,190  

Share-based payments (employees and executives)

     282        667        949  

Social security expenses

     575        1,223        1,798  
  

 

 

    

 

 

    

 

 

 

Total personnel expenses

     2,203        5,735        7,938  
  

 

 

    

 

 

    

 

 

 

 

Research and development expenses

For the nine months ended September 30, 2019

(amounts in thousands of euros)

   R&D      Clinical studies      Total  

Wages and salaries

     1,558        6,463        8,022  

Share-based payments (employees and executives)

     173        339        512  

Social security expenses

     613        1,905        2,518  
  

 

 

    

 

 

    

 

 

 

Total personnel expenses

     2,344        8,708        11,052  
  

 

 

    

 

 

    

 

 

 

 

Research and development expenses

For the three months ended September 30, 2018

(amounts in thousands of euros)

   R&D      Clinical studies      Total  

Wages and salaries

     376        1,159        1,535  

Share-based payments (employees and executives)

     90        215        305  

Social security expenses

     191        382        572  
  

 

 

    

 

 

    

 

 

 

Total personnel expenses

     657        1,756        2,413  
  

 

 

    

 

 

    

 

 

 

 

Research and development expenses

For the three months ended September 30, 2019

(amounts in thousands of euros)

   R&D      Clinical studies      Total  

Wages and salaries

     481        2,324        2,805  

Share-based payments (employees and executives)

     56        82        138  

Social security expenses

     184        645        828  
  

 

 

    

 

 

    

 

 

 

Total personnel expenses

     721        3,051        3,772  
  

 

 

    

 

 

    

 

 

 

The increase in personnel expenses is mainly due to an increase in research and development employee headcount. The weighted average full-time employees (FTE) was 148 during the nine months ended September 30, 2019 and 92 during the nine months ended September 30, 2018.

4.3.2 General and administrative expenses

 

General and administrative expenses

(amounts in thousands of euros)

   09/30/2018
(9 months)
     09/30/2019
(9 months)
     09/30/2018
(3 months)
     09/30/2019
(3 months)
 

Wages and salaries

     2,567        3,310        842        978  

Share-based payments (employees and executive management)

     647        387        173        125  

Social security expenses

     1,104        1,099        221        360  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total personnel expenses

     4,317        4,796        1,234        1,463  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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The increase in personnel expenses is due to an increase in general and administrative employee headcount. The weighted average full-time employees (FTE) was 43 during the nine months ended September 30, 2019 and 36 during the nine months ended September 30, 2018.

4.3.3 Share-based payments (IFRS 2)

Share subscription warrants (“BSA”) plan

The main assumptions used to determine the fair value of the plans granted during the nine months ended September 30, 2019 are:

 

     Grant in April 2019  

Number of warrants

     25,998 BSA2018  

Exercise price

   6.82  

Price of the underlying share

   7.20  

Expected dividends

     0.00

Volatility (1)

     38.91

Expected term

    

T1 : 3 years

T2 : 3.5 years

T3 : 4 years

 

 

 

Fair value of the plan (in thousands of euros) (2)

     56  

(1) based on the historical volatility observed on the ERYP index on Euronext.

(2) BSA were granted at fair value (€2.15). Therefore, no expense was recognized under IFRS 2.

Stock-options (“SO”) plan

The main assumptions used to determine the fair value of the plans granted during the nine months ended September 30, 2019 are:

 

     Grant in January
2019
    Grant in April
2019
    Grant in July
2019
 

Number of warrants

     38,025 SO2018       76,905 SO2018       59,123 SO2019  

Exercise price

   6.38     7.20     5.78  

Price of the underlying share

   6.38     7.20     5.81  

Expected dividends

     0.00     0.00     0.00

Volatility (1)

     41.88     41.65     41.00

Expected term

    

T1 : 6 years

T2 : 6,5 years

 

 

   

T1 : 6 years

T2 : 6,5 years

 

 

   

T1 : 6 years

T2 : 6,5 years

 

 

Fair value of the plan (in thousands of euros)

     97       217       131  

(1) based on the historical volatility observed on the ERYP index on Euronext.

 

 

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Free shares (“AGA”) plan

The main assumptions used to determine the fair value of the plans granted during the nine months ended September 30, 2019 are:

 

     Grant in January
2019
    Grant in April 2019  

Number of shares

     36,150 AGA2018       94,200 AGA2018  

Price of the underlying share

   6.38     7.20  

Expected dividends

     0.00     0.00

Volatility (1)

     38.22     36.32

Repo margin

     5.00     5.00

Maturity

     3 years       3 years  

Performance criteria

     (2     (2

Fair value of the plan (in thousands of euros)

     102       269  

 

(1)

based on the historical volatility observed on the ERYP index on Euronext.

 

(2)

performance criteria: progression of the quoted market share price between the grant date and the tranche acquisition date

 

   

ERYP2018: average price of the 40-quoted market share price days before the grant date (€6.54 for the plan granted in January 2019 and €7.52 for the plan granted in April 2019).

 

   

ERYPi : average price of the 40-quoted market share price days before the acquisition date,

 

   

Tri : (ERYPi / ERYP2018) – 1

o If TRi <=0 % no shares granted are acquired

o If Tri>100% all the shares granted are acquired

o If 0%<TRi<100% shares granted are acquired following the TRi percentage

 

 

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Breakdown of expenses

 

Plan name    Amount in P&L
in euros
thousands as of
September 30,
2018
     of which
employees
     of which
executive
officers and
executive
committee
     of which board
members
 

Grant in October 2016

     194        91        103        —    

Grant in January 2017

     24        —          24        —    

Grant in June 2017

     411        189        223        —    

Grant in October 2017

     86        86        0        —    

Grant in January 2018

     400        225        175        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL AGA

     1,116        592        524        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Grant in October 2016

     62        —          —          62  

Grant in January 2017

     12        —          —          12  

Grant in June 2017

     152        —          —          152  

Grant in January 2018

     132        —          —          132  
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL BSA

     358        —          —          358  
  

 

 

    

 

 

    

 

 

    

 

 

 

Grant in October 2016

     67        34        33        —    

Grant in January 2017

     4        4        —          —    

Grant in June 2017

     102        72        30        —    

Grant in October 2017

     69        69        —          —    

Grant in January 2018

     236        138        98        —    

Grant in September 2018

     2        —          2        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL SO

     480        316        164        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total IFRS 2 expenses

     1,954        908        688        358  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Plan name    Amount in P&L
in euros
thousands as of
September 30,
2019
     of which
employees
     of which
executive
officers and
executive
committee
     of which board
members
 

Grant in October 2016

     52        15        37        —    

Grant in January 2017

     9        —          9        —    

Grant in June 2017

     139        50        89        —    

Grant in October 2017

     8        8        —          —    

Grant in January 2018

     222        88        133        —    

Grant in January 2019

     33        33        —          —    

Grant in April 2019

     61        38        23        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL AGA

     524        232        291        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Grant in October 2016

     24        —          —          24  

Grant in January 2017

     (12      —          —          (12

Grant in June 2017

     47        —          —          47  

Grant in January 2018

     41        —          —          41  

Grant in April 2019

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL BSA

     100        —          —          100  
  

 

 

    

 

 

    

 

 

    

 

 

 

Grant in October 2016

     12        3        8        —    

Grant in January 2017

     —          —          —          —    

Grant in June 2017

     63        40        22        —    

Grant in October 2017

     41        41        —          —    

Grant in January 2018

     194        93        101        —    

Grant in September 2018

     (11      —          (11      —    

Grant in January 2019

     31        31        —          —    

Grant in April 2019

     44        18        26        —    

Grant in July 2019

     10        —          10        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL SO

     385        229        156        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total IFRS 2 expenses

     1,008        461        447        100  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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Summary of outstanding instruments

 

Number of outstanding warrants (BSA) and founder’s warrants (BSPCE)
with a ratio of 1 option = 10 shares

   Number of
BSA and
BSPCE
     Weighted-
average
exercise price
 

Outstanding as of December 31, 2018

     40,804      97.34  
  

 

 

    

 

 

 

Exercisable as of December 31, 2018

     40,804      97.34  
  

 

 

    

 

 

 

Granted

     —        —    

Forfeited

     —        —    

Exercised

     —        —    
  

 

 

    

 

 

 

Outstanding as of September 30, 2019

     40,804      97.34  
  

 

 

    

 

 

 

Exercisable as of September 30, 2019

     40,804      97.34  
  

 

 

    

 

 

 

 

Number of outstanding stock-options and warrants (BSA) with a ratio of 1 option = 1
share

   Number of
stock-options
and BSA
     Weighted-
average
exercise price
 

Outstanding as of December 31, 2018

     340,063      19.87  
  

 

 

    

 

 

 

Exercisable as of December 31, 2018

     88,999      19.88  
  

 

 

    

 

 

 

Granted

     200,051      6.58  

Forfeited

     (24,195    9.24  

Exercised

     —        —    
  

 

 

    

 

 

 

Outstanding as of September 30, 2019

     515,919      15.05  
  

 

 

    

 

 

 

Exercisable as of September 30, 2019

     151,566      21.54  
  

 

 

    

 

 

 

 

     Number of
oustanding
free shares
 

Outstanding as of December 31, 2018

     342,020  
  

 

 

 

Granted

     130,350  

Forfeited

     (26,553

Acquired

     —    
  

 

 

 

Outstanding as of September 30, 2019

     445,817  
  

 

 

 

4.4 Depreciation, amortization and provisions

 

(amounts in thousands of euros)    09/30/2018
(9 months)
     09/30/2019
(9 months)
     09/30/2018
(3 months)
     09/30/2019
(3 months)
 

Amortization of intangible assets

     30        12        10        4  

Depreciation of property, plant and equipment

     595        1,017        157        514  

Depreciation of the right of use

     —          973        —          389  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total amortization and depreciation

     626        2,003        167        907  

Provision

     —          —          —          (50
  

 

 

    

 

 

    

 

 

    

 

 

 

Total amortization, depreciation & provisions

     626        2,003        167        857  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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4.5 Financial income (loss)

 

(amounts in thousands of euros)    09/30/2018
(9 months)
     09/30/2019
(9 months)
     09/30/2018
(3 months)
     09/30/2019
(3 months)
 

Income from short term deposits

     121        5        42        3  

Other financial income

     3,873        3,970        986        2,707  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial income

     3,994        3,975        1,028        2,709  

Financial expenses on lease liability

     —          (251      3        (93

Interest expense related to borrowings

     (8      (134      (5      (12

Other financial expenses

     (7      (7      29        17  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial expenses

     (15      (392      27        (87
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial income (loss)

     3,979        3,582        1,055        2,622  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income and expenses is mainly comprised of:

 

   

A foreign currency gain generated by the conversion into euros of the Company’s U.S. dollar bank account of :

 

   

€3,021 thousand during the nine months ended September 30, 2019 and September 30, 2018;

 

   

€2,425 thousand during the third quarter of 2019 (€590 thousand during the third quarter of 2018).

 

   

A gain on investment currency transactions on swaps of :

 

   

€947 thousand during the nine months ended September 30, 2019 (€847 thousand during the nine months ended September 30, 2018).

 

   

€281 thousand during the third quarter of 2019 (€427 thousand during the third quarter of 2018).

 

   

Financial expenses related to lease liability as a result of IFRS16 in the amount of €251 thousand during during the nine months ended September 30, 2019 (no corresponding charge during the nine months ended September 30, 2018).

4.6 Basic earnings per share and diluted earnings (loss) per share

 

     09/30/2018
(9 months)
     09/30/2019
(9 months)
     09/30/2018
(3 months)
     09/30/2019
(3 months)
 

Net loss (in thousands of euros)

     (29,649      (43,256      (10,679      (13,970

Weighted number of shares for the period (1)

     17,937,462        17,937,535        17,937,535        17,937,535  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic loss per share (€/share)

     (1.65      (2.41      (0.60      (0.78
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted loss per share (€/share)

     (1.65      (2.41      (0.60      (0.78
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

after deduction of treasury shares (2,500 shares are held by the Company as treasury shares and recognized as a deduction of shareholders’ equity).

 

 

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5. NOTES RELATED TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

5.1 Property, plant and equipment

 

(amounts in thousands of euros)    Assets under
construction
    Plant,
equipment
and tooling
    General
equipment,
fixtures and

fittings
    Office
equipment and
computers
    TOTAL  

GROSS VALUE

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2018

     13,559       2,584       2,007       824       18,974  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase

     7,161       808       3,587       345       11,901  

Decrease

     (21     —         —         —         (21

FX rate impact

     498       20       433       17       967  

Reclassification

     (12,117     (178     11,105       70       (1,120
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2019

     9,080       3,234       17,131       1,256       30,701  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ACCUMULATED DEPRECIATION

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2018

     —         (1,824     (1,471     (405     (3,700
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase

     —         (257     (637     (123     (1,017

Decrease

     —         —         —         —         —    

FX rate impact

     —         (1     (20     (7     (29

Reclassification

     —         974       74       8       1,056  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2019

     —         (1,108     (2,054     (528     (3,690
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET VALUE

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2018

     13,559       760       536       419       15,274  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2019

     9,080       2,125       15,078       728       27,011  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Assets capitalized during the nine months ended September 30, 2019 in the amount of €12.1 million mainly relate to general equipment, fixtures and fittings of the Princeton manufacturing facility (€10.3 million).

 

 

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5.2 Right of use

 

(amounts in thousands of euros)    Buildings     Plant,
equipment
and
tooling
    Transport
equipment
    Office
equipment
and
computers
    TOTAL  

GROSS VALUE

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
As of December 31, 2018    —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

First application of IFRS 16

     7,397       —         47       —         7,443  

Increase

     4,057       —         34       —         4,091  

Decrease

     (355     —         —         —         (355

FX rate impact

     289       —         —         —         289  

Reclassification

     —         974       —         118       1,092  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2019

     11,388       974       80       118       12,560  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ACCUMULATED DEPRECIATION

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
As of December 31, 2018    —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase

     (928     —         (16     (30     (973

Decrease

     16       —         —         —         16  

FX rate impact

     (20     —         —         —         (20

Reclassification

     —         (974     —         (79     (1,053
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2019

     (931     (974     (16     (108     (2,030
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET VALUE

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
As of December 31, 2018    —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2019

     10,457       —         64       10       10,530  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reclassifications correspond to assets financed by finance leases which have been reclassified in right of use with the application of IFRS 16 as of January 1, 2019. These assets were classified in property, plant and equipment until December 31, 2018.

The increase of €4,057 thousand is mainly linked to the partial relocation of the French team in new facilities in July (impact of €4,026 thousand).

The decrease in net value of €339 thousand corresponds to a decrease in the right of use following a decrease in the rental space of a building lease (linked to a partial relocation of the French team in new facilities).

5.3 Other financial assets

 

(amounts in thousands of euros)    12/31/2018      09/30/2019  

Deposits related to leased premises

     446        484  

Advance payments to suppliers

     510        226  

Other

     91        26  
  

 

 

    

 

 

 

Total other non-current financial assets

     1,046        736  

Deposits related to leased premises

     —          25  

Advance payments to suppliers

     —          28  

Other

     —          4  
  

 

 

    

 

 

 

Total other current financial assets

     —          57  

Advance payments to suppliers is comprised of payments made to service providers, especially contract research organizations, involved with the conduct of the Company’s clinical trials in the solid tumor indication (TRYbeCA-1 and TRYbeCA-2 trials).

 

 

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5.4 Other current assets

 

(amounts in thousands of euros)    12/31/2018      09/30/2019  

Research Tax Credit

     7,701        10,554  

Tax receivables (e.g., VAT), social receivables and other receivables

     1,949        1,202  

Prepaid expenses

     4,461        2,829  
  

 

 

    

 

 

 

Total other current assets

     14,111        14,585  

Research Tax Credit (Crédit d’Impôt Recherche or “CIR”)

The Company benefits from the provisions in Articles 244 quater B and 49 septies F of the French Tax Code related to the Research Tax Credit. The Research Tax Credit is recognized in the consolidated statement of income (loss) in “other income” during the year in which the eligible research expenditures are incurred.

As of September 30, 2019, the CIR receivable included the Research Tax Credit for the 2017 and 2018 financial years and the CIR estimate as of September 30, 2019.

Prepaid expenses

Prepaid expenses mainly related to advance payments made to suppliers of asparaginase (€3,180 thousand as of December 31, 2018 and €2,189 thousand as of September 30, 2019).

5.5 Cash and cash equivalents

 

(amounts in thousands of euros)    12/31/2018      09/30/2019  

Cash and cash equivalents

     134,371        81,927  
  

 

 

    

 

 

 

Total cash and cash equivalents as reported in statement of financial position

     134,371        81,927  

Bank overdrafts

     —          —    
  

 

 

    

 

 

 

Total cash and cash equivalents as reported in statement of cash flow

     134,371        81,927  

As of December 31, 2018, the cash position is composed of the following items: (i) €118.4 million in current accounts and (ii) €16.0 million in term deposits, with a maturity in January 2019.

As of September 30, 2019, the cash position is composed of the following items: (i) €76.8 million in current accounts, (ii) €5.0 million in term deposits, with a one-month maturity and (iii) €0.1 million in other cash equivalents.

5.6 Shareholders’ equity

As of September 30, 2019, the capital of the Company consisted of 17,940,035 shares, fully paid up, with a nominal value of 0.10 euro.

5.7 Provisions

 

(amounts in thousands of euros)

   Provisions for
retirement
indemnities
     TOTAL  

As of December 31, 2018

     347        347  
  

 

 

    

 

 

 

Provisions

     91        91  

Actuarial gains and losses

     96        96  
  

 

 

    

 

 

 

As of September 30, 2019

     533        533  
  

 

 

    

 

 

 

 

 

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Provision for retirement indemnities

The regime for retirement indemnities applicable at ERYTECH Pharma S.A., is defined by the collective agreement for the pharmaceutical industry in France.

As part of the estimate of the retirement commitments, the following assumptions were used for all categories of employees:

 

     12/31/2018     09/30/2019  

Discount rate

     1.57     0.47

Wage increase

     2     2

Social welfare contribution rate

- non executive employees

     44     39

- executive employees

     54     51

- executive management

     55     52

Expected staff turnover

- non executive and executive employees

     Medium - High       High  

- executive management

     Low       Low  

Age of retirement

     65 - 67 years       65 - 67 years  

Mortality table

     INSEE 2014       INSEE 2018  
  

 

 

   

 

 

 

5.8 Financial liabilities

Financial liabilities by type

 

(amounts in thousands of euros)    12/31/2018      09/30/2019  

Financial liabilities related to finance leases

     39        —    

Conditional advances

     1,181        1,312  

Bank loans

     799        246  

Other

     —          39  
  

 

 

    

 

 

 

Total financial liabilities

     2,019        1,597  

The Company did not subscribe new loans during the nine months ended September 30, 2019.

Financial liabilities by maturity

Maturity dates of financial liabilities as of December 31, 2018 are as follows:

 

     Less
than one
year
     One to
three
years
     Three to
five
years
     More
than five
years
     Total  

Conditional advances

              1,181        1,181  

Bank loans

     738        62              799  

Financial liabilities related to finance leases

     39                 39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

     776        62        —          1 181        2,019  

 

 

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Maturity dates of financial liabilities as of September 30, 2019 are as follows:

 

(amounts in thousands of euros)    Less
than one
year
     One to
three
years
     Three to
five
years
     More
than five
years
     Total  

Conditional advances

     —          —          —          1,312        1,312  

Bank loans

     246        —          —          —          246  

Other

     —          —          39        —          39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

     246        —          39        1,312        1,597  

Conditional advances

 

(amounts in thousands of euros)    BPI France -
TEDAC
     TOTAL  

Financial liabilities as of December 31, 2018

     1,181        1,181  
  

 

 

    

 

 

 

Capitalized interest

     131        131  
  

 

 

    

 

 

 

Financial liabilities as of September 30, 2019

     1,312        1,312  
  

 

 

    

 

 

 

5.9 Lease labilities

 

(amounts in thousands of euros)    Lease debt  

As of December 31, 2018

     —    
  

 

 

 

First application of IFRS 16

     7,734  

Increase

     5,949  

Decrease

     (1,125

FX rate impact

     348  

Capitalized interests

     75  

Reclassification

     42  
  

 

 

 

As of September 30, 2019

     13,023  
  

 

 

 

The increase of €5,949 thousand is mainly linked to the partial relocation of the French team in new facilities in July (impact of €4,026 thousand) and an improvement allowance received for the Princeton manufacturing facility (€1,859 thousand).

The decrease of €1,125 thousand reflects the impact of a decrease in the liability of €339 thousand following a decrease in the rental space of a building lease (linked to a partial relocation of the French team in new facilities).

Lease liabilities by maturity

Maturity dates of lease liabilities are as follows:

 

     Less
than
one year
     One to
three
years
     Three to
five
years
     More
than
five
years
     Total  
As of December 31, 2018    —        —        —        —        —    

As of September 30, 2019

     1,142        3,432        2,728        5,721        13,023  

 

 

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5.10 Trade and other payables

 

(amounts in thousands of euros)    12/31/2018      09/30/2019  

Vendors

     13,402        3,678  

Vendors - accruals

     3,253        8,984  
  

 

 

    

 

 

 

Total trade and other payables

     16,655        12,662  

5.11 Other current liabilities

 

(amounts in thousands of euros)    12/31/2018      09/30/2019  

Social liabilities, taxation and social security

     3,148        3,502  

Fixed assets payables

     —          1,092  

Deferred revenue

     16        61  

Other payables

     53        86  
  

 

 

    

 

 

 

Total other current liabilities

     3,217        4,741  

5.12 Financial instruments recognized in the consolidated statement of financial position and effect on net income (loss)

 

As of December 31, 2018

(amounts in thousands of euros)

   Carrying
amount
on the
statement
of
financial
position

(1)
     Fair
value
through
profit
and loss
     Fair value
through other
comprehensive
income
     Loans and
receivables
     Debt at
amortized
cost
     Fair
value
 

Other non-current financial assets

     1,046              1,046           1,046  

Trade and other receivables

     30              30           30  

Other current assets

     14,111              14,111           14,111  

Cash and cash equivalents

     134,371        134,371                 134,371  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

     149,557        134,371        —          15,187        —          149,557  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities - non current portion

     1,243                 1,243        1,243  

Financial liabilities - current portion

     776                 776        776  

Trade and other payables

     16,655                 16,655        16,655  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

     18,674        —          —          —          18,674        18,674  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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As of September 30, 2019

(amounts in thousands of euros)

   Carrying
amount
on the
statement
of
financial
position

(1)
     Fair
value
through
profit
and loss
     Fair value
through other
comprehensive
income
     Loans and
receivables
     Debt at
amortized
cost
     Fair
value
 

Other non-current financial assets

     736              736           736  

Other current financial assets

     57              57           57  

Trade and other receivables

     58              58           58  

Other current assets

     11,755              11,755           11,755  

Cash and cash equivalents

     81,927        81,927                 81,927  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

     94,534        81,927        —          12,607        —          94,534  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities - non current portion

     1,312                 1,312        1,312  

Lease liabilities - non current portion

     11,880                 11,880        11,880  

Financial liabilities - current portion

     285                 285        285  

Lease liabilities - current portion

     1,142                 1,142        1,142  

Trade and other payables

     12,662                 12,662        12,662  

Other current liabilities

     4,680                 4,680        4,680  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

     31,962        —          —          —          31,962        31,962  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

The carrying amount of these assets and liabilities is a reasonable estimate of their fair value.

 

 

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6. RELATED PARTIES

The Company’s related parties include the Chairman of the Board of Directors (Jean-Paul Kress), the Chief Executive Officer (Gil Beyen), the two Deputy General Managers (Jérôme Bailly and Eric Soyer), members of the Board of Directors (five Board members in addition to the Chairman and the Chief Executive Officer) and members of the executive committee (four members in addition to the Chief Executive Officer and the Deputy General Managers).

The remuneration of directors and other members of the executive committee was as set forth in the table below.

 

     09/30/2018      09/30/2019  
(amounts in thousands of euros)    Salary
/ fees
     Retirement
benefits
     Share
based
payments
     Salary
/ fees
     Retirement
benefits
     Share
based
payments
 

Executive officers / Deputy General Managers

     572        2        274        813        12        231  

Executive committee

     1,077        11        414        1,018        7        216  

Board of directors

     184        —          358        236        —          100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,832        13        1,046        2,067        19        547  

The Company has no other related parties.

 

 

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7. OFF-BALANCE SHEET COMMITMENTS

The off-balance-sheet commitments as of December 31, 2018 have not changed significantly during the nine months ended September 30, 2019, except for:

 

   

the lease commitments that are now recognized in the financial statements in accordance with IFRS 16;

 

   

the following commitments:

Agreement with Orphan Europe

In November 2012, the Company entered into a marketing agreement with Orphan Europe, a subsidiary of Recordati Group, to market and distribute GRASPA® for the treatment of ALL and AML in 38 countries in Europe, including all of the countries in the European Union.

As a consequence of the Company’s withdrawal of the MAA for ALL and the Company’s strategic re-focus on solid tumors, this contract was terminated during the first half of 2019, without any financial consequence for the Company.

Agreement with SQZ Biotechnologies

On June 24, 2019, the Company entered into a collaboration agreement with SQZ Biotechnologies, a cell therapy company developing novel treatments in multiple therapeutic areas, to advance novel red blood cell-based therapeutics for immune modulation. Under the terms of the agreement, the Company has granted to SQZ Biotechnologies an exclusive worldwide license to develop antigen specific immune modulating therapies employing red blood cell-based approaches. Combining SQZ Biotechnologies’ proprietary and versatile cell engineering platform with the intellectual property of the Company related to red blood cell-based therapeutics is intended to allow for the rapid development of a broad pipeline of novel immunomodulatory products addressing multiple indications.

The agreement provides:

 

   

An upfront payment of $1 million (recognized in 2019);

 

   

Potential development, regulatory and commercial milestone payments up to $56 million for the first product successfully developed by SQZ Biotechnologies under this agreement;

 

   

The Company could also receive progressive royalties based on future sales.

Sublease in the United-States

In July 2019, the Company signed an operating sublease agreement for a portion of its premises located in Cambridge.

 

(amounts in thousands of euros)    Sublease to be received  
As of September 30, 2019    Total      Less than one year      One to five years      More than five
years
 

Sublease in US

     578        171        407        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total sublease to be received

     578        171        407        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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