Unaudited Notes to the Interim Condensed Consolidated Financial Statements
(Amounts in Swiss francs)
1. General information
Addex Therapeutics Ltd (the 'Company'), formerly Addex Pharmaceuticals Ltd, and its subsidiaries (together, the 'Group') are a clinical stage pharmaceutical group applying its leading allosteric modulator drug discovery platform to discovery and development of small molecule pharmaceutical products, with an initial focus on central nervous system disorders.
The Company is a Swiss stockholding corporation domiciled c/o Addex Pharma SA, Chemin des Aulx 12, CH1228 Plan-les-Ouates, Geneva, Switzerland and the parent company of Addex Pharma SA, Addex Pharmaceuticals France SAS and Addex Pharmaceuticals Inc. registered in Delaware with its principal business location in San Francisco, California, United States. Its registered shares are traded at the SIX, Swiss Exchange, under the ticker symbol ADXN. On January 29, 2020, the Group listed on the Nasdaq Stock Market, American Depositary Shares (ADSs) under the symbol 'ADXN', without a new issuance of securities. ADSs represents shares that continue to be admitted to trading on SIX Swiss Exchange.
These condensed consolidated financial statements have been approved for issuance by the Board of Directors on May 4, 2021.
2. Basis of preparation
These condensed consolidated interim financial statements for the three months ended March 31, 2021, have been prepared under the historic cost convention and in accordance with IAS 34 'Interim Financial Reporting' and are presented in a format consistent with the consolidated financial statements under IAS 1 'Presentation of Financial Statements'. However, they do not include all of the notes that would be required in a complete set of financial statements. Thus, this interim financial report should be read in conjunction with the consolidated financial statements for the year ended December 31, 2020.
Interim financial results are not necessarily indicative of results anticipated for the full year. The preparation of these unaudited condensed consolidated interim financial statements made in accordance with IAS 34 requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. The areas involving a higher degree of judgment which are significant to the condensed consolidated interim financial statements are disclosed in note 4 to the consolidated financial statements for the year ended December 31, 2020.
A number of new or amended standards and interpretations became applicable for financial periods beginning on or after January 1, 2021. The Group noted that the latter did not have a material impact on the Group's financial position or disclosures made in the condensed consolidated interim financial statements.
Due to rounding, numbers presented throughout these condensed consolidated financial statements may not add up precisely to the totals provided. All ratios and variances are calculated using the underlying amount rather than the presented rounded amount.
3. Critical accounting estimates and judgments
The Group makes estimates and assumptions concerning the future. These estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities or may have had a significant impact on the reported results are disclosed below:
The Group's accounts are prepared on a going concern basis. To date, the Group has financed its cash requirements primarily from share issuances and licensing certain of its research and development stage products. The Group is a development-stage enterprise and is exposed to all the risks inherent in establishing a business. The Group maintains detailed financial forecasts and monitors actual results on a regular basis so that measures can be taken to ensure the Group remains solvent.
In early 2020 a coronavirus disease (COVID-19) pandemic developed globally resulting in a significant number of infections and negative effects on economic activity. The Group is actively monitoring the situation and is taking any necessary measures to respond to the situation in cooperation with the various stakeholders. On March 18, 2020, the Group announced the suspension of the initiation of a placebo-controlled Phase 2b/3 pivotal clinical trial of dipraglurant in levodopa-induced dyskinesia associated with Parkinson's disease (dipraglurant PD-LID). The Group decided to suspend the trial based on the inability of planned clinical trial sites in the United States to initiate the trial in full compliance with the Group's planned clinical trial procedures including with respect to data reporting, data monitoring, and the recommendations of various health authorities that the infirm patients who would participate in the trial not risk being exposed to COVID-19 at clinical trial sites. Such sites have been and may continue to be required to focus their limited resources on matters unrelated to our planned clinical trial, thereby decreasing availability, in whole or in part, for services to our planned clinical trial. The Group will not be able to initiate the trial until these risks have been significantly reduced or remediated. Although the Group believes, based on current projections of the pandemic, that it will be able to initiate the trial in the second quarter of 2021, the duration of the COVID-19 crisis is uncertain and, if the enumerated risks are not addressed, the Group may have to adjust its expectations as to trial initiation, including potentially initiating the trial later in 2021, in order to accommodate the foregoing factors. In addition, the COVID-19 pandemic may affect the operations of the FDA and other health authorities, which could result in delays of reviews and approvals, including with respect to dipraglurant and our other product candidates. Any such delays could increase the cost of our planned clinical trial and increase the uncertainty of receiving approval from the FDA for dipraglurant in PD-LID patients. Depending on the duration of the COVID-19 crisis and continued negative impact on global economic activity, the Group may have to take additional measures that will have a negative impact on the Group's business continuity and may experience certain liquidity restraints as well as incur impairments on its assets. The exact impact on the Group's activities in 2021 and thereafter cannot be reasonably predicted. However, based on the risk mitigation measures undertaken, the Group concluded that there is no material uncertainty that may cast a significant doubt upon the Group's ability to continue as a going concern.
Revenue is primarily from fees related to licenses, milestones and research services. Given the complexity of the relevant agreements, judgements are required to identify distinct performance obligations, allocate the transaction price to these performance obligations and determine when the performance obligations are met. In particular, the Group's judgement over the estimated stand-alone selling price which is used to allocate the transaction price to the performance obligations is disclosed in note 15.
Grants are recorded at their fair value when there is reasonable assurance that they will be received and recognized as income when the Group has satisfied the underlying grant conditions. In certain circumstances, grant income may be recognized before explicit grantor acknowledgement that the conditions have been met.
Accrued research and development costs
The Group records accrued expenses for estimated costs of research and development activities conducted by third party service providers. The Group records accrued expenses for estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced, and these costs are included in accrued expenses on the balance sheets and within research and development expenses in the statements of comprehensive loss. These costs are a significant component of research and development expenses. Accrued expenses for these costs are recorded based on the estimated amount of work completed in accordance with agreements established with these third parties.
To date, the Group has not experienced significant changes in the estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, the Group may be required to make changes to the estimates in the future as it becomes aware of additional information about the status or conduct of its research activities.
The Group recognizes expenditure incurred in carrying out its research and development activities, including development supplies, until it becomes probable that future economic benefits will flow to the Group, which results in recognizing such costs as intangible assets, involving a certain degree of judgement. Currently, such development supplies are associated with pre-clinical and clinical trials of specific products that do not have any demonstrated technical feasibility.
The Group recognizes an expense for share-based compensation based on the valuation of equity incentive units using the Black-Scholes valuation model. A number of assumptions related to the volatility of the underlying shares and to the risk-free rate are made in this model. Should the assumptions and estimates underlying the fair value of these instruments vary significantly from management's estimates, then the share-based compensation expense would be materially different from the amounts recognized.
The present value of the pension obligations is calculated by an independent actuary and depends on a number of assumptions that are determined on an actuarial basis such as discount rates, future salary and pension increases, and mortality rates. Any changes in these assumptions will impact the carrying amount of pension obligations. The Group determines the appropriate discount rate at the end of each period. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. Other key assumptions for pension obligations are based in part on current market conditions.
4. Interim measurement note
Seasonality of the business: The business is not subject to any seasonality, but expenses and corresponding revenue are largely determined by the phase of the respective projects, particularly with regard to external research and development expenditures.
Costs: Costs that incur unevenly during the financial year are anticipated or deferred in the interim report only if it would also be appropriate to anticipate or defer such costs at the end of the financial year.
5. Segment reporting
Management has identified one single operating segment, related to the discovery, development and commercialization of small-molecule pharmaceutical products.
Information about products, services and major customers
External income of the Group for the three-month periods ended March 31, 2021 and 2020 is derived from the business of discovery, development and commercialization of pharmaceutical products. Income was earned from rendering of research services to a pharmaceutical company and grants earned.
Information about geographical areas
External income is exclusively recorded in the Swiss operating company.
Analysis of revenue from contract with customer and other income by nature is detailed as follows:
Analysis of revenue from contract with customer and other income by major counterparties is detailed as follows:
For the three months ended
For more detail, refer to note 15, 'Revenue from contract with customer' and note 16 'Other income'.
The geographical allocation of long-lived assets is detailed as follows:
March 31, 2021
December 31, 2020
United States of America
The geographical analysis of operating costs is as follows:
For the three months ended
United States of America
Total operating costs (note 17)
The capital expenditure during the three-month period ended March 31, 2021 is CHF 3,159 (CHF 8,510 for the three-month period ended March 31, 2020).
6. Cash and cash equivalents
March 31, 2021
December 31, 2020
Cash at bank and on hand
Total cash and cash equivalents
Split by currency:
March 31, 2021
December 31, 2020
The Group pays interests on CHF cash and cash equivalents and earns interests on USD cash and cash equivalents. The Group invests its cash balances into a variety of current and deposit accounts with Swiss banks. In addition, the Group invests a portion of its USD cash in line with its treasury guidelines. As of March 31, 2021, non-used funds received from Eurostars/Innosuisse amount to CHF 13,364 (CHF 86,481 as of December 31, 2020) (note 16).
All cash and cash equivalents were held either at banks or on hand as of March 31, 2021 and December 31, 2020.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses ('ECL'), which uses a lifetime expected loss allowance for all contract assets, trade receivables and other receivables. As of March 31, 2021, the contract asset relates to the research agreement with Indivior whilst the trade and other receivables comprise of four non-governmental debtors whose combined outstanding balances are CHF 14,072 (four non-governmental debtors for CHF 20,577 as of December 31, 2020). The Group has considered that the contract asset and the trade and other receivables have a low risk of default based on historic loss rates and forward-looking information on macroeconomic factors affecting the ability of the third parties to settle invoices. As a result, expected loss allowance has been deemed as nil as of March 31, 2021 and December 31, 2020. The increase in prepayments as of March 31, 2021 compared to December 31, 2020 primarily relates to retirement benefits paid annually at the beginning of the year. As of December 31, 2020 deferred costs relate to paid legal and auditor fees associated with the preparation of the capital increase executed on January 8, 2021.
All payables mature within 3 months. Accrued expenses and trade payables primarily relate to R&D services from contract research organizations, consultants and professional fees. The increase in trade payable as of March 31, 2021 compared to December 31, 2020, primarily relates to R&D activities and to the annual Directors and Officers (D&O) insurance premium. The carrying amounts of payables do not materially differ from their fair values, due to their short-term nature.
12. Share capital
Number of shares
Balance as of January 1, 2020
Settlement of supplier invoices
Net sale of treasury shares under liquidity agreement
Net purchase of treasury shares under liquidity agreement
Other net sale of treasury shares
Balance as of March 31, 2021
The Company maintains a Liquidity Agreement with Kepler Capital Markets SA ('Kepler'). Under the agreement, the Group has provided Kepler with cash and shares to enable them to buy and sell the Company's shares. As of March 31, 2021, 90,534 (December 31, 2020: 54,489) treasury shares are recorded under this agreement in the treasury share reserve and CHF 9,963 (December 31, 2020: CHF 64,930) is recorded in other financial assets.
As of March 31, 2021, the total outstanding share capital is CHF 34,060,051, consisting of 34,060,051 shares excluding 5,688,584 treasury shares. As of December 31, 2020, the total outstanding share capital was CHF 27,118,774 consisting of 27,118,774 shares excluding 5,729,861 treasury shares. All shares have a nominal value of CHF 1.
On January 8, 2021, Addex Therapeutics Ltd issued 6,900,000 registered shares, with a nominal value of CHF 1 each, at an issue price of CHF 1.46367. Out of the total new shares, 6,750,000 are in the form of American Depositary Shares, listed on the Nasdaq Stock Market. The gross proceeds amounted to CHF 10.1 million (USD 11.5 million) and directly related share issuance costs of CHF 1.8 million were recorded as a deduction in equity.
During the three-month period ended March 31, 2021, the Group sold 39,940 treasury shares for a gross amount of CHF 80,944 under a Sale Agency Agreement entered with Kepler Cheuvreux and used 37,382 treasury shares to purchase services from consultants (March 31, 2020: 62,808) including 19,376 treasury shares for Roger Mills, the Group's Chief Medical Officer (March 31, 2020: 37,932). The total value of consulting services settled in shares was CHF 58,666 for the three-month period ended March 31, 2021 (CHF 82,931 for the three-month period ended March 31, 2020).
13. Share-based compensation
The total share-based compensation expense recognized in the statement of comprehensive loss for equity incentive units granted to directors, executives, employees, consultants and investors for the three-month period ended March 31, 2021 amounts to CHF 186,102 (CHF 297,708 for the first quarter 2020).
As of March 31, 2021, 6,763,564 options were outstanding (6,768,460 options as of December 31, 2020). No options were granted during the three-month period ended March 31, 2021 and 4,896 options were forfeited.
On January 1, 2020, the exercise period of 194,687 vested options has been extended for 5 years and share-based compensation related to the fair value adjustment for the exercise period extensions of CHF 15,502 has been recognized in the first quarter 2020.
As of March 31, 2021 and December 31, 2020, a total of 198,750 equity sharing certificates (ESCs) were outstanding.
14. Retirement benefits obligations
The amounts recognized in the statement of comprehensive loss are as follows:
The conversion rates have successively changed as of January 1, 2020, and January 1, 2021, which has led to a positive past service cost.
The amounts recognized in the balance sheet are determined as follows:
December 31, 2020
Defined benefit obligation
Fair value of plan assets
15. Revenue from contract with customer
License & research agreement with Indivior PLC
On January 2, 2018, the Group entered into an agreement with Indivior for the discovery, development and commercialization of novel GABAB PAM compounds for the treatment of addiction and other CNS diseases. This agreement included the selected clinical candidate, ADX71441. In addition, Indivior agreed to fund a research program at the Group to discover novel GABAB PAM compounds.
The contract contains two distinct material promises and performance obligations: (1) the selected compound ADX71441 which falls within the definition of a licensed compound, whose rights of use and benefits thereon was transferred in January 2018 and, (2) the research services to be conducted by the Group and funded by Indivior to discover novel GABAB PAM compounds for clinical development that may be discovered over the research term of the agreement and selected by Indivior.
Indivior has sole responsibility, including funding liability, for development of selected compounds under the agreement through preclinical and clinical trials, as well as registration procedures and commercialization, if any, worldwide. Indivior has the right to design development programs for selected compounds under the agreement. Through the Group's participation in a joint development committee, the Group reviews, in an advisory capacity, any development programs designed by Indivior. However, Indivior has authority over all aspects of the development of such selected compounds.
Under terms of the agreement, the Group granted Indivior an exclusive license to use relevant patents and know-how in relation to the development and commercialization of product candidates selected by Indivior. Subject to agreed conditions, the Group and Indivior jointly own all intellectual property rights that are jointly developed and the Group or Indivior individually own all intellectual property rights that the Group or Indivior develop individually. The Group has retained the right to select compounds from the research program for further development in areas outside the interest of Indivior including Charcot-Marie-Tooth type 1A neuropathy, or CMT1A. Under certain conditions, but subject to certain consequences, Indivior may terminate the agreement.
In January 2018, the Group received, under the terms of the agreement, a non-refundable upfront fee of USD 5.0 million for the right to use the clinical candidate, ADX71441, including all materials and know-how related to this clinical candidate. In addition, the Group is eligible for payments on successful achievement of pre-specified clinical, regulatory and commercial milestones totaling USD 330 million and royalties on net sales of mid-single digits to low double-digits.
On February 14, 2019, Indivior terminated the development of their selected compound, ADX71441. Separately, Indivior funds research at the Group, based on a research plan to be mutually agreed between the parties, to discover novel GABAB PAM compounds. These future novel GABAB PAM compounds, if selected by Indivior, become licensed compounds. The Group agreed with Indivior to an initial research term of two years, that can be extended by twelve-month increments and a minimum annual funding of USD 2 million for the Group's R&D costs incurred. R&D costs are calculated based on the costs incurred in accordance with the contract. In 2020, the Group implemented improved systems to capture internal staff costs by project and consequently revised certain cost estimates. Following Indivior's selection of one newly identified compound, the Group has the right to also select one additional newly identified compound. The Group is responsible for the funding of all development and commercialization costs of its selected compounds and Indivior has no rights to the Group's selected compounds. The initial two-year research term was expected to run from May 2018 to April 2020. In 2019, Indivior agreed an additional research funding of USD 1.6 million, for the research period. On October 30, 2020, the research term was extended until June 30, 2021 and Indivior agreed an additional research funding of USD 2.8 million. The Group is currently negotiating the extension of the research agreement beyond June 30, 2021.
For the research activities, the Group recognized CHF 0.8 million for the three-month period ended March 31, 2021 (March 31, 2020: CHF 0.9 million) and recorded CHF 0.1 million as contract asset as of March 31, 2021 (December 31, 2020: CHF 0.7 million as contract liability).
Janssen Pharmaceuticals Inc. (formerly Ortho-McNeil-Janssen Pharmaceuticals Inc).
On December 31, 2004, the Group entered into a research collaboration and license agreement with Janssen Pharmaceuticals Inc. (JPI). In accordance with this agreement, JPI has acquired an exclusive worldwide license to develop mGlu2 PAM compounds for the treatment of human health. The Group is eligible to receive up to EUR 109 million in success-based development and regulatory milestone, and low double-digit royalties on net sales. The Group considers these various milestones to be variable consideration as they are contingent upon achieving uncertain, future development stages and net sales. For this reason, the Group considers the achievement of the various milestones as binary events that will be recognized as revenue upon occurrence.
No amounts have been recognized under this agreement in the three-month periods ended March 31, 2021 and 2020.
16. Other income
Under a grant agreement with Eurostars/Innosuisse the Group is required to complete specific research activities within a defined period of time. The Group's funding is fixed and received based on the satisfactory completion of the agreed research activities and incurring the related costs.
The Group was funded by Eurostars/Innosuisse for CHF 512,032 of which CHF 380,184 were paid as of March 31, 2021.
For the three-month period ended March 31, 2021, the Group has recognized CHF 73,117 as other income (CHF 44,425 for the three-month period ended March 31, 2020). As of March 31, 2021, the Group recognized CHF 13,364 as short term deferred income in accordance with the grant conditions (CHF 86,481 as of December 31,2020).
17. Operating costs
For the three months ended
Staff costs (note 18)
Depreciation (notes 8/9)
External research and development costs
Patent maintenance and registration costs
Other operating costs
Total operating costs
The evolution of the total operating costs is mainly driven by external research and development expenses, staff costs, D&O insurance, professional fees and other operating costs.
During the three-month period ended March 31, 2021, external research and development costs decreased by CHF 0.8 million compared to the same period ended March 31, 2020, primarily due a decrease of CHF 1.0 million related to the Dipraglurant PD-LID program as the initiation of a placebo Phase 2b/3 clinical trial, prepared during the first quarter 2020, was suspended on March 18, 2020 because of the global coronavirus pandemic. During the same period, the external research and development costs associated to other discovery programs increased by CHF 0.2 million. The decrease in professional fees for CHF 0.3 million is primarily due to lower legal fees that were abnormally high in the first quarter 2020 due to the company's listing on the Nasdaq Stock Market on January 29, 2020.
Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of shares in issue during the period excluding shares purchased by the Group and held as treasury shares.
For the three months ended
Loss attributable to equity holders of the Company
Weighted average number of shares in issue
Basic and diluted loss per share
The Company has three categories of dilutive potential shares as of March 31, 2021 and 2020: equity sharing certificates ('ESCs'), share options and warrants. For the three-month periods ended March 2021 and 2020, equity sharing certificates, share options and warrants have been ignored in the calculation of the loss per share, as they would be antidilutive.
21. Related party transactions
Related parties include members of the Board of Directors and the Executive Management of the Group. The following transactions were carried out with related parties:
Key management compensation
For the three months ended
Salaries, other short-term employee benefits and post-employment benefits
Salaries, other short-term employee benefits and post-employment benefits relate to members of the Board of Directors and Executive Management who are employed by the Group. Consulting fees relate to Roger Mills, a member of the Executive Management who delivers his services to the Group under a consulting contract. The Group has a net payable to the Board of Directors and Executive Management of CHF 176,215 as of March 31, 2021 (December 31, 2020: CHF 145,443).
On April 23, 2021, the Company issued 9,524,317 new registered shares from its authorized capital to its 100% owned subsidiary, Addex Pharma SA at nominal value of CHF 1 and recorded the new shares as treasury shares.
Addex Therapeutics Ltd. published this content on 05 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 May 2021 10:08:09 UTC.