If the only securities being
registered on this Form are to be offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any
of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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offering. ☐
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shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
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filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
If an emerging growth
company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The term new or revised financial accounting
standard refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks described in the documents incorporated by reference in
this prospectus and any prospectus supplement, as well as other information we include or incorporate by reference into this prospectus and any applicable prospectus supplement, before making an investment decision. Our business, financial condition
or results of operations could be materially adversely affected by the materialization of any of these risks. The trading price of our securities could decline due to the materialization of any of these risks, and you may lose all or part of your
investment. See Cautionary Note Regarding Forward-Looking Statements above.
Risks Related to Product Development, Regulatory Approval and
Commercialization
We are heavily dependent on the regulatory approval of our clinical candidates
CYAD-01, CYAD-02, CYAD-101 and CYAD-211 in the United States and Europe, and subsequent
commercial success of CYAD-01, CYAD-02, CYAD-101 and CYAD-211, both of which may never
occur.
We are a clinical-stage biopharmaceutical company with no products approved by regulatory authorities or available for commercial sale. We
may be unable to develop or commercialize a product, product candidate or research program, or may cease some of our operations, which may have a material adverse effect on our business.
We have generated limited revenue to date and do not expect to generate any revenue from product sales for the foreseeable future. As a result, our future
success is currently dependent upon the regulatory approval and commercial success of our clinical CAR-T cell therapies, including CYAD-01, CYAD-02, CYAD-101 and CYAD-211 which we intend to seek approval. Our ability to generate revenues in the near term will depend on our
ability to obtain regulatory approval and successfully commercialize CYAD-01, CYAD-02, CYAD-101 and CYAD-211 in the United States, the first country in which we intend to seek approval for these candidates. We may experience delays in obtaining regulatory approval in the United States for these clinical
candidates, if it is approved at all, and the price of our ordinary shares and/or ADSs may be negatively impacted. Even if we receive regulatory approval, the timing of the commercial launch of CYAD-01, CYAD-02, CYAD-101 and CYAD-211 in the United States is dependent upon a number of factors, including, but not limited to, hiring sales
and marketing personnel, pricing and reimbursement timelines, the production of sufficient quantities of commercial drug product and implementation of marketing and distribution infrastructure.
In addition, we have incurred and expect to continue to incur significant expenses as we continue to pursue the approval of
CYAD-01, CYAD-02, CYAD-101 and CYAD-211 in the United States, Europe and elsewhere. We
plan to devote a substantial portion of our effort and financial resources in order to continue to grow our operational capabilities. This represents a significant investment in the clinical and regulatory success of
CYAD-01 and CYAD-02 for the treatment of relapsed / refractory acute myeloid leukemia, CYAD-101 for the treatment of metastatic
colorectal cancer and CYAD-211 for the treatment of relapsed or refractory multiple myeloma, which is uncertain. The success of our clinical candidates, if approved, and revenue from commercial sales, will
depend on several factors, including:
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execution of an effective sales and marketing strategy for the commercialization of CYAD-01, CYAD-02, CYAD-101 and CYAD-211;
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acceptance by patients, the medical community and third-party payors;
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our success in educating physicians and patients about the benefits, administration and use of CYAD-01, CYAD-02, CYAD-101 and CYAD-211;
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the incidence and prevalence of the indications for which our CYAD-01 and
CYAD-02 drug product candidates are approved in those markets in which the candidate(s) are approved;
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the prevalence and severity of side effects, if any, experienced by patients treated with CYAD-01, CYAD-02, CYAD-101 and CYAD-211;
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the availability, perceived advantages, cost, safety and efficacy of alternative treatments, including potential
alternate treatments that may currently be available or in development or may later be available or in development or approved by regulatory authorities;
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successful implementation of our manufacturing processes that we plan to include in a future biologics license
application, or BLA, and production of sufficient quantities of commercial drug product;
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maintaining compliance with regulatory requirements, including current good manufacturing practices, or cGMPs,
good laboratory practices, or GLPs and good clinical practices, or GCPs; and
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obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity and otherwise
protecting our rights in our intellectual property portfolio.
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We may also fail in our efforts to develop and commercialize future drug
product candidates, including CYAD-103 and our other CYAD-200 series of next-generation CAR T candidates. If this were to occur, we would continue to be heavily
dependent on the regulatory approval and successful commercialization of our NKG2D CAR-T product candidates, including CYAD-01,
CYAD-02, CYAD-101 and CYAD-211, our development costs may increase and our ability to generate revenue or profits, or to raise
additional capital, could be impaired.
The achievement of milestones (such as those related to research and development, scientific, clinical, regulatory
and business) will trigger payment obligations towards Celdara and Dartmouth, which will negatively impact our profitability.
Our clinical trials
are ongoing and not complete. Initial success in our ongoing clinical trial may not be indicative of results obtained when this trial is completed. Furthermore, success in early clinical trials may not be indicative of results obtained in later
trials.
Our clinical experience with our lead drug product candidates is limited. We have treated a small number of patients as of the date of
this prospectus. In particular, the results of our alloSHRINK, THINK and DEPLETHINK trials should not be relied upon as evidence that our ongoing or future clinical trials will succeed. Trial designs and results from previous or ongoing trials are
not necessarily predictive of future clinical trial results, and initial or interim results may not continue or be confirmed upon completion of the trial. These data, or other positive data, may not continue or occur for these patients or for any
future patients in our ongoing or future clinical trials, and may not be repeated or observed in ongoing or future trials involving our drug product candidates. There is limited data concerning long-term safety and efficacy following treatment with
our product candidates. Our product candidates may fail to show the desired safety and efficacy in later stages of clinical development despite having successfully advanced through initial clinical trials. There can be no assurance that any of these
trials will ultimately be successful or support further clinical advancement or regulatory approval of our product candidates.
There is a high failure
rate for drugs and biologics proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials even after achieving promising results in
earlier stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, regulatory delays or rejections may be encountered as a
result of many factors, including changes in regulatory policy during the period of product development.
In previous clinical trials involving T
cell-based immunotherapies, some patients experienced serious adverse events. Our drug product candidates may demonstrate a similar effect or have other properties that could halt our clinical development, prevent our regulatory approval, limit our
commercial potential, or result in significant negative consequences.
In previous and ongoing clinical trials involving CAR-T cell products by other companies or academic researchers, many patients experienced side effects such as neurotoxicity and cytokine release syndrome (CRS),
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which have in some cases resulted in clinical holds in ongoing clinical trials of CAR-T drug product candidates. There have been life threatening events
related to severe neurotoxicity and CRS, requiring intense medical intervention such as intubation or pressor support, and in several cases, resulted in death. Severe neurotoxicity is a condition that is currently defined clinically by cerebral
edema, confusion, drowsiness, speech impairment, tremors, seizures, or other central nervous system side effects, when such side effects are serious enough to lead to intensive care. In some cases, severe neurotoxicity was thought to be associated
with the use of certain lymphodepletion preconditioning regimens used prior to the administration of the CAR-T cell products. CRS is a condition that is currently defined clinically by certain symptoms related
to the release of cytokines, which can include fever, chills, low blood pressure, when such side effects are serious enough to lead to intensive care with mechanical ventilation or significant vasopressor support. The exact cause or causes of CRS
and severe neurotoxicity in connection with treatment of CAR-T cell products is not fully understood at this time. In addition, patients have experienced other adverse events in these studies, such as a
reduction in the number of blood cells (in the form of neutropenia, thrombocytopenia, anemia or other cytopenias), febrile neutropenia, chemical laboratory abnormalities (including elevated liver enzymes), and renal failure.
Undesirable side effects caused by our drug product candidates, CYAD-01,
CYAD-02 and CYAD-101 or other T cell-based immunotherapy drug product candidates, could cause us or regulatory authorities to interrupt, delay or halt clinical trials
and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. Results of our trials could reveal a high and unacceptable severity and prevalence of side
effects or unexpected characteristics. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trials or result in potential product liability claims. In addition, these side effects
may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from T cell-based immunotherapies are not normally encountered in the general patient population and by medical personnel. We expect to have to
train medical personnel regarding our T cell-based immunotherapy drug product candidates to understand their side effects for both our planned clinical trials and upon any commercialization of any T cell-based immunotherapy drug product candidates.
Inadequate training in recognizing or managing the potential side effects of T cell-based immunotherapy drug product candidates could result in patient deaths. Any of these occurrences could have a material adverse effect on our business, financial
condition and prospects.
Our drug product candidates, CYAD-01,
CYAD-02, CYAD-101 and CYAD-211 are a new approach to cancer treatment that presents significant challenges.
We have concentrated our research and development efforts on cell-based immunotherapy technology, and our future success is highly dependent on the successful
development of cell-based immunotherapies in general and in particular our approach using the NKG2D receptor, an activating receptor of NK cells, to target stress ligands. Currently, all three of clinical candidates,
CYAD-01, CYAD-02 and CYAD-101 use the NKG2D receptor and our fourth clinical candidate,
CYAD-211, is a non-gene edited allogeneic short hairpin (shRNA)-based CAR T candidate that targets B-cell maturation antigen, or
BCMA. We cannot be sure that our T cell immunotherapy technologies will yield satisfactory products that are safe and effective, scalable or profitable.
Our approach to cancer immunotherapy and cancer treatment generally poses a number of challenges, including:
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obtaining regulatory approval from the FDA and other regulatory authorities that have very limited experience
with the commercial development of genetically modified T cell therapies for cancer;
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developing and deploying consistent and reliable processes for engineering a patients T cells ex vivo and
infusing the engineered T cells back into the patient;
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preconditioning patients with chemotherapy or other product treatments in conjunction with delivering each of our
drug product candidates, which may increase the risk of adverse side effects;
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educating medical personnel regarding the potential side effect profile of each of our drug product candidates,
such as the potential adverse side effects related to cytokine release or neurotoxicity;
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developing processes for the safe administration of these drug product candidates, including long-term follow-up for all patients who receive our drug product candidates;
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sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our
drug product candidates;
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developing a manufacturing process and distribution network with a cost of goods that allows for an attractive
return on investment;
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establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance,
and obtaining adequate coverage, reimbursement, and pricing by third-party payors and government authorities; and
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developing therapies for types of cancers beyond those addressed by our current drug product candidates.
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Additionally, because our technology involves the genetic modification of patient cells ex vivo using a virus, we are subject to many
of the challenges and risks that gene therapies face, including:
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Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to
change in the future. For example, the FDA recently released new guidance documents related to gene therapy products. To date, only one product that involves the genetic modification of patient cells has been approved in the United States and only
one has been approved in the European Union.
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In the event of improper insertion of a gene sequence into a patients chromosome, genetically modified
products could lead to lymphoma, leukemia or other cancers, or other aberrantly functioning cells.
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Although our viral vectors are not able to replicate, there is a risk with the use of retroviral or lentiviral
vectors that they could lead to new or reactivated pathogenic strains of virus or other infectious diseases.
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The FDA recommends a 15-year
follow-up observation period for all patients who receive treatment using certain gene therapies, and we may need to adopt such an observation period for our drug product candidates.
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Moreover, public perception of therapy safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the
willingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to the novel treatment mechanics. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment
practices that require additional upfront costs and training. Physicians may not be willing to undergo training to adopt this novel and personalized therapy, may decide the therapy is too complex to adopt without appropriate training and may choose
not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of this new therapy do not or will not outweigh its costs.
We have not yet finalized our clinical development program for our lead product candidates. The FDA and comparable foreign regulators may not agree with
our proposed protocols for these clinical trials, which could result in delays.
We are still considering the clinical development program for our
lead product candidates, CYAD-01, CYAD-02, CYAD-101 and CYAD-211. Prior to initiating new
clinical trials for our drug product candidates, we are required to submit clinical trial protocols for these trials to the FDA and comparable foreign regulators in other jurisdictions where we plan to undertake clinical trials. We may not reach
agreement with these regulators, or there may be a delay in reaching agreement. These regulators may want to see additional clinical or preclinical data regarding our product candidates before we initiate new clinical trials. Any of these decisions
could have a
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material adverse effect on our expected clinical and regulatory timelines, business, prospects, financial condition and results of operations.
We may encounter substantial delays in our clinical trials or may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory
authorities.
Before obtaining regulatory approval or marketing authorization from regulatory authorities for the sale of our drug product
candidates, if at all, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the drug product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any
clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:
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delays in raising, or inability to raise, sufficient capital to fund the planned clinical trials;
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delays in reaching a consensus with regulatory agencies on trial design;
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identifying, recruiting and training suitable clinical investigators;
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delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and
clinical trial sites;
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delays in obtaining required Investigational Review Board, or IRB, approval at each clinical trial site;
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delays in recruiting suitable patients to participate in our clinical trials;
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delays due to changing standard of care for the diseases we are studying;
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adding new clinical trial sites;
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imposition of a clinical hold by regulatory agencies, including after an inspection of our clinical trial
operations or trial sites;
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failure by our CROs, other third parties or us to adhere to clinical trial requirements;
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catastrophic loss of drug product candidates due to shipping delays or delays in customs in connection with
delivery to foreign countries for use in clinical trials;
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failure to perform in accordance with the FDAs GCPs or applicable regulatory guidelines in other countries;
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delays in the testing, validation, manufacturing and delivery of our drug product candidates to the clinical
sites;
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delays in having patients complete participation in a trial or return for post-treatment follow-up;
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clinical trial sites or patients dropping out of a trial;
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occurrence of serious adverse events associated with the drug product candidate that are viewed to outweigh its
potential benefits; or
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changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.
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Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our
ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our drug product
candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our drug product candidates and may harm our business and results of operations.
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If the results of our clinical trials are inconclusive or if there are safety concerns or adverse events
associated with our drug product candidates, we may:
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be delayed in obtaining marketing approval for our drug product candidates, if at all;
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obtain approval for indications or patient populations that are not as broad as intended or desired;
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obtain approval with labelling that includes significant use or distribution restrictions or safety warnings;
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be subject to changes in the way the product is administered;
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be required to perform additional clinical trials to support approval or be subject to additional post-marketing
testing requirements;
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have regulatory authorities withdraw their approval of the product or impose restrictions on our distribution in
the form of a risk evaluation and mitigations strategy, or REMS, program;
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be subject to the addition of labelling statements, such as warnings or contraindications;
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experience damage to our reputation.
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Our drug product candidates could potentially cause other adverse events that have not yet been predicted. As described above, any of these events could
prevent us from achieving or maintaining market acceptance of our drug product candidates and impair our ability to commercialize our products if they are ultimately approved by applicable regulatory authorities.
Side effects of our drug product candidates could halt their clinical development, prevent their regulatory approval, limit their commercial potential,
or result in significant negative consequences.
As with most biological drug products, use of our drug product candidates could be associated with
side effects or adverse events which can vary in severity from minor reactions to death and in frequency from infrequent to prevalent. Undesirable side effects or unacceptable toxicities caused by our drug product candidates could cause us or
regulatory authorities to interrupt, delay, or halt clinical trials. The FDA, EMA, or comparable foreign regulatory authorities could delay or deny approval of our drug product candidates for any or all targeted indications and negative side effects
could result in a more restrictive label for any product that is approved. Side effects such as toxicity or other safety issues associated with the use of our drug product candidates could also require us or our collaborators to perform additional
studies or halt development or sale of these drug product candidates.
Treatment-related side effects could also affect patient recruitment or the ability
of enrolled subjects to complete the trial, or could result in potential product liability claims. In addition, these side effects may not be appropriately or timely recognized or managed by the treating medical staff. Any of these occurrences may
materially and adversely harm our business, financial condition and prospects.
Additionally, if one or more of our drug product candidates receives
marketing approval, and we or others later identify undesirable side effects caused by such products, including during any long-term follow-up observation period recommended or required for patients who
receive treatment using our products, a number of potentially significant negative consequences could result, including:
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regulatory authorities may withdraw approvals of or revoke licenses for such product;
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regulatory authorities may require additional warnings on the label;
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we may be required to create a REMS program which could include a medication guide outlining the risks of such
side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements to assure safe use;
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we could be sued and held liable for harm caused to patients; and
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our reputation may suffer.
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Any of the foregoing could prevent us from achieving or maintaining market acceptance of the particular drug product candidate, if approved, and could
significantly harm our business, results of operations, and prospects.
If we encounter difficulties enrolling patients in our clinical trials, our
clinical development activities could be delayed or otherwise adversely affected.
The timely completion of clinical trials in accordance with
their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until our conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons,
including:
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the size and nature of the patient population;
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the patient eligibility criteria defined in the protocol;
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the size of the study population required for analysis of the trials primary endpoints;
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the proximity of patients to trial sites;
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the design of the trial;
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our ability to recruit clinical trial investigators with the appropriate competencies and experience;
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competing clinical trials for similar therapies;
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clinicians and patients perceptions as to the potential advantages and side effects of the drug
product candidate being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating;
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our ability to obtain and maintain patient consents; and
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the risk that patients enrolled in clinical trials will not complete a clinical trial.
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In addition, our clinical trials will compete with other clinical trials for drug product candidates that are in the same therapeutic areas as our drug
product candidates, and this competition will reduce the number and types of patients available us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors.
Because the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our
clinical trials at such clinical trial sites. Moreover, because our drug product candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional
therapies, rather than enroll patients in our clinical trials.
In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic. Due to the COVID-19 pandemic, we experienced enrollment delays in our Phase 1 clinical trials. Specifically, in March and April 2020, we
experienced a delay in enrollment in the CYAD-01 THINK and DEPLETHINK trials at multiple clinical trial sites in both Belgium and the United States. Recruitment and enrollment had recovered by the end of the
second quarter of 2020. As of the date hereof, we have not experienced significant delays in our CYAD-101 and CYAD-211 programs. The long-term impact of COVID-19 is uncertain and we are unable to predict whether we will experience additional delays in our clinical trials in the future.
Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect
the timing or outcome of our clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our drug product candidates.
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Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier
studies and trials as well as data from any interim analysis of ongoing clinical trials may not be predictive of future trial results. Clinical failure can occur at any stage of clinical development.
Clinical testing is expensive and can take many years to complete, and our outcome is inherently uncertain. Failure can occur at any time during the clinical
trial process. Although drug product candidates may demonstrate promising results in early clinical (human) trials and preclinical (animal) studies, they may not prove to be effective in subsequent clinical trials. For example, testing on animals
may occur under different conditions than testing in humans and therefore the results of animal studies may not accurately predict human experience. Likewise, early clinical trials may not be predictive of eventual safety or effectiveness results in
larger-scale pivotal clinical trials. The results of preclinical studies and previous clinical trials as well as data from any interim analysis of ongoing clinical trials of our drug product candidates, as well as studies and trials of other
products with similar mechanisms of action to our drug product candidates, may not be predictive of the results of ongoing or future clinical trials. Drug product candidates in later stages of clinical trials may fail to show the desired safety and
efficacy traits despite having progressed through preclinical studies and earlier clinical trials. In addition to the safety and efficacy traits of any drug product candidate, clinical trial failures may result from a multitude of factors including
flaws in trial design, dose selection, placebo effect and patient enrollment criteria. Based upon negative or inconclusive results, we or our collaborators may decide, or regulators may require it, to conduct additional clinical trials or
preclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval.
The regulatory approval processes of the FDA, EMA and other comparable regulatory authorities is lengthy, time-consuming, and inherently unpredictable,
and we may experience significant delays in the clinical development and regulatory approval, if any, of our drug product candidates.
The
research, testing, manufacturing, labelling, approval, selling, import, export, marketing, and distribution of drug products, including biologics, are subject to extensive regulation by the FDA, EMA and other comparable regulatory authorities. We
are not permitted to market any biological drug product in the United States until we receive a license from the FDA for our BLA, or an approval of our marketing authorization application, or MAA, from the EMA. We have not previously submitted a BLA
to the FDA, MAA to the EMA, or similar approval filings to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish that the drug product candidate is safe, pure, and potent
for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing, and controls for the product, and the manufacturing facilities must complete a successful
pre-license inspection. We expect the nature of our drug product candidates to create further challenges in obtaining regulatory approval. For example, the FDA and EMA have limited experience with commercial
development of genetically modified T-cell therapies for cancer. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data
to support licensure. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain licensure of the drug product candidates based on the completed clinical trials. Accordingly, the regulatory
approval pathway for our drug product candidates may be uncertain, complex, expensive, and lengthy, and approval may not be obtained.
Obtaining and
maintaining regulatory approval of our drug product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our drug product candidates in other jurisdictions.
If we obtain and maintain regulatory approval of our drug product candidates in one jurisdiction, such approval does not guarantee that we will be able to
obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA or
EMA grants marketing approval of a drug product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing,
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marketing and promotion of the drug product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different
from those in the European Union or in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many
jurisdictions, a drug product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us
and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or to receive applicable marketing approvals, our target market will be reduced and
our ability to realize the full market potential of our drug product candidates will be harmed.
A Breakthrough Therapy Designation by the FDA for
our drug product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our drug product candidates will receive marketing approval.
We may seek a Breakthrough Therapy Designation for some of our drug product candidates. A breakthrough therapy is defined as a product that is intended, alone
or in combination with one or more other products, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or
more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drug product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and
the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drug product candidates designated as breakthrough therapies by the FDA
may also be eligible for accelerated approval.
Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe
one of our drug product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a drug
product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of
our drug product candidates qualify as breakthrough therapies, the FDA may later decide that the drug product candidates no longer meet the conditions for designation.
A Fast Track Designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
We may seek Fast Track Designation for some of our drug product candidates. If a product is intended for the treatment of a serious or life-threatening
condition and the product demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, so even if we
believe a particular drug product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review or
approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.
We may seek Orphan Drug Designation for some of our drug product candidates, and we may be unsuccessful or may be unable to maintain the benefits
associated with Orphan Drug Designation, including the potential for market exclusivity.
As part of our business strategy, we may seek Orphan Drug
Designation for some of our drug product candidates, and we may be unsuccessful. Regulatory authorities in some jurisdictions, including the United States and the
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European Union, may designate products for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a product
intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States, or a patient population greater than 200,000 in the United States where there is no
reasonable expectation that the cost of developing the product will be recovered from sales in the United States. In the United States, Orphan Drug Designation entitles a party to financial incentives such as opportunities for grant funding towards
clinical trial costs, tax advantages and user-fee waivers.
Similarly, in the European Union, after recommendation
from the EMAs Committee for Orphan Medicinal Products, the European Commission grants Orphan Drug Designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or
chronically debilitating conditions affecting not more than five in 10,000 persons in the European Union and for which no satisfactory method of diagnosis, prevention, or treatment has been authorized (or the product would be a significant benefit
to those affected). Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely
that sales of the product in the European Union would be sufficient to justify the necessary investment in developing the product. In the European Union, Orphan Drug Designation entitles a party to financial incentives such as reduction of fees or
fee waivers.
Generally, if a drug product candidate with an Orphan Drug Designation subsequently receives the first marketing approval for the indication
for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing application for the same product and indication for that time period, except in
limited circumstances. The applicable period is seven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a product no longer meets the criteria for Orphan Drug Designation or if the
drug is sufficiently profitable so that market exclusivity is no longer justified.
Even if we obtain orphan drug exclusivity for a product, that
exclusivity may not effectively protect the product from competition because different products can be approved for the same condition or the same products can be approved for different conditions. If one of our drug product candidates that receives
an orphan drug designation is approved for a particular indication or use within the rare disease, the FDA may later approve the same product for additional indications or uses within that rare disease that are not protected by our exclusive
approval. Even after an orphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effective or makes a
major contribution to patient care. In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Moreover, orphan drug
exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of
patients with the rare disease or condition. Orphan Drug Designation neither shortens the development time or regulatory review time of a product nor gives the product any advantage in the regulatory review or approval process. While we intend to
seek Orphan Drug Designation for some of our drug product candidates, we may never receive such designations. Even if we do receive such designations, there is no guarantee that we will enjoy the benefits of those designations.
Even if we receive regulatory approval of our drug product candidates, we will be subject to ongoing regulatory obligations and continued regulatory
review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our drug product candidates.
If our drug product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage,
advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and requirements of
comparable foreign regulatory authorities.
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Manufacturers and manufacturers facilities are required to comply with extensive FDA, and comparable
foreign regulatory authority, requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices, or cGMP, and in certain cases current Good Tissue Practices, or cGTP, regulations. As
such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance, to the extent applicable, with cGMP and adherence to commitments made in any BLA, other marketing application, and previous responses
to inspection observations. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.
Any regulatory approvals that we receive for our drug product candidates may be subject to limitations on the approved indicated uses for which the product
may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the drug product candidate. The FDA may
also require a REMS program as a condition of approval of our drug product candidates, which could entail requirements for long-term patient follow-up, a medication guide, physician communication plans or
additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our drug product candidates, we will
have to comply with requirements including submissions of safety and other post-marketing information and reports, establishment registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval.
The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur
after the product reaches the market. Later discovery of previously unknown problems with our drug product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes,
or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution
restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market, or
voluntary or mandatory product recalls;
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fines, untitled or warning letters, or holds on clinical trials;
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refusal by the FDA to approve pending applications or supplements to approved applications filed by us or
suspension or revocation of license approvals;
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product seizure or detention, or refusal to permit the import or export of our drug product candidates; and
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injunctions or the imposition of civil or criminal penalties.
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The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. Products may be promoted only for the
approved indications and in accordance with the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to
have improperly promoted off-label uses may be subject to significant liability. The policies of the FDA and of other regulatory authorities may change and additional government regulations may be enacted that
could prevent, limit or delay regulatory approval of our drug product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United
States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have
obtained and we may not achieve or sustain profitability.
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Even if we obtain regulatory approval of our drug product candidates, the products may not gain market
acceptance among physicians, patients, hospitals and others in the medical community.
Our autologous engineered-cell therapies may not become
broadly accepted by physicians, patients, hospitals, and others in the medical community. Numerous factors will influence whether our drug product candidates are accepted in the market, including:
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the clinical indications for which our drug product candidates are approved;
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physicians, hospitals, and patients considering our drug product candidates as a safe and effective treatment;
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the potential and perceived advantages of our drug product candidates over alternative treatments;
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the prevalence and severity of any side effects;
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product labelling or product insert requirements of the FDA, EMA, or other regulatory authorities;
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limitations or warnings contained in the labelling approved by the FDA or EMA;
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the timing of market introduction of our drug product candidates as well as competitive products;
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the cost of treatment in relation to alternative treatments;
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the availability of adequate coverage, reimbursement and pricing by third-party payors and government
authorities;
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the willingness of patients to pay
out-of-pocket in the absence of coverage by third-party payors and government authorities;
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relative convenience and ease of administration, including as compared to alternative treatments and competitive
therapies; and
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the effectiveness of our sales and marketing efforts.
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In addition, although we are not utilizing embryonic stem cells in our drug product candidates, adverse publicity due to the ethical and social controversies
surrounding the therapeutic use of such technologies, and reported side effects from any clinical trials using these technologies or the failure of such trials to demonstrate that these therapies are safe and effective may limit market acceptance
our drug product candidates due to the perceived similarity between our drug product candidates and these other therapies. If our drug product candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, or
others in the medical community, we will not be able to generate significant revenue.
Even if our products achieve market acceptance, we may not be able
to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.
Our drug product candidates are biologics, which are complex to manufacture, and we may encounter difficulties in production, particularly with respect
to process development or scaling-out of our manufacturing capabilities. If we or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our drug product candidates
for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.
Our drug product candidates are biologics and the process of manufacturing our products is complex, highly-regulated and subject to multiple risks. The
manufacture of our drug product candidates involves complex processes, including harvesting cells from patients or healthy donors, selecting and expanding certain cell types, engineering or reprogramming the cells in a certain manner to create CAR T-cells, expanding the cell population to obtain the desired dose, and ultimately infusing the cells back into a patients body. In addition, the
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manufacture of allogeneic T cell products candidates involves engineering or reprogramming healthy donor T cells using our novel non-gene editing
technologies in an effort to avoid Graft-versus-Host Disease (GvHD), enriching for the allogeneic T cell products, freezing and storage of the manufactured allogeneic T cell bank and implementing process development capabilities to manufacture
allogeneic T cells from multiple donors. As a result of the complexities, the cost to manufacture our drug product candidates is higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and is more
difficult to reproduce. Our manufacturing process is susceptible to product loss or failure due to logistical issues associated with the collection of blood cells, or starting material, from the patient, shipping such material to the manufacturing
site, shipping the final product back to the patient, and infusing the patient with the product, manufacturing issues associated with the differences in patient starting materials, interruptions in the manufacturing process, contamination, equipment
or reagent failure, improper installation or operation of equipment, vendor or operator error, inconsistency in cell growth, and variability in product characteristics. Even minor deviations from normal manufacturing processes could result in
reduced production yields, product defects, and other supply disruptions. Because some of our drug product candidates are manufactured for each particular patient, we are required to maintain a chain of identity with respect to materials as they
move from the patient to the manufacturing facility, through the manufacturing process, and back to the patient. Maintaining such a chain of identity is difficult and complex and failure to do so could result in adverse patient outcomes, loss of
product, or regulatory action including withdrawal of our products from the market. Further, as drug product candidates are developed through preclinical to late stage clinical trials towards approval and commercialization, it is common that various
aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes
could cause our drug product candidates to perform differently and affect the results of ongoing clinical trials or other future clinical trials.
Although we are working, or will be working, to develop commercially viable processes for the manufacture of our drug product candidates, doing so is a
difficult and uncertain task, and there are risks associated with scaling to the level required for later-stage clinical trials and commercialization, including, among others, cost overruns, potential problems with process scale-out, process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. We may ultimately be unable to reduce the cost of goods for our drug product candidates to
levels that will allow for an attractive return on investment if and when those drug product candidates are commercialized.
In addition, the
manufacturing process that we develop for our drug product candidates is subject to regulatory authorities approval processes, and we will need to make sure that we or our contract manufacturers, or CMOs, if any, are able to meet all
regulatory authorities requirements on an ongoing basis. If we or our CMOs are unable to reliably produce drug product candidates to specifications acceptable to the regulatory authorities, we may not obtain or maintain the approvals we need
to commercialize such drug product candidates. Even if we obtain regulatory approval for any of our drug product candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to specifications
acceptable to the regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could have an adverse effect on our
business, financial condition, results of operations and growth prospects.
We may face competition from biosimilars, which may have a material
adverse impact on the future commercial prospects of our drug product candidates.
Even if we are successful in achieving regulatory approval to
commercialize a drug product candidate faster than our competitors, we may face competition from biosimilars. The Biologics Price Competition and Innovation Act of 2009, or BPCI Act, created an abbreviated approval pathway for biological products
that are demonstrated to be biosimilar to, or interchangeable with, an FDA-approved biological product. Biosimilarity means that the biological product is highly similar to the reference product
notwithstanding minor differences in clinically inactive components and there are no clinically meaningful differences between the biological product and the
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reference product in terms of safety, purity, and potency of the product. To meet the higher standard of interchangeability, an applicant must provide sufficient information to show
biosimilarity and demonstrate that the biological product can be expected to produce the same clinical result as the reference product in any given patient and, if the biological product is administrated more than once to an individual, the risk in
terms of safety or diminished efficacy of alternating or switching between the use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch.
A reference biological product is granted 12 years of exclusivity from the time of first licensure of the product, and the FDA will not accept an application
for a biosimilar or interchangeable product based on the reference biological product until four years after first licensure. First licensure typically means the initial date the particular product at issue was licensed in the United States. This
does not include a supplement for the biological product or a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change that results in a new
indication, route of administration, dosing schedule, dosage form, delivery system, delivery device, or strength, unless that change is a modification to the structure of the biological product and such modification changes our safety, purity, or
potency. Whether a subsequent application, if approved, warrants exclusivity as the first licensure of a biological product is determined on a case-by-case basis with
data.
This data exclusivity does not prevent another company from developing a product that is highly similar to the innovative product, generating our
own data, and seeking approval. Data exclusivity only assures that another company cannot rely upon the data within the application for the reference biological product to support the biosimilar products approval.
In the European Union, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product
class-specific guidelines for biosimilar approvals issued over the past few years. In the European Union, a competitor may reference data supporting approval of an innovative biological product, but will not be able do so until eight years after the
time of approval of the innovative product and to get our biosimilar on the market until ten years from the aforementioned approval. This 10-year marketing exclusivity period will be extended to 11 years if,
during the first eight of those ten years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition, companies may be
developing biosimilars in other countries that could compete with our products.
If competitors are able to obtain marketing approval for biosimilars
referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.
Nearly all aspects of our activities are subject to substantial regulation. No assurance can be given that any of our product candidates will fulfill
regulatory compliance. Failure to comply with such regulations could result in delays, suspension, refusals, fines and withdrawal of approvals.
The international pharmaceutical and medical technology industry is highly regulated by government bodies (hereinafter the Competent Authorities)
that impose substantial requirements covering nearly all aspects of our activities notably on research and development, manufacturing, preclinical tests, clinical trials, labelling, marketing, sales, storage, record keeping, promotion and pricing of
our research programs and product candidates. Compliance with standards laid down by local Competent Authorities is required in each country where the Company, or any of our partners or licensees, conducts said activities in whole or in part. The
Competent Authorities notably include the EMA in the European Union and the FDA in the United States.
There can be no assurance that our product
candidates will fulfill the criteria required to obtain necessary regulatory authorization to access the market. Also, at this time, we cannot guarantee or know the exact nature, precise timing and detailed costs of the efforts that will be
necessary to complete the remainder of the development of our research programs and product candidates.
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The specific regulations and laws, as well as the time required to obtain Competent Authorities approvals, may
vary from country to country, but the general regulatory procedures are similar in the European Union and the United States. Each Competent Authority may impose its own requirements, may discontinue an approval, may refuse to grant approval, or may
require additional data before granting approval, notwithstanding that approval may have been granted by one or more other Competent Authorities. Competent Authority approval may be delayed, limited or denied for a number of reasons, most of which
are beyond our control. Such reasons include the production process or site not meeting the applicable requirements for the manufacture of regulated products, or the products not meeting applicable requirements for safety or efficacy during the
clinical development stage or after marketing. No assurance can be given that clinical trials will be approved by Competent Authorities or that products will be approved for marketing by Competent Authorities in any
pre-determined indication or intended use. Competent Authorities may disagree with our interpretation of data submitted for their review. Even after obtaining approval for clinical trials or marketing,
products will be subject to ongoing regulation and evaluation of their benefit/safety or risk/performance ratio; a negative evaluation of the benefit/safety or risk/performance ratio could result in a potential use restriction and/or withdrawal of
approval for one or more products. At any time Competent Authorities may require discontinuation or holding of clinical trials or require additional data prior to completing their review or may issue restricted authorization or authorize products
for clinical trials or marketing for narrower indications than requested or require further data or studies be conducted and submitted for their review. There can be no guarantee that such additional data or studies, if required, will corroborate
earlier data.
Research programs and our product candidates must undergo rigorous preclinical tests and clinical trials, the start, timing of
completion, number and results of which are uncertain and could substantially delay or prevent the products from reaching the market.
Preclinical
tests and clinical trials are expensive and time-consuming, and their results are uncertain. We, our collaborative partners or other third parties may not successfully complete the preclinical tests and clinical trials of the research programs and
product candidates. Failure to do so may delay or prevent the commercialization of products. We cannot guarantee that our research programs and product candidates will demonstrate sufficient safety or efficacy or performance in our preclinical tests
and clinical trials to obtain marketing authorization in any given territory or at all, and the results from earlier preclinical tests and clinical trials may not accurately predict the results of later-stage preclinical tests and clinical trials.
At any stage of development, based on a review of available preclinical and clinical data, the estimated costs of continued development, market assessments and other factors, the development of any of our research programs and product candidates may
be suspended or discontinued.
We and our collaborative partners are, or may become subject to, numerous ongoing regulatory obligations, such as data
protection, environmental, health and safety laws and restrictions on the experimental use of animals and/or human beings. The costs of compliance with applicable regulations, requirements or guidelines could be substantial, and failure to comply
could result in sanctions, including fines, injunctions, civil penalties, denial of applications for marketing authorization of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products,
operating restrictions and criminal prosecutions, any of which could significantly increase our or our collaborative partners costs or delay the development and commercialization of our product candidates.
We may face significant competition and technological change which could limit or eliminate the market opportunity for our product candidates.
The market for pharmaceutical products is highly competitive. Our competitors include many established pharmaceutical, biotechnology, universities
and other research or commercial institutions, many of which have substantially greater financial, research and development resources than the Company. The fields in which we operate are characterized by rapid technological change and innovation.
There can be no assurance that our competitors are not currently developing, or will not in the future develop technologies and products that are
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equally or more effective and/or are more economical as any current or future technology or product of ours. Competing products may gain faster or greater market acceptance than our products and
medical advances or rapid technological development by competitors may result in our product candidates becoming non-competitive or obsolete before we are able to recover our research and development and
commercialization expenses. If we or our product candidates do not compete effectively, it may have a material adverse effect on our business.
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price setting, the availability and level of adequate reimbursement by third parties, such as insurance companies, governmental and other healthcare payers is uncertain and may impede on our ability to generate sufficient operating margins to offset
operating expenses.
Our commercial performance will depend in part on the conditions for setting the sales price of our products by the relevant
public commissions and bodies and the conditions of their reimbursement by the health agencies or insurance companies in the countries where we intend to market our products. The current context of healthcare cost control and economic and financial
crisis that most countries are currently facing, coupled with the increase in health care budgets caused by the aging population creates extra pressure on health care spending in most if not all countries. Consequently, pressure on sales prices and
reimbursement levels is intensifying owing in particular to:
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price controls imposed by many states;
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the increasing reimbursement limitations of some products under budgetary policies; and
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the heightened difficulty in obtaining and maintaining a satisfactory reimbursement rate for medicines.
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Obtaining adequate pricing decisions that would generate return on the investment incurred for the development of the product
candidates developed by us are therefore uncertain. Our ability to manage our expenses and cost structure to adapt to increased pricing pressure is untested and uncertain.
All of these factors will have a direct impact on our ability to make profits on the products in question. The partial/no reimbursement policy of medicines
could have a material adverse effect on the business, prospects, financial situation, earnings and growth of the Company.
Changes in regulatory
approval policies or enactment of additional regulatory approval requirements may delay or prevent the product candidates from being marketed.
The
regulatory clearance process is expensive and time consuming and the timing of marketing is difficult to predict. Once marketed, products may be subject to post-authorization safety studies or other pharmacovigilance or vigilance activities or may
be subject to limitations on their uses or may be withdrawn from the market for various reasons, including if they are shown to be unsafe or ineffective, or when used in a larger population that may be different from the trial population studied
prior to market introduction of the product.
Our product candidates may become subject to changes in the regulatory framework or market conditions.
Regulatory guidelines may change during the course of product development and review process, making the chosen development strategy suboptimal. Market conditions may change resulting in the emergence of new competitors or new treatment guidelines
which may require alterations in the development strategy. These factors may result in significant delays, increased trial costs, significant changes in commercial assumptions or failure of the products to obtain marketing authorization.
We are subject to inspection and shall be subject to market surveillance by the FDA, EMA and other Competent Authorities for compliance with regulations
that prohibit the promotion of our products for a purpose or indication other than those for which approval has been granted.
While a product
manufacturer may not promote a product for such off label use, doctors are allowed, in the exercise of their professional judgment in the practice of medicine, to use a product in ways not approved by Competent Authorities. Off-label marketing regulations are subject to varying evolving interpretations.
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Post-approval manufacturing and marketing of our products may show different safety and efficacy profiles to
those demonstrated in the data on which approval to test or market said products was based. Such circumstances could lead to the withdrawal or suspension of approval, which could have a material adverse effect on our business, financial condition,
operating results or cash flows. In addition, Competent Authorities may not approve the labelling claims or advertisements that are necessary or desirable for the successful commercialization of our products.
Competent Authorities have broad enforcement power, and a failure by us or our collaboration partners to comply with applicable regulatory requirements can,
among other things, result in recalls or seizures of products, operating and production restrictions, withdrawals of previously approved marketing applications, total or partial suspension of regulatory approvals, refusal to approve pending
applications, warning letters, injunctions, penalties, fines, civil proceedings, criminal prosecutions and imprisonment.
We may fail to comply with
evolving European and other privacy laws.
In Europe, Directive 95/46/EC of the European Parliament and of the Council of October 24, 1995 on
the protection of individuals with regard to the processing of personal data and on the free movement of such data (the Directive), and Directive 2002/58/EC of the European Parliament and of the Council of July 12, 2002 concerning
the processing of personal data and the protection of privacy in the electronic communications sector (as amended by Directive 2009/136/EC) (the e-Privacy-Directive), have required the European
Union, or EU member states, to implement data protection laws to meet strict privacy requirements. Violations of these requirements can result in administrative measures, including fines, or criminal sanctions. The
e-Privacy Directive will likely be replaced in time by a new e-Privacy Regulation which may impose additional obligations and risk for our business.
Beginning on May 25, 2018, the Directive was replaced by Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016 on
the protection of natural persons with regard to the processing of personal data and on the free movement of such data (the GDPR). The GDPR imposes a broad range of strict requirements on companies subject to the GDPR, such as us,
including requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside the European Economic Area (the EEA), including to the United
States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to
individuals requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data
protection officers, conducting data protection impact assessments, and record-keeping. The GDPR increases substantially the penalties to which we could be subject in the event of any non-compliance, including
fines of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to 20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses. Given the new law,
we face uncertainty as to the exact interpretation of the new requirements, and we may be unsuccessful in implementing all measures required by data protection authorities or courts in interpretation of the new law.
In particular, national laws of member states of the EU are in the process of being adapted to the requirements under the GDPR, thereby implementing national
laws which may partially deviate from the GDPR and impose different obligations from country to country, so that we do not expect to operate in a uniform legal landscape in the EU. Also, in the field of handling genetic data, the GDPR specifically
allows national laws to impose additional and more specific requirements or restrictions, and European laws have historically differed quite substantially in this field, leading to additional uncertainty.
We must also ensure that we maintain adequate safeguards to enable the transfer of personal data outside of the EEA, in particular to the United States in
compliance with European data protection laws. We expect that we will
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continue to face uncertainty as to whether our efforts to comply with our obligations under European privacy laws will be sufficient. If we are investigated by a European data protection
authority, we may face fines and other penalties. Any such investigation or charges by European data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new clients or pharmaceutical
partners. We may also experience hesitancy, reluctance, or refusal by European or multi-national clients or pharmaceutical partners to continue to use our products and solutions due to the potential risk exposure as a result of the current (and, in
particular, future) data protection obligations imposed on them by certain data protection authorities in interpretation of current law, including the GDPR. Such clients or pharmaceutical partners may also view any alternative approaches to
compliance as being too costly, too burdensome, too legally uncertain, or otherwise objectionable and therefore decide not to do business with the Company. Any of the foregoing could materially harm our business, prospects, financial condition and
results of operations.
Risks Related to Our Reliance on Third Parties
We have obtained and will obtain significant funding from the Walloon Region of Belgium. The terms of the agreements signed with the Region may hamper
our ability to partner part or all our products.
We contracted over the past year numerous funding agreements with the Walloon Region to partially
finance our research and development programs. Under the terms of the agreements, we would need to obtain the consent of the Walloon Region for any out-licensing agreement or sale to a third party of any or
all of our products, prototypes or installations which may reduce our ability to partner or sell part or all of our products.
Furthermore, when the
research and development programs partially financed by us enter in exploitation phase, we have to start reimbursing the funding received. We may not be able to reimburse such funding under the terms of the agreements or such
reimbursement may jeopardize the funding of our clinical and scientific activities.
We rely and will continue to rely on collaborative partners
regarding the development of our research programs and product candidates.
We are and expect to continue to be dependent on collaborations with
partners relating to the development and commercialization of our existing and future research programs and product candidates. We had, have and will continue to have discussions on potential partnering opportunities with various pharmaceutical and
medical device companies. If we fail to enter into or maintain collaborative agreements on reasonable terms or at all, our ability to develop our existing or future research programs and product candidates could be delayed, the commercial potential
of our products could change and our costs of development and commercialization could increase.
Our dependence on collaborative partners subjects it to a
number of risks, including, but not limited to, the following:
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we may not be able to control the amount or timing of resources that collaborative partners devote to our
research programs and product candidates;
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we may be required to relinquish significant rights, including intellectual property, marketing and distribution
rights;
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we rely on the information and data received from third parties regarding our research programs and product
candidates and will not have control of the process conducted by the third party in gathering and composing such data and information. We may not have formal or appropriate guarantees from our contract parties with respect to the quality and the
completeness of such data;
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a collaborative partner may develop a competing product either by itself or in collaboration with others,
including one or more of our competitors;
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our collaborative partners willingness or ability to complete their obligations under our collaboration
arrangements may be adversely affected by business combinations or significant changes in a collaborative partners business strategy; and/or
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we may experience delays in, or increases in the costs of, the development of our research programs and product
candidates due to the termination or expiration of collaborative research and development arrangements.
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We rely on third parties
to conduct, supervise and monitor our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug product
candidates and our business could be substantially harmed.
We rely on clinical research organizations, or CROs, clinical investigators and
clinical trial sites to ensure our clinical trials are conducted properly and on time. While we will have agreements governing their activities, we will have limited influence over their actual performance. We will control only certain aspects of
our CROs activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on
these third parties does not relieve us of our regulatory responsibilities.
We and these third parties are required to comply with the FDAs GCPs
for conducting, recording and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA,
the Competent Authorities of the Member States of the EEA, and comparable foreign regulatory authorities, enforce these GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or these third
parties fail to comply with applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA, the EMA, or other foreign regulatory authorities may require us to perform additional clinical trials before
approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. In addition, our future clinical trials will require a sufficient number of test subjects to evaluate the safety and
effectiveness of our drug product candidates. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory
approval process.
These third parties are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time
and resources to our clinical and preclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development
activities that could harm our competitive position. If these third parties do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is
compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or
successfully commercialize, our drug product candidates. If any such event were to occur, our financial results and the commercial prospects for our drug product candidates would be harmed, our costs could increase, and our ability to generate
revenues could be delayed.
If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with
alternative CROs or to do so on commercially reasonable terms. Further, switching or adding additional CROs involves additional costs and requires management time and focus. In addition, there is a natural transition period when a new CRO commences
work. As a result, delays occur, which could materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter
challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
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Cell-based therapies rely on the availability of specialty raw materials, which may not be available to us
on acceptable terms or at all.
Engineered-cell therapies require many specialty raw materials, some of which are manufactured by small companies
with limited resources and experience to support a commercial product. The suppliers may be ill-equipped to support our needs, especially in non-routine circumstances
like an FDA inspection or medical crisis, such as widespread contamination. We also do not have contracts with many of these suppliers, and may not be able to contract with them on acceptable terms or at all. Accordingly, we may experience delays in
receiving key raw materials to support clinical or commercial manufacturing.
In addition, some raw materials are currently available from a single
supplier, or a small number of suppliers. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials
for our intended purpose.
Risks Related to Our Intellectual Property
Our patents and other intellectual property rights portfolio are relatively young and may not adequately protect our research programs and product
candidates, which may impede our ability to compete effectively.
Our success will depend in part on our ability to obtain, maintain and enforce
our patents and other intellectual property rights. Our research programs and product candidates are covered by several patent application families, which are either licensed to us or owned by the Company. Out of the numerous patent applications
controlled by the Company, eleven national patents have been granted in the US relating to the field of immuno-oncology. We cannot guarantee that it will be in a position in the future to develop new patentable inventions or that we or our licensors
will be able to obtain or maintain these patent rights against challenges to their validity, scope and/or enforceability. We cannot guarantee that it is or has been the first to conceive an invention or to file a patent application on an invention,
particularly given that patent applications are not published in most countries before 18-months after the date of filing. Moreover, we may have little or no control over its licensors abilities to
prevent the infringement of their patents or the misappropriation of their intellectual property. There can be no assurance that the technologies used in our research programs and product candidates are patentable, that pending or future
applications will result in the grant to us or our licensors, that any patents will be of sufficient breadth to provide adequate and commercially meaningful protection against competitors with similar technologies or products, or that any patents
granted to us or our licensors will not be successfully challenged, circumvented, invalidated or rendered unenforceable by third parties, enabling competitors to circumvent or use them and depriving us from the protection it would need against
competitors. If we or our licensors do not obtain meaningful patents on their technologies or if the patents of us or our licensors are invalidated, third parties may use the technologies without payment to us. A third partys ability to use
unpatented technologies is enhanced by the fact that the published patent application contains a detailed description of the relevant technology.
We
cannot guarantee that third parties, contract parties or employees will not claim ownership rights over the patents or other intellectual property rights owned or held by the Company.
We also rely on proprietary know-how to protect our research programs and product candidates. Know-how is difficult to maintain and protect. We use reasonable efforts to maintain our know-how, but it cannot assure that our partners, employees, consultants, advisors or
other third parties will not willfully or unintentionally disclose proprietary information to competitors. Furthermore, our competitors may independently develop equivalent knowledge and know-how, which could
diminish or eliminate our competitive advantage.
The enforcement of patents, know-how and other intellectual
property is costly, time consuming and highly uncertain. We cannot guarantee that it will be successful in preventing the infringement of our patented inventions, or the misappropriation of our know-how and
other intellectual property rights and those of our licensors, and failure to do so could significantly impair the ability of us to compete effectively.
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We may infringe on the patents or intellectual property rights of others and may face patent litigation,
which may be costly and time consuming.
Our success will depend in part on our ability to operate without infringing or misappropriating the
intellectual property rights of others. We cannot guarantee that our activities will not infringe on the patents or other intellectual property rights owned by others. We may expend significant time and effort and may incur substantial costs in
litigation if it is required to defend against patent or other intellectual property right suits brought against us regardless of whether the claims have any merit. Additionally, we cannot predict whether we will be successful in any litigation. If
we are found to infringe the patents or other intellectual property rights of others, we may be subject to substantial claims for damages, which could materially impact our cash flow and financial position. We may also be required to cease
development, use or sale of the relevant research program, product candidate or process or it may be required to obtain a license to the disputed rights, which may not be available on commercially reasonable terms, if at all.
There can be no assurance that we are even aware of third-party rights that may be alleged to be relevant to any particular product candidate, method, process
or technology.
We may spend significant time and effort and may incur substantial costs if required to defend against any infringement claims or to
assert our intellectual property rights against third parties. The risk of such a claim by a third party may be increased by our public announcement regarding our research programs and product candidates. We may not be successful in defending our
rights against such claims and may incur as a consequence thereof significant losses, costs or delays in our intended commercialization plans as a result thereof.
We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights,
which would harm our business.
We are dependent on patents, know-how, and proprietary technology, both our
own and licensed from others. We license technology from the Trustees of Dartmouth College, or Dartmouth College. Dartmouth College may terminate our license, if we fail to meet a milestone within the specified time period, unless we pay the
corresponding milestone payment. Dartmouth College may terminate either the license in the event we default or breach any of the provisions of the applicable license, subject to 30 days prior notice and opportunity to cure. In addition, the
license automatically terminates in the event we become insolvent, make an assignment for the benefit of creditors or file, or have filed against us, a petition in bankruptcy. Furthermore, Dartmouth College may terminate our license, after
April 30, 2024, if we fail to meet the specified minimum net sales obligations for any year, unless we pay to Dartmouth College the royalty we would otherwise be obligated to pay had we met such minimum net sales obligation. We also license
technology from Horizon Discovery Limited, or Horizon Discovery. Horizon Discovery may terminate our license in case of insolvency, material breach or force majeure. Any termination of these licenses or any of our other licenses could result in the
loss of significant rights and could harm our ability to commercialize our drug product candidates. Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including those relating to:
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the scope of rights granted under the license agreement and other interpretation-related issues;
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whether and the extent to which our technology and processes infringe on intellectual property of the licensor
that is not subject to the license agreement;
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our right to sublicense patent and other rights to third parties under collaborative development relationships;
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the amount and timing of milestone and royalty payments;
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whether we are complying with our diligence obligations with respect to the use of the licensed technology in
relation to our development and commercialization of our drug product candidates; and
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the allocation of ownership of inventions and know-how resulting from the
joint creation or use of intellectual property by us and our partners and by our licensors.
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If disputes over intellectual property that
we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected drug product candidates. We are generally also subject to all
of the same risks with respect to protection of intellectual property that we license as it is for intellectual property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our
ability to commercialize our products could suffer.
Our licenses may be terminated if we are unable to meet the payment obligations under the agreements
(notably if we are unable to obtain additional financing).
We could be unsuccessful in obtaining or maintaining adequate patent protection for one
or more of our drug product candidates.
The patent application process is expensive and time-consuming, and we and our current or future licensors
and licensees may not be able to apply for or prosecute patents on certain aspects of our drug product candidates or deliver technologies at a reasonable cost, in a timely fashion, or at all. It is also possible that we or our current licensors, or
any future licensors or licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, our patents and
applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the
future, such as with respect to proper priority claims, inventorship, claim scope or patent term adjustments. Under our existing license agreements with the Trustees of Dartmouth College, we have the right, but not the obligation, to enforce our
licensed patents. If our current licensors, or any future licensors or licensees, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised and we
might not be able to prevent third parties from making, using, and selling competing products. If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and
unenforceable.
Moreover, our competitors may independently develop equivalent knowledge, methods, and know-how.
Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business, financial condition and operating results.
We currently have issued patents and patent applications directed to our drug product candidates and medical devices, and we anticipate that it will file
additional patent applications in several jurisdictions, including several European Union countries and the United States, as appropriate.
However, we
cannot predict:
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if and when any patents will issue from patent applications;
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the degree and range of protection any issued patents will afford us against competitors, including whether third
parties will find ways to invalidate or otherwise circumvent our patents;
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whether others will apply for or obtain patents claiming aspects similar to those covered by our patents and
patent applications; or
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whether we will need to initiate litigation or administrative proceedings to defend our patent rights, which may
be costly whether we win or lose.
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We cannot be certain, however, that the claims in our pending patent applications will be considered
patentable by patent offices in various countries, or that the claims of any of our issued patents will be considered valid and enforceable by local courts.
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The strength of patents in the biotechnology and pharmaceutical field can be uncertain, and evaluating the scope
of such patents involves complex legal and scientific analyses. The patent applications that we own, or in-licenses may fail to result in issued patents with claims that cover our drug product candidates or
uses thereof in the European Union, in the United States or in other jurisdictions. Even if the patents do successfully issue, third parties may challenge the validity, enforceability, or scope thereof, which may result in such patents being
narrowed, invalidated, or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing their products to avoid being covered
by our claims. If the breadth or strength of protection provided by the patent applications, we hold with respect to our drug product candidates is threatened, this could dissuade companies from collaborating with us to develop, and could threaten
our ability to commercialize, our drug product candidates. Further, because patent applications in most countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related
to our drug product candidates.
Patents have a limited lifespan. Various extensions may be available; however, the life of a patent, and the protection
it affords, is limited. Further, the extensive period of time between patent filing and regulatory approval for a drug product candidate limits the time during which we can market a drug product candidate under patent protection, which may
particularly affect the profitability of our early-stage drug product candidates. If we encounter delays in our clinical trials, the period of time during which we could market our drug product candidates under patent protection would be reduced.
Without patent protection for our drug product candidates, we may be open to competition from biosimilar versions of our drug product candidates.
Third-party claims of intellectual property infringement against us or our collaborators may prevent or delay our product discovery and development
efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a
substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, and
reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. Recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and
post-grant review have been implemented. This reform adds uncertainty to the possibility of challenge to our patents in the future.
Numerous U.S. and
foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our drug product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk
increases that our drug product candidates may give rise to claims of infringement of the patent rights of others.
Although we have conducted analyses of
the patent landscape with respect to our drug product candidates, and based on these analyses, we believe that we will be able to commercialize our drug product candidates, third parties may nonetheless assert that we infringe their patents, or that
we are otherwise employing their proprietary technology without authorization, and may sue us. There may be third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture, or methods of use or
treatment that cover our drug product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our drug product candidates may infringe. In
addition, third parties may obtain patents in the future and claim that use of our technologies or the manufacture, use, or sale of our drug product candidates infringes upon these patents. If any such third-party patents were held by a court of
competent jurisdiction to cover our technologies or drug product candidates, the holders of any such patents may be able to block our ability to commercialize the applicable drug product candidate unless we obtain a license under the applicable
patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party
patent on commercially reasonable terms, our ability to commercialize our drug product candidates may be impaired or delayed, which could in turn significantly harm our business.
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Third parties asserting their patent rights against us may seek and obtain injunctive or other equitable relief,
which could effectively block our ability to further develop and commercialize our drug product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of
management and other employee resources from our business, and may impact our reputation. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys fees for
willful infringement, obtain one or more licenses from third parties, pay royalties, or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. In that event, we would be unable to further
develop and commercialize our drug product candidates, which could harm our business significantly.
We may not be able to protect our intellectual
property rights throughout the world.
Filing, prosecuting and defending patents on drug product candidates in all countries throughout the world
would be prohibitively expensive. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as laws in the European Union or the United States. Consequently, we may not be able to prevent third
parties from practicing our inventions in all countries, or from selling or importing products made using our inventions in and into other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent
protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong. These products may compete with our products and our patents or other
intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in
protecting and defending intellectual property rights in a number of jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual
property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings
to enforce our patent rights in some jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent
applications at risk of not issuing and could provoke third parties to assert claims against the Company. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming, and
unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To address such infringement, we may be required to file
patent infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding or a declaratory judgment action against us, a court may decide that one or more of our patents is not valid or is unenforceable, or
may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one or more of our or of our
licensors patents at risk of being invalidated, held unenforceable, interpreted narrowly, or amended such that they do not cover our drug product candidates. Such results could also increase the risk that pending patent applications of our or
our licensors may not issue. Defense of these claims, regardless of their merit, would involve substantial litigation expense and could create a substantial diversion of employee resources from our business. Interference or derivation proceedings
provoked by third parties may be necessary to determine the priority of inventions with respect to, or the correct inventorship of, our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our
current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer
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us a license on commercially reasonable terms. Litigation, interference, or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in
substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in some
jurisdictions in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the
results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our ordinary shares.
Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information,
and our inability to maintain the confidentiality of that information, due to unauthorized disclosure or use, cyber-attack, or other event, could have a material adverse effect on our business.
In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and any other elements of our product discovery and development processes that involve
proprietary know-how, information, or technology that is not covered by patents. Trade secrets, however, may be difficult to protect. We seek to protect our proprietary processes, in part, by entering into
confidentiality agreements with our employees, consultants, outside scientific advisors, contractors and collaborators. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, outside scientific advisors,
contractors, and collaborators might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent
information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting
and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third
parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.
Our intellectual property and other sensitive company information are also dependent on sophisticated information technology systems and are potentially
vulnerable to cyber-attack, loss, damage, destruction from system malfunction, computer viruses, loss of data privacy, or misappropriation or misuse of it by those with permitted access, and other events. While we have invested to protect our data
and other information and continue to upgrade and enhance our systems to keep pace with continuing changes in information processing technology, there can be no assurance that our precautionary measures will prevent breakdowns, breaches,
cyber-attacks, or other events. Such events could have a material adverse effect on our reputation, financial condition, or results of operations.
Issued patents covering our drug product candidates could be found invalid or unenforceable if challenged in court or before relevant authority.
If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our drug product
candidates, the defendant could counterclaim that the patent covering our drug product candidate is invalid or unenforceable. Third parties may also raise similar claims before administrative bodies, even outside the context of litigation. Such
mechanisms include re-examination, inter partes review, post grant review, oppositions and derivation proceedings. Such proceedings could result in revocation or amendment to our or those of our
licensing partners patents in such a way that the patent no longer covers and protects the relevant drug product candidate(s). The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the
validity of our patents, for example, we cannot be certain that there is no
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invalidating prior art of which the Company, our patent counsel, and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or
unenforceability, we would lose at least part, and perhaps all, of the patent protection on our drug product candidates. Such a loss of patent protection could have a material adverse impact on our business.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing
patents in the biopharmaceutical industry involves, both technological and legal complexity, and is therefore costly, time-consuming, and inherently uncertain. Numerous recent changes to the patent laws and proposed changes to the rules of the USPTO
may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, the Leahy-Smith America Invents Act, or AIA, enacted in 2011 involves significant changes in patent legislation. An
important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a first-to-file system for deciding which party
should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application with the USPTO after that date but before us could therefore be awarded a
patent covering an invention of ours even if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application.
Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and provide opportunities
for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard
in United States federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to
invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a
defendant in a district court action.
In addition, recent court rulings in cases such as Association for Molecular Pathology v. Myriad Genetics,
Inc. (Myriad I); BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litig. (Myriad II); and Promega Corp. v. Life Technologies Corp. have narrowed the scope of patent protection available in certain circumstances and
weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents
once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our
existing patents and patents that we might obtain in the future. For example, in Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to naturally-occurring substances are not patentable.
Although we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress, or the USPTO may impact the value of our patents.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of
third parties.
We have received confidential and proprietary information from third parties. In addition, we employ individuals who were
previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed confidential information of these
third parties or our employees former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our
management and employees.
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Risks Related to Our Organization, Structure and Operation
Maintenance of high standards of manufacturing in accordance with cGMPs and other manufacturing regulations.
We, and key third-party suppliers on which we rely, currently or in the future must continuously adhere to cGMPs and corresponding manufacturing regulations of
Competent Authorities. In complying with these regulations, we and our third-party suppliers must expend significant time, money and effort in the areas of design and development, testing, production, record-keeping and quality control to assure
that the products meet applicable specifications and other regulatory requirements. The failure to comply with these requirements could result in an enforcement action against us, including the seizure of products and shutting down of production. We
and any of these third-party suppliers may also be subject to audits by the Competent Authorities. If any of our third-party suppliers or we ourselves fail to comply with cGMPs or other applicable manufacturing regulations, our ability to develop
and commercialize the products could suffer significant interruptions.
We rely on a single manufacturing facility.
We face risks inherent in operating a single manufacturing facility, since any disruption, such as a fire, natural hazards or vandalism could significantly
interrupt our manufacturing capability. We currently do not have alternative production plans in place or disaster-recovery facilities available. In case of a disruption, we will have to establish alternative manufacturing sources. This would
require substantial capital on our part, which it may not be able to obtain on commercially acceptable terms or at all. Additionally, we would likely experience months or years of manufacturing delays as we build or locate replacement facilities and
seek and obtain necessary regulatory approvals. If this occurs, we will be unable to satisfy manufacturing needs on a timely basis, if at all. Also, operating any new facilities may be more expensive than operating our current facility. Further,
business interruption insurance may not adequately compensate us for any losses that may occur, and we would have to bear the additional cost of any disruption. For these reasons, a significant disruptive event of the manufacturing facility could
have drastic consequences, including placing our financial stability at risk.
We will need increased manufacturing capacity.
We may not be able to expand the manufacturing capacity within the anticipated time frame or budget or may not be able to obtain the requisite regulatory
approvals for the increase in manufacturing capacity on a timely basis, or at all. If we cannot obtain necessary approvals for this contemplated expansion in a timely manner, our ability to meet demand for our products would be adversely affected.
We may have difficulties in finding suitable locations or commercially acceptable terms for the leasing of such facilities. We may also have difficulties in finding a commercial partner for the construction of those facilities and/or partners for
investing in the capital expenses related to the manufacturing plants. We will need to obtain GMP certification of those plants for commercial products. Obtaining those certificates may be delayed, or may not be granted.
We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may
not be able to successfully implement our business strategy.
Our ability to compete in the highly competitive biotechnology and pharmaceutical
industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on members of our Executive Committee, and our scientific and medical personnel. The loss of
the services of any members of our Executive Committee, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements, could result in delays in product development and harm our business.
Competition for skilled personnel in the biotechnology and pharmaceutical industries is intense and the turnover rate can be high, which may limit our ability
to hire and retain highly qualified personnel on acceptable terms or at all.
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To induce valuable employees to remain within the Company, in addition to salary and cash incentives, we have
provided warrants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by movements in our share price that are beyond our control, and may at any time be insufficient to counteract
more lucrative offers from other companies. We do not maintain key man insurance policies on the lives of all of these individuals or the lives of any of our other employees.
The improper conduct of employees, agents, contractors, consultants or collaborators could adversely affect our reputation and business, prospects,
operating results, and financial condition.
We cannot ensure that our compliance controls, policies, and procedures will in every instance protect
it from acts committed by our employees, agents, contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which it operates, including, without limitation, healthcare, employment, foreign corrupt practices,
environmental, competition, and patient privacy and other privacy laws and regulations. Such improper actions could subject us to civil or criminal investigations, and monetary and injunctive penalties, and could adversely impact our ability to
conduct business, operating results, and reputation. In particular, our business activities may be subject to anti-bribery or anti-corruption laws, regulations or rules of countries in which it operates, including the Foreign Corrupt Practices Act,
or FCPA, or the U.K. Bribery Act.
Violations of these laws and regulations could result in fines, criminal sanctions against the Company, our officers,
or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business. Any such
violations could include prohibitions on our ability to offer products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our
business, prospects, operating results, and financial condition.
We have limited experience in sales, marketing and distribution.
Given our stage in development, we have never marketed a product and have therefore limited experience in the fields of sales, marketing and distribution of
therapies. As a consequence, we will have to acquire marketing skills and develop our own sales and marketing infrastructure and would need to incur additional expenses, mobilize management resources, implement new skills and take the time necessary
to set up the appropriate organization and structure to market the relevant product(s), in accordance with applicable laws.
While several of our managers
have commercialized and launched high technology medical products there can be no assurance that the existing limited experience would be sufficient to effectively commercialize any or all of our product candidates. We may not be able to attract
qualified sales and marketing personnel on acceptable terms in the future and therefore may experience constraints that will impede the achievement of our commercial objectives. Such events could have a material adverse effect on our business,
prospects, financial situation, earnings and growth.
We will need to grow the size and capabilities of our organization, and we may experience
difficulties in managing this growth.
As of June 30, 2020, we had 90 employees and six senior managers, three being under employment
contracts and three under management services agreements, most of whom are full-time. As our drug product candidates move into later stage clinical development and towards commercialization, we must add a significant number of additional managerial,
operational, sales, marketing, financial, and other personnel. Future growth will impose significant added responsibilities on members of management, including:
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identifying, recruiting, integrating, maintaining, and motivating additional employees;
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managing our internal development efforts effectively, including the clinical and FDA review process for our drug
product candidates, while complying with our contractual obligations to contractors and other third parties; and
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improving our operational, financial and management controls, reporting systems, and procedures.
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Our future financial performance and our ability to commercialize our drug product candidates will depend, in part, on our ability to
effectively manage any future growth, and our management may also have to divert a disproportionate amount of our attention away from day-to-day activities in order to
devote a substantial amount of time to managing these growth activities.
If we are not able to effectively expand our organization by hiring new
employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our drug product candidates and, accordingly, may not achieve our research,
development, and commercialization goals.
If we engage in future acquisitions or strategic partnerships, this may increase our capital
requirements, dilute our shareholders, and cause it to incur debt or assume contingent liabilities, and subject it to other risks.
We may evaluate
various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks,
including:
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increased operating expenses and cash requirements;
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the assumption of additional indebtedness or contingent liabilities;
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the issuance of our equity securities;
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assimilation of operations, intellectual property and products of an acquired Company, including difficulties
associated with integrating new personnel;
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the diversion of our managements attention from our existing product programs and initiatives in pursuing
such a strategic merger or acquisition;
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retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business
relationships;
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risks and uncertainties associated with the other party to such a transaction, including the prospects of that
party and their existing products or drug product candidates and regulatory approvals; and
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our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in
undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
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In addition, if we undertake
acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.
Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
We are subject to certain covenants as a result of certain non-dilutive financial support received to date.
We have received some non-dilutive financial support from the Walloon Region to support various research
programs. The support has been granted in the form of recoverable cash advances, or RCAs, and subsidies.
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In the event we decide to exploit any discoveries or products from the research funded by under an RCA, the
relevant RCA becomes refundable; otherwise the RCA is not refundable. We own the intellectual property rights which result from the research programs partially funded by the Region, unless it decides not to exploit, or cease to exploit, the results
of the research in which case the results and intellectual property rights are transferred to the Region. Subject to certain exceptions, however, we cannot grant to third parties, by way of license or otherwise, any right to use the results without
the prior consent of the Region. We also need the consent of the Region to transfer an intellectual property right resulting from the research programs or a transfer or license of a prototype or installation. Obtaining such consent from the Region
could give rise to a review of the applicable financial terms. The RCAs also contain provisions prohibiting us from conducting research for any other person which would fall within the scope of a research program of one of the RCAs. Most RCAs
provide that this prohibition is applicable during the research phase and the decision phase, but a number of RCAs extend it beyond these phases.
Subsidies received from the Region are dedicated to funding research programs and patent applications and are not refundable. We own the intellectual property
rights which result from the research programs or with regard to a patent covered by a subsidy. Subject to certain exceptions, however, we cannot grant to third parties, by way of license, transfer or otherwise, any right to use the patents or
research results without the prior consent of the Region. In addition, certain subsidies require that we exploit the patent in the countries where the protection was granted and to make an industrial use of the underlying invention. In case of
bankruptcy, liquidation or dissolution, the rights to the patents covered by the patent subsidies will be assumed by the Region by operation of law unless the subsidy is reimbursed. Furthermore, we would lose our qualification as a small or medium-sized enterprise, the patent subsidies will terminate, and no additional expenses will be covered by such patent subsidies. In 2020, we will be required to make exploitation decisions on our remaining
outstanding RCA related to the CAR-T platform.
Failure to build our finance infrastructure and improve our
accounting systems and controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies.
As a public company, we are operating in an increasingly demanding regulatory environment that requires us to comply with, among other things, the
Sarbanes-Oxley Act of 2002 and related rules and regulations of the Securities and Exchange Commissions substantial disclosure requirements, accelerated reporting requirements and complex accounting rules. Company responsibilities required by
the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and
are important to help prevent financial fraud.
Management identified the following material weaknesses as of December 31, 2019: given the size of
its operations, we maintain a limited finance and accounting staff, which does not ensure (i) a sufficient backup in personnel with an appropriate level of knowledge and experience in the application of IFRS, (ii) a proper and effective
segregation of duties consistently, or (iii) allow the documentation, on a systematic basis, of performance of controls in accordance with internal control procedures.
Section 404 of the Sarbanes-Oxley Act requires that we include a report of management on our internal control over financial reporting in our annual
report on Form 20-F. However, until we cease to be an emerging growth company, as that term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, our independent
registered public accounting firm will not be required to attest to and report on the effectiveness of our internal control over financial reporting. As such, our independent registered public accounting firm was not engaged to express, nor have
they expressed, an opinion on the effectiveness of our internal control over financial reporting as of December 31, 2019 or any previous period. Had our independent registered public accounting firm performed an evaluation of our internal
control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies may have been identified by our independent registered public accounting firm.
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Assessing our procedures to improve our internal control over financial reporting is an ongoing process. With the
oversight of senior management and our Audit Committee, we have taken, and are taking, several remedial actions to address the material weaknesses that have been identified:
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We have hired, and are hiring, additional finance staff, who are familiar with external financial reporting under
IFRS and have experience with establishing appropriate financial reporting policies and control procedures, to provide more resources to support, design, implement and document effective internal controls over financial reporting;
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We have engaged, and are engaging, external professional advisors with international accounting, reporting and
controlling expertise to assist us in the implementation and evaluation of internal controls over financial reporting and segregating duties amongst finance and accounting personnel;
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We have closely reviewed our Risk Control Matrix in order to perform a design gap analysis and ensure that our
updated internal control environment reasonably prevents or timely detects risk of material misstatements in our financial statements;
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We have upgraded, and are upgrading, our information technology infrastructure and accounting system to enforce
proper segregation duties amongst finance and accounting information systems.
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We can provide no assurance that our remediation efforts
will be successful and that we will not have material weaknesses in the future. Any additional material weaknesses we identify could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our
consolidated financial statements. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to remedy the
material weaknesses and conclude that our internal control over financial reporting is ineffective, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of the ADSs could decline, and we could
be subject to sanctions or investigations by the NASDAQ Stock Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective
control systems required of public companies, could also restrict our future access to the capital markets.
Our international operations subject it
to various risks, and our failure to manage these risks could adversely affect our results of operations.
We face significant operational risks as
a result of doing business internationally, such as:
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fluctuations in foreign currency exchange rates;
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potentially adverse and/or unexpected tax consequences, including penalties due to the failure of tax planning or
due to the challenge by tax authorities on the basis of transfer pricing and liabilities imposed from inconsistent enforcement;
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potential changes to the accounting standards, which may influence our financial situation and results;
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becoming subject to the different, complex and changing laws, regulations and court systems of multiple
jurisdictions and compliance with a wide variety of foreign laws, treaties and regulations (including those relating to corporate taxation and sales taxes);
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reduced protection of, or significant difficulties in enforcing, intellectual property rights in certain
countries;
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difficulties in attracting and retaining qualified personnel;
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restrictions imposed by local labor practices and laws on our business and operations, including unilateral
cancellation or modification of contracts; and
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rapid changes in global government, economic and political policies and conditions, political or civil unrest or
instability, terrorism or epidemics and other similar outbreaks or events, and potential failure in confidence of our suppliers or customers due to such changes or events; and tariffs, trade protection measures, import or export licensing
requirements, trade embargoes and other trade barriers.
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We incur portions of our expenses, and may in the future derive revenues, in
currencies other than the euro, in particular, the U.S. dollar. As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. We currently do
not engage in hedging transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the euro. Therefore, for example, an increase in the value of the euro against the U.S. dollar could be expected to
have a negative impact on our revenue and earnings growth as U.S. dollar revenue and earnings, if any, would be translated into euros at a reduced value. We cannot predict the impact of foreign currency fluctuations, and foreign currency
fluctuations in the future may adversely affect our financial condition, results of operations and cash flows.
We or third parties upon whom we
depend may be adversely affected by natural disasters and/or global health pandemics, and our business, financial condition and results of operations could be adversely affected.
The occurrence of unforeseen or catastrophic events, including extreme weather events and other natural disasters,
man-made disasters, or the emergence of epidemics or pandemics, depending on their scale, may cause different degrees of damage to the national and local economies and could cause a disruption in our
operations and have a material adverse effect on our financial condition and results of operations. Man-made disasters, pandemics, and other events connected with the regions in which we operate could have
similar effects. If a natural disaster, health pandemic, or other event beyond our control occurred that prevented us from using all or a significant portion of our office and/or lab spaces, damaged critical infrastructure, such as our manufacturing
facilities or our manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult for us to continue our business for a substantial period of time.
On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global
pandemic and recommended containment and mitigation measures worldwide. Due to the COVID-19 pandemic, we experienced enrollment delays in our Phase 1 clinical trials. Specifically, in March and April 2020, we
experienced a delay in enrollment in the CYAD-01 THINK and DEPLETHINK trials at multiple clinical trial sites in both Belgium and the United States. Recruitment and enrollment had recovered by the end of the
second quarter of 2020. As of the date hereof, we have not experience significant delays in our CYAD-101 and CYAD-211 programs. The long-term impact of COVID-19 is uncertain and we are unable to predict whether we will experience additional delays in our clinical trials in the future.
To date, COVID-19 has had no impact on our financial statements and corporate cash flow but, with COVID-19 continuing to spread in the United States and Europe, our business operations could be delayed or interrupted, particularly if a large portion of our employees become ill.
COVID-19 may also affect employees of third-party organizations located in affected geographies that we rely upon to carry out our clinical trials. The spread of
COVID-19, or another infectious disease, could also negatively affect the operations at our third-party suppliers, which could result in delays or disruptions in the supply of drug product used in our clinical
trials. In addition, we are taking temporary precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all
non-essential travel worldwide for our employees and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively
affect our business.
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Further, timely enrollment in clinical trials is reliant on clinical trial sites which may be adversely affected
by global health matters, including, among other things, pandemics such as COVID-19. For example, many of our clinical trial sites are located in regions currently being afflicted by COVID-19. Some factors from the COVID-19 outbreak that have adversely affected enrollment in our trials and may continue to affect enrollment in the future include:
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the diversion of healthcare resources away from the conduct of clinical trial matters to focus on pandemic
concerns, including the attention of physicians serving as our clinical trial investigators, hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
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limitations on travel that interrupt key trial activities, such as clinical trial site initiations and
monitoring;
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interruption in global shipping affecting the transport of clinical trial materials, such as investigational drug
product used in our trials; and
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employee absences that delay necessary interactions with local regulators, ethics committees and other important
agencies and contractors.
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The impact of COVID-19 on our business is uncertain at this time and
will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among other
things, but prolonged closures or other business disruptions may negatively affect our operations and the operations of our agents, contractors, consultants or collaborators, which could have a material adverse impact our business, results of
operations and financial condition.
Risks Related to Our Financial Position and Need for Capital
We have incurred net losses in each period since our inception and anticipate that we will continue to incur net losses in the future.
We are not profitable and have incurred losses in each period since our inception. For the years ended December 31, 2019 and 2018, we incurred a loss for
the year of 28.6 million and 37.4 million, respectively. As of June 30, 2020, we had a retained loss of 91.0 million. We expects these losses to increase as we continue to incur significant research and
development and other expenses related to our ongoing operations, continue to advance our drug product candidates through preclinical studies and clinical trials, seek regulatory approvals for our drug product candidates, scale-up manufacturing capabilities and hire additional personnel to support the development of our drug product candidates and to enhance our operational, financial and information management systems.
Our main assets are intellectual property rights concerning technologies that have not led to commercialization of any product. We have never been profitable
and have never commercialized any products.
Even if we succeed in commercializing one or more of our drug product candidates, we will continue to incur
losses for the foreseeable future relating to our substantial research and development expenditures to develop our technologies. We anticipate that our expenses will increase substantially if and as we:
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continue our research, preclinical and clinical development of our drug product candidates;
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expand the scope of therapeutic indications of our current clinical studies for our drug product candidates;
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initiate additional preclinical studies or additional clinical trials of existing drug product candidates or new
drug product candidates;
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further develop the manufacturing process for our drug product candidates;
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change or add additional manufacturers or suppliers;
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seek regulatory and marketing approval for our drug product candidates that successfully complete clinical
studies;
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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may
obtain marketing approval, in the European Union and the United States;
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make milestone or other payments under any in-license agreements;
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maintain, protect and expand our intellectual property portfolio; and
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maintain and upgrade internal controls.
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We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our
future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.
Our prior losses and expected
future losses have had and will continue to have an adverse effect on our shareholders equity and working capital. Further, the net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period to
period comparison of our results of operations may not be a good indication of our future performance.
We may need substantial additional funding,
which may not be available on acceptable terms when needed, if at all.
Our operations have required substantial amounts of cash since inception.
We expect to continue to spend substantial amounts to continue the clinical development of our drug product candidates, including our ongoing and planned clinical trials for CAR-T NKG2D and any future drug
product candidates. If approved, we will require significant additional amounts in order to launch and commercialize our drug product candidates.
On
June 30, 2020, we had 26.7 million in cash and no short-term investments. On September 16, 2019, we raised of $20.0 million through a U.S. public offering and concurrent European private placement.
We believe that such resources will be sufficient to fund our operations for at least the next 12 months from balance sheet date as of June 30, 2020.
However, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We may require
additional capital for the further development and commercialization of our drug product candidates and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate.
Our ability to raise additional funds will depend on financial, economic and market conditions and other factors, over which we may have no or limited
control, and we cannot guarantee that additional funds will be available to us when necessary on commercially acceptable terms, if at all. If the necessary funds are not available, we may need to seek funds through collaborations and licensing
arrangements, which may require us to reduce or relinquish significant rights to our research programs and product candidates, to grant licenses on our technologies to partners or third parties or enter into new collaboration agreements, the terms
could be less favorable to us than those we might have obtained in a different context. If adequate funds are not available on commercially acceptable terms when needed, we may be forced to delay, reduce or terminate the development or
commercialization of all or part of our research programs or product candidates or we may be unable to take advantage of future business opportunities.
Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our drug
product candidates or technologies.
We may seek additional funding through a combination of equity offerings, debt financings, collaborations
and/or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible
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debt securities, the shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. The incurrence of indebtedness
and/or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to incur additional debt and/or issue
additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, issuance of additional equity securities,
or the possibility of such issuance, may cause the market price of the Shares to decline. In the event that we enter into collaborations and/or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms,
including relinquishing or licensing to a third party on unfavorable terms our rights to technologies or drug product candidates that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential
arrangements when we might be able to achieve more favorable terms.
We may be exposed to significant foreign exchange risk.
We incur portions of our expenses, and may in the future derive revenues, in currencies other than the euro, in particular, the U.S. dollar. As a result, we
are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. We currently do not engage in hedging transactions to protect against uncertainty in future
exchange rates between particular foreign currencies and the euro. Therefore, for example, an increase in the value of the euro against the U.S. dollar could be expected to have a negative impact on our revenue and earnings growth as U.S. dollar
revenue and earnings, if any, would be translated into euros at a reduced value. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of
operations and cash flows.
The investment of our cash and cash equivalents may be subject to risks that may cause losses and affect the liquidity
of these investments.
As of June 30, 2020, we had cash and cash equivalents of 26.7 million and no short-term investments. We
historically have invested substantially all of our available cash and cash equivalents in corporate bank accounts. Pending their use in our business, we may invest the net proceeds of our global offerings in investments that may include corporate
bonds, commercial paper, certificates of deposit and money market funds. These investments may be subject to general credit, liquidity, and market and interest rate risks. We may realize losses in the fair value of these investments or a complete
loss of these investments, which would have a negative effect on our financial statements.
Risks Related to Ownership of Our Ordinary Shares and
American Depositary Shares
If securities or industry analysts do not publish research or publish inaccurate research or unfavorable research
about our business, the price of the ordinary shares and the ADSs and trading volume could decline.
The trading market for the ordinary shares and
the ADSs depends in part on the research and reports that securities or industry analysts publish about us or our business. If no or few securities or industry analysts cover our company, the trading price for the ordinary shares and the ADSs would
be negatively impacted. If one or more of the analysts who covers us downgrades the ordinary shares or the ADSs or publishes incorrect or unfavorable research about our business, the price of the ordinary shares and the ADSs would likely decline. If
one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, or downgrades the ordinary shares or the ADSs, demand for the ADSs and ordinary shares could decrease, which could cause the price of the ADSs
and ordinary shares or trading volume to decline.
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The market price of the shares could be negatively impacted by actual or anticipated sales of substantial
numbers of ordinary shares or ADSs.
Sales of a substantial number of Shares in the public markets, or the perception that such sales might occur,
might cause the market price of the Shares to decline. We cannot make any prediction as to the effect of any such sales or perception of potential sales on the market price of the Shares.
A public market for our shares may not be sustained.
We cannot guarantee the extent to which a liquid market for our ordinary shares or ADSs will be sustained. In the absence of such liquid market for our
ordinary shares or ADSs, the price of our ordinary shares or ADSs could be influenced. The liquidity of the market for our ordinary shares or ADSs could be affected by various causes, including the factors identified in the next risk factor (below)
or by a reduced interest of investors in biotechnology sector.
The market price of the shares may fluctuate widely in response to various factors.
A number of factors may significantly affect the market price of our ordinary shares or ADSs. The main factors are changes in our operating
results and those of our competitors, announcements of technological innovations or results concerning the product candidates, changes in earnings estimates by analysts.
Other factors which could cause the price of the shares to fluctuate or could influence our reputation include, amongst other things:
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public information regarding actual or potential results relating to products and product candidates under
development by our competitors;
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actual or potential results relating to products and product candidates under development by us;
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developments concerning intellectual property rights, including patents;
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regulatory and medicine pricing and reimbursement developments in Europe, the United States and other
jurisdictions;
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any publicity derived from any business affairs, contingencies, litigation or other proceedings, our assets
(including the imposition of any lien), our management, or our significant Shareholders or collaborative partners;
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divergences in financial results from stock market expectations;
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changes in the general conditions in the pharmaceutical industry and general economic, financial market and
business conditions in the countries in which we operate; and
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any publicity derived from data protection or cybersecurity breaches.
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In addition, stock markets have from time to time experienced extreme price and volume volatility which, in addition to general economic, financial and
political conditions, could affect the market price for the Shares regardless of the operating results or financial condition of the Company.
We
have no present intention to pay dividends on our ordinary shares in the foreseeable future and, consequently, your only opportunity to achieve a return on your investment during that time is if the price of the securities increases.
We have no present intention to pay dividends in the foreseeable future. Any recommendation by our Board of Directors to pay dividends will depend on many
factors, including our financial condition (including losses carried-forward), results of operations, legal requirements and other factors. Furthermore, pursuant to Belgian
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law, the calculation of amounts available for distribution to shareholders, as dividends or otherwise, must be determined on the basis of our
non-consolidated statutory accounts prepared in accordance with Belgian accounting rules. In addition, in accordance with Belgian law and our Articles of Association, we must allocate each year an amount of at
least 5% of our annual net profit under our non-consolidated statutory accounts to a legal reserve until the reserve equals 10% of our share capital. Therefore, we are unlikely to pay dividends or other
distributions in the foreseeable future. If the price of the securities or the underlying ordinary shares declines before we pay dividends, investors will incur a loss on their investment, without the likelihood that this loss will be offset in part
or at all by potential future cash dividends.
Takeover provisions in the national law of Belgium may make a takeover difficult.
Public takeover bids on our shares and other voting securities, such as warrants or convertible bonds, if any, are subject to the Belgian Act of 1 April
2007 on public takeover bids, as amended and implemented by the Belgian Royal Decree of April 27, 2007, or Royal Decree, and to the supervision by the Belgian Financial Services and Markets Authority, or FSMA. Public takeover bids must be made
for all of our voting securities, as well as for all other securities that entitle the holders thereof to the subscription to, the acquisition of or the conversion into voting securities. Prior to making a bid, a bidder must issue and disseminate a
prospectus, which must be approved by the FSMA. The bidder must also obtain approval of the relevant competition authorities, where such approval is legally required for the acquisition of the Company. The Belgian Act of 1 April 2007 provides
that, subject to certain exceptions, a mandatory bid will be required to be launched for all of our outstanding shares and securities giving access to ordinary shares if a person, as a result of our own acquisition or the acquisition by persons
acting in concert with it or by persons acting on their account, directly or indirectly holds more than 30% of the voting securities in a company that has our registered office in Belgium and of which at least part of the voting securities are
traded on a regulated market or on a multilateral trading facility designated by the Royal Decree. The mere fact of exceeding the relevant threshold through the acquisition of one or more shares will give rise to a mandatory bid, irrespective of
whether or not the price paid in the relevant transaction exceeds the current market price.
There are several provisions of Belgian company law and
certain other provisions of Belgian law, such as the obligation to disclose important shareholdings and merger control, that may apply to us and which may make an unfriendly tender offer, merger, change in management or other change in control, more
difficult. These provisions could discourage potential takeover attempts that third parties may consider and thus deprive the shareholders of the opportunity to sell their shares at a premium (which is typically offered in the framework of a
takeover bid).
We may be at an increased risk of securities class action litigation.
Historically, securities class action litigation has often been brought against a company following a decline in the market price of that companys
securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant share price volatility in recent years. If we were to be sued, it could result in substantial costs and a
diversion of managements attention and resources, which could harm our business.
Holders of the shares outside Belgium and France may not be
able to exercise pre-emption rights (notice for non-Belgian resident investors).
In the event of an increase in our share capital in cash, holders of shares are generally entitled to full pre-emption
rights unless these rights are excluded or limited either by a resolution of the general meeting, or by a resolution of the Board of Directors (if the Board of Directors has been authorized by the general meeting in the articles of association to
increase the share capital in that manner). Certain holders of shares outside Belgium or France may not be able to exercise pre-emption rights unless local securities laws have been complied with. In
particular, U.S. holders of the shares may not be able to exercise pre-emption rights unless a registration statement under the
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Securities Act is declared effective with respect to the shares issuable upon exercise of such rights or an exemption from the registration requirements is available. We do not intend to obtain a
registration statement in the U.S. or to fulfil any requirement in other jurisdictions (other than Belgium and France) in order to allow shareholders in such jurisdictions to exercise their pre-emptive rights
(to the extent not excluded or limited).
Any future sale, purchase or exchange of shares may become subject to the Financial Transaction Tax.
On February 14, 2013, the European Commission published a proposal (the Draft Directive) for a Directive for a common FTT in Belgium,
Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (save for Estonia, the Participating Member States). However, Estonia has since then stated that it would not participate.
Pursuant to the Draft Directive, the FTT will be payable on financial transactions provided at least one party to the financial transaction is established or
deemed established in a Participating Member State and there is a financial institution established or deemed established in a Participating Member State which is a party to the financial transaction, or is acting in the name of a party to the
transaction. The FTT shall, however, not apply to, among others, primary market transactions referred to in Article 5(c) of Regulation (EC) No 1287/2006, including the activity of underwriting and subsequent allocation of financial instruments in
the framework of their issue.
The rates of the FTT will be fixed by each Participating Member State but for transactions involving financial instruments
other than derivatives shall amount to at least 0.1% of the taxable amount. The taxable amount for such transactions shall in general be determined by reference to the consideration paid or owed in return for the transfer. The FTT will be payable by
each financial institution established or deemed established in a Participating Member State which is either a party to the financial transaction, or acting in the name of a party to the transaction or where the transaction has been carried out on
our account. Where the FTT due has not been paid within the applicable time limit, each party to a financial transaction, including persons other than financial institutions, shall become jointly and severally liable for the payment of the FTT due.
Investors should note, in particular, that following implementation of the Draft Directive, any future sale, purchase or exchange of shares will be
subject to the FTT at a minimum rate of 0.1% provided the above-mentioned prerequisites are met. The investor may be liable to pay this charge or reimburse a financial institution for the charge, and/or the charge may affect the value of the Shares.
The issuance of the new Shares by the Issuer should not be subject to the FTT.
The Draft Directive is still subject to negotiation among the
Participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate.
Investors should consult their own tax advisers in relation to the consequences of the FTT associated with subscribing for, purchasing, holding and disposing
of the Shares.
We have been subject to an investigation by the Belgian Financial Services and Markets Authority.
The Belgian Financial Services and Markets Authority, or the FSMA, opened an investigation against us on April 22, 2014. Such investigation was related
to whether we had failed to timely disclose inside information to the market in relation to the Investigational New Drug, or IND, clearance from the FDA for our CHART-2 Phase III heart-failure trial received
on December 26, 2013 and reported on 9 January 2014. In April 2015, we notified the FSMA our agreement to settle our investigation by paying the proposed settlement amount of 175,000. Although such settlement does not provide for any
admission of guilt on our part, the fact that we have entered into a settlement with the FSMA could cause investors to have a negative perception of our governance structure,
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which would have a material adverse effect on our business. Further, any future allegations (based on other facts and circumstances) that we failed to comply with applicable securities laws,
whether or not true, may subject us to fines, claims and/or sanctions, which could impair our ability to offer our securities or restrict trading in our securities. The occurrence of any of the foregoing could have a material adverse effect on the
trading price of our securities and our business.
The market price for the ADSs may be volatile or may decline regardless of our operating
performance.
The trading price of the ADSs has fluctuated, and is likely to continue to fluctuate, substantially. The trading price of the ADSs
depends on a number of factors, many of which are beyond our control and may not be related to our operating performance, including, among others:
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actual or anticipated fluctuations in our financial condition and operating results;
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actual or anticipated changes in our growth rate relative to our competitors;
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competition from existing products or new products that may emerge;
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announcements by us, our partners or our competitors of significant acquisitions, strategic collaborations, joint
ventures, collaborations, or capital commitments;
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failure to meet or exceed financial estimates and projections of the investment community or that we provide to
the public;
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issuance of new or updated research or reports by securities analysts;
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fluctuations in the valuation of companies perceived by investors to be comparable to us;
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additions or departures of key management or scientific personnel;
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disputes or other developments related to proprietary rights, including patents, litigation matters, and our
ability to obtain patent protection for our technologies;
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changes to coverage policies or reimbursement levels by commercial third-party payors and government payors and
any announcements relating to coverage policies or reimbursement levels;
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announcement or expectation of additional debt or equity financing efforts;
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sales of the ADSs or ordinary shares by us, our insiders or our other shareholders;
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general economic and market conditions; and
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failure to meet financial reporting and internal control requirements of a US public company.
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These and other market and industry factors may cause the market price and demand for the ADSs to fluctuate substantially, regardless
of our actual operating performance, which may limit or prevent investors from readily selling their ADSs and may otherwise negatively affect the liquidity of our ADSs shares. In addition, the stock market in general, and biotechnology and
biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.
Fluctuations in the exchange rate between the U.S. dollar and the euro may increase the risk of holding the ADSs.
Our ordinary shares currently trade on Euronext Brussels and Euronext Paris in euros, while the ADSs trade on NASDAQ in U.S. dollars. Fluctuations in the
exchange rate between the U.S. dollar and the euro may result in differences between the value of the ADSs and the value of our ordinary shares, which may result in heavy trading by investors seeking to exploit such differences. In addition, as a
result of fluctuations in the exchange rate between the U.S. dollar and the euro, the U.S. dollar equivalent of the proceeds that a holder of the ADSs
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would receive upon the sale in Belgium of any ordinary shares withdrawn from the depositary upon calculation of the corresponding ADSs and the U.S. dollar equivalent of any cash dividends paid in
euros on our ordinary shares represented by the ADSs could also decline.
Holders of the ADSs are not treated as shareholders of our company.
Holders of the ADSs are not treated as shareholders of our company, unless they cancel the ADSs and withdraw our ordinary shares underlying the
ADSs. The depositary (or its nominee) is the shareholder of the ordinary shares underlying the ADSs. Holders of ADSs therefore do not have any rights as shareholders of our company, other than the rights that they have pursuant to the deposit
agreement.
Our shareholders residing in countries other than Belgium may be subject to double withholding taxation with respect to dividends or
other distributions made by us.
Any dividends or other distributions we make to shareholders will, in principle, be subject to withholding tax in
Belgium at a rate of 30%, except for shareholders which qualify for an exemption of withholding tax such as, among others, qualifying pension funds or a company qualifying as a parent company within the meaning of the Council Directive (90/435/EEC)
July 23, 1990, known as the Parent-Subsidiary Directive, or that qualify for a lower withholding tax rate or an exemption by virtue of a tax treaty. Various conditions may apply and shareholders residing in countries other than Belgium are
advised to consult their advisers regarding the tax consequences of dividends or other distributions made by us. Our shareholders residing in countries other than Belgium may not be able to credit the amount of such withholding tax to any tax due on
such dividends or other distributions in any other country than Belgium. As a result, such shareholders may be subject to double taxation in respect of such dividends or other distributions. U.S. shareholders are encouraged to consult their own tax
advisers to determine whether they can invoke the benefits and meet the limitation of benefits conditions as imposed by the U.S.-Belgium Tax Treaty.
U.S. holders of the ADSs may suffer adverse tax consequences if we are characterized as a PFIC for any taxable year.
Generally, if, for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets
that produce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investment company (PFIC), for U.S. federal income tax purposes. Passive income for this purpose generally
includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary
investment of cash, including the funds raised in offerings of the ADSs. If we are characterized as a PFIC, U.S. holders (as defined below under Material Tax ConsiderationsCertain Material U.S. Federal Income Tax Considerations to U.S.
Holders) of the ADSs may suffer adverse tax consequences, including having gains realized on the sale of the ADSs treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on the
ADSs by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of sales of the ADSs.
We do not
believe that we were a PFIC for the 2019 taxable year and, based on the expected composition of our income and assets, we do not expect to be a PFIC for the 2020 taxable year; however, we cannot provide any assurances regarding our PFIC status for
past, current or future taxable years. Our status as a PFIC is a fact intensive determination made on an annual basis. Whether we are a PFIC for any taxable year will depend on the composition of our income and assets, and the estimated fair market
values of our assets, in each year. The market value of our assets may be determined in large part by reference to the market price of the ADSs and our ordinary shares, which is likely to fluctuate. Our status as a PFIC also depends on the
interpretation of the rules governing the PFIC income and asset tests, which are subject to uncertainty (including with respect to the characterization of income from government grants, for which direct legal authority does not exist).
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Future sales of ordinary shares or ADSs by existing shareholders could depress the market price of the
ADSs.
If our existing shareholders sell, or indicate an intent to sell, substantial amounts of ordinary shares or ADSs in the public market, the
trading price of the ADSs could decline significantly. In the future we may file one or more registration statements with the SEC covering ordinary shares available for future issuance under our equity incentive plans. Upon effectiveness of such
registration statements, any shares subsequently issued under such plans will be eligible for sale in the public market, except to the extent that they are restricted by the lock-up agreements referred to
above and subject to compliance with Rule 144 in the case of our affiliates. Sales of a large number of the shares issued under these plans in the public market could have an adverse effect on the market price of the ADSs and the ordinary shares.
We are a Belgian public limited liability company, and shareholders of our company may have different and, in some cases, more limited shareholder
rights than shareholders of a U.S. listed corporation.
We are a public limited liability company incorporated under the laws of Belgium. Our
corporate affairs are governed by Belgian corporate and securities law. The rights provided to our shareholders under Belgian corporate law and our articles of association differ in certain respects from the rights that you would typically enjoy as
a shareholder of a U.S. corporation under applicable U.S. federal and state laws. Under Belgian corporate law, other than certain information that we must make public and except in certain limited circumstances, our shareholders may not ask for an
inspection of our corporate records, while under Delaware corporate law any shareholder, irrespective of the size of its shareholdings, may do so. Shareholders of a Belgian corporation have more limited rights to initiate a derivative action, a
remedy typically available to shareholders of U.S. companies, in order to enforce a right of our Company, in case we fail to enforce such right ourselves.
A liability action can be instituted for our account by one or more of our shareholders who, individually or together, hold securities representing at least
1.0% of the votes or a part of the capital worth at least 1.25 million and have not approved of the discharge from liability that was granted to the directors. If the court orders the directors to pay damages, they are due to us, though
the amounts advanced by the minority shareholders (for example attorneys fees) are to be reimbursed by us. If the action is disallowed, the minority shareholders may be ordered to pay the costs, and, should there be grounds therefor, to pay
damages to the directors, for example for having conducted provocative and reckless legal proceedings.
In addition, a majority of our shareholders
present or represented at our meeting of shareholders may release a director from any claim of liability we may have, provided that the financial position of the Company are accurately reflected in the annual accounts. This includes a release from
liability for any acts of the directors beyond their statutory powers or in breach of the Belgian Companies and Associations Code, provided that the relevant acts were specifically mentioned in the convening notice to the meeting of shareholders
deliberating on the discharge. In contrast, most U.S. federal and state laws prohibit a company or its shareholders from releasing a director from liability altogether if he or she has acted in bad faith or has breached his or her duty of loyalty to
the Company. Also, the Belgian Companies and Associations Code caps the directors liability at EUR 12 million, except in case of fraud or intent to cause damage, gross negligence or recurring negligence. This cap will apply on an
aggregate basis for all directors of the Company. Finally, Belgian corporate law does not provide any form of appraisal rights in the case of a business combination. As a result of these differences between Belgian corporate law and our articles of
association, on the one hand, and the U.S. federal and state laws, on the other hand, in certain instances, you could receive less protection as an ADS holder of our company than you would as a shareholder of a listed U.S. company.
Holders of ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares.
ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in
connection with the performance of its duties. The depositary may
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refuse to deliver, transfer or register transfers of your ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to
do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason, subject to your right to cancel your ADSs and withdraw the underlying ordinary shares. Temporary
delays in the cancellation of your ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting
at a shareholders meeting or we are paying a dividend on our ordinary shares.
In addition, you may not be able to cancel your ADSs and withdraw the
underlying ordinary shares when you owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary
shares or other deposited securities.
As of the date of this prospectus, we are an emerging growth company and are availing ourselves
of reduced disclosure requirements applicable to emerging growth companies, which could make the ADSs or the ordinary shares less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot
predict if investors will find the ADSs or the ordinary shares less attractive because we may rely on these exemptions. If some investors find the ADSs or the ordinary shares less attractive as a result, there may be a less active trading market for
the ADSs or the ordinary shares and the price of the ADSs or the ordinary shares may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We would cease to be an emerging growth
company upon the earliest to occur of (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a large accelerated filer, with at least $700 million of
equity securities held by non-affiliates; (3) the issuance, in any three-year period, by our company of more than $1.0 billion in non-convertible debt
securities held by non-affiliates; and (4) December 31, 2020. We may choose to take advantage of some but not all of these exemptions.
We expect to cease being an emerging growth company on December 31, 2020.
As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC
than a U.S. company. This may limit the information available to holders of ADSs or ordinary shares.
We are a foreign private issuer,
as defined in the SECs rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we are exempt from certain rules under the
Exchange Act, that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under
Section 14 of the Exchange Act. In addition, our officers and directors are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their
purchases and sales of our securities. Moreover, while we currently make annual and semi-annual filings with respect to our listing on Euronext Brussels and Euronext Paris, we will not be required to file periodic reports and financial statements
with the SEC as frequently or as promptly as U.S. domestic issuers and will not be required to file quarterly reports on Form 10-Q or current reports on Form 8-K under
the Exchange Act. Accordingly, there will be less publicly available information concerning our company than there would be if we were not a foreign private issuer.
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As a foreign private issuer, we are permitted to adopt certain home country practices in relation to
corporate governance matters that differ significantly from NASDAQ corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing
standards.
As a foreign private issuer listed on NASDAQ, we are subject to corporate governance listing standards. However, rules permit a foreign
private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in Belgium, which is our home country, may differ significantly from corporate governance listing standards. For example,
neither the corporate laws of Belgium nor our articles of association require a majority of our directors to be independent and we could include non-independent directors as members of our Nomination and
Remuneration Committee, and our independent directors would not necessarily hold regularly scheduled meetings at which only independent directors are present. Currently, we intend to follow home country practice to the maximum extent possible.
Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.
We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.
While we currently qualify as a foreign private issuer, the determination of foreign private issuer status is made annually on the last business day of an
issuers most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2021. In the future, we would lose our foreign private issuer status if we to fail to meet the
requirements necessary to maintain our foreign private issuer status as of the relevant determination date. For example, if more than 50% of our securities are held by U.S. residents and more than 50% of the members of our Executive Committee or
members of our Board of Directors are residents or citizens of the United States, we could lose our foreign private issuer status.
The regulatory and
compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly more than costs we incur as a foreign private issuer. If we are not a foreign private issuer, we will be required to file periodic reports and
registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. We would be required under current SEC rules to prepare our financial
statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, rather than IFRS, and modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers. Such conversion of
our financial statements to U.S. GAAP could involve significant time and cost. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private
issuers such as the ones described above and exemptions from procedural requirements related to the solicitation of proxies.
It may be difficult
for investors outside Belgium to serve process on, or enforce foreign judgments against, us or our directors and senior management.
We are a
Belgian public limited liability company. Less than a majority of the members of our Board of Directors and members of our Executive Committee are residents of the United States. All or a substantial portion of the assets of such non-resident persons and most of our assets are located outside the United States. As a result, it may not be possible for investors to effect service of process upon such persons or on us or to enforce against them
or us a judgment obtained in U.S. courts. Original actions or actions for the enforcement of judgments of U.S. courts relating to the civil liability provisions of the federal or state securities laws of the United States are not directly
enforceable in Belgium.
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The United States and Belgium do not currently have a multilateral or bilateral treaty providing for reciprocal
recognition and enforcement of judgments, other than arbitral awards, in civil and commercial matters. In order for a final judgment for the payment of money rendered by U.S. courts based on civil liability to produce any effect on Belgian soil, it
is accordingly required that this judgment be recognized or be declared enforceable by a Belgian court in accordance with Articles 22 to 25 of the 2004 Belgian Code of Private International Law. Recognition or enforcement does not imply a review of
the merits of the case and is irrespective of any reciprocity requirement. A U.S. judgment will, however, not be recognized or declared enforceable in Belgium if it infringes upon one or more of the grounds for refusal that are exhaustively listed
in Article 25 of the Belgian Code of Private International Law. Actions for the enforcement of judgments of U.S. courts might be successful only if the Belgian court is satisfied that:
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the effect of the recognition of enforcement of the U.S. judgment is not manifestly incompatible with Belgian
public policy;
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the judgment did not violate the rights of the defendant;
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the judgment was not rendered in a matter in which the parties cannot freely dispose of their rights with the
sole purpose of avoiding the application of the law applicable according to Belgian rules of private international law;
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the judgment is not subject to further recourse under U.S. law;
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the judgment is not compatible with a judgment rendered in Belgium or with a prior judgment rendered abroad that
may be recognized in Belgium;
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the claim has not been filed before the U.S. courts after a claim had been filed in Belgium, which relates to the
same parties and the same cause of action and is still pending
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the Belgian courts did not have exclusive jurisdiction to rule on the matter;
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the jurisdiction of the U.S. court was not solely based on the presence within the U.S. of the defendant or
assets that do not have any direct relation to the dispute;
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the judgment does not violate specific rules in relation to the validity or registration of intellectual property
rights in Belgium, the validity, operation, dissolution or liquidation of legal entities having their main seat in Belgium, and the opening, conduct or closure of insolvency proceedings; and
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the judgment submitted to the Belgian court is authentic under the laws of the state where the judgment was
issued.
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In addition to recognition or enforcement, a judgment by a federal or state court in the United States against us may also
serve as evidence in a similar action in a Belgian court if it meets the conditions required for the authenticity of judgments according to the law of the state where it was rendered. The findings of a federal or state court in the United States
will not, however, be taken into account to the extent they appear incompatible with Belgian public policy.
We may be subject at an increased risk
of securities class action litigation.
Historically, securities class action litigation has often been brought against a company following a
decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant share price volatility in recent years. If we were to be sued, it could result
in substantial costs and a diversion of managements attention and resources, which could harm our business.
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Tax law changes could adversely affect our shareholders and our business and financial condition.
We and our subsidiaries are subject to income and other taxes in Belgium, the United States, and other tax jurisdictions throughout the world. Tax
laws and rates in these jurisdictions are subject to change. Our financial condition can be impacted by a number of complex factors, including, but not limited to: (i) interpretations of existing tax laws; (ii) the tax impact of existing
or future legislation; (iii) changes in accounting standards; and (iv) changes in the mix of earnings in the various tax jurisdictions in which we operate. In recent years, many such changes have been made and changes are likely to
continue to occur in the future. For example, in 2017 the U.S. government enacted comprehensive tax legislation that includes significant changes to the taxation of U.S. business entities. This legislation, among other things, contains significant
changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for net interest expense to 30% of taxable earnings (except for certain small
businesses), generated after December 31, 2017 modification of the limitations on the use of net operating losses, and the modification or repeal of many business deductions and credits (including reducing the business tax credit for certain
clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as orphan drugs). Future changes in tax laws could have a material adverse effect on our business, cash flow,
financial condition or results of operations. We urge our shareholders to consult with their legal and tax advisors with respect to any such legislation and the potential tax consequences of investing in our common shares.
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DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF ASSOCIATION
The following description is a summary of certain information relating to our share capital, certain provisions of our articles of association and the Belgian
Companies and Association Code. Because this description is a summary, it may not contain all of the information important to you. Accordingly, this description is qualified entirely by reference to the description of our share capital and the
material terms of our articles of association contained in the documents incorporated herein by reference, including our most recent Annual Report on 20-F, as updated by other reports and documents we file
with the SEC after the date of this prospectus and that are incorporated by reference herein, together with our articles of association, a copy of which has been filed as an exhibit hereto. Please see the section of this prospectus entitled
Where You Can Find More Information.
The following description includes comparisons of certain provisions of our articles of association and
the Belgian Companies and Association Code applicable to us and the Delaware General Corporation Law, or the DGCL, the law under which many publicly listed companies in the United States are incorporated. Because such statements are summaries, they
do not address all aspects of Belgian law that may be relevant to us and our shareholders or all aspects of Delaware law which may differ from Belgian law, and they are not intended to be a complete discussion of the respective rights.
Share Capital
Share Capital and Shares
Our share capital is represented by ordinary shares without nominal value. Our share capital is fully
paid-up. Our shares are not separated into classes.
As of June 30, 2020, our share capital amounted to
48,512,614.57 represented by 13,942,344 fully authorized and subscribed and paid-up shares without nominal value. This number does not include outstanding warrants issued by us and granted to certain of
our directors, employees and non-employees, nor any other capital increases after June 30, 2020. As of July 31, 2020, we had seven shareholders who held shares in registered form, representing 16.99%
of our ordinary shares. The remainder of our ordinary shares are in dematerialized form. Neither we nor any of our subsidiaries hold any of our own shares.
As of July 31, 2020, assuming that all of our ordinary shares represented by ADSs are held by residents of the United States, we estimate that
approximately 10.73% of our outstanding ordinary shares were held in the United States. The top 10 holders hold 1,058,841 ADSs out of the total amount of 1,495,541 ADSs, which represent 70.13% of the total amount of ADSs.
Other Outstanding Securities
In addition to the
shares already outstanding, we have granted warrants, which upon exercise will lead to an increase in the number of our outstanding shares. A total of 1,604,156 warrants (where each warrant entitles the holder to subscribe for one new share) were
outstanding and granted as of July 31, 2020, which represent approximately 10.32% of the total number of all our issued and outstanding voting financial instruments. Apart from the warrants and warrant plans, we do not currently have other
share options, options to purchase securities, convertible securities or other rights to subscribe for or purchase securities outstanding. For further information, see our most recent Annual Report on Form
20-F, as updated by other reports and documents we file with the SEC after the date of this prospectus and that are incorporated by reference herein.
Board of Directors
Belgian law does not specifically
regulate the ability of directors to borrow money from us.
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Article 7:96 of the Belgian Code for Companies and Associations provides that if one of our directors directly or
indirectly has a personal patrimonial interest that conflicts with a decision or transaction that falls within the powers of our board of directors, the director concerned must inform our other directors before our board of directors makes any
decision on such transaction. The statutory auditor must also be notified. The director may neither participate in the deliberation nor vote on the conflicting decision or transaction. A copy of the minutes of the meeting of our board of directors
that sets forth the statements of the conflicted director, the nature of the transaction, the financial impact of the matter on us and the justification of the decision of our board of directors must be published in our Annual Report. The statutory
auditors report on the annual accounts must contain a description of the financial impact on us of each of the decisions of our board of directors where director conflicts arise.
In case of non-compliance with the foregoing, we may request the annulment of the decision or the transaction which
has taken place in breach of these provisions if the counterparty to the decision or the transaction was, or should have been, aware of such breach.
The
DGCL generally permits transactions involving a Delaware corporation and an interested director of that corporation if (i) the material facts as to the directors relationship or interest and as to the transaction are disclosed and a
majority of disinterested directors consent, (ii) the material facts are disclosed as to the directors relationship or interest and a majority of shares entitled to vote thereon consent or (iii) the transaction is fair to the
corporation at the time it is authorized by the board of directors, a committee of the board of directors or the shareholders.
We rely on a provision in
the Listing Rules of the NASDAQ Stock Market that allows us to follow Belgian corporate law with respect to certain aspects of corporate governance. This allows us to continue following certain corporate governance practices that differ in
significant respects from the corporate governance requirements applicable to U.S. companies listed on the NASDAQ Global Market. In particular, the Listing Rules of the NASDAQ Stock Market require a majority of the directors of a listed U.S. company
to be independent, whereas in Belgium, only three directors need to be independent. Nevertheless, our board of directors is currently comprised of six independent directors and three non-independent directors.
For further information, see our most recent Annual Report on Form 20-F, as updated by other reports and documents we file with the SEC after the date of this prospectus and that are incorporated by reference
herein. The Listing Rules of the NASDAQ Stock Market further require that each of the nominating, compensation and audit committees of a listed U.S. company be comprised entirely of independent directors. However, the Belgian Corporate Governance
Code recommends only that a majority of the directors on each of these committees meet the technical requirements for independence under Belgian corporate law. At present, our Audit Committee is composed entirely of independent directors. Our
nomination and remuneration committee is composed of two independent directors out of three members.
Form and Transferability of Our Shares
All of our shares belong to the same class of securities and are in registered form or in dematerialized form. All of our outstanding shares are
fully paid-up and freely transferable, subject to any contractual restrictions.
Belgian company law and our
articles of association entitle shareholders to request, in writing and at their expense, the conversion of their dematerialized shares into registered shares and vice versa. Any costs incurred as a result of the conversion of shares into another
form will be borne by the shareholder. For shareholders who opt for registered shares, the shares will be recorded in our shareholder register.
Currency
Our share capital, which is represented
by our outstanding ordinary shares, is denominated in euros.
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Changes to Our Share Capital
In principle, changes to our share capital are decided by our shareholders. Our shareholders may at any time at a meeting of shareholders decide to increase or
decrease our share capital. Any such resolution of shareholders must satisfy the quorum and majority requirements that apply to an amendment of the articles of association, as described below in Description of SecuritiesOrdinary
SharesRight to Attend and Vote at Our Meeting of ShareholdersQuorum and Majority Requirements. No shareholder is liable to make any further contribution to our share capital other than with respect to shares held by such
shareholder that would not be fully paid-up.
Share Capital Increases by Our Board of Directors
Subject to the quorum and majority requirements described below in Description of SecuritiesOrdinary SharesRight to Attend and Vote at Our
Meeting of ShareholdersQuorum and Majority Requirements, our meeting of shareholders may authorize our board of directors, within certain limits, to increase our share capital without any further approval of our shareholders. A capital
increase that is authorized in this manner is referred to as authorized capital. This authorization can only be granted for a renewable period of a maximum of five years as from the date of the publication of the authorization in the Annexes to the
Belgian Official Gazette and may not exceed the amount of the registered share capital at the time of the authorization.
Normally, the authorization of
the board of directors to increase our share capital through contributions in kind or in cash with cancellation or limitation of the preferential right of the existing shareholders is suspended if we are notified by the Belgian Financial Services
and Markets Authority, or the FSMA, of a public takeover bid on the financial instruments of the company. The shareholders meeting can, however, authorize the board of directors to increase the share capital by issuing further shares, not
representing more than 10% of the shares of the Company at the time of such a public tender offer.
On June 8, 2020, the shareholders at the
extraordinary shareholders meeting authorized the board of directors to increase our share capital for an amount up to 48,512,614.57, including with limitation or cancellation of the shareholders preferential subscription rights,
in one or more times and including the authorization to make use of such authorized capital in the framework of a public tender offer.
As of the date of
this prospectus, authorized capital in the amount of 48,512,614.57 still remained available under the authorized capital. As of the date hereof, our board of directors may decide to issue up to 13,942,344 ordinary shares pursuant to this
authorization, without taking into account however subsequent issuances under our warrant programs or otherwise.
Preferential Subscription Rights
In the event of a share capital increase for cash through the issuance of new shares, or in the event we issue convertible bonds or warrants, our
existing shareholders have a preferential right to subscribe, pro rata, to the new shares, convertible bonds or warrants. These preferential subscription rights are transferable during the subscription period.
Our shareholders may, at a meeting of shareholders, decide to limit or cancel this preferential subscription right, subject to special reporting requirements.
Such decision by the shareholders must satisfy the same quorum and majority requirements as the decision to increase our share capital.
Shareholders may
also decide to authorize our board of directors to limit or cancel the preferential subscription right within the framework of the authorized capital, subject to the terms and conditions set forth in the Belgian Code for Companies and Associations.
Our board of directors currently has the authority to increase the share capital within the framework of the authorized capital, and the right to limit or cancel the preferential subscription right within the framework of the authorized capital. See
also Share Capital Increases by Our Board of Directors above.
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Under the DGCL, shareholders of a Delaware corporation have no preemptive rights to subscribe for additional
issues of stock or to any security convertible into such stock unless, and to the extent that, such rights are expressly provided for in the corporations certificate of incorporation.
Purchases and Sales of Our Own Shares
We may only
repurchase our own shares pursuant to authorization of our shareholders at a meeting of shareholders taken under the conditions of quorum and majority provided for in the Belgian Companies and Associations Code. Pursuant to the Belgian Companies and
Associations Code, such a decision requires a quorum of shareholders holding an aggregate of at least 50% of the share capital and approval by a majority of at least 75% of the share capital present or represented. If there is no quorum, a second
meeting must be convened. No quorum is required at the second meeting, but the relevant resolution must be approved by a majority of at least 75% of the votes validly cast at the shareholders meeting.
Within such authorization, we may only repurchase our own shares if the amount that we would use for repurchase is available for distribution. Currently we
have no such an authorization and we neither have any funds available for distribution, nor own any of our own shares.
Under the DGCL, a Delaware
corporation may purchase or redeem its own shares, unless the capital of the corporation is impaired or the purchase or redemption would cause an impairment of the capital of the corporation.
Belgian Legislation
Disclosure of Significant
Shareholdings
The Belgian Law of May 2, 2007 regarding the disclosure of significant shareholdings in issuers whose securities are admitted
to trading on a regulated market requires each natural or legal person acquiring or transferring our shares (directly or indirectly, by ownership of ADSs or otherwise) to notify us and the FSMA each time their shareholding crosses (upwards or
downwards) a threshold of 5% of the total number of outstanding voting rights allocated to the Companys securities or any multiple thereof.
Similarly, if as a result of events changing the breakdown of voting rights, the percentage of the voting rights reaches, exceeds or falls below any of the
above thresholds, disclosure is required even when no acquisition or disposal of shares or ADSs has occurred (e.g., as a result of a capital increase or a capital decrease). Finally, disclosure is also required when persons acting in concert enter
into, modify or terminate their agreement resulting in their voting rights reaching, exceeding or falling below any of the above thresholds.
The
disclosure statements must be addressed to the FSMA and to us at the latest on the fourth trading day following the day on which the circumstance giving rise to the disclosure occurred.
The notification can be electronically transmitted to the Company and the FSMA. The forms required to make such notifications, as well as further explanations
may be found on the website of the FSMA (www.fsma.be).
Violation of the disclosure requirements may result in the suspension of voting rights, a court
order to sell the securities to a third party and/or criminal liability. The FSMA may also impose administrative sanctions.
We must publish all
information contained in such notifications no later than three trading days after receipt of such notification. In addition, we must mention in the notes to its annual accounts, our shareholders structure (as it appears from the notifications
received). Moreover, we must publish the total share capital, the total number of voting securities and voting rights (for each class of securities (if any)), at the end of each calendar month during which one of these numbers has changed, as well
as on the day on which our shares will for the first time be
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admitted to trading on Euronext Brussels and Euronext Paris. Furthermore, we must disclose, as the case may be, the total number of bonds convertible in voting securities (if any), whether or not
incorporated in securities, to subscribe to voting securities not yet issued (if any), the total number of voting rights that can be obtained upon the exercise of these conversion or subscription rights and the total number of shares without voting
rights (if any).
In accordance with U.S. federal securities laws, holders of our ordinary shares and holders of ADSs will be required to comply with
disclosure requirements relating to their ownership of our securities. Any person that, after acquiring beneficial ownership of our ordinary shares or ADSs, is the beneficial owners of more than 5% of our outstanding ordinary shares or ordinary
shares underlying ADSs must file with the SEC a Schedule 13D or Schedule 13G, as applicable, disclosing the information required by such schedules, including the number of our ordinary shares or ordinary shares underlying ADSs that such person has
acquired (whether alone or jointly with one or more other persons). In addition, if any material change occurs in the facts set forth in the report filed on Schedule 13D (including a more than 1% increase or decrease in the percentage of the total
shares beneficially owned), the beneficial owner must promptly file an amendment disclosing such change.
Disclosure of Net Short Positions
Pursuant to the Regulation (EU) No. 236/2012 of the European Parliament and the Council on short selling and certain aspects of credit
default swaps, any person that acquires or disposes of a net short position relating to our issued share capital, whether by a transaction in shares or ADSs, or by a transaction creating or relating to any financial instrument where the effect or
one of the effects of the transaction is to confer a financial advantage on the person entering into that transaction in the event of a decrease in the price of such shares or ADSs is required to notify the FSMA if, as a result of which acquisition
or disposal his net short position reaches, exceeds or falls below 0.2% of our issued share capital and each 0.1% above that. If the net short position reaches 0.5%, and also at every 0.1% above that, the FSMA will disclose the net short position to
the public. Pursuant to article 28 of the Regulation (EU) No. 236/2012 of the European Parliament and the Council on short selling and certain aspects of credit default swaps, the European Securities and Markets Authority (ESMA) has imposed
temporary additional transparency obligations, requiring the notification of if a net short position reaches 0.1% of the issued share capital and each 0.1% above that threshold.
Public Takeover Bids
The European Takeover
Directive 2004/25/EC of April 21, 2004 has been implemented in Belgium through the law of April 1, 2007 on public takeovers, or the Takeover Law, the Royal Decree of April 27, 2007 on public takeovers and the Royal Decree of
April 27, 2007 on squeeze-out bids.
Public takeover bids in Belgium for our shares or other securities
giving access to voting rights are subject to supervision by the FSMA. The Takeover Law determines when a bid is deemed to be public in Belgium. Public takeover bids must be extended to all of the voting securities, as well as all other securities
giving access to voting rights. Prior to making a bid, a bidder must publish a prospectus that has been approved by the FSMA prior to publication.
The
Takeover Law provides that a mandatory bid must be launched on all our shares (and our other securities giving access to voting rights), if a person, as a result of its own acquisition or the acquisition by persons acting in concert with it or by
persons acting for its account, directly or indirectly holds more than 30% of our voting securities (directly or through ADSs). In general and except for certain exceptions, the mere fact of exceeding the relevant threshold as a result of an
acquisition will give rise to the obligation to launch a mandatory tender offer, irrespective of whether or not the price paid in the relevant transaction exceeds the then current market price. In such an event, the tender offer must be launched at
a price equal to the higher of the two following amounts: (i) the highest price paid by the offeror or the persons acting in concert with it for the acquisition of shares during the last 12 calendar months; and (ii) the average trading
price during the last 30 days before the obligation to
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launch a tender offer arose. No mandatory tender offer is required, amongst other things, when the acquisition is the result of a subscription for a capital increase with application of the
preferential subscription rights of the shareholders. The acceptance period for the tender offer must be at least two weeks and not more than ten weeks.
In principle, the authorization granted to the board of directors to increase the share capital through contributions in cash with cancellation or limitation
of the preferential subscription right of the existing shareholders is suspended as of the notification to the company by the FSMA of a public tender offer on the securities of such company. The shareholders meeting can, however, authorize the board
of directors to increase the share capital by issuing shares representing not more than 10% of the existing shares of the company at the time of such a public tender offer.
Squeeze-out
Pursuant to Article 7:82 of the Belgian Companies and Associations Code and the regulations promulgated thereunder, a person or legal entity, or different
persons or legal entities acting alone or in concert, that own together with the company 95% of the securities with voting rights in a public company are entitled to acquire the totality of the securities with voting rights in that company following
a squeeze-out offer. The securities that are not voluntarily tendered in response to such an offer are deemed to be automatically transferred to the bidder at the end of the procedure. At the end of the
procedure, the company is no longer deemed a public company, unless bonds issued by the company are still spread among the public. The consideration for the securities must be in cash and must represent the fair value (verified by an independent
expert) in order to safeguard the interests of the transferring shareholders.
The DGCL provides for shareholders appraisal rights, or the right to demand
payment in cash of the judicially determined fair value of the shareholders shares, in connection with certain mergers and consolidations.
Limitations on the Right to Own Securities
Neither
Belgian law nor our articles of association impose any general limitation on the right of non-residents or foreign persons to hold our securities or exercise voting rights on our securities other than those
limitations that would generally apply to all shareholders.
Exchange Controls and Limitations Affecting Shareholders
There are no Belgian exchange control regulations that impose limitations on our ability to make, or the amount of, cash payments to residents of the United
States.
We are in principle under an obligation to report to the National Bank of Belgium certain cross-border payments, transfers of funds, investments
and other transactions in accordance with applicable balance-of-payments statistical reporting obligations. Where a cross-border transaction is carried out by a Belgian
credit institution on our behalf, the credit institution will in certain circumstances be responsible for the reporting obligations.
Right to
Attend and Vote at Our Meetings of Shareholders
Annual Meeting of Shareholders
Our annual meeting of shareholders is held every year on May 5, at 9 am (Central European Time), at our registered office or at any other place in Belgium
mentioned in the notice of the meeting. If this date is a Saturday, Sunday or a public holiday in Belgium, the meeting is held on the following day that is a business day in Belgium.
At the annual meeting of shareholders, the board of directors submits the audited statutory financial statements under Belgian GAAP and the reports of the
board of directors and of the statutory auditor with respect thereto to
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the shareholders. The shareholders meeting then decides on the approval of the statutory financial statements under Belgian GAAP, the proposed allocation of the Companys profit or loss, the
discharge of liability of the directors and the statutory auditor, and, as the case may be, the reappointment or dismissal of the statutory auditor and/or of all or certain directors and the matters described in Article 7:92 of the Belgian Companies
and Associations Code.
Special and Extraordinary Meetings of Shareholders
Our board of directors or the statutory auditor (or the liquidators, if appropriate) may, whenever our interests so require, convene a special or extraordinary
meeting of shareholders. Such meeting of shareholders must also be convened when one or more shareholders holding at least one-tenth of our share capital so demands.
Under the DGCL, special meetings of the shareholders of a Delaware corporation may be called by such person or persons as may be authorized by the certificate
of incorporation or by the bylaws of the corporation, or if not so designated, as determined by the board of directors. Shareholders generally do not have the right to call meetings of shareholders, unless that right is granted in the certificate of
incorporation or the bylaws.
Notices Convening Meetings of Shareholders and Agenda
Notices of our meetings of shareholders contain the agenda of the meeting, indicating the items to be discussed as well as any proposed resolutions that will
be submitted at the meeting.
One or more shareholders holding at least 3% of our share capital may request for items to be added to the agenda of any
convened meeting and submit proposed resolutions in relation to existing agenda items or new items to be added to the agenda, provided that:
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They prove ownership of such shareholding as at the date of their request and record their shares representing
such shareholding on the record date; and
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The additional items on the agenda and any proposed resolutions have been submitted in writing by these
shareholders to the board of directors at the latest on the twenty-second day preceding the day on which the relevant meeting of shareholders is held.
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The shareholding must be proven by a certificate evidencing the registration of the relevant shares in the share register of the company or by a certificate
issued by the authorized account holder or the clearing organization certifying the book-entry of the relevant number of dematerialized shares in the name of the relevant shareholder(s).
The notice must be published in the Belgian Official Gazette (Belgisch Staatsblad / Moniteur belge) at least 30 days prior to the meeting of
shareholders. In the event a second convening notice is necessary and the date of the second meeting is mentioned in the first convening notice, that period is seventeen days prior to the second meeting of shareholders. The notice must also be
published in a national newspaper 30 days prior to the date of the meeting of shareholders, except if the meeting concerned is an annual meeting of shareholders held at the municipality, place, day and hour mentioned in the articles of association
and whose agenda is limited to the examination of the annual accounts, the Annual Report of the board of directors, the Annual Report of the statutory auditor, the vote on the discharge of the directors and the statutory auditor and the vote on the
items referred to in Article 7:92 of the Belgian Companies and Associations Code (i.e., in relation to a remuneration report or a severance pay). Notices of all our meetings of shareholders and all related documents, such as specific board
and auditors reports, are also published on our website.
Convening notices must be sent 30 days prior to the meeting of shareholders to the holders
of registered shares, holders of registered bonds, holders of registered warrants, holders of registered certificates issued with our cooperation and to our directors and statutory auditor. This communication is made by ordinary letter unless the
addressees have individually and expressly accepted in writing to receive the notice by another form of communication, without having to give evidence of the fulfillment of such formality.
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Under the DGCL, unless otherwise provided in the certificate of incorporation or bylaws, written notice of any
meeting of the shareholders of a Delaware corporation must be given to each shareholder entitled to vote at the meeting not less than ten nor more than sixty days before the date of the meeting and shall specify the place, date, hour and, in the
case of a special meeting, the purpose of the meeting.
Admission to Meetings
A shareholder is only entitled to participate in and vote at the meeting of shareholders, irrespective of the number of shares he owns on the date of the
meeting of shareholders, provided that his shares are recorded in his name at midnight (Central European Time) at the end of the fourteenth day preceding the date of the meeting of shareholders, or the record date:
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in case of registered shares, in our register of registered shares; or
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in case of dematerialized shares, through book-entry in the accounts of an authorized account holder or clearing
organization.
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In addition, we (or the person designated by us) must, at the latest on the sixth day preceding the day of the meeting of
shareholders, be notified as follows of the intention of the shareholder to participate in the meeting of shareholders:
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In case of registered shares, the shareholder must, at the latest on the above-mentioned date, notify us (or the
person designated by us) in writing of his intention to participate in the meeting of shareholders and of the number of shares he intends to participate in the meeting of shareholders with by returning a signed paper form, or, if permitted by the
convening notice, by sending an electronic form (signed by means of an electronic signature in accordance with the applicable Belgian law) electronically, to us on the address indicated in the convening notice; and
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In case of dematerialized shares, the shareholder must, at the latest on the above-mentioned date, provide us (or
the person designated by us), or arrange for us (or the person designated by us) to be provided with, a certificate issued by the authorized account holder or clearing organization certifying the number of dematerialized shares recorded in the
shareholders accounts on the record date in respect of which the shareholder has indicated his intention to participate in the meeting of shareholders.
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Each shareholder has the right to attend a meeting of shareholders and to vote at the meeting of shareholders in person or through a proxy holder. The proxy
holder does not need to be a shareholder. A shareholder may only appoint one person as proxy holder for a particular meeting of shareholders, except in cases provided for in the law. Our board of directors may determine the form of the proxies. The
appointment of a proxy holder must in any event take place in paper form or electronically, the proxy must be signed by the shareholder (as the case may be, by means of an electronic signature in accordance with the applicable Belgian law) and we
must receive the proxy at the latest on the sixth day preceding the day on which the meeting of shareholders is held.
The board of directors must
maintain a register in which, for each shareholder who has duly expressed its intention to participate to the shareholders meeting, it shall record the name and address (or registered offices) of such shareholder, the number of shares it held on the
registration date and for which it has expressed its intention to participate to the meeting, as well as a description of the documents evidencing that such shareholder held the relevant shares at the registration date.
Prior to participating to the shareholders meeting, the holders of securities or their proxy holders must sign the attendance list, thereby mentioning:
(i) the identity of the holder of securities, (ii) if applicable, the identity of the proxy holder, and (iii) the number of securities they represent. The representatives of shareholders-legal entities must present the documents
evidencing their quality as legal body or special proxy holder of such legal entity. In addition, the proxy holders must present the original of their proxy evidencing their powers, unless the convening
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notice required the prior deposit of such proxies. The physical persons taking part in the shareholders meeting must be able to prove their identity.
The holders of profit certificates (if any), shares without voting rights (if any), bonds (if any), warrants or other securities issued by us (if any), as
well as the holders of certificates issued with our co-operation and representative securities issued by us (if any), may attend the shareholders meeting.
Pursuant to Article 7, section 5 of the Belgian Law of May 2, 2007 regarding the disclosure of major shareholdings, a transparency declaration must be
made if a proxy holder that is entitled to voting rights above the threshold of 5% or any multiple of 5% of the total number of voting rights attached to our outstanding financial instruments on the date of the relevant meeting of shareholders,
would have the right to exercise the voting rights at his discretion.
Votes
Each shareholder is entitled to one vote per share. However, registered shares held for at least two consecutive years under the registered form by a
shareholder are entitled to two votes per share.
Voting rights can be suspended in relation to shares:
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that were not fully paid up, notwithstanding the request thereto of our board of directors;
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to which more than one person is entitled, except in the event a single representative is appointed for the
exercise of the voting right;
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that entitle their holder to voting rights above the threshold of 5% or any multiple of 5% of the total number of
voting rights attached to our outstanding financial instruments on the date of the relevant general meeting of shareholders, except to the extent where the relevant shareholder has notified us and the FSMA at least twenty days prior to the date of
the general meeting of shareholders on which he or she wishes to vote its shareholding reaching or exceeding the thresholds above; or
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of which the voting right was suspended by a competent court.
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Quorum and Majority Requirements
Generally, there is no
quorum requirement for our meeting of shareholders, except as provided for by law in relation to decisions regarding certain matters. Decisions are made by a simple majority, except where the law provides for a special majority.
Under the DGCL, the certificate of incorporation or bylaws of a Delaware corporation may specify the number of shares required to constitute a quorum but in
no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting. In the absence of such specifications, a majority of shares entitled to vote shall constitute a quorum.
Matters involving special legal quorum and majority requirements include, among others, amendment to the articles of association, issues of new shares,
convertible bonds or warrants and decisions (except if decided by the board in the framework of the authorized capital) regarding mergers and demergers, dissolutions or other reorganizations, which require at least 50% of the share capital to be
present or represented and the affirmative vote of the holders of at least 75% of the votes cast. The cancellation of the double voting attached to registered shares held for at least two consecutive years under the registered form by a shareholder
requires at least 50% of the share capital to be present or represented and the affirmative vote of the holders of at least 66.66% of the votes cast.
Any
modification of our corporate purpose or legal form or subject to certain exceptions the possibility of acquiring own shares requires a quorum of shareholders holding an aggregate of at least 50% of the share capital
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and at least 50% of the profit certificates if any and approval by a majority of at least 75% of the share capital present or represented. If there is no quorum, a second meeting must be
convened. At the second meeting, no quorum is required, but the relevant resolution must be approved by a majority of at least 75% of the share capital present or represented.
Right to Ask Questions at Our Meetings of Shareholders
Within the limits of Article 7:139 of the Belgian Companies and Associations Code, members of the board of directors and the auditor will answer, during the
meeting of shareholders, the questions raised by shareholders. Shareholders can ask questions either during the meeting or in writing, provided that we receive the written questions at the latest on the sixth day preceding the meeting of
shareholders and that they have complied with the formalities to attend the meeting of shareholders.
Dividends
All shares participate in the same manner in our profits, if any. Pursuant to the Belgian Companies and Associations Code, the shareholders can in principle
decide on the distribution of profits with a simple majority vote at the occasion of the annual meeting of shareholders, based on the most recent non-consolidated statutory audited annual accounts, prepared in
accordance with the generally accepted accounting principles in Belgium and based on a (non-binding) proposal of the board of directors. The articles of association also authorize our board of directors to
declare interim dividends subject to the terms and conditions of the Belgian Companies and Associations Code.
Pursuant to Article 7:212 of the Belgian
Companies and Associations Code, dividends can only be distributed if following the declaration and payment of the dividends the amount of the companys net assets on the date of the closing of the last financial year according to the non-consolidated statutory annual accounts (i.e., the amount of the assets as shown in the balance sheet, decreased with provisions and liabilities, all as prepared in accordance with Belgian accounting
rules), decreased with the non-amortized costs of incorporation and expansion and the non-amortized costs for research and development, does not fall below the amount of
the paid-up capital (or, if higher, the called capital), increased with the amount of non-distributable reserves. In addition, prior to distributing dividends, at least
5% of our annual net profit under our non-consolidated statutory accounts (prepared in accordance with Belgian accounting rules) must be allotted to a legal reserve, until the legal reserve amounts to 10% of
the share capital.
The right to payment of dividends expires five years after the board of directors declared the dividend payable.
Under the DGCL, a Delaware corporation may pay dividends out of its surplus (the excess of net assets over capital), or in case there is no surplus, out of
its net profits for either or both of the fiscal year in which the dividend is declared and the preceding fiscal year (provided that the amount of the capital of the corporation is not less than the aggregate amount of the capital represented by the
issued and outstanding stock of all classes having a preference upon the distribution of assets). Dividends may be paid in the form of shares, property or cash.
Appointment of Directors
Our articles of
association provide that our board of directors shall be composed of at least three directors.
Under our articles of association, each of PMV-TINA Comm. V, or PMV-TINA, and Sofipôle SA, or Sofipôle, and SRIW are entitled to nominate a candidate for appointment to our board of directors as long as
such entity (or any of its affiliates) continues to hold a minimum number of shares. As of June 8, 2020, the number of shares was 360,775 shares for PMV-TINA, 217,600 shares for Sofipôle and 197,400
shares for SRIW.
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Liquidation Rights
Our company can only be voluntarily dissolved by a shareholders resolution passed with a majority of at least 75% of the votes cast at an extraordinary
meeting of shareholders where at least 50% of the share capital is present or represented. In the event the required quorum is not present or represented at the first meeting, a second meeting needs to be convened through a new notice. The second
meeting of shareholders can validly deliberate and decide regardless of the number of shares present or represented.
Under the DGCL, unless the board of
directors approves the proposal to dissolve, dissolution of a Delaware corporation must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be
approved by a simple majority of the corporations outstanding shares. The DGCL allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the
board.
In the event of the dissolution and liquidation of our company, the assets remaining after payment of all debts and liquidation expenses will be
distributed to the holders of our shares, each receiving a sum on a pro rata basis.
If, as a result of losses incurred, the ratio of our net assets (on a
non-consolidated basis, determined in accordance with Belgian legal and accounting rules) to share capital is less than 50%, our board of directors must convene an extraordinary general meeting of shareholders
within two months of the date upon which our board of directors discovered or should have discovered this undercapitalization. At this meeting of shareholders, our board of directors needs to propose either our dissolution or our continuation, in
which case our board of directors must propose measures to address our financial situation. Our board of directors must justify its proposals in a special report to the shareholders. Shareholders representing at least 75% of the votes validly cast
at this meeting have the right to dissolve us, provided that at least 50% of our share capital is present or represented at the meeting. In the event the required quorum is not present or represented at the first meeting, a second meeting needs to
be convened through a new notice. The second meeting of shareholders can validly deliberate and decide regardless of the number of shares present or represented.
If, as a result of losses incurred, the ratio of our net assets to share capital is less than 25%, the same procedure must be followed, it being understood,
however, that in the event shareholders representing 25% of the votes validly cast at the meeting can decide to dissolve the company. If the amount of our net assets has dropped below 61,500 (the minimum amount of share capital of a Belgian
public limited liability company), any interested party is entitled to request the competent court to dissolve us. The court can order our dissolution or grant a grace period during which time we must remedy the situation. Holders of ordinary shares
have no sinking fund, redemption or appraisal rights.
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TAXATION
Material Income Tax Considerations
The information
presented under the caption Certain Material U.S. Federal Income Tax Considerations to U.S. Holders below is a discussion of certain material U.S. federal income tax considerations to a U.S. holder (as defined below) of investing in
ADSs. The information presented under the caption Belgian Tax Consequences is a discussion of the material Belgian tax consequences of investing in ADSs.
You should consult your own tax advisor regarding the applicable tax consequences to you of investing in ADSs under the laws of the United States (federal,
state and local), Belgium, and any other applicable foreign jurisdiction.
Certain Material U.S. Federal Income Tax Considerations to U.S. Holders
The following is a summary of certain material U.S. federal income tax considerations relating to the acquisition, ownership and disposition of
ADSs by a U.S. holder (as defined below). This summary addresses only the U.S. federal income tax considerations for U.S. holders that are initial purchasers of the ADSs pursuant to the offering and that will hold such ADSs as capital assets
for U.S. federal income tax purposes. This summary does not address all U.S. federal income tax matters that may be relevant to a particular U.S. holder. This summary does not address tax considerations applicable to a holder of ADSs that may be
subject to special tax rules including, without limitation, the following:
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banks, financial institutions or insurance companies;
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brokers, dealers or traders in securities, currencies, commodities, or notional principal contracts;
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tax-exempt entities or organizations, including an individual
retirement account or Roth IRA as defined in Section 408 or 408A of the Code (as defined below), respectively;
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real estate investment trusts, regulated investment companies or grantor trusts;
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persons that hold the ADSs as part of a hedging, integrated or conversion
transaction or as a position in a straddle for U.S. federal income tax purposes;
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partnerships (including entities and arrangements classified as partnerships for U.S. federal income tax
purposes) or other pass-through entities, or persons that will hold the ADSs through such an entity;
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certain former citizens or long-term residents of the United States;
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persons required under Section 451(b) of the Code to conform the timing of income accruals with respect to
the ADSs to their financial statements;
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holders that own (directly, indirectly, or through attribution) 10% or more of the voting power or value of the
ADSs and shares; and
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holders that have a functional currency for U.S. federal income tax purposes other than the U.S.
dollar.
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Further, this summary does not address the U.S. federal estate, gift, or alternative minimum tax considerations, or any U.S.
state, local, or non-U.S. tax considerations of the acquisition, ownership and disposition of the ADSs.
This
description is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code; existing, proposed and temporary U.S. Treasury Regulations promulgated thereunder, administrative and judicial interpretations thereof, and the Convention
between the Government of the United States and the Government of the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed on November 27, 2006, or the U.S.-Belgium
Tax Treaty, in each case as of and available as of the date hereof. All the foregoing is subject to change, which change could apply retroactively, and to differing interpretations, all of which could affect the tax considerations described below.
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There can be no assurances that the U.S. Internal Revenue Service, or IRS, will not take a contrary or different
position concerning the tax consequences of the acquisition, ownership and disposition of the ADSs or that such a position would not be sustained. Holders should consult their own tax advisors concerning the U.S. federal, state, local and non-U.S. tax consequences of owning, and disposing of the ADSs in their particular circumstances.
For the purposes of
this summary, a U.S. holder is a beneficial owner of ADSs that is (or is treated as), for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation, or other entity that is treated as a corporation for U.S. federal income tax purposes, created or
organized in or under the laws of the United States, any state thereof, or the District of Columbia;
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust, (1) if a court within the United States is able to exercise primary supervision over its
administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust or (2) if the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United
States person.
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If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes)
holds ADSs, the U.S. federal income tax consequences relating to an investment in the ADSs will depend in part upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor
regarding the U.S. federal income tax considerations of owning and disposing of the ADSs in its particular circumstances.
As indicated below, this
discussion is subject to U.S. federal income tax rules applicable to a passive foreign investment company, or a PFIC, and assumes that we are not classified as a PFIC in any taxable year, except as specifically noted.
The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any
related agreement will be complied with in accordance with their terms. In general, a U.S. holder who owns ADSs will be treated as the beneficial owner of the underlying shares represented by those ADSs for U.S. federal income tax purposes.
Accordingly, no gain or loss will generally be recognized if a U.S. holder exchanges ADSs for the underlying shares represented by those ADSs.
Persons
considering an investment in the ADSs should consult their own tax advisors as to the particular tax consequences applicable to them relating to the acquisition, ownership and disposition of the ADSs, including the applicability of U.S. federal,
state and local tax laws and non-U.S. tax laws.
Distributions. Although we do not currently plan to
pay dividends, and subject to the discussion under Passive Foreign Investment Company Considerations below, the gross amount of any distribution (before reduction for any amounts withheld in respect of Belgian withholding tax)
actually or constructively received by a U.S. holder with respect to ADSs will be taxable to the U.S. holder as a dividend to the extent of the U.S. holders pro rata share of our current and accumulated earnings and profits as determined
under U.S. federal income tax principles. Distributions in excess of earnings and profits will be non-taxable to the U.S. holder to the extent of, and will be applied against and reduce, the U.S. holders
adjusted tax basis in the ADSs. Distributions in excess of earnings and profits and such adjusted tax basis will generally be taxable to the U.S. holder as capital gain as described below under Sale, Exchange or Other Taxable Disposition
of the ADSs.. However, since we do not calculate our earnings and profits under U.S. federal income tax principles, it is expected that any distribution will be reported as a dividend, even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. Non-corporate U.S. holders may qualify for the preferential rates of taxation with respect to
dividends on ADSs applicable to long-term capital gains
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(i.e., gains from the sale of capital assets held for more than one year) applicable to qualified dividend income (as discussed below) if we are a qualified foreign
corporation and certain other requirements are met. A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding
taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is
satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on ADSs which are readily tradable on an established securities market in the United States. The
ADSs are listed on the Nasdaq Global Market, or NASDAQ, which is an established securities market in the United States, and we expect the ADSs to be readily tradable on NASDAQ. However, there can be no assurance that the ADSs will be considered
readily tradable on an established securities market in the United States in future years. We are incorporated under the laws of Belgium, and we believe that we qualify as a resident of Belgium for purposes of, and are eligible for the benefits of
the U.S.-Belgium Tax Treaty, although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-Belgium Tax Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange-of-information program. Dividends received by a corporate U.S. holder will not be eligible for the dividends-received deduction generally allowed to corporate U.S.
holders.
A U.S. holder generally may claim the amount of any Belgian withholding tax as either a deduction from gross income or a credit against U.S.
federal income tax liability. However, the foreign tax credit is subject to numerous complex limitations that must be determined and applied on an individual basis. Generally, the credit cannot exceed the proportionate share of a U.S. holders
U.S. federal income tax liability that such U.S. holders foreign source taxable income bears to such U.S. holders worldwide taxable income. In applying this limitation, a U.S. holders various items of income and
deduction must be classified, under complex rules, as either foreign source or U.S. source. In addition, this limitation is calculated separately with respect to specific categories of income. For foreign tax credit
limitation purposes, distributions paid on ADSs that are treated as dividends will generally be foreign source income and will generally constitute passive category income. Furthermore, Belgian income taxes that are withheld in excess of the rate
applicable under the U.S.-Belgium Tax Treaty (for U.S. holders that are eligible for reduced rates under the U.S.-Belgium Tax Treaty) or that are refundable under Belgian law will not be eligible for credit
against a U.S. holders federal income tax liability. Each U.S. holder should consult its own tax advisors regarding the foreign tax credit rules.
In general, the amount of a distribution paid to a U.S. holder in a foreign currency will be the dollar value of the foreign currency calculated by reference
to the spot exchange rate on the day the U.S. holder actually or constructively receives the distribution, regardless of whether the foreign currency is converted into U.S. dollars at that time. The U.S. holder will take a tax basis in the foreign
currency equal to their U.S. dollar equivalent on such date. The conversion of the foreign currency into U.S. dollars at a later date will give rise to foreign currency exchange gain or loss equal to the difference between the foreign
currencys U.S. dollar equivalent at such later time and the U.S. holders tax basis in the foreign currency. Any foreign currency gain or loss that a U.S. holder recognizes on a subsequent conversion of foreign currency into U.S. dollars
will be U.S. source ordinary income or loss. If a distribution received in a foreign currency is converted into U.S. dollars on the day they are received, a U.S. holder should not be required to recognize foreign currency gain or loss in respect of
the distribution.
Sale, Exchange or Other Taxable Disposition of the ADSs. A U.S. holder will generally recognize gain or loss for U.S. federal
income tax purposes upon the sale, exchange or other taxable disposition of ADSs in an amount equal to the difference between the U.S. dollar value of the amount realized from such sale or exchange and the U.S. holders adjusted tax basis for
those ADSs. Subject to the discussion under Passive Foreign Investment Company Considerations below, this gain or loss will generally be a capital gain or loss. The adjusted tax basis in the ADSs generally will be equal to the cost
of such ADSs. Capital gain from the sale, exchange or other taxable disposition of ADSs of a non-corporate U.S. holder is generally eligible for a preferential rate of taxation applicable to capital gains, if
the non-corporate U.S. holders holding period determined at the time of such sale,
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exchange or other taxable disposition for such ADSs exceeds one year (i.e., such gain is long-term taxable gain). The deductibility of capital losses for U.S. federal income tax purposes
is subject to limitations. Any such gain or loss that a U.S. holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.
Medicare Tax. Certain U.S. holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their net investment
income, which may include all or a portion of their dividend income and net gains from the disposition of ADSs. Each U.S. holder that is an individual, estate or trust is urged to consult its tax advisors regarding the applicability of the
Medicare tax to its income and gains in respect of its investment in the ADSs.
Passive Foreign Investment Company Considerations. A corporation
organized outside the United States generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying certain look-through rules with respect to the income and assets of its subsidiaries,
either: (i) at least 75% of its gross income is passive income or (ii) at least 50% of the average quarterly value of its total gross assets (which is measured by the fair market value of our assets, and for which purpose the
total value of our assets may be determined in part by reference to the market value of the ADSs and our ordinary shares, which is subject to change) is attributable to assets that produce passive income or are held for the production of
passive income.
Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and
securities transactions, the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of cash, including the funds raised in offerings of the ADSs. If
a non-U.S. corporation owns directly or indirectly at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the
PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporations income. If we are a PFIC for any year with respect to which a U.S. holder owns the
ADSs, we will continue to be treated as a PFIC with respect to such U.S. holder in all succeeding years during which the U.S. holder owns the ADSs, regardless of whether we continue to meet the tests described above.
We do not believe that we were a PFIC for the 2019 taxable year and, based on the expected composition of our income and assets, we do not expect to be a PFIC
for the 2020 taxable year; however, we cannot provide any assurances regarding our PFIC status for past, current or future taxable years. Our status as a PFIC is a fact intensive determination made on an annual basis. Whether we are a PFIC for any
taxable year will depend on the composition of our income and assets, and the estimated fair market values of our assets, in each year. The market value of our assets may be determined in large part by reference to the market price of the ADSs and
our ordinary shares, which is likely to fluctuate. Our status as a PFIC also depends on the interpretation of the rules governing the PFIC income and asset tests, which are subject to uncertainty (including with respect to the characterization of
income from government grants, for which direct legal authority does not exist).
If we are a PFIC for any taxable year, then unless you make one of the
elections described below, a special tax regime will apply to both (a) any excess distribution by us to you (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distribution
received by you in the shorter of the three preceding years or your holding period for the ADSs) and (b) any gain realized on the sale or other disposition of the ADSs. Under this regime, any excess distribution and realized gain will be
treated as ordinary income and will be subject to tax as if (a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in each year had been subject to tax in each year of that
holding period at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. holders regular ordinary income rate for the
current year and would not be subject to the interest charge discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years. In addition,
dividend distributions made to you will not qualify for the lower rates of taxation applicable to long-term capital gains discussed above under Distributions.
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Certain elections exist that would result in an alternative treatment (such as mark-to-market treatment) of the ADSs. If a U.S. holder makes the mark-to- market election, the U.S. holder generally will
recognize as ordinary income any excess of the fair market value of the ADSs at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ADSs over their
fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If
a U.S. holder makes the election, the U.S. holders tax basis in the ADSs will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition of ADSs in a year when we are a PFIC will be treated as
ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the
mark-to-market election). The mark-to- market election is available only if we are a PFIC
and the ADSs are regularly traded on a qualified exchange. The ADSs will be treated as regularly traded in any calendar year in which more than a de minimis quantity of the ADSs are traded on a qualified
exchange on at least 15 days during each calendar quarter (subject to the rule that trades that have as one of their principal purposes the meeting of the trading requirement are disregarded). NASDAQ is a qualified exchange for this purpose and,
consequently, if the ADSs are regularly traded, the mark- to-market election will be available to a U.S. holder.
If a U.S. Holder makes an effective qualified electing fund election, or QEF Election, the U.S. Holder will be required to include in gross income each year,
whether or not we make distributions, as capital gains, such U.S. Holders pro rata share of our net capital gains and, as ordinary income, such U.S. Holders pro rata share of our earnings in excess of our net capital gains. We do
not intend to provide the information necessary for U.S. holders to make QEF elections if we are treated as a PFIC for any taxable year.
If we are
determined to be a PFIC for any taxable year included in the holding period of a U.S. holder, such holder may be subject to adverse tax consequences. U.S. holders should consult their tax advisors to determine whether any of these elections, or
other elections for current or past taxable years, may be available and if so, what the consequences of the alternative treatments would be in their particular circumstances.
If we are determined to be a PFIC, the general tax treatment for U.S. holders described in this section would apply to indirect distributions and gains deemed
to be recognized by U.S. holders in respect of any of our subsidiaries that also may be determined to be PFICs.
If a U.S. holder owns ADSs during any
taxable year in which we are a PFIC, the U.S. holder generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with respect to the Company, generally
with the U.S. holders federal income tax return for that year. If our company were a PFIC for a given taxable year, then you should consult your tax advisor concerning your annual filing requirements.
The U.S. federal income tax rules relating to PFICs are complex. Prospective U.S. investors are urged to consult their own tax advisors with respect to the
acquisition, ownership and disposition of the ADSs, the consequences to them of an investment in a PFIC, any elections available with respect to the ADSs and the IRS information reporting obligations with respect to the acquisition, ownership and
disposition of the ADSs.
Backup Withholding and Information Reporting. U.S. holders generally will be subject to information reporting
requirements with respect to dividends on ADSs and on the proceeds from the sale, exchange or disposition of ADSs that are paid within the United States or through U.S.-related financial intermediaries, unless the U.S. holder is an exempt
recipient. In addition, U.S. holders may be subject to backup withholding on such payments, unless the U.S. holder provides a correct taxpayer identification number and a duly executed IRS Form W-9 or
otherwise establishes an exemption. Backup withholding is not an additional tax, and the amount of any backup withholding will be allowed as a credit against a U.S. holders U.S. federal income tax liability and may entitle such holder to a
refund, provided that the required information is timely furnished to the IRS.
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Foreign Asset Reporting. Certain U.S. holders who are individuals and certain entities controlled by
individuals may be required to report information relating to an interest in the ADSs, subject to certain exceptions (including an exception for shares held in accounts maintained by U.S. financial institutions) by filing IRS Form 8938 (Statement of
Specified Foreign Financial Assets) with their federal income tax return. U.S. holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their acquisition, ownership and disposition of
the ADSs.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH
PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN ADSS IN LIGHT OF THE INVESTORS OWN CIRCUMSTANCES.
Belgian Tax Consequences
The following paragraphs are a
summary of material Belgian tax consequences of the ownership of ADSs by an investor. The summary is based on laws, treaties and regulatory interpretations in effect in Belgium on the date of this prospectus, all of which are subject to change,
including changes that could have retroactive effect.
The summary only discusses Belgian tax aspects which are relevant to U.S. holders of ADSs
(Holders). This summary does not address Belgian tax aspects which are relevant to persons who are fiscally resident in Belgium or who avail of a permanent establishment or a fixed base in Belgium to which the ADSs are effectively connected.
This summary does not purport to be a description of all of the tax consequences of the ownership of ADSs, and does not take into account the specific
circumstances of any particular investor, some of which may be subject to special rules, or the tax laws of any country other than Belgium. This summary does not describe the tax treatment of investors that are subject to special rules, such as
banks, insurance companies, collective investment undertakings, dealers in securities or currencies, persons that hold, or will hold, ADSs in a position in a straddle, share-repurchase transaction, conversion transactions, synthetic security or
other integrated financial transactions. Investors should consult their own advisors regarding the tax consequences of an investment in ADSs in the light of their particular circumstances, including the effect of any state, local or other national
laws.
In addition to the assumptions mentioned above, it is also assumed in this discussion that for purposes of the domestic Belgian tax legislation,
the owners of ADSs will be treated as the owners of the ordinary shares represented by such ADSs. However, the assumption has not been confirmed by or verified with the Belgian Tax Authorities.
Dividend Withholding Tax
As a general rule, a
withholding tax of 30% is levied on the gross amount of dividends paid on the ordinary shares represented by the ADSs, subject to such relief as may be available under applicable domestic or tax treaty provisions.
Dividends subject to the dividend withholding tax include all benefits attributed to the ordinary shares represented by the ADSs, irrespective of their form,
as well as reimbursements of statutory share capital by us, except reimbursements of fiscal capital made in accordance with the Belgian Companies and Associations Code. In principle, fiscal capital includes
paid-up statutory share capital, and subject to certain conditions, the paid-up issue premiums and the amounts subscribed to at the time of the issue of profit-sharing
certificates. As a rule, any reduction of fiscal capital is deemed to be paid out on a pro rata basis of the fiscal capital and certain reserves (in the following order: the taxed reserves incorporated in the statutory capital, the taxed
reserves not incorporated in the statutory capital and the tax-exempt reserves incorporated in the statutory capital). Only the part of the capital
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reduction that is deemed to be paid out of the fiscal capital will, for Belgian withholding tax purposes, not be considered as a dividend distribution provided such repayment is carried out in
accordance with the relevant provisions of company law.
In case of a redemption by us of our own shares represented by ADSs, the redemption distribution
(after deduction of the portion of fiscal capital represented by the redeemed shares) will be treated as a dividend which in principle is subject to the withholding tax of 30%, subject to such relief as may be available under applicable domestic or
tax treaty provisions. In case of a liquidation of our company, any amounts distributed in excess of the fiscal capital will also be treated as a dividend, and will in principle be subject to a 30% withholding tax, subject to such relief as may be
available under applicable domestic or tax treaty provisions.
For non-residents the dividend withholding tax, if
any, will be the only tax on dividends in Belgium, unless the non-resident avails of a fixed base in Belgium or a Belgian permanent establishment to which the ADSs are effectively connected.
Relief of Belgian Dividend Withholding Tax
Under
the U.S.-Belgium Tax Treaty, under which we are entitled to benefits accorded to residents of Belgium, there is a reduced Belgian withholding tax rate of 15% on dividends paid by us to a U.S. resident which beneficially owns the dividends and is
entitled to claim the benefits of the U.S.-Belgium Tax Treaty under the limitation of benefits article included in the U.S.-Belgium Tax Treaty (Qualifying Holders).
If such Qualifying Holder is a company that owns directly at least 10% of our voting stock, the Belgian withholding tax rate is further reduced to 5%. No
withholding tax is however applicable if the Qualifying Holder, is either of the following:
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a company that is a resident of the United States that has owned directly ADSs representing at least 10% of our
capital for a twelve-month period ending on the date the dividend is declared, or
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a pension fund that is a resident of the United States, provided that such dividends are not derived from the
carrying on of a business by the pension fund or through an associated enterprise.
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Under the normal procedure, we or our paying agent
must withhold the full Belgian withholding tax, without taking into account the reduced U.S.-Belgium Tax Treaty rate. Qualifying Holders may then make a claim for reimbursement for amounts withheld in excess of the rate defined by the U.S.-Belgium
Tax Treaty. The reimbursement form (Form 276 Div-Aut.) can be obtained as follows:
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by letter from the Centre EtrangersTeam 617P, Boulevard du Jardin Botanique 50 boîte 3429, 1000
Brussels, Belgium;
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by telephone at +32 (0) 257/74 040;
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via e-mail at foreigners.team6@minfin.fed.be; or at
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http://financien.belgium.be/nl/ondernemingen/vennootschapsbelasting/voorheffingen/roerende_
voorheffing/formulieren.
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The reimbursement form is to be sent to the Centre EtrangersTeam 617P, Boulevard du Jardin
Botanique 50 boîte 3429, 1000 Brussels, Belgium as soon as possible and in each case within a term of five years starting from the first of January of the year the withholding tax was paid to the Belgian Treasury.
Qualifying Holders may also, subject to certain conditions, obtain the reduced U.S.-Belgium Tax Treaty rate at source. Qualifying Holders should deliver a
duly completed Form 276 Div-Aut. no later than ten days after the date on which the dividend has been paid or attributed (whichever comes first).
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Additionally, pursuant to Belgian domestic tax law, dividends distributed to corporate Holders that qualify as a
parent company will be exempt from Belgian withholding tax provided that the ADSs held by the Holder, upon payment or attribution of the dividends, amount to at least 10% of our share capital and are held or will be held during an uninterrupted
period of at least one year, and provided the anti-abuse provision does not apply.
A Holder qualifies as a parent company if it has a legal form
similar to the ones listed in the annex to the EU Parent-Subsidiary Directive of 23 July 1990 (90/435/EC), if it is considered to be a tax resident according to the laws of the United States and the U.S.-Belgium Tax Treaty, and if it is subject
to a tax similar to the Belgian corporate income tax without benefiting from a tax regime that derogates from the ordinary tax regime.
In order to
benefit from this exemption, the Holder must provide us or our paying agent with a certificate confirming its qualifying status and the fact that it satisfies the required conditions. If the Holder holds the ADSs for less than one year, at the time
the dividends are paid on or attributed to the shares represented by the ADSs, we must deduct the withholding tax but we do not need to transfer it to the Belgian Treasury provided that the Holder certifies its qualifying status, the date from which
the Holder has held the ADSs, and the Holders commitment to hold the shares for an uninterrupted period of at least one year. The Holder must also inform us or our paying agent when the one-year period
has expired or if its shareholding drops below 10% of our share capital before the end of the one-year holding period. Upon satisfying the one-year shareholding
requirement, the deducted dividend withholding tax will be paid to the Holder.
Dividends paid or attributable to a corporate Holder will under certain
conditions benefit from a full withholding tax exemption, provided that the Holder has a legal form similar to the ones listed in Annex I, Part A to Council Directive 2011/96/EU of November 30, 2011 on the common system of taxation applicable
in the case of parent companies and subsidiaries of different Member States, as amended by the Council Directive of July 8, 2014 (2014/86/EU) and holds a share participation in our share capital, upon payment or attribution of the dividends, of
less than 10% but with an acquisition value of at least EUR 2,500,000 and has held this share participation in full legal ownership during an uninterrupted period of at least one year. The Holder should also be subject to corporate income tax or a
similar tax without benefiting from a tax regime that derogates from the ordinary tax regime. The withholding tax exemption is only applied to the extent that the Belgian withholding tax cannot be credited nor reimbursed at the level of the
qualifying, dividend receiving, Holder. The Holder must provide us or our paying agent with a certificate confirming its qualifying status and the fact that it meets the required conditions.
Withholding tax is also not applicable, pursuant to Belgian domestic tax law, on dividends paid to a U.S. pension fund which satisfies the following
conditions:
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(i)
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to be an entity with a separate legal personality with fiscal residence in the United States and without a
permanent establishment or fixed base in Belgium,
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(ii)
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whose corporate purpose consists solely in managing and investing funds collected in order to pay legal or
complementary pensions,
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(iii)
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whose activity is limited to the investment of funds collected in the exercise of its statutory mission,
without any profit-making aim and without operating a business in Belgium,
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(iv)
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which is exempt from income tax in the United States, and
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(v)
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provided that it (save in certain particular cases as described in Belgian law) is not contractually obligated
to redistribute the dividends to any ultimate beneficiary of such dividends for whom it would manage the shares or ADSs, nor obligated to pay a manufactured dividend with respect to the shares or ADSs under a securities borrowing transaction. The
exemption will only apply if the U.S. pension fund provides an affidavit confirming that it is the full legal owner or usufruct holder of the shares or ADSs and that the above conditions are satisfied. The organization must then forward that
affidavit to us or our paying agent. In addition, the exemption will only apply if the U.S. pension fund has held the
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ADSs in full legal ownership for an uninterrupted period of at least 60 days prior to the dividend payment, unless the U.S. pension fund can evidence that the legal acts or arrangements to which
the dividends relate are not artificial and not set up with the principal purpose or one of the principle purpose of obtaining the benefit of this withholding tax exemption.
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Non-resident individuals may be eligible for an exemption of the first tranche of dividend income up to the amount of
812 for the year of assessment 2021, i.e., for dividends paid or attributed as of January 1, 2020.
Prospective Holders are encouraged to
consult their own tax advisors to determine whether they qualify for an exemption or a reduction of the withholding tax rate upon payment of dividends and, if so, the procedural requirements for obtaining such an exemption or a reduction upon the
payment of dividends or making claims for reimbursement.
Capital Gains and Losses
Pursuant to the U.S.-Belgium Tax Treaty, capital gains and/or losses realized by a Qualifying Holder from the sale, exchange or other disposition of ADSs are
exempt from tax in Belgium.
Capital gains realized on ADSs by a corporate Holder who is not a Qualifying Holder are generally not subject to taxation in
Belgium unless such Holder is acting through a Belgian permanent establishment or a fixed place in Belgium to which the ADSs are effectively connected (in which case a 25% or 0% tax on the capital gain may apply, depending on the particular
circumstances, taking into account that different rates may apply if the establishment qualifies as a small enterprise). Capital losses are generally not tax deductible.
Private individual Holders who are not Qualifying Holders and who are holding ADSs as a private investment will, as a rule, not be subject to tax in Belgium
on any capital gains arising out of a disposal of ADSs. Losses will, as a rule, not be tax deductible.
However, if the gain realized by such individual
Holders on ADSs is deemed to be realized outside the scope of the normal management of such individuals private estate and the capital gain is obtained or received in Belgium, the gain will be subject to a final tax of 33%.
Moreover, capital gains realized by such individual Holders on the disposal of ADSs for consideration, outside the exercise of a professional activity, to a non-resident corporation (or a body constituted in a similar legal form), to a foreign state (or one of its political subdivisions or local authorities) or to a non-resident
legal entity that is established outside the European Economic Area, are in principle taxable at a rate of 16.5% if, at any time during the five years preceding the realization event, such individual Holders own or have owned directly or indirectly,
alone or with his/her spouse or with certain other relatives, a substantial shareholding in us (that is, a shareholding of more than 25% of our shares).
Capital gains realized by a Holder upon the redemption of ADSs or upon our liquidation will generally be taxable as a dividend. See Dividend
Withholding Tax above.
Estate and Gift Tax
There is no Belgium estate tax on the transfer of ADSs on the death of a Belgian non-resident. Donations of ADSs made
in Belgium may or may not be subject to gift tax depending on the modalities under which the donation is carried out.
Belgian Tax on Stock Exchange
Transactions
Upon the issuance of ADSs (primary market transaction) no tax on stock exchange transactions is due.
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The purchase and sale or any other acquisition or transfer for consideration of existing ADSs (secondary market)
in Belgium through a professional intermediary is subject to the tax on stock exchange transactions (taxe sur les opérations de bourse/taks op beursverrichtingen) currently at a rate of 0.35%, capped at EUR 1,600 per taxable
transaction. A separate tax is due from each party to the transaction, both collected by the professional intermediary.
Belgian non-residents who purchase or otherwise acquire or transfer, for consideration, ADSs in Belgium for their own account through a professional intermediary established in Belgium may be exempt from the tax on stock
exchange transactions if they deliver a sworn affidavit to such intermediary confirming their non-resident status, unless they would be considered to have their habitual abode (for individuals) or their seat
or establishment (for legal entities) in Belgium.
In addition to the above, no tax on stock exchange transactions is payable by (without this list being
exhaustive): (i) professional intermediaries described in Article 2, 9 and 10 of the Law of August 2, 2002 acting for their own account, (ii) insurance companies described in Article 2, §1 of the Law of July 9, 1975
acting for their own account, (iii) professional retirement institutions referred to in Article 2, §1 of the Law of October 27, 2006 relating to the control of professional retirement institutions acting for their own account,
(iv) collective investment institutions acting for their own account, (v) the aforementioned non-residents acting for their own account (upon delivery of a certificate of non-residency in Belgium), or (vi) regulated real estate companies acting for their own account.
No tax on stock
exchange transactions should thus be due by Holders on the subscription, purchase or sale of ADSs, if the Holders are acting for their own account. In order to benefit from this exemption, the Holders must file with the professional intermediary in
Belgium a sworn affidavit evidencing that they are non-residents for Belgian tax purposes.
Proposed
Financial Transactions Tax
The European Commission has published a proposal for a Directive for a common financial transactions tax, or FTT, in
Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia, or collectively, the Participating Member States. However, Estonia has since stated that it will not participate, and it is unclear whether Belgium
will participate.
The proposed FTT has a very broad scope and could, if introduced in its current form, apply to certain dealings in ADSs in certain
circumstances. Under current proposals, the FTT could apply in certain circumstances to persons both within and outside of the Participating Member States. Generally, it would apply to certain dealings in ADSs where at least one party is a financial
institution, and at least one party is established in a Participating Member State.
A financial institution may be, or be deemed to be,
established in a Participating Member State in a broad range of circumstances, including by transacting with a person established in a Participating Member State.
The proposal currently stipulates that once the FTT enters into force, the participating Member States shall not maintain or introduce taxes on financial
transactions other than the FTT (or VAT as provided in the Council Directive 2006/112/EC on the common system of value added tax). For Belgium, the tax on stock exchange transactions should thus be abolished once the FTT enters into force. The
proposal is still subject to negotiation between the participating Member States and therefore may be changed at any time.
Prospective investors are
advised to seek their own professional advice in relation to the FTT.
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