UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March, 2020
Commission File Number: 001-37891
AC IMMUNE SA
(Exact name of registrant as specified in its charter)
EPFL Innovation Park
Building B
1015 Lausanne, Switzerland
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| Form 20-F |
☒ |
Form 40-F | ☐ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
| Yes | ☐ | No |
☒ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
| Yes | ☐ | No |
☒ |
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AC IMMUNE SA | |||
| By: | /s/ Andrea Pfeifer | ||
| Name: | Andrea Pfeifer | ||
| Title: | Chief Executive Officer | ||
| By: | /s/ Joerg Hornstein | ||||
| Name: | Joerg Hornstein | ||||
| Title: | Chief Financial Officer | ||||
| Date: | March 30, 2020 | ||||
2
Exhibit Index
|
Exhibit Number |
Description |
| 99.1 | Press Release dated March 30, 2020 |
| 99.2 | 2019 Statutory Annual Report |
| 99.3 | 2019 Compensation Report |
3
Exhibit 99.1
 |
Press Release |
AC Immune Reports Full-Year 2019 Financial Results and
Provides 2020 R&D Outlook
| § | Ongoing strong financial position with CHF 288.6 million in cash, ensuring the Company is fully financed through Q1 2024, excluding potential incoming milestones |
| § | Received CHF 110 million in upfront and development milestone payments and a USD 50 million equity note in 2019 as a result of the Morphomer™ Tau Lilly partnership |
| § | Added new potential CHF 60 million Phase 2 initiation milestone and achieved CHF 10 million milestone in Q1 2020 in Lilly partnership |
| § | Five clinical milestones expected in 2020 including the first Phase 2 readout of an anti-Tau antibody in Alzheimer’s disease (AD) |
| § | Initiated three clinical trials targeting Tau and a substudy within the ongoing Phase 2 Alzheimer’s Prevention Initiative trial |
Lausanne, Switzerland, March 30, 2020 – AC Immune SA (NASDAQ: ACIU), a Swiss-based, clinical-stage biopharmaceutical company with a broad pipeline focused on neurodegenerative diseases, today announced financial results for the year ended December 31, 2019, and provided a business and 2020 research and development outlook.
Prof. Andrea Pfeifer, CEO of AC Immune SA, commented: “AC Immune is building on clinical and business accomplishments in 2019, and anticipates multiple clinical, value-creating milestones in 2020. We anticipate reporting data from two studies of our proprietary anti-Abeta vaccine program, ACI-24 as well as Phase 1 results for the small molecule Morphomer™ Tau aggregation inhibitor, ACI-3024, in partnership with Eli Lilly and Company.
Prof. Pfeifer continued: “In parallel, our heritage as a leader in delivering cutting-edge science enables our Company to advance novel preclinical therapeutic and diagnostic candidates focused on emerging targets and neuroinflammation towards the clinic, setting the stage for additional value creation and partnership opportunities. AC Immune’s leading position in the field is built upon our proprietary discovery technology platforms, SupraAntigenTM and MorphomerTM, as well as our personalized medicine approach and exceptional development execution.”
2019 and Q1 2020 Research & Development Highlights
Successful execution in preclinical and clinical development during 2019 resulted in a stronger pipeline.
| § | A Phase 1 study is ongoing for ACI-3024, a first-in-class investigational oral small molecule Morphomer™ Tau specific aggregation inhibitor that will be studied in neurodegenerative diseases characterized by the presence of pathological Tau aggregates. The initial CHF 60 million milestone payment has been modified such that Lilly has paid AC Immune CHF 30 |
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million during Q3 2019 and CHF 10 million in Q1 2020; and, AC Immune now is eligible for a new additional milestone payment of CHF 60 million within 60 days after dosing of the first patient in the first Phase 2 clinical trial of a Morphomer™ Tau in the United States or European Union. The amendment to the financial terms increases the total deal value by CHF 40 million to CHF 1.86 billion, up from CHF 1.82 billion.
| § | Initiation of a second Phase 2 trial of semorinemab in patients with moderate AD, by our collaboration partner Genentech, a member of the Roche Group. This antibody is also being studied in a separate Phase 2 trial in prodromal to mild AD |
| § | Received a milestone payment from our collaboration partner, Life Molecular Imaging, in connection with the initiation of a Phase 2 study in AD of the Tau positron emission tomography (PET) tracer PI-2620 |
| § | Initiation of a Phase 1b/2a clinical trial in early AD to evaluate the anti-phospho-Tau vaccine, ACI-35.030, which targets pathological Tau and is intended as a disease-modifying treatment for AD and other Tauopathies in collaboration with Janssen Pharmaceuticals, Inc |
| § | Initiation of a substudy by our partner Genentech, a member of the Roche Group, within the ongoing Phase 2 Alzheimer’s Prevention Initiative (API) trial of AC Immune’s investigational candidate, crenezumab. This substudy aims to measure Tau burden using PET in order to increase the understanding of disease progression in the preclinical stage of autosomal dominantly inherited AD |
| § | Presented initial interim data from an on-going Phase 1b trial of the ACI-24 anti-Abeta vaccine to treat Down syndrome (DS)-related AD |
| § | Discontinuation by our collaboration partner Roche of the CREAD and CREAD 2 Phase 3 studies of the anti-beta-amyloid antibody, crenezumab, in people with prodromal to mild sporadic AD |
| § | Established a research collaboration with leading scientists at the Perelman School of Medicine, University of Pennsylvania focused on studying the pathological mechanisms of TDP-43 misfolding and aggregation |
| § | Awarded a new grant from The Michael J. Fox Foundation (MJFF) for development of AC Immune’s pioneering alpha-synuclein PET tracers |
| § | Hosted two Key Opinion Leader (KOL) events focused on “untangling” Tau pathology as an important therapeutic and diagnostic target for AD and other neurodegenerative diseases, and on treating DS-related AD |
2020 Research & Development Outlook
The coming years will be transformational for the field of neuroscience and AC Immune is poised to make significant clinical contributions, capturing substantial interest and value in 2020 and beyond. The Company will deliver multiple near-term catalysts, including results from five clinical trials. The Company’s sustained growth is driven by its industry-leading Roadmap to Successful Therapies for Neurodegenerative Diseases, and is fueled by its proprietary technology platforms, SupraAntigenTM and MorphomerTM, which continue to generate therapeutic antibody, small molecule and vaccine candidates.
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2020 Clinical Readouts
| § | Semorinemab, anti-Tau antibody: Phase 2 trial primary completion (estimated last patient, last visit) in prodromal/mild in Q2 |
| § | ACI-24 anti-Abeta vaccine in DS: Phase 1b full study reporting in H2 |
| § | ACI-35.030 anti-pTau vaccine: Phase 1b/2a in AD interim analysis in Q2 |
| § | ACI-3024 small molecule Morphomer™ Tau aggregation inhibitor: Phase 1 results in healthy volunteers in Q2; data disclosed by partner in H2 (expected) |
| § | ACI-24 in AD: Phase 2, 12-month interim analysis in H2 |
2020 Preclinical Milestones
| § | Alpha-synuclein antibody: started investigational new drug (IND)-enabling studies for lead candidate in Q1 |
| § | Anti-TDP-43 antibody: declare clinical lead and start IND-enabling studies in Q2 |
| § | Alpha-synuclein small molecule: identify first biologically active small molecule in Q2 |
| § | Alpha-synuclein imaging agent: advance third generation candidate to clinical stage in Q4 |
| § | Neuroinflammation: declare lead candidates for small molecule and antibody programs in Q4 |
Prof. Pfeifer concluded: “In summary, 2020 begins a decade with the potential for major neuroscience advances. With AC Immune’s remarkably broad development pipeline focused on neurodegenerative diseases we have multiple opportunities to contribute to the advancement of this field from a business, clinical and human perspective.”
Analysis of Financial Statements for the year ended December 31, 2019
| § | Cash Position: The Company had a total cash balance of CHF 288.6 million, comprised of CHF 193.6 million in cash and cash equivalents and CHF 95 million in short-term financial assets. This compares to a total cash balance of CHF 186.5 million as of December 31, 2018. The increase of CHF 102.1 million is principally due to the CHF 80 million upfront payment, USD 50 million convertible equity note and CHF 30 million milestone payment related to the agreement with Lilly. The total shareholders’ equity position increased to CHF 272.4 million from CHF 177.6 million as of the prior year. The Company’s cash balance provides enough capital resources to progress through at least Q1 2024 |
| § | Revenues: Revenues for the year ended December 31, 2019 totaled CHF 111.0 million. This represents an increase of CHF 103.8 million compared to 2018. The increase for the year end relates to the recognition of CHF 75.7 million from the right-of-use license and research and development activities linked to the 2018 Lilly agreement and a CHF 30 million payment for the first milestone achieved with Lilly. Additionally, the Company recorded a EUR 2 million (CHF 2.2 million) in connection with the initiation of a Phase 2 trial in AD of Tau PET Tracer with Life Molecular Imaging |
| § | R&D Expenditures: R&D expenses increased by CHF 6.2 million to CHF 50.4 million for the year ended December 31, 2019. Of this increase, CHF 1.7 million relates to increases in R&D expenses directly allocated to R&D programs such as a CHF 0.9 million increase related to higher research, preclinical and manufacturing costs for the lead alpha- |
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synuclein antibody and a CHF 0.7 million increase for manufacturing and preparation of the Phase 2 study for ACI-24 for DS. Additionally, the personnel costs increased by CHF 1.6 million through the addition of 16 FTEs with remaining increases of CHF 2.8 million in the area of consumables, depreciation of R&D equipment and regulatory and quality assurance
| § | G&A Expenses: For the year ended December 31, 2019, G&A increased CHF 3.6 million to CHF 16.1 million. Increases were driven by personnel and IT expenses |
| § | IFRS Income/(Loss) for the period: The Company recorded net income after taxes of CHF 45.4 million for the year ended December 31, 2019, compared with net losses of CHF 50.9 million for 2018 |
2020 Financial Guidance
For the full year 2020, the Company expects its total cash burn to range between CHF 65‒80 million at constant exchange rates.
About AC Immune SA
AC Immune SA is a Nasdaq-listed clinical-stage biopharmaceutical company, which aims to become a global leader in precision medicine for neurodegenerative diseases. The Company utilizes two proprietary platforms, SupraAntigenTM and MorphomerTM, to design, discover and develop small molecule and biological therapeutics as well as diagnostic products intended to diagnose, prevent and modify neurodegenerative diseases caused by misfolding proteins. The Company's pipeline features nine therapeutic and three diagnostic product candidates, with six currently in clinical trials. It has collaborations with major pharmaceutical companies including Roche/Genentech, Lilly and Janssen.
For further information, please contact:
|
Head of Investor Relations Joshua Drumm AC Immune Phone: +1 917 809 0814 Email: joshua.drumm@acimmune.com |
US Media Katie Gallagher LaVoieHealthScience Phone: +1 617 792 3937 Email: kgallagher@lavoiehealthscience.com |
|
Global Head of Communications Judith Moore AC Immune Phone: +41 79 826 63 82 Email: judith.moore@acimmune.com
|
European Investors & Media Chris Maggos LifeSci Advisors Phone: +41 79 367 6254 Email: chris@lifesciadvisors.com |
Forward looking statements
This press release contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements other than historical fact and may include statements that address future operating, financial or business performance or AC Immune’s strategies or expectations. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “outlook” or “continue,” and other
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comparable terminology. Forward-looking statements are based on management’s current expectations and beliefs and involve significant risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements. These risks and uncertainties include those described under the captions “Item 3. Key Information – Risk Factors” and “Item 5. Operating and Financial Review and Prospects” in AC Immune’s Annual Report on Form 20-F and other filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and AC Immune does not undertake any obligation to update them in light of new information, future developments or otherwise, except as may be required under applicable law. All forward-looking statements are qualified in their entirety by this cautionary statement.
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Balance Sheets
(in CHF thousands)
| As of December 31, 2019 | As of December 31, | |||||||
| ASSETS | ||||||||
| Non-current assets | ||||||||
| Property, plant and equipment | 3,917 | 3,324 | ||||||
| Right-of-use assets | 2,255 | — | ||||||
| Long-term financial assets | 304 | 304 | ||||||
| Total non-current assets | 6,476 | 3,628 | ||||||
| Current assets | ||||||||
| Prepaid expenses | 2,788 | 2,364 | ||||||
| Accrued income | 1,095 | 3,667 | ||||||
| Finance receivable | — | 199 | ||||||
| Other current receivables | 304 | 236 | ||||||
| Short-term financial assets | 95,000 | 30,000 | ||||||
| Cash and cash equivalents | 193,587 | 156,462 | ||||||
| Total current assets | 292,774 | 192,928 | ||||||
| Total assets | 299,250 | 196,556 | ||||||
| SHAREHOLDERS’ EQUITY AND LIABILITIES | ||||||||
| Shareholders’ equity | ||||||||
| Share capital | 1,437 | 1,351 | ||||||
| Share premium | 346,526 | 298,149 | ||||||
| Accumulated losses | (75,521 | ) | (121,877 | ) | ||||
| Total shareholders’ equity | 272,442 | 177,623 | ||||||
| Non-current liabilities | ||||||||
| Long-term financing obligation | — | 186 | ||||||
| Long-term lease liabilities | 1,813 | — | ||||||
| Net employee defined benefit liabilities | 7,485 | 5,665 | ||||||
| Total non-current liabilities | 9,298 | 5,851 | ||||||
| Current liabilities | ||||||||
| Trade and other payables | 142 | 1,979 | ||||||
| Accrued expenses | 11,797 | 10,420 | ||||||
| Short-term deferred income | 4,477 | 351 | ||||||
| Short-term financing obligation | 652 | 332 | ||||||
| Short-term lease liabilities | 442 | — | ||||||
| Total current liabilities | 17,510 | 13,082 | ||||||
| Total liabilities | 26,808 | 18,933 | ||||||
| Total shareholders’ equity and liabilities | 299,250 | 196,556 | ||||||
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Statements of Income/(Loss)
(in CHF thousands except for per share data)
| For the years ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| Revenue | ||||||||||||
| Contract revenue | 111,026 | 7,194 | 20,255 | |||||||||
| Total revenue | 111,026 | 7,194 | 20,255 | |||||||||
| Operating expenses | ||||||||||||
| Research & development expenses | (50,432 | ) | (44,277 | ) | (32,663 | ) | ||||||
| General & administrative expenses | (16,058 | ) | (12,467 | ) | (10,131 | ) | ||||||
| Total operating expenses | (66,490 | ) | (56,774 | ) | (42,794 | ) | ||||||
| Operating income/(loss) | 44,536 | (49,550 | ) | (22,539 | ) | |||||||
| Finance income / (expense), net | (2,046 | ) | (1,132 | ) | (4,055 | ) | ||||||
| Change in fair value of conversion feature | 4,542 | — | — | |||||||||
| Interest income | 304 | 29 | 330 | |||||||||
| Interest expense | (1,894 | ) | (298 | ) | (147 | ) | ||||||
| Finance result, net | 906 | (1,401 | ) | (3,872 | ) | |||||||
| Income/(loss) before tax | 45,442 | (50,951 | ) | (26,411 | ) | |||||||
| Income tax expense | — | — | — | |||||||||
| Income/(loss) for the period | 45,442 | (50,951 | ) | (26,411 | ) | |||||||
| Income/(loss) per share (EPS): | ||||||||||||
| Basic income/(loss) for the period attributable to equity holders | 0.64 | (0.82 | ) | (0.46 | ) | |||||||
| Diluted income/(loss) for the period attributable to equity holders | 0.64 | (0.82 | ) | (0.46 | ) | |||||||
Statements of Comprehensive Income/(Loss)
(in CHF thousands)
| For the years ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| Income/(loss) for the period | 45,442 | (50,951 | ) | (26,411 | ) | |||||||
| Other comprehensive income/(loss) not to be reclassified to income or loss in subsequent periods (net of tax): | ||||||||||||
| Re-measurement losses on defined benefit plans (net of tax) | (1,304 | ) | (302 | ) | (780 | ) | ||||||
| Total comprehensive income/(loss), net of tax | 44,138 | (51,253 | ) | (27,191 | ) | |||||||
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Reconciliation of Income/(Loss) to Adjusted
Income/(Loss) and
Earnings/(Loss) Per Share to Adjusted Earnings/(Loss) Per Share
| For the Years Ended December 31, | ||||||||||||
| (in CHF thousands except for share and per share data) | 2019 | 2018 | 2017 | |||||||||
| Income/(Loss) | 45,442 | (50,951 | ) | (26,411 | ) | |||||||
| Adjustments: | ||||||||||||
| Non-cash share-based payments (a) | 2,834 | 2,518 | 1,579 | |||||||||
| Foreign currency (gains)/losses (b) | 826 | 1,179 | 4,168 | |||||||||
| Effective interest expense (c) | 1,355 | — | — | |||||||||
| Change in fair value of conversion feature (d) | (4,542 | ) | — | — | ||||||||
| Adjusted Income/(Loss) | 45,915 | (47,254 | ) | (20,664 | ) | |||||||
| Earnings/(Loss) per share – basic | 0.64 | (0.82 | ) | (0.46 | ) | |||||||
| Earnings/(Loss) per share – diluted | 0.64 | (0.82 | ) | (0.46 | ) | |||||||
| Adjustment to earnings/(loss) per share – basic | 0.01 | 0.06 | 0.10 | |||||||||
| Adjustment to earnings/(loss) per share – diluted | 0.00 | 0.06 | 0.10 | |||||||||
| Adjusted earnings/(loss) per share – basic | 0.65 | (0.76 | ) | (0.36 | ) | |||||||
| Adjusted earnings/(loss) per share – diluted | 0.64 | (0.76 | ) | (0.36 | ) | |||||||
| Weighted-average number of shares used to compute Adjusted Loss per share – basic | 70,603,611 | 61,838,228 | 57,084,295 | |||||||||
| Weighted-average number of shares used to compute Adjusted Loss per share – diluted | 71,103,341 | 61,838,228 | 57,084,295 | |||||||||
| (a) | Reflects non-cash expenses associated with share-based compensation for equity awards issued to Directors, Management and employees of the Company. This expense reflects the awards’ fair value recognized for the portion of the equity award which is vesting over the period. |
| (b) | Reflects foreign currency remeasurement gains and losses for the period, predominantly impacted by the change in the exchange rate between the US Dollar and the Swiss Franc. |
| (c) | Effective interest expense for the period relates to the accretion of the Company’s convertible loan in accordance with the effective interest method. |
| (d) | Change in fair value of conversion feature that is bifurcated from the convertible loan host debt with Lilly. |
Adjustments for the years ended December 31, 2019, 2018 and 2017, were CHF 0.4 million in net gains, CHF 3.7 million in net losses and CHF 5.7 million in net losses, respectively. The Company recorded CHF 2.8 million, CHF 2.5 million and CHF 1.6 million for the years ended December 31, 2019, 2018 and 2017, respectively, for share-based compensation expenses. There were foreign currency remeasurement losses of CHF 0.8 million, CHF 1.2 million, CHF 4.2 million for the years ended December 31, 2019, 2018 and 2017, respectively, predominantly related to the cash balance of the Company as a result of fluctuations of the US Dollar against the Swiss Franc. Related to the Company’s convertible note settled with Lilly in 2019, we recorded CHF 1.4 million for amortization of effective interest for the year ended December 31, 2019 and recognized a CHF 4.5 million gain for the change in fair value of the liability related to the conversion feature in 2019. There were no comparable expenses and gains in 2018 nor 2017, respectively.
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Exhibit 99.2
Statutory Financial Statements (Swiss CO)
1 January - 31 December 2019
| Financial Statements | 2 | |
| Notes to the Financial Statements | 4 |
AC Immune SA
EPFL Innovation Park
1015 Lausanne / Ecublens
Switzerland
Report of the statutory auditor
to the General Meeting of AC Immune SA
Ecublens
Report on the audit of the financial statements
Opinion
We have audited the financial statements of AC Immune SA, which comprise the balance sheet as at 31 December 2019, income statement and notes for the year then ended, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements as at 31 December 2019 comply with Swiss law and the company’s articles of incorporation.
Basis for opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report.
We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit approach
| Overview | Overall materiality: CHF 632'950 |
 |
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the entity, the accounting processes and controls, and the industry in which the entity operates.
As key audit matter the following area of focus has been identified:
Revenue recognition – License agreement Eli Lilly and Company |
PricewaterhouseCoopers SA, avenue C.-F. Ramuz 45, case postale, CH-1001 Lausanne, Switzerland Téléphone: +41 58 792 81 00, Téléfax: +41 58 792 81 10, www.pwc.ch
PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. |
Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole.
| Overall materiality | CHF 632'950 |
| How we determined it | 1% of total operating expenses |
| Rationale for the materiality benchmark applied | Profit before tax is not considered an appropriate benchmark as the entity is a start-up still in a developmental phase and has no recurring revenues. Based on the nature of the entity we deter-mined total expenses as the most appropriate benchmark for the materiality considerations applied during our audit. |
We agreed with the Audit Committee that we would report to them misstatements above CHF 63'200 identified during our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.
Audit scope
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we considered where subjective judgements were made; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognition – License agreement Eli Lilly and Company
| Key audit matter | How our audit addressed the key audit matter | |
|
AC Immune SA has entered into a material revenue-generating license and collaborative research and development contract with Eli Lilly and Company (“license agreement”). The license agreement contains upfront fees related to the grant of right of use over licenses, additional payments based on achievement of various clinical and commercial milestones and royalties on commercial sales. The license agreement also sets out certain obligations on the company to deliver research and development services.
Given the complex nature of the license agreement, judgements involved in identifying performance obligations, allocating the transaction price and in determining the pattern of revenue recognition, we consider this area to be a key audit matter for our audit.
Refer to Note 2 in the financial statements for AC Immune's accounting policy. |
We assessed the application of the accounting policy for the license agreement in accordance with Swiss law.
We read the respective contract, and reviewed Management’s assessment of the performance obligation(s), the determination, and allocation of the transaction price to the respective performance obligation(s), and Management’s conclusion as to whether revenues was recognized when the performance obligations were satisfied.
On the basis of the work performed, we do not take exception to Management’s key judgements.
|
 | AC Immune SA | Report of the statutory auditor to the General Meeting on the financial statements 2019 |
Responsibilities of the Board of Directors for the financial statements
The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
| · | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| · | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. |
| · | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. |
| · | Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going concern. |
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
| AC Immune SA | Report of the statutory auditor to the General Meeting on the financial statements 2019 |
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers SA
| /s/ Michael Foley | /s/ Alex Fuhrer |
| Michael Foley | Alex Fuhrer |
| Audit expert | Audit expert |
| Auditor in charge |
Lausanne, 30 March 2020
| AC Immune SA | Report of the statutory auditor to the General Meeting on the financial statements 2019 |
AC Immune SA, Ecublens
Balance Sheet
| As at 31 December, | ||||||||||
| in CHF thousands | Notes | 2019 | 2018 | |||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | 5 | 193,587 | 156,774 | |||||||
| Short-term financial assets | 5 | 95,000 | 30,000 | |||||||
| Other current receivables | ||||||||||
| - Third parties | 6 | 304 | 236 | |||||||
| - Short-term financial receivables | 6 | - | 219 | |||||||
| Prepaid expenses | 7 | 2,796 | 2,381 | |||||||
| Accrued income | 8 | 1,095 | 3,667 | |||||||
| Total current assets | 292,782 | 193,277 | ||||||||
| Non-current assets | ||||||||||
| Long-term financial assets | 4 | 304 | 304 | |||||||
| Property, plant and equipment | 3 | 3,917 | 3,324 | |||||||
| Total non-current assets | 4,221 | 3,628 | ||||||||
| Total assets | 297,003 | 196,905 | ||||||||
| Liabilities and shareholders' equity | ||||||||||
| Current liabilities | ||||||||||
| Trade payables | ||||||||||
| - To third parties | 9 | 142 | 1,979 | |||||||
| Accrued expenses | 9 | 11,805 | 10,420 | |||||||
| Deferred income | 10 | 4,477 | 351 | |||||||
| Short-term financing obligation | 11 | 652 | 332 | |||||||
| Total current liabilities | 17,076 | 13,082 | ||||||||
Non-current liabilities | ||||||||||
| Long-term financing obligation | 11 | - | 186 | |||||||
| Total non-current liabilities | - | 186 | ||||||||
| Shareholders' equity | ||||||||||
| Share capital | 12 | 1,435 | 1,350 | |||||||
| Reserves from capital contributions | 340,643 | 289,607 | ||||||||
| Accumulated losses brought forward | (107,320 | ) | (58,426 | ) | ||||||
| Profit / (loss) for the year | 45,169 | (48,894 | ) | |||||||
| Total shareholders' equity | 279,927 | 183,637 | ||||||||
| Total liabilities and shareholders' equity | 297,003 | 196,905 | ||||||||
| Statutory Financial Statements | 2 |
AC Immune SA, Ecublens
Income Statement
| For the Years Ended 31 December, | ||||||||||
| in CHF thousands | Notes | 2019 | 2018 | |||||||
| Contract revenue | 13 | 111,073 | 7,234 | |||||||
| Operating expenses | ||||||||||
| Salaries and related costs | 14 | (19,076 | ) | (16,029 | ) | |||||
| Operating expenses | 14 | (42,946 | ) | (37,796 | ) | |||||
| Depreciation of fixed assets | 14 | (1,273 | ) | (960 | ) | |||||
| Total operating expenses | (63,295 | ) | (54,785 | ) | ||||||
| Operating profit / (loss) | 47,778 | (47,551 | ) | |||||||
| Financial income | 15 | 442 | 127 | |||||||
| Financial expenses | 15 | (3,051 | ) | (1,470 | ) | |||||
| Total net financial expenses | (2,609 | ) | (1,343 | ) | ||||||
| Profit / (loss) for the period | 45,169 | (48,894 | ) | |||||||
| Statutory Financial Statements | 3 |
AC Immune SA, Ecublens
Notes to the financial statements
| 1. | General information |
AC Immune SA (the “Company,” “AC Immune,” “ACIU,” “we,” “our,” “ours,” or “us”) is a clinical stage biopharmaceutical company leveraging our two proprietary technology platforms to discover, design and develop novel, proprietary medicines and diagnostics for prevention and treatment of neurodegenerative diseases associated with protein misfolding. Misfolded proteins are generally recognized as the leading cause of neurodegenerative diseases, such as Alzheimer’s disease, or AD, and Parkinson’s disease, or PD, with common mechanisms and drug targets, such as Abeta, Tau and alpha-synuclein. Our corporate strategy is founded upon a three-pillar approach that targets Alzheimer’s disease, non-Alzheimer’s neurodegenerative diseases including NeuroOrphan indications and diagnostics. We use our two unique proprietary platform technologies, SupraAntigen™ (conformation-specific biologics) and Morphomer™ (conformation-specific small molecules), to discover, design and develop novel medicines and diagnostics to target misfolded proteins.
The Company was initially incorporated as a limited liability company on February 13, 2003 in Basel and effective August 25, 2003 was transitioned into a stock company. The Company’s corporate headquarters are located at EPFL Innovation Park Building B, 1015 Lausanne, Switzerland.
The statutory financial statements of AC Immune SA for the period ended 31 December 2019 were authorized for issue in accordance with a resolution of the Board of Directors on 27 March 2020 and will be submitted to the next Ordinary General Assembly.
During 2019 and 2018, AC Immune had an annual average of more than 50 but less than 250 full time equivalent positions.
| 2. | Summary of significant accounting principles |
The present annual accounts have been prepared in accordance with the provisions of the Swiss law on accounting and financial reporting (32nd Title of the Swiss Code of Obligations). The principal accounting policies are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Current vs. non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification. The Company classifies all amounts to be realized or settled within 12 months after the reporting period to be current and all other amounts to be non-current.
Foreign currency transactions
The financial statements are presented in Swiss Francs (CHF). Foreign currency transactions are translated into the functional currency (CHF) using prevailing exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into CHF at rates of exchange prevailing at the reporting date. Any gains or losses from these translations are included in the income statement in the period in which they arise.
Non-monetary assets and liabilities at historical costs are converted at the foreign exchange rate at the time of the transaction. Any foreign exchange profits are deferred in the balance sheet as not having an effect on net income. Foreign exchange losses, on the other hand, are recorded in the profit and loss account.
Revenue recognition
Revenue includes upfront fees, milestone payments as well as revenue from research and development agreements associated with collaborations with third parties and grants from public institutions and foundations.
License of intellectual property
Revenue from non-refundable, upfront license payments and performance milestones where the Company has continuing involvement is recognized over the estimated performance or agreement period, depending on the terms of the agreement. The recognition of revenue is prospectively changed for subsequent changes in the development or agreement period.
| Statutory Financial Statements | 4 |
AC Immune SA, Ecublens
For collaboration agreements on product candidates (i) that are in clinical development, (ii) where the upfront payment reflects a payment for past investments the Company has made in the development of the product candidate, access to the product candidate, the associated intellectual property and our knowledge, and, (iii) where there is no further performance commitment, the Company recognizes the fair value of the upfront payment at the time of entering into the collaboration agreement. For collaboration agreements (i) in clinical development but where conditions (ii) and (iii) are not met, the Company recognizes revenue from upfront payments under our collaboration agreements pro-rata over the term of the estimated period of performance under each agreement.
For collaboration agreements, in addition to receiving upfront payments, the Company is also entitled to milestone and other contingent payments upon achieving pre-defined objectives.
Milestone payments
Revenue from milestones, if they are non-refundable and deemed substantive, is recognized upon successful accomplishment of the milestones. To the extent that non-substantive milestones are achieved and the Company has remaining performance obligations, milestones are deferred and recognized as revenue over the estimated remaining period of performance.
Research and Development Services
The Company has certain arrangements with our collaboration partners that include contracting our full-time employees for research and development programs. These revenues are recorded in license and collaboration revenues as the services are performed.
Research and development expenditures
Given the stage of development of the Company’s products, all research expenditure is recognized as expense when incurred. Research and development expenditures include:
| · | the cost of acquiring, developing and manufacturing active pharmaceutical ingredients for product candidates that have not received regulatory approval, clinical trial materials and other research and development materials; |
| · | fees and expenses incurred under agreements with contract research organizations, investigative sites, and other entities in connection with the conduct of clinical trials and preclinical studies and related services, such as administrative, data management, and laboratory services; |
| · | fees and costs related to regulatory filings and activities; |
| · | costs associated with preclinical and clinical activities; and |
| · | employee-related expenses, including salaries and bonuses, benefits, travel and stock-based compensation expense |
For external research contracts, expenses include those associated with contract research organizations, or CROs. The invoicing from CROs for services rendered do not always align with work performed. We accrue the cost of services rendered in connection with CRO activities based on our estimate of the “stage of completion” for such contracted services. We maintain regular communication with our CRO vendors to gauge the reasonableness of our estimates and accrue expenses as of the balance sheet date in the financial statements based on facts and circumstances known at the time.
Registration costs for patents are part of the expenditure for research and development projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does not meet the criteria for capitalization.
Property, plant and equipment
Equipment is shown at historical acquisition cost, less accumulated depreciation and any accumulated impairment losses. Historical costs include expenditures that are directly attributable to the acquisition of the property, plant and equipment. Depreciation is calculated using a straight-line method to write off the cost of each asset to its residual value over its estimated useful life as follows:
| IT equipment | 3 years |
| Laboratory equipment | 5 years |
| Leasehold improvements / furniture | 5 years |
| Statutory Financial Statements | 5 |
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Where an asset’s carrying amount is greater than its estimated recoverable amount, it is written down to its recoverable amount.
Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the income statement.
Financial assets and liabilities
The Company’s financial assets and liabilities are comprised of receivables, cash and cash equivalents, short-term financial assets, trade payables and financing obligations.
Receivables
Receivables are non-derivative financial assets with fixed payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date, which are classified as long-term assets. Receivables are recognized at their billing value. An allowance for doubtful accounts is recorded for potential estimated losses when there is evidence of the debtor’s inability to make required payments and the Company assesses on a forward-looking basis the expected credit losses associated with these receivables held at amortized cost.
Short-term financial assets
Short-term financial assets are held with external financial institutions and comprise fixed-term deposits with maturities ranging from more than 3 until 12 months in duration.
Cash and cash equivalents
Cash and cash equivalents include deposits held with external financial institutions and cash on hand. All cash and cash equivalents are either in cash or in deposits with original duration of less than 3 months.
The Company assesses at each period whether there is objective evidence that financial assets are impaired.
Trade payables
Trade payables are recognized initially at nominal amount, which represents cost incurred.
Financing obligation
The Company’s financing obligation relates to its agreement with a third party and is measured as of the period end date based on the repayment terms when originated.
| Statutory Financial Statements | 6 |
AC Immune SA, Ecublens
Significant Shareholders
Principal shareholders who own more than 5 percent of the voting rights as at 31 December:
| Shares Owned | Shares Owned | |||||||||||||||
| 2019 | 2018 | |||||||||||||||
| Principal Shareholders | Number | Percent | Number | Percent | ||||||||||||
| 5% Shareholders | ||||||||||||||||
| dievini Hopp BioTech holding GmbH & Co KG(1) | 18,041,000 | 25.1 | % | 18,041,000 | 26.7 | % | ||||||||||
| Varuma AG(2) | 11,999,999 | 16.7 | % | 11,999,999 | 17.8 | % | ||||||||||
| BVF Inc.(3) | 11,342,505 | 15.8 | % | 5,663,760 | 8.4 | % | ||||||||||
| Eli Lilly and Company(4) | 3,615,328 | 5.0 | % | - | 0 | % | ||||||||||
| (1) | Represents 18,041,000 shares held by dievini Hopp BioTech holding GmbH & Co KG. Dietmar Hopp controls the voting and investment decisions of the ultimate parent company of dievini Hopp BioTech holding GmbH & Co KG. The shares registered in the name of dievini Hopp BioTech holding GmbH & Co KG may also be deemed to be beneficially owned by Friedrich von Bohlen und Halbach, who is a managing director of dievini Hopp BioTech holding GmbH & Co KG. The address for dievini Hopp BioTech holding GmbH & Co KG, Friedrich von Bohlen und Halbach is Johann-Jakob-Astor Str. 57, 69190 Walldorf, Germany. |
| (2) | The address for Varuma AG is Aeschenvorstadt 55, CH-4051 Basel, Switzerland. Rudolf Maag controls the voting and investment decisions of Varuma AG. |
| (3) | Based on information set forth in a Schedule 13G filed with the SEC by Biotechnology Value Fund on February 14, 2020, these shares consist of 11,342,505 shares held of record by BVF Inc. The address of BVF Inc. is 44 Montgomery St., 40th Floor, San Francisco, California 94104. |
| (4) | Represents 3,615,328 that Lilly obtained as part of its conversion in April 2019 of the Convertible Note Agreement which was deemed effective in January 2019. See Form 20-F as filed. |
Operating lease liabilities
We have been a tenant at our current location in the EPFL Innovation Park in Ecublens/Lausanne since shortly after our inception in 2003. We lease our corporate, laboratory and other facilities under multiple operating leases that are month to month with no termination clause longer than a 12-month contractual notice period. Our lease agreements are structured such that we can exit these lease agreements without penalty provided we give the owner of our premises sufficient notice. As of 31 December 2019, total minimum liability for the remaining term was CHF 776 thousand.
Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events where it is more likely than not that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.
Critical judgments and accounting estimates
The preparation of financial statements in conformity with the Swiss Code of Obligations requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
The areas where AC Immune has had to make judgments, estimates and assumptions relate to (i) revenue recognition on collaboration and licensing agreements and (ii) clinical development accruals. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
| Statutory Financial Statements | 7 |
AC Immune SA, Ecublens
Information relating to items on Balance Sheet and Income Statement
| 3. | Property, plant and equipment |
| in CHF thousands | As at 31 December, | |||||||
| 2019 | 2018 | |||||||
| Furniture | 158 | 126 | ||||||
| IT equipment | 1,187 | 1,025 | ||||||
| Lab equipment | 6,698 | 5,367 | ||||||
| Leasehold improvements | 402 | 350 | ||||||
| Total property, plant and equipment | 8,445 | 6,868 | ||||||
| Accumulated depreciation | (4,528 | ) | (3,544 | ) | ||||
| Total | 3,917 | 3,324 | ||||||
| 4. | Long-term financial assets |
| As at 31 December, | ||||||||
| in CHF thousands | 2019 | 2018 | ||||||
| Rental deposit (restricted cash) | 301 | 301 | ||||||
| Security deposit | 3 | 3 | ||||||
| Total | 304 | 304 | ||||||
| 5. | Cash and cash equivalents and short-term financial assets |
| As at 31 December, | ||||||||
| in CHF thousands | 2019 | 2018 | ||||||
| Cash and cash equivalents | 193,587 | 156,774 | ||||||
| Short-term financial assets due in one year or less | 95,000 | 30,000 | ||||||
| Total | 288,587 | 186,774 | ||||||
| Cash and cash equivalents by currency | ||||||||
| CHF | 158,173 | 126,218 | ||||||
| EUR | 10,169 | 11,584 | ||||||
| USD | 25,245 | 18,972 | ||||||
| Total | 193,587 | 156,774 | ||||||
| 6. | Other current receivables |
| As at 31 December, | ||||||||
| in CHF thousands | 2019 | 2018 | ||||||
| Other current receivables | ||||||||
| - from third parties | 304 | 236 | ||||||
| - short-term financial receivables | - | 219 | ||||||
| Total | 304 | 455 | ||||||
| Statutory Financial Statements | 8 |
AC Immune SA, Ecublens
