annual report - ablynx · class therapy to treat respiratory syncytial virus (rsv) infections in...

ANNUAL REPORT

ANNUAL REPORT 2012 / AbLyNx 3. AbLyNx AT A gLANcE

Ablynx is a biopharmaceutical company focused on the discovery and development of Nanobodies®, a novel class of antibody-derived therapeutic proteins based on single-domain antibody fragments, for a range of serious human diseases in the areas of inflammation, haematology, oncology and infections.

At 31 December 2012, there were approximately 25 programmes in the R&D pipeline, five of which are wholly-owned Nanobody-based products at clinical development stage, and two of which have achieved clinical proof-of-concept in patients with rheumatoid arthritis. At the end of 2012, the Company employed more than 250 people at its headquarters in Ghent, Belgium.

Ablynx has on-going partnerships with major pharmaceutical companies including Boehringer Ingelheim, Merck & Co., Merck Serono and Novartis.

The Company ended 2012 with a strong financial position of €62.8M in cash and cash equivalents, restricted cash and short-term investments.

ABLYNX AT A GLANCE

ANNUAL REPORT 2012 / AbLyNx 5. iNdEx

1. bUsiNEss sEcTiON 07.

iNTROdUcTiON 08. Letter to Shareholders Highlights 2012

cORPORATE gOALs 14. Strategy Outlook 2013

PiPELiNE PROgREss 20. Internal activities Partnerships

shAREhOLdERs’ iNfORmATiON 36. Key metrics The shares in 2012 Analyst coverage Financial calendar Shareholders’ club IR contact details

gLOssARy 52.

2. cORPORATE gOvERNANcE 59. ANd fiNANciAL iNfORmATiON

iNdEX

bUsiNEss sEcTiON

iNTROdUcTiON

During the past year, Ablynx’s existing partnered activities continued to go from strength to strength. Boehringer Ingelheim extended their FTE payments by a further two years as part of our Strategic Alliance, during which we will focus our resources on bringing Nanobodies to the clinic. A second pre-clinical candidate in oncology was selected as part of this on-going collaboration, which brings the total number to three. Boehringer Ingelheim also filed a Clinical Trials Application, as part of our Alzheimer’s collaboration, with the current expectation being that a Phase I trial of this Nanobody product will start in 2013. Our partnership with Merck Serono also advanced further with the selection of a second pre-clinical candidate in the field of oncology.

In October 2012, we added another flagship pharmaceutical company to our list of partners, when we signed a deal with Merck & Co., the world’s third largest pharma company. The partnership will focus on the discovery and development of Nanobodies against a voltage-

gated ion channel, with the option to develop Nanobodies against a second non-disclosed target. Ion channels are of tremendous importance in many diseases and to date, no antibody-based drugs have been successfully developed to modulate ion channel functions. This is an exciting area where the Nanobody platform could prove to have major advantages compared with conventional technologies.

Ablynx remains committed to working with external partners to evaluate the potential of the Nanobody platform in a number of different ways. The research collaboration with Algeta, announced at the end of 2012, is a further proof of that strategy. The discovery and development of novel cancer therapeutics based on both companies’ proprietary technologies, offer an exciting opportunity to combine our unique and powerful Nanobody technology with Algeta’s leading alpha emitting radio-isotope payload expertise, to search for breakthrough developments in the field of oncology.

2012 has been marked by continued positive progress with our own clinical development programmes as well as success with existing partnered programmes, and the addition of an important new partner. While continuing to invest strongly in R&D, we have managed our resources carefully to maintain a good cash runway. As always, the key to this success is our people. I would therefore like to thank you – our staff, investors and other key stakeholders – for your commitment and trust. I believe that we have the potential to continue with this positive momentum and I look forward to sharing our further progress with you over the coming months.

Edwin MosesChairman and Chief Executive Officer

LETTER

TO

SHAREHOLdERS

Dear Shareholder,

2012 was an excellent and rewarding year for Ablynx across all areas of our business.

In September 2012, we successfully delivered our first inhaled Nanobody (ALX-0171) in humans using a nebuliser, which is a major breakthrough in alternative administration of biological drugs and opens up the potential for new ways to treat pulmonary diseases. ALX-0171 could become a first-in-class therapy to treat respiratory syncytial virus (RSV) infections in infants, an area with high unmet medical need.

The second clinical proof-of-concept with Nanobodies was achieved in October 2012 with our anti-IL-6R Nanobody (ALX-0061) in patients with rheumatoid arthritis (RA). We believe that ALX-0061 could become a best-in-class RA therapeutic thanks to its improved efficacy, safety, convenience of administration and the potential for faster onset of remission. These attributes represent some very valuable general advantages of the

Nanobody platform which have also delivered important benefits with other Nanobody-based clinical assets.

Our anti-TNFα Nanobody, ozoralizumab, reported strong open-label extension data from the worldwide Phase II study in RA patients, which demonstrated that it could have the potential for individualised treatment, a possible new approach in TNFα-targeted therapy.

We strengthened our Board of Directors with the appointment of key industry experts: Dr Roger Perlmutter, who spent more than a decade as Executive Vice President, Research and Development, at Amgen Inc, the world’s largest biotechnology company; and Dr Russell Greig, who has held a number of executive positions at GSK, including the positions of President of Pharmaceuticals International and Senior Vice President Worldwide Business Development. The ability of Ablynx to attract such high-level Board members is a testament to the strength of the Company’s technology and product pipeline.

AnnuAl RepoRt 2012 / Ablynx intRoduction / 110.AnnuAl RepoRt 2012 / Ablynx 10. introduction / 1 ANNUAL REPORT 2012 / AbLyNx 11. iNTROdUcTiON / 1

JANUARyAblynx was granted an extended GMP certificate for its new GMP unit.

fEbRUARyThe global Strategic Alliance with Boehringer Ingelheim progressed further with the selection of a second pre-clinical candidate. The Nanobody development candidate was designed to interfere with the function of two distinct proteins that are thought to play a major role in human cancers.

Appointment of Dr Andreas Menrad as Chief Scientific Officer.

mARchFTE payments under the Global Strategic Alliance with Boehringer Ingelheim were extended for another two years to run until September 2014.

APRiLAblynx’s partner Novartis filed an IND for the Nanobody TAS266 to start a Phase I study in cancer patients. Results from the pre-

clinical study showed that TAS266 elicits a superior anti-tumour effect compared with conventional monoclonal antibody approaches.

Ablynx’s partner Boehringer Ingelheim filed a CTA for the Nanobody in Alzheimer’s disease.

JUNEThe long-term open-label study with the anti-TNFα Nanobody, ozoralizumab, showed new compelling results, indicating that the Nanobody could have a differentiating profile based on its individualised dosing potential and low immunogenicity profile (0.75% of patients tested positive for neutralising anti-drug antibodies (nADAs) at the end of the treatment period).

sEPTEmbERFirst inhaled Nanobody, ALX-0171, successfully completed Phase I safety study in healthy volunteers. This is the first time that an antibody-derived drug could successfully be administered to humans with a nebuliser.

The second Nanobody under the first co-discovery and co-development collaboration with Merck Serono entered pre-clinical development in the field of oncology.

Ablynx strengthened its Board of Directors with the appointment of two new independent Directors: Dr Greig (former President of Pharmaceuticals International GSK) and Dr Perlmutter (former Executive Vice President, Research and Development, at Amgen Inc).

OcTObERAblynx signed a collaboration with Merck & Co. to discover and develop Nanobodies against a voltage gated ion channel with the option to discover and develop Nanobodies against a second, non-disclosed target. Ablynx received an upfront payment of €8.5 million and, in addition, is eligible to receive up to €448 million in research, regulatory and commercial milestone payments associated with the progress of multiple candidates, as well as tiered royalties on any products derived from the collaboration.

Ablynx reported excellent interim results from the Phase I/II study with ALX-0061, the anti-IL-6R Nanobody in patients with RA. At the week 12 interim analysis, the 3mg/kg dose level of ALX-0061 met the efficacy endpoint in achieving statistically significant improvement in DAS28 remission and ACR20 scores compared with placebo. Moreover, all dose groups showed impressive results in all efficacy endpoints, with a DAS28 remission of >40% achieved consistently at week eight and with an onset of remission observed in some patients already at week two. At all doses tested, ALX-0061 was well-tolerated and the safety profile compared favourably to data reported for other biological DMARDs (disease-modifying anti-rheumatic drugs).

NOvEmbERAblynx and Algeta entered into a cancer research collaboration to evaluate the potential of novel alpha-pharmaceuticals comprising thorium-277 conjugated to tumour-targeting Nanobodies.

First inhaled nanobody successFully delivered to humans

new partnership with merck & co. in the Field oF ion channel drug development

HiGHLiGHTS

2012

second clinical prooF-oF-concept achieved in patients with ra

AnnuAl RepoRt 2012 / Ablynx intRoduction / 112. AnnuAl RepoRt 2012 / Ablynx intRoduction / 113.AnnuAl RepoRt 2012 / Ablynx intRoduction / 112.

cORPORATE gOALs

COmpANY STRATEGY

Ablynx aims to become a leading international biopharmaceutical company with a broad product pipeline addressing disease areas with a high unmet medical need, where its proprietary Nanobody-based products can offer a clear benefit to patients and payers.

To maximise the chances of success, Ablynx drives multiple R&D programmes in parallel, both internally and with its partners, across a broad range of biological targets and disease indications.

In general, Ablynx will partner its Nanobody programmes during clinical development or earlier where appropriate. For specific niche indications, such as its anti-von Willebrand Factor Nanobody for the treatment of acquired thrombotic thrombocytopenic purpura (TTP), Ablynx may consider taking products to market itself though it will always evaluate whether there is a marketing partner better placed to lead the commercialisation process.

Creative collaborative deal structures will remain a key part of Ablynx’s business strategy. This allows the Company to access additional skills and resources to exploit its broadly applicable platform technology as well as accessing non-dilutive financing to invest in its own Nanobody-based programmes and further build its product pipeline.

AnnuAl RepoRt 2012 / Ablynx 16. AnnuAl RepoRt 2012 / Ablynx 17.16. cORPORATE gOALs / 2cORPORATE gOALs / 2ANNUAL REPORT 2012/ AbLyNx

OuTLOOk 2013 Ablynx is well-positioned to generate further shareholder value during the course of 2013.

We expect important progress for three clinical programmes: caplacizumab in TTP, ALX-0061, anti-IL-6R, in inflammation, and ALX-0171, anti-RSV, in viral infections.

We also anticipate important new partnering deals and advances in existing collaborations as some of our partnered programmes move into the clinical development stage.

Technology developments, to exploit the Nanobody platform even more broadly, will continue in-house and in collaboration with external partners.

Finally, good cash management will remain a key priority for the Company, with a strong focus on net cash burn and the generation of cash to support the on-going development of the business.

AnnuAl RepoRt 2012 / Ablynx 18.AnnuAl RepoRt 2012 / Ablynx 18. 19.ANNUAL REPORT 2012 / AbLyNx cORPORATE gOALs / 2cORPORATE gOALs / 2

PiPELiNE PROgREss

ThERAPEUTic AREA PROdUcT NAmE TARgET PARTNER discOvERy PRE-cLiNicAL PhAsE i PhAsE ii PhAsE iii

hAEmATOLOgy cAPLAcizUmAb vWf

iNfLAmmATiON/ OzORALizUmAb TNfα

immUNOLOgy/ ALx-0061 iL-6R

iNfEcTiON NA igE

vARiOUs

ONcOLOgy ALx-0141 RANKL

vARiOUs

vARiOUs

PULmONARy ALx-0171 Rsv

vARiOUs

vARiOUs

iNfLAmmATiON/ ALx-0761

immUNOLOgy NA

NA

NA

ONcOLOgy ALx-0751

NEUROLOgy NA

NA

ONcOLOgy NA

PULmONARy NA

vARiOUs NA

NA

f

ULL

y PA

RTN

EREd

50%

cO

-cO

fU

LLy

OW

NEd

cLiNicALLy vALidATEd TARgETs

1sT iN cLAss

22.ANNUAL REPORT 2012 / AbLyNx ANNUAL REPORT 2012 / AbLyNx 23. PiPELiNE PROgREss / 3PiPELiNE PROgREss / 3

Ablynx has developed a broad product pipeline, both internally and with pharmaceutical partners, addressing some of the most important areas of medical need in inflammation, haematology, oncology and infectious diseases.

Today, the Company has five Nanobody-based products in clinical development, two have already achieved clinical proof-of-concept in patients with rheumatoid arthritis, one is in a (potentially pivotal) Phase II trial, and two are in Phase I clinical development. The pipeline is well-balanced between first-in-class therapeutics and innovative products against clinically validated disease targets.

iNTERNAL ACTiviTiES

ALx-0061 (ANTi-iL-6R) fOR ThE TREATmENT Of RhEUmATOid ARThRiTis (RA)

ALX-0061 targets the interleukin 6 pathway via its IL-6R, which plays a fundamental role in the inflammation process in RA.

ALX-0061 has been designed to become a best-in-class therapeutic. Its small size (26kD) should allow ALX-0061 to penetrate more effectively into tissues. The potent, monovalent interaction of the molecule with its target reduces the possibility of off-target effects. Its binding to human serum albumin prolongs the in vivo half-life of the product and can lead to improved trafficking to areas of inflammation. The Nanobody has a very strong affinity for soluble IL-6R which should ensure fast target engagement and could result in a fast onset of effect. ALX-0061 appears to benefit from the general Nanobody characteristic of having a very low immunogenic potential. ALX-0061 is a very robust and stable drug

that can be administered by both the intravenous and subcutaneous route.

A randomised, double-blind, placebo-controlled Phase I/II study was initiated in March 2011 combining a dose finding single ascending with a POC multiple ascending dose in the target patient population of RA. A total of 37 RA patients were recruited in the multiple-dose 24 week Phase II study and were, for the first 12 weeks, randomised to three dose groups of intravenously administered ALX-0061 (1 mg/kg every 4 weeks, 3 mg/kg every 4 weeks or 6 mg/kg every 8 weeks) or to placebo. At week 10, patients were allowed, depending on their disease status, to modify their treatment regimen, or for placebo patients to roll over into the active treatment group. The treatment continued for a total of 24 weeks to enrich the safety and efficacy population size.

In October 2012, positive 12 week interim results of the Phase II study were published. At this

ANNUAL REPORT 2012 / AbLyNx 25. PiPELiNE PROgREss / 324. PiPELiNE PROgREss / 3ANNUAL REPORT 2012 / AbLyNx

week 12 interim analysis, the 3 mg/kg dose level of ALX-0061 met the efficacy endpoint in achieving statistically significant improvement in DAS28 remission and ACR20 scores compared with placebo. All dose groups showed impressive results in all efficacy endpoints, with a DAS28 remission of >40% achieved consistently at week eight and with an onset of remission observed in some patients already at week two. At all doses tested, ALX-0061 was well-tolerated and the safety profile compared favourably to data reported for other biological DMARDs. Additionally, no clinically relevant neutropenia (severe decrease in white blood cell count) and no clinically significant increases in liver enzymes or lipid levels (cholesterol) were observed at the interim analysis.

Final Phase II results at week 24 were released in February 2013 and confirmed the Nanobody’s potential to become a best-in-class RA therapeutic.

(Ro)Actemra® (tocilizumab, marketed by Roche) is the first and only available monoclonal antibody that blocks the IL-6 receptor and is approved to treat RA.

AbOUT RhEUmATOid ARThRiTis (RA)

RA is a chronic, progressive, inflammatory disease of the joints and surrounding tissues, and is associated with pain, irreversible joint destruction and systemic complications such as fatigue and anaemia. Although the cause of RA is still unidentified, it is known that various inflammatory factors play a significant role, including TNFα, interleukin-1 (IL-1) and interleukin-6 (IL-6).About 24 million people are diagnosed with RA worldwide.

cAPLAcizUmAb (ANTi-vWf) fOR ThE TREATmENT Of AcqUiREd ThROmbOTic ThROmbOcyTOPENic PURPURA (TTP)

Caplacizumab (ALX-0081/ALX-0681) is a bivalent Nanobody that potently and selectively inhibits the binding interaction of platelets to ultra-large, multimeric precursors of vWF (UL-vWF). UL-vWF multimers accumulate in the blood of TTP patients and spontaneously bind to platelets, forming characteristic string-like clots, which lead to a potentially life-threatening disease.

ablynx believes that the unique properties oF alx-0061 together with its excellent eFFicacy data and its promising saFety proFile conFirm the substantial potential value oF this asset in the huge ra market and in other indications.

Caplacizumab has a well-understood PK and PD profile with fast onset of activity and it is quickly cleared from the body via the kidneys. It can be administered in two forms: an intravenous bolus and a subcutaneous injection (allowing self-administration at home). The Nanobody received Orphan Drug Designation from both the EMA (EU) and the FDA (US) in April 2009.

Ablynx initiated a randomised, single-blind, placebo-controlled international Phase II study in September 2010 (the TITAN trial) in patients with acquired TTP who receive, on top of the standard of care, either placebo or caplacizumab for the duration of plasma exchange plus 30 days. The goal is to have completed the recruitment of 110 patients with acquired TTP by the end of 2013. It is intended that the trial is accepted as a pivotal study for conditional Marketing Authorisation (MA) in Europe, and in the USA, Ablynx will have a post-Phase II meeting with the FDA to agree on the next steps.Today, there are no drugs specifically approved for the treatment of acquired TTP. Patients who have an episode of TTP receive multiple rounds

of plasma exchange, as well as immune modulators. This requires lengthy hospital stays that are frequently associated with clinical complications. It is believed that caplacizumab could become the first of three key pillars in acquired TTP management in conjunction with plasma exchange and immune modulators. Through shortening the time to platelet recovery, caplacizumab may reduce the volume, number of days and associated risks of plasma exchange. In addition, it may reduce the risk of exacerbations and improve clinical outcomes.

ThROmbOTic ThROmbOcyTOPENic PURPURA (TTP)

TTP is a rare bleeding disorder, causing extensive blood clots that block small blood vessels throughout the body. It is a life-threatening disorder characterised by thrombocytopenia, haemolytic anaemia and microvascular thromboses causing variable degrees of tissue ischaemia and infarction. TTP exists in two forms: a congenital and an acquired form, with the latter accounting for >90% of the patients. Mortality due to TTP remains high at 10-

caplacizumab could be the First drug on the market that is speciFically approved to treat acquired ttp.

AnnuAl RepoRt 2012 / Ablynx 26. ANNUAL REPORT 2012 / AbLyNx 27. PiPELiNE PROgREss / 3PiPELiNE PROgREss / 3

30%, despite intensive treatment procedures.

ALx-0171 (ANTi-Rsv) fOR ThE TREATmENT Of REsPiRATORy syNcyTiAL viRUs iNfEcTiON iN iNfANTs (Rsv)

Ablynx’s innovative technology platform, which enables unique and flexible drug formatting, resulted in the creation of a trivalent Nanobody, ALX-0171.

The physical robustness allows fast delivery directly into the lungs, i.e. the site of infection, via nebulisation. The trivalent structure allows for increased activity at the target, which enables neutralisation of virus replication in the lungs.

As such, Ablynx was able to generate a therapeutic product that works specifically at the site of infection. In contrast, it is very difficult, or even impossible to nebulise classical monoclonal antibodies. Hence these can currently only be administered systemically. It has proved very difficult to deliver sufficient antibody to the infection site to achieve a therapeutic effect.

In December 2011, Ablynx initiated a randomised, double-blind, placebo controlled Phase I study in healthy volunteers and the results were published in September 2012. These results demonstrated that single and multiple inhalations of the Nanobody were well tolerated and no dose-limiting toxicity or treatment emergent immunogenicity was observed. Furthermore, ALX-0171 had no clinically relevant effect on lung function and had the opportunity for once-daily dosing.

During the course of 2013, additional clinical and pre-clinical studies will be performed. The clinical studies include a safety study in adults with hyper-active airways, to extend the current safety package beyond “healthy” airways, and a pulmonary and systemic PK study in healthy volunteers. The additional pre-clinical package consists of a study in juvenile animals to extend juvenile PK knowledge of ALX-0171, and two efficacy studies in more recently developed RSV models. This package has been designed to meet regulatory requirements for a first-in-infant study in the EU, which is expected to start in 2014.

28.AnnuAl RepoRt 2012 / Ablynx 28. PiPELiNE PROgREss / 3 ANNUAL REPORT 2012 / AbLyNx 29. PiPELiNE PROgREss / 3

REsPiRATORy syNcyTiAL viRUs iNfEcTiON (Rsv)

RSV is a respiratory virus that infects the lungs and respiratory tract and is the most common cause of bronchiolitis and pneumonia in children under one year of age.

Current treatment of patients infected with RSV is mostly symptomatic. RSV remains the primary reason for infant hospitalisation and virus-associated deaths in infants, hence the high need for an effective and specific anti-RSV therapeutic drug.

It is estimated that there are more than 300,000 child hospitalisations per year in the seven major pharmaceutical markets and the reported infection rate is 70-80% in children under two years of age.

In addition, RSV infection is a significant cause of pulmonary disease in transplant patients, immune-compromised subjects and the elderly.

alx-0171 has the potential to be a transFormational treatment For rsv inFections in inFants.

introduction / 130. AnnuAl RepoRt 2012 / Ablynx 31.AnnuAl RepoRt 2012 / Ablynx 30. PiPELiNE PROgREss / 3 PiPELiNE PROgREss / 3

pARTNEREd ACTiviTiES

PARTNERshiPs WiTh LEAdiNg PhARmAcEUTicAL cOmPANiEs

Ablynx has on-going partnerships with major pharmaceutical companies including Merck Serono, Boehringer Ingelheim, Novartis and Merck & Co.To date, these partnerships have provided Ablynx with €160 million in non-dilutive cash, some of which the Company has used to fund its own internal R&D activities.

Ablynx and Merck Serono selected a second programme, ALX-0751, to enter pre-clinical development. Both companies are at this stage equally responsible for the development of this programme. Three other programmes (in inflammation and osteoarthritis) are at an earlier stage of development.

Ablynx has two collaborations with Boehringer Ingelheim. One in the area of Alzheimer’s disease, which is expected to enter Phase I clinical development in 2013. The second agreement, the Strategic

Alliance, includes eight earlier stage Nanobody programmes across multiple therapeutic areas.

The partnership with Novartis started in 2005. In 2012, the first programme, TAS266 (DR5 agonist) entered Phase I clinical development in cancer patients and was terminated later the same year. The second Nanobody programme (against a non-disclosed target) is in earlier stage development. Novartis is fully responsible for these programmes.

In 2012, Ablynx and Merck & Co. entered into a collaboration to develop and commercialise Nanobody candidates directed towards a voltage gated ion channel with the option to develop and commercialise a Nanobody to a second target. The physiological importance of ion channels is underlined by their involvement in a wide range of conditions including neurological disorders, hypertension, diabetes, cancer and arrhythmia. Ion channels represent highly valuable therapeutic targets, which

are currently only modulated by a range of small-molecule drugs which have the general disadvantage of lack of specificity. Today, there are no approved antibody-based drugs that target ion channels and Ablynx’s innovative Nanobody technology could potentially lead to a breakthrough in the field and the development of highly specific ion channel targeting therapeutics.

Ablynx also has a research collaboration with Algeta, the Oslo quoted company focused on developing novel targeted therapies for patients with cancer. The feasibility study, which started at the end of 2012, will evaluate a novel Targeted Thorium Conjugate (TTC), combining Algeta’s proprietary thorium-227 alpha-pharmaceutical payload with Nanobodies generated by Ablynx. Both companies will contribute resources towards the research collaboration, which is expected to last for up to a year initially and has the option to be extended thereafter.

OzORALizUmAb (ANTi-TNfα) fOR ThE TREATmENT Of RhEUmATOid ARThRiTis ANd ALx-0141 (ANTi-RANKL) fOR UsE iN bONE RELATEd disORdERs.

Ablynx is exploring various routes to license both assets.

Ozoralizumab is a Phase IIb ready Nanobody candidate to treat RA. In 2012, results from the long-term, open-label Phase II extension study demonstrated that ozoralizumab could be differentiated over other TNFα blockers thanks to its immunogenicity profile (only 0.76% of patients at the end of the study remained positive for neutralising anti-drug antibodies) and its potential for an individualised treatment regimen.

ALX-0141 is a Phase IIa ready Nanobody candidate with the potential to treat bone related disorders including osteoporosis and bone metastases. A Phase I study in healthy post-menopausal women showed

that the Nanobody has a strong and sustained inhibitory effect on bone resorption biomarkers and was well tolerated with no serious adverse events or dose-limiting toxicity being observed.

introduction / 132. AnnuAl RepoRt 2012 / Ablynx 33.AnnuAl RepoRt 2012 / Ablynx 32. PiPELiNE PROgREss / 3 PiPELiNE PROgREss / 3

AnnuAl RepoRt 2012 / Ablynx 34. AnnuAl RepoRt 2012 / Ablynx 35.PiPELiNE PROgREss / 3 PiPELiNE PROgREss / 3

shAREhOLdERs’ iNfORmATiON

27%2010

15%2009

14%2008

fREE fLOAT36%

201153%

2012

shAREhOLdERs’ iNfORmATiON / 438.ANNUAL REPORT 2012 / AbLyNx ANNUAL REPORT 2012 / AbLyNx 39. shAREhOLdERs’ iNfORmATiON / 4

PROdUcTsiN ThE cLiNics

32008

42009

52010

72011

52012

REvENUEs( € miLLiON )

16.82008

29.72009

31.42010

21.92011

26.72012

40.ANNUAL REPORT 2012 / AbLyNx shAREhOLdERs’ iNfORmATiON / 4 ANNUAL REPORT 2012 / AbLyNx 41. shAREhOLdERs’ iNfORmATiON / 4

NUmbER Of EmPLOyEEs

32 174 38 192

TOTAL

38 224 42 250 40 222 g&A R&d

2332009

2052008

2922011

2622010

2622012


113,53437,33619,2902008

92,32151,84422,5652009

115,84257,39431,0892010

83,82166,73028,5082011

62,76758,75136,4622012

cAsh ANd ExPENsEs( € ‘000 )

cAsh POsiTiONOPExcAsh iNcOmE


ThE shAREsiN 2012

On 31 December 2012, there were 43,717,385 shares representing a total share capital of the Company of €81,700,0531. The total number of outstanding warrants (in number of shares) as at 31 December 2012 was 3,481,301 with the total number of fully diluted shares being 47,198,686.

Ablynx’s shares are traded on NYSE Euronext Brussels, under the ticker symbol ABLX.

Based on the most recent notifications received until 31 December 2012, the shareholder structure of the Company is as follows:

1 Under Belgian GAAP

gimv18%

sOfiNNOvA15%

AbiNgWORTh9%

bOEhRiNgERiNgELhEim5%

fREE fLOAT53%

AnnuAl RepoRt 2012 / Ablynx 46. AnnuAl RepoRt 2012 / Ablynx 47.shAREhOLdERs’ iNfORmATiON / 4 shAREhOLdERs’ iNfORmATiON / 4

2012 2011 2010Average daily volume 116,296 69,642 25,292Average daily value 503,372 353,980 197,362Total traded volume 29,771,718 17,975,216 6,499,989Total traded value 128,863,121 90,972,838 50,722,056

ThE shAREsiN 2012

AnnuAl RepoRt 2012 / AblynxAnnuAl RepoRt 2012 / Ablynx 48. shAREhOLdERs’ iNfORmATiON / 4 ANNUAL REPORT 2012 / AbLyNx 49. shAREhOLdERs’ iNfORmATiON / 4

ANALysT cOvERAgE

Ablynx is covered by six brokers:

bROKER ANALysT RATiNg ENd 2012Berenberg Bank Adrian Howd BuyHelvea Olav Zilian BuyKBC Securities Jan De Kerpel BuyKempen & Co Sachin Soni BuyEdison Investment Research* Mick Cooper BuyLifeSci Advisors* Andrew I. McDonald - Jeremy Isaacson Buy

* Paid research

In 2013, Ablynx will organise four events for individual investors at their headquarters in Ghent, during which a group presentation will be given followed by a guided visit to the laboratories and a networking drink. The events will be held in Dutch and will start at 5.45pm on the following days:

6 March22 May18 September 11 December

If you would like to attend a shareholders’ club, please email [email protected], mentioning your name and preferred day. The registrations are on a “first come, first serve” basis.

shAREhOLdERs’ cLUbs AT AbLyNx’s hEAdqUARTERs

iNvEsTOR RELATiONs cONTAcT

Ablynx NVTechnologiepark 21B-9052 Zwijnaarde (Ghent)BelgiumEmail: [email protected]: +32 9 262 00 00Website: www.ablynx.com

fiNANciAL cALENdAR 2013

dATE EvENT27 February Full year results 201225 April Annual General Meeting15 May Results Q1 201321 August Half year results 201314 November Results Q3 2013

AnnuAl RepoRt 2012 / Ablynx intRoduction / 150.AnnuAl RepoRt 2012 / Ablynx 50. shAREhOLdERs’ iNfORmATiON / 4 ANNUAL REPORT 2012 / AbLyNx 51. shAREhOLdERs’ iNfORmATiON / 4

gLOssARy

GLOSSARY

AcRthe response criteria for achievement of clinical response after treatment with the anti-rheumatoid therapeutics (e.g.ACR20)

biOmARKERcharacteristic that is objectively measured and evaluated as an indicator of normal biological processes, pathogenic processes, or pharmacologic responses to a therapeutic intervention

bisPEcific cONsTRUcTNanobody construct which binds to two different epitopes on the same target or on different targets

bivALENT cONsTRUcTNanobody construct comprising two Nanobodies

bOLUs iNJEcTiONrapid injection of a drug, medication or other substance directly into the blood vessel

bRONchiOLiTisinflammation of the small airways in the lung

dmARddisease modifying anti-rheumatic drug

EPiTOPEsite on an antigen recognised by an antibody

fcfragment crystallisation region - the tail region of an antibody that interacts with cell surface receptors and some proteins of the complement system. The property allows antibodies to activate the immune system

gLPgood laboratory practice - GLP refers to a quality system of management controls for laboratories and research organisations to ensure the consistency and reliability and reproducibility of results

gmPgood manufacturing practice - GMP standards are a part of the guarantee of the biopharmaceutical quality of the drug and guarantee that drugs are made up and controlled in a consistent way, according to a

standard of quality adapted to the considered use and in compliance with provisions on drugs

iL-6Rreceptor of interleukin-6 - a cytokine involved in a wide range of biological activities

iNdInvestigational New Drug Application - request for clinical trials authorisation

mAMarket Authorisation - medicines can only be prescribed or sold in a country when they are granted Marketing Authorisation by the applicable regulatory authorities. Before receiving this license, new medicines are subjected to careful review, to ensure that they meet the required high standards for safety, quality and efficacy

NANObOdyprotein that is composed of one or more binding domains with the structural and functional characteristics of naturally occurring heavy chain variable domains (VHH’s) from Camelidae. Nanobody® is a registered

trademark of Ablynx

NEbULisERa device used to administer medication in the form of a mist inhaled into the lungs

ORPhAN dRUgdrug treating a rare disease - the grant of orphan drug status by the authorities provides certain privileges, intended to stimulate the research, development and commercialisation of orphan drugs including market exclusivity of ten years in Europe and seven years in the USA

Pdpharmacodynamics - the action or effect of drugs on living organisms

PhAsE ifirst stage of testing in human subjects. Normally, a small (20-100) group of healthy volunteers will be selected. This phase includes trials designed to assess the safety (pharmacovigilance), tolerability, pharmacokinetics, and pharmacodynamics of a drug

PhAsE iionce the initial safety of the study

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drug has been confirmed in Phase I trials, Phase II trials are performed on larger patient groups (20-300) and are designed to assess how well the drug works, as well as to continue Phase I safety assessments in a larger group of patients

PhAsE iiiPhase III studies are randomised controlled multi-centre trials on large patient groups (300-3,000 or more depending upon the disease/medical condition studied) and are aimed at being the definitive assessment of how effective the drug is in comparison with current ‘gold standard’ treatment. Because of their size and comparatively long duration Phase III trials are the most expensive, time-consuming and difficult trials to design and run, especially in therapies for chronic medical conditions

PKpharmacokinetics - the study of the absorption, distribution, metabolism, and excretion of drugs in the body

PRE-cLiNicALinvolves in vitro (test tube or cell culture) and in vivo (animal) experiments using wide-ranging doses of the study drug to obtain preliminary efficacy, toxicity and pharmacokinetic information

PROOf-Of-cONcEPT sTUdyclinical trial to demonstrate the product is effective in patients

RArheumatoid arthritis - autoimmune disease that causes chronic inflammation of the joints, the tissue around the joints, as well as other organs in the body

RANKLReceptor Activator of Nuclear factor Kappa-B Ligand - a key regulator in bone remodelling

Rsvrespiratory syncytial virus

TNfαprotein named Tumour Necrosis Factor-alpha - a cytokine involved in systemic inflammation

TTPthrombotic thrombocytopenic purpura - a rare blood disorder

UL-vWfultra-large vWF multimers

vWfvon Willebrand factor - a blood glycoprotein involved in haemostasis

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cORPORATE gOvERNANcE & fiNANciAL REviEW

8. NOTEs TO ThE cONsOLidATEd 120. fiNANciAL sTATEmENTs 8.1. General Information 8.2. Summary of Significant Accounting Policies 8.3. Financial Risk Management 8.4. Critical Accounting Estimates and Judgements 8.5. Segment Information 8.6. Intangible Fixed Assets 8.7. Property, Plant and Equipment 8.8. Restricted Cash 8.9. Tax Receivables 8.10. Trade Receivables and Other Current Assets 8.11. Other Short-term Investments 8.12. Cash and Cash Equivalents 8.13. Financial Instruments by Category 8.14. Share Capital 8.15. Share-Based Payments 8.16. Borrowings 8.17. Trade Payables and Other Current Liabilities 8.18. Deferred Income Tax 8.19. Retirement Benefit Obligations 8.20. Research and Development Expenses 8.21. General and Administrative Expenses 8.22. Other Income and Expenses 8.23. Employee Benefit Expense 8.24. Operating Leases 8.25. Finance Income and Expenses 8.26. Income Tax Expense 8.27. Loss Per Share 8.28. Contingencies and Arbitrations 8.29. Commitments 8.30. Related Party Transactions 8.31. Events after Balance Sheet Date 9. discLOsURE AUdiT fEEs 168. 10. cONdENsEd sTATUTORy fiNANciAL 169. sTATEmENTs Of AbLyNx Nv As Of ANd fOR ThE yEAR ENdEd 31 dEcEmbER 2012 11. sUmmARy Of vALUATiON RULEs ANd 172. AddiTiONAL iNfORmATiON

1. REPORT Of ThE bOARd Of diREcTORs 62. 1.1. Strategic Highlights 1.2. Analysis of Results of Operations 1.3. Balance Sheet Analysis 1.4. Cash Flow Analysis 1.5. Outlook 2013 1.6. Corporate Governance Statement 1.7. Transactions within the Authorised Capital 1.8. Acquisition of Own Securities 1.9. Use of Financial Instruments by the Group 1.10. Statements required by Article 34 of the Royal Decree of 14 November 2007 1.11. Circumstances that could considerably affect the Development of the Group 1.12. Research and Development 1.13. Conflicting Interests of Directors (Article 523 of the Belgian Companies Code) 1.14. Risks 1.15. Independence and Expertise of at least one Member of the Audit Committee 1.16. Justification of the Valuation Rules 1.17. Appropriation of Results 1.18. Important Events subsequent to the Accounting Reference Date 1.19. Grant of Discharge to the Directors and the Statutory Auditor

2. REsPONsibiLiTy sTATEmENT 112.

3. sTATUTORy AUdiTOR’s REPORT TO 113. ThE shAREhOLdERs’ mEETiNg ON ThE cONsOLidATEd fiNANciAL sTATEmENTs fOR ThE yEAR ENdEd 31 dEcEmbER 2012

4. cONsOLidATEd bALANcE shEET 116.

5. cONsOLidATEd sTATEmENT Of 117. cOmPREhENsivE iNcOmE

6. cONsOLidATEd cAsh fLOW sTATEmENT 118.

7. cONsOLidATEd sTATEmENT Of 119. chANgEs iN shAREhOLdER’s EqUiTy

CONTENTS

ANNUAL REPORT 2012 / AbLyNx 61. cONTENTsANNUAL REPORT 2012 / AbLyNx 60. cONTENTs

Patient recruitment in the Phase II TITAN trial with caplacizumab, the anti-vWF Nanobody (ALX-0081/ALX-0681) to treat acquired thrombocytopenic purpura (TTP), progressed further and the goal is to complete recruitment of 110 patients by the end of 2013.

The first inhaled Nanobody (anti-RSV, ALX-0171) was successfully administered directly into the lungs of humans using a nebuliser, which is potentially a major breakthrough in the alternative administration of biological drugs and opens up the possibility of new ways to treat pulmonary diseases. ALX-0171 could become a first-in-class therapy to treat respiratory syncytial virus (RSV) infections, an area with high unmet medical need in infants as well as the elderly population.

Partnerships update During the year, Ablynx’s existing partnering activities continued to make very encouraging progress.

Boehringer Ingelheim extended their FTE payments by a further two years, as part of the Strategic Alliance, during which time the primary focus will be to advance the existing Nanobody programmes towards the clinic. A second pre-clinical candidate in oncology was also selected as part of this on-going collaboration, with now a total of three pre-clinical candidates in development. Boehringer Ingelheim filed a Clinical Trials Application, as part of the Alzheimer’s disease collaboration, with the current expectation being that a Phase I trial of this Nanobody programme will start in 2013.

Ablynx’s partnership with Merck Serono also advanced further with the selection of a second pre-clinical candidate, ALX-0751, in the field of oncology.

Ablynx added another flagship pharmaceutical company to its list of partners with a deal with Merck & Co., the world’s third largest pharmaceutical company. The partnership will focus on the discovery and development of Nanobodies against a voltage-gated ion channel, with the option to develop Nanobodies against a second non-disclosed target. The first partnered programme with Novartis, TAS266 (anti-DR5),

01.

REpORT Of THE BOARd Of

diRECTORS

Dear Shareholders,

We are pleased to present to you the consolidated financial statements for the fiscal year ended 31 December 2012 prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU.

1.1. sTRATEgic highLighTs

Revenues were €26.7 million (2011: €21.9 million) comprising up-fronts, milestone payments, payments for full-time equivalents and grants. Cash-in for the period of €36.5 million (2011: €28.5 million) showed a 28% growth compared with 2011. Total research and development costs were €46.9 million (2011: €56.3 million). General and administrative expenses remained well under control at €9.4 million (2011: €10.4 million). The loss from continuing operations (before tax and net finance income) decreased by 35% to €29.8 million (2011: €45.5 million). The net loss for the period was €28.5 million (2011: €43.9 million). The Company ended the year with €62.8 million in cash, cash equivalents, restricted cash and short-term investments.

Pipeline update At the end of 2012, Ablynx had five wholly-owned Nanobodies in the clinic, three in Phase II and two in Phase I clinical development.

The anti-IL-6R Nanobody, ALX-0061, was the Company’s second Nanobody to achieve clinical proof-of-concept in patients with rheumatoid arthritis (RA). It is believed that ALX-0061 could become a best-in-class RA therapeutic due to its improved efficacy and safety profile, its potential for less frequent dosing and the faster onset of remission. The anti-TNFα Nanobody, ozoralizumab (ATN-103), reported good 48 week open-label extension data from a worldwide Phase II study in RA patients, which demonstrated that it could have the potential for individualised treatment – a possible new approach in TNFα-targeted therapy.

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consultancy.Other operating expenses decreased to €0.2 million (2011: €0.7 million), mainly because of costs related to the closing of the Portuguese site in 2011.

Operating resultAs a result of the foregoing, the loss from operating results, before tax and net finance income, decreased to €29.8 million in 2012 (2011: €45.5 million).

Finance income (net)Net finance income primarily comprises interest from deposits and decreased with €0.4 million to €1.3 million in 2012 (2011: €1.7 million). This decrease was primarily attributable to lower interest rates and a lower cash position.

Loss before taxesAs a result of the foregoing, the net loss before taxes decreased to €28.5 million in 2012 (2011: €43.9 million).

Income taxAs the Group incurred losses in all of the relevant periods, the Group had no taxable income, and therefore paid no income taxes.

Loss for the periodThe net loss for the period was €28.5 million (2011: €43.9 million).

LiquidityThe Company ended the year with €62.8 million in cash, cash equivalents, restricted cash and short-term investments. Subsequent to year-end, the Company increased its cash by €31.5 million through a private placement of new shares.

1.3. bALANcE shEET ANALysis

The Group’s intangible assets include a portfolio of patents, which are being amortised over approximately twelve years and technology licences that are being amortised over five and eighteen years. The Group has not capitalised any other patents and it expenses all of its research and development activities. The intangible assets also include software licenses acquired over the last years.

entered Phase I clinical development in cancer patients in 2012 but was terminated later the same year.

Ablynx remains committed to working with external partners to evaluate the potential of its Nanobody platform in a number of different ways. A further example of this strategy is the recently announced research collaboration with Algeta to discover and develop novel radio-isotope-based cancer therapeutic conjugates using target-specific Nanobodies.

Corporate developments Ablynx has strengthened its Board of Directors with the appointment of key industry experts as non-executive Directors of the Company: Dr. Roger Perlmutter, who spent more than a decade as Executive Vice President, Research and Development, at Amgen Inc, the world’s largest biotechnology company; and Dr. Russell Greig, who has held a number of executive positions at GSK, including President of Pharmaceuticals International and Senior Vice President Worldwide Business Development. The ability of Ablynx to attract such high-level Board members is a testament to the strength of the Company’s technology and product pipeline.

1.2. ANALysis Of REsULTs Of OPERATiONs

RevenuesTotal revenues were €26.7 million in 2012 (2011: €21.9 million), comprising up-fronts, milestone payments and payments for full-time equivalents from our partners, together with grants. The increase relates to higher FTE income and milestones.

Research and development expensesIn 2012, research and development expenses decreased by €9.4 million to €46.9 million (2011: €56.3 million). This decrease was mainly attributable to a €1.0 million decrease in consumables costs and a €7.5 million decrease in external development costs largely related to reduced technology and preclinical development costs.

General and administrative expensesGeneral and administrative expenses decreased by €1.0 million to €9.4 million in 2012 (2011: €10.4 million). This decrease was mainly attributable to a €1.0 million decrease in administrative costs and


which will allow the Company to maximise the value of the asset.The Phase II trial with caplacizumab is expected to progress further with the goal to complete the recruitment of 110 patients with acquired TTP by the end of 2013. It is intended that the trial is accepted as a pivotal study for conditional Marketing Authorisation (MA) in Europe and in the USA, Ablynx will have a post-Phase II meeting with the FDA to agree on the next steps. Caplacizumab could be the first drug on the market that is specifically approved to treat acquired TTP. During the course of 2013, additional clinical and pre-clinical studies will be performed with the anti-RSV Nanobody (ALX-0171). The clinical studies include a safety study in adults with hyper-active airways, to extend the current safety package beyond “healthy” airways, and a pulmonary and systemic PK study in healthy volunteers. Additionally, a pre-clinical package consisting of a study in juvenile animals to extend juvenile PK knowledge of ALX-0171 plus two additional efficacy studies in recently developed RSV models will be performed. This package has been designed to meet regulatory requirements for a first-in-infant study for ALX-0171 in the EU which is expected to start in 2014. Ablynx also expects important new partnering deals and advances in existing collaborations as some of its partnered programmes move into the clinical development stage. Technology developments, to exploit the Nanobody platform even more broadly, will continue both in-house and in collaboration with partners. Finally, good cash management will remain a key priority for the Company, with a strong focus on net cash burn and the generation of cash to support the on-going development of the business. Again in 2013, we expect to keep net cash burn in the range of €20-25 million.

1.6. cORPORATE gOvERNANcE sTATEmENT

1.6.1. REfERENcE cOdE – cOmPLy OR ExPLAiN

The corporate governance of the Company has been organised pursuant to the Belgian Companies Code and the Company’s Articles of Association. The Company’s Corporate Governance Charter is available on the Ablynx website. The Company’s Corporate Governance Charter and this Corporate Governance Statement have been adopted in accordance with the recommendations set out in the Belgian Corporate Governance Code (the “CGC”) that was issued on 9 December 2004

The Group’s non-current assets include the Group’s laboratory and office equipment, the investments in the building, tax receivables and €2.7 million restricted cash, which is related to a cash pledge that the Company has provided. The Group does not own any real estate and continues to invest in equipment for its research activities.

The Group’s current assets consist mainly of trade receivables, other current assets, other short-term investments and cash and cash equivalents.

The Company’s equity decreased from €58.6 million to €31.7 million mainly as a result of the incorporation of the loss for the year (€28.5 million).

The Group’s non-current liabilities relate to the financing of investments in the building and the leasing of equipment.

The Group’s current liabilities primarily relate to deferred income from collaborative agreements and trade payables.

1.4. cAsh fLOW ANALysis

Cash flow from operating activities represented a net outflow of €21.2 million in 2012, as compared to a net outflow of €30.6 million in 2011. The decrease is mainly related to higher revenues and lower operating expenses in 2012.

Cash inflow from investing activities of €22.9 million comprises primarily €22 million proceeds from the sale of short-term investments, and expenditure of €0.9 million on property, plant and equipment. Cash flow from financing activities represented a net outflow of €0.7 million mainly attributable to reimbursed borrowings (e.g. leasing).

1.5. OUTLOOK 2013

Ablynx is well positioned to generate further shareholder value during the course of 2013. Ablynx will investigate various possibilities through which it can progress the development of the anti-IL-6R Nanobody, ALX-0061, including discussions with potential licensing partners and other paths


of which they are members. In principle, they will not receive any performance-related remuneration, nor will any options or warrants be granted to them in their capacity as Director. However, upon recommendation of the Nomination and Remuneration Committee, the Board of Directors may propose to the Shareholders’ Meeting to deviate from that principle in application of article 554 BCC, if, to the Board of Directors’ reasonable opinion, the granting of options or warrants would be necessary or useful to attract or retain independent Directors with the most relevant experience and expertise.

1.6.2. cAPiTAL ANd shAREs

The following capital increases took place in 2012:

On 18 January 2012, the Company issued 15,000 new shares in exchange for €30,000 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €28,050 and €1,950 respectively.

On 19 April 2012, the Company issued 5,000 new shares in exchange for €7,000 as a result of the exercise of warrants by some employees and consultants of the Company. The par value amounted to €7,000.

On 18 October 2012, the Company issued 7,490 new shares in exchange for €21,204.64 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €13,997.48 and €7,207.16 respectively.

The share capital consists of shares, which are fully paid up, with a par value of €1.87 per share.

• Number of shares on 31 December 2011 43,689,895• Number of new shares (exercise of warrants) 27,490• Number of shares on 31 December 2012 43,717,385

During the Board meeting of 1 February 2012, the issuance of a maximum number of 860,000 warrants was approved and 748,750 warrants have been issued.

Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a

by the Belgian Corporate Governance Committee and subsequently amended on 12 March 2009. The charter is regularly updated and the date of modification is mentioned each time.

The Company has opted for a two-tier governance structure. As a result, the governance structure of Ablynx is based on a distinction between:

• The management of Ablynx (including the daily management), a task conducted by the Executive Committee (“Directiecomité”) within the meaning of Article 524bis of the Belgian Companies Code and within the framework of the general strategy defined by, and under the supervision of the Board of Directors; and

• The development of the general strategy of Ablynx, the supervision of the Executive Committee and the exercise of specific powers attributed by the Belgian Companies Code, the Company’s Articles of Association and the Company’s Corporate Governance Charter, which fall within the powers of the Board of Directors.

All transactions involving conflicts of interests were in line with the precisions of the Corporate Governance Charter and are listed in the annual report under point 1.13.

The Company’s Board of Directors complies with the Corporate Governance Charter (CGC), and believes that certain deviations from its provisions are justified in view of the Company’s particular situation. These deviations include the following:

• Provision 1.5 CGC: for reasons of continuity in the management of the Company, the Chairman of the Board of Directors and the CEO are one and the same individual.

• Provision 2.1: gender diversity. Historically, the Board was always composed of men. The Company commits to build a diverse list of candidates for new positions in the future.

• Provision 2.9: the Company has no Company Secretary. The CFO acts as Company Secretary with the assistance of external counsels.

• Provision 5.2 CGC: the Company has no overall formal internal auditor because of the size of the Company, however, the Audit Committee regularly evaluates the need for this function and/or commissions external parties to conduct specific internal audit missions and report back to the Audit Committee.

• Provision 7.7 CGC: only the independent Directors shall receive a fixed remuneration in consideration of their membership to the Board of Directors and their attendance in the meetings of the committees


The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until January 2017 for consultants and as from 1 January 2016 until January 2019 for employees). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.

During the Extraordinary General Shareholders’ Meeting of 6 November 2012, the issuance of a maximum number of 35,000 warrants and a maximum number of warrants relating to a number of shares worth €35,000 was approved and 17,868 warrants have been issued in 2013.

Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of thirty days before the date of the grant (€5.44 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month).

The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until July 2017 for independent directors and as from 1 January 2016 until July 2019 for employees). In case of normal termination of the Director’s mandate or the employee contract, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for independent Directors and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.

period of 30 days before the date of the grant (€3.21 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month).

The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until October 2016 for consultants and as from 1 January 2016 until October 2018 for employees). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the exercise period of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.

The General Shareholders’ Meeting of 30 April 2009 and the Board of Directors meeting of 22 June 2009 approved the 5-year extension of certain warrant plans in accordance with Article 583 of the Belgian Company Code and in accordance with Article 21 of the “Economische Herstelwet”. Because of this extension, the fair value of the warrants has changed. The incremental fair value was calculated as the difference between the fair value with and without extension at the date of extension.The incremental fair value granted had a €483,000 impact on the share-based cost for the year 2009.

During the General Shareholders’ Meeting of 26 April 2012, the issuance of a maximum number of 180,000 warrants was approved and 162,500 warrants have been issued.

Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€3.23 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month).


time he has been involved in a number of financing rounds, a series of M&A transactions and four IPOs. He has been Chairman of Ablynx since 2004, and in 2006 he accepted the offer by Ablynx’s Board of Directors to extend his role as Chairman to include that of Chief Executive Officer.

Apart from and in addition to his duties as CEO and Chairman of the Company, Edwin Moses is the Chairman of the Board of Capricorn Health-tech Fund (Belgium)

Furthermore, in the past five years, in addition to Ablynx, he has held Board memberships with the following companies: Clinphone Group plc (UK), Fusion IP plc (formerly Biofusion plc) (UK), Phoqus Pharmaceuticals Ltd (UK), Pharmaceutical Profiles Ltd (UK), Proimmune Ltd (UK), Paradigm Therapeutics Ltd (UK), Avantium Technologies (the Netherlands), Ionix Pharmaceuticals Ltd (UK), Evotec OAI AG (Germany), Bioimage A/S (Denmark), Inpharmatica Ltd (UK), Prolysis Ltd (UK), ProPharma Ltd (UK), Lectus Therapeutics Ltd. (UK) and the European Biopharmaceutical Enterprises.

Stephen Bunting, Abingworth Management

Stephen Bunting has more than 27 years of experience in life science venture capital investment. He joined the Abingworth Group in 1987 and became its Managing Director (now Managing Partner and Chairman of the Board of Abingworth LLP) in 2002. He has been a Director with a number of companies in the United States and Europe and was Founding Chairman of Astex Therapeutics, Devgen and Hexagen. Other directorships have included Aurora Biosciences, Galapagos and Genetic Therapy. At Abingworth, he is responsible for building and leading the team and for investment strategy. He is active in United Kingdom and Continental European deals. He is currently a member of the Board of the following companies: Abingworth LLP (UK), Abingworth Bioventures IIA GP Limited (UK), Abingworth Bioventures III GP Limited (UK), Abingworth Bioventures IV GP Limited (UK), Abingworth Bioventures V GP Limited (UK), Abingworth Management Limited (UK), Abingworth Management Holdings Limited (UK), Abingworth Management Inc. (UK), Abingworth Trustee Limited (UK), Astex Therapeutics Limited (UK), Elkinbrook Limited (formerly Abingworth Limited) (UK) and Prosensa (the Netherlands). He has also served on the Board of: Abingworth Executives Limited (UK), Akubio Limited (UK), Devgen NV (Belgium), Galapagos NV (Belgium) and Inpharmatica Limited (UK) and Prosensa (the Netherlands). Stephen Bunting has a PhD in Biological Sciences.

The Company had a total of 4,606,126 outstanding warrants at the end of 2012.

1.6.3. shAREhOLdERs ANd shAREhOLdER sTRUcTURE

As at 31 December 2012, the shareholding structure is as follows (based on the most recent transparency declarations):

Shareholder Address Number of % voting voting rights rights

GIMV NV, Adviesbeheer Karel Oomsstraat 37, 7,991,430 18.28% GIMV Life Sciences NV and 2018 Antwerp, BelgiumBiotech Fonds VlaanderenSofinnova Partners SAS 17, rue de Surène, 6,467,342 14.79% 75008 Paris, France Abingworth 38 Jermyn Street, 4,102,952 9.39%Management Limited SW1Y 6DN London, and Abingworth LLP United KingdomC.H. Boehringer Binger Strasse 173, 2,142,857 4.90%Sohn AG & Co. KG 55216 Ingelheim am Rhein, GermanyFree Float 23,012,804 52.64%

1.6.4. bOARd Of diREcTORs

1.6.4.1. COMPOSITION OF THE BOARDThe Board of Directors consists of nine members, one of whom is an executive Director, eight of whom are non-executive Directors, and five of whom are independent Directors.

Edwin Moses, Chief Executive Officer and Chairman of the Board

After completing his post-doctoral research in Germany, Edwin Moses began a commercial career with successful periods spent at Amersham International, Enzymatix and Raggio-Italgene. From 1993-2001, first as CEO and later as Chairman, he was responsible for the growth of Oxford Asymmetry (OAI) through a series of venture rounds cumulating in a flotation (LSE) in 1998 at a value of £120 million. This was followed by a sale of the company to Evotec Biosystems in 2000 for £316 million. During this period, OAI grew from four people to over 250. Over the past eight years, Edwin has played an important role at Board level (primarily as Chairman) in over 15 European life science companies. During this


with Legacy Health Care (Switzerland), member of the Board of Alto Pharmaceuticals (Canada) and member of the Board of Moberg Derma (Sweden). In the past five years, he has also served as member of the Board of DARA Biosciences (U.S.) and as the Chairman and CEO of Barrier Therapeutics (U.S.).

Russell G. Greig

Dr. Greig has more than 30 years’ experience in the pharmaceutical industry, with knowledge and expertise in research and development, business development and commercial operations. He spent the majority of his career at GlaxoSmithKline, where he held a number of positions including GSK’s President of Pharmaceuticals International from 2003 to 2008 and Senior Vice-President Worldwide Business Development. From 2008 to 2010, Dr. Greig was also President of SR One, GSK’s Corporate Venture Group. He is currently Chairman of Syntaxin (UK), AM Pharma (The Netherlands) and Isconova (Sweden) as well as a Director of Tigenix (Belgium). He also acts as a consultant to Genocea (US), BigDNA (Scotland), Edinburgh BioQuarter (Scotland), and Kurma Life Sciences (France). He served as acting CEO at Genocea and Isconova for an interim period. He is also a member of the Scottish Scientific Advisory Committee.

Denis Lucquin, Sofinnova Partners Denis Lucquin is Managing Partner and Chairman of Sofinnova Partners S.A., specialising in life sciences and, more recently, cleantech investments. He joined Sofinnova in 1991. After having obtained a degree in engineering from Ecole Polytechnique and Ecole du Génie Rural des Eaux et Forêts, he began his career in academic research. For five years, he was in charge of the technology transfer department at the Institut National de la Recherche Agronomique (INRA), France’s agricultural research institute. In 1989, he joined the venture capital industry as director of investments at Innolion (Crédit Lyonnais). He carried out many investments in France and other European countries in companies such as Nicox, Exonhit, IDM, Neurotech, Innate Pharma, Neuro 3D, Oxford Glycosciences, Oxford Molecular, PPL Therapeutics, CropDesign, Metris Therapeutics, Cerenis, Ablynx, Novexel and Noxxon. He is currently a member of the Board (in his own name or as the permanent representative of Sofinnova Partners S.A.) or advisory Board member of the following companies: Sofinnova Partners SAS (France), Noxxon

Geert Cauwenbergh

Dr. Geert Cauwenbergh currently is CEO and President of RXi Pharmaceuticals Corporation, a biotechnology company focused on discovering, developing and commercializing innovative therapies based on its proprietary, next-generation RNAi platform. In February 2008, Dr. Cauwenbergh founded Phases123, a company focused on high potential health care technology platforms and emerging health care companies. Prior to founding Phases123, Dr. Cauwenbergh founded Barrier Therapeutics (a biopharmaceutical company with focus on research and development of patented drugs for treatment of skin diseases) in September of 2001. As its Chairman and CEO he raised private financing for the company in 2002 and took it public with a listing on the NASDAQ (Symbol: BTRX) in 2004. Through capital increases for a total of US$250 million, he developed Barrier Therapeutics from a pure R&D organisation into a fully integrated commercial U.S. company with US$45 million in revenues in 2008. Barrier Therapeutics was acquired by Stiefel Laboratories in 2008.

Prior to founding Barrier Therapeutics, Dr. Cauwenbergh was Vice President of Technology of the Johnson & Johnson (J&J) Consumer and Personal Care Products Companies. In 1994, Dr. Cauwenbergh moved from Europe to the U.S., and became Vice President of Product Development and member of the Board of the U.S. Johnson & Johnson Consumer Company. Dr. Cauwenbergh joined the R&D organisation of the Janssen Research Foundation in Belgium in 1982, after three years in sales and marketing in Janssen Pharmaceutica. He held positions of increasing responsibility and oversaw global development of several drugs in the areas of dermatology and infectious diseases as the worldwide director for those two franchises until 1994.

Dr. Cauwenbergh is a member of the Board of Trustees, and is the current Chairman of the Board of BioNJ, the industry organisation for biotechnology in New Jersey, US. In 2004, Dr. Cauwenbergh was appointed Trade Advisor for Health Care in North America to the Belgian Government, and was reconfirmed in this function in 2007. He received his Doctorate in Medical Sciences from the Catholic University of Leuven, Faculty of Medicine, where he also completed his masters and undergraduate work. In 2004 Dr. Cauwenbergh was inducted in the New Jersey High Tech Hall of Fame. Dr. Cauwenbergh is currently the Chairman and CEO of Rhei Pharmaceuticals (Belgium), and the managing partner of Phases123 LLC (U.S.). He also serves on the Board of Euroscreen (Belgium) and Cutanea Inc. (US), and he is Senior Advisor


founder and Board member of SwedenBio AB (Sweden). In the past, he has held Board memberships with Biovitrum AB (Sweden), Metacure Inc. (Bermuda), Biacore AB (Sweden), Active Biotech (AB) (Sweden) and NsGene A/S (Denmark) and Indepentent Pharmaceutica AB (Sweden). Mats Pettersson has obtained a BSc in economics and business administration.

Jim Van heusden, Gimv Jim Van heusden is a Venture Capital partner at Gimv and focuses on investments in Life Sciences. He currently serves on the Board of ActoGeniX (Belgium), Pronota (Belgium), and Prosensa (the Netherlands) and he is Chairman of Multiplicom (Belgium) and was a Board member with CropDesign (acquired by BASF). Prior to joining Gimv in 2001, he was working as a senior scientist at the department of Oncology Drug Discovery at Janssen Pharmaceutica, a Johnson & Johnson company, where he also served on the research management committee of the collaboration with Rigel Pharmaceuticals (U.S.). Jim Van heusden holds BSc and MSc degrees in chemistry and biochemistry from the University of Antwerp (Belgium) and a PhD in molecular and cellular biology from the University of Maastricht (The Netherlands).

Remi Vermeiren

Before Remi Vermeiren became an independent director of Ablynx, he had a 43-year long career at Kredietbank NV, which in 1998 merged with Cera Bank and ABB Insurance into KBC Bank and Insurance Group. In the earlier years, he was mainly involved in Asset Management, Trading and Administration of Securities, Treasury and International and Investment banking. From 1989 on, he was a member of the Executive Committee responsible for the day-to-day management of the bank. From 1998 until 2003, he held the function of Chairman of the KBC Bank and Insurance Group and of KBC Bank. During this period, he was mainly involved in defining the strategy of the new group, integration of the banking and insurance activities, implementation of the merger of the two banks and the cost reduction going with it, and expansion of KBC into Central Europe where it became one of the most important Western European investors in the banking and insurance industry. Currently, Mr. Vermeiren is also member of a number of quoted and non-quoted companies and of charitable organisations, including of ‘‘Foundation RV’’ set up and funded by himself. He is currently a member of the Board or supervisory bodies of the following

Pharma AG (Germany), Cerenis Therapeutics S.A. (France), BioAmber Inc (US) and Avantium Holding BV (the Netherlands). Denis is also a founder of Association France Biotech. In the past five years, he has served as a member of the Board (in his own name or as the permanent representative of Sofinnova Partners S.A.) or advisory Board member of the following companies: Neuro 3D S.A. (France), DBV Technologies S.A. (France), Carex S.A. (France), Fovea S.A. (France), Innate Pharma SAS (France), Inserm Transfert Initiative S.A. (France), Novexel S.A. (France), DNP Green Technology Inc. (U.S.) and Sequoia Pharmaceuticals Inc. (U.S.).

Roger Perlmutter

Dr. Perlmutter was Executive Vice-President, Research and Development, at Amgen Inc, the world’s largest biotechnology company, from 2001 to 2012. Before joining Amgen, he was the Executive Vice-President of Worldwide Basic Research and Preclinical Development at Merck and Co. Prior to joining Merck, Dr. Perlmutter had been Professor and founding Chairman of the Department of Immunology at the University of Washington, Seattle, USA. Dr. Perlmutter is currently a Director of StemCells Inc. and the Immune Design Corporation. He is also Chairman of the Board of Trustees of Reed College and a Director of the Institute for Systems Biology (a not-for-profit research institute based in Seattle, Washington). He is a fellow of the American Academy of Arts and Sciences, a fellow of the American Association for the Advancement of Science and a past President of the American Association of Immunologists. Ablynx is the first Board mandate that Dr Perlmutter has accepted outside the USA.

Mats Pettersson

Mats Pettersson is the founder of Biovitrum AB, a spin-out company from Pharmacia and one of the largest biotech companies in Europe, and he was its first CEO from 2001 until 2007. After a career as a CPA (1968-1976), he joined the Pharmacia group in 1976 where he mainly worked in CFO and Business Development positions. Before founding Biovitrum, he was Senior Vice-President and a member of the management committee of Pharmacia Corporation. He was responsible for several of the transforming mergers in Pharmacia. He is currently a Chairman of the Board of Lundbeck A\S (Denmark), member of the Board of Photocure AS (Norway) and to-BBB technologies B.V. (the Netherlands), Chairman of the Board of Moberg Derma AB (Sweden), and he was


(2) First appointed as independent Director by the Extraordinary General Meeting of Shareholders held on

21 October 2004. He has been re-appointed as executive Director by the Extraordinary General Meeting of

Shareholders held on 23 August 2006. Mr. Moses has taken up the position of CEO on 6 June 2006(3) Newly appointed Directors during the Extraordinary Shareholders’ Meeting held on 6 November 2012.

1.6.4.2. ACTIvITy REPORTIn 2012, ten Board meetings have been held. In six of these meetings, the strategy and/or the company results have been discussed. All members of the Board were present in these meetings. All other Board meetings related to the exercise of warrants and the preparation of General Assemblies.

1.6.4.3. PERFORMANCE EvALuATION OF THE BOARDUnder the lead of the Chairman, the Board started a performance evaluation in 2011 to determine whether the Board and its Committees are functioning effectively. The evaluation process has the following objectives: assessing how the Board operates; verifying that important issues are adequately prepared and discussed; evaluating the actual composition of each Director’s work, the Director’s presence in the Board and Committee meetings and his constructive involvement in discussions and decision-making and verifying the Board’s current composition against the Board’s desired composition.

The non-executive Directors will assess their interactions with the Executive Committee. At least once a year, they meet in the absence of the CEO. No formal Board decision can be taken in such meeting.

The Board has discussed the composition and performance of the Board at several occasions in 2012. Ablynx has strengthened its Board of Directors with the appointment of key industry experts as non-executive Directors of the Company: Dr. Roger Perlmutter, who spent more than a decade as Executive Vice-President, Research and Development, at Amgen Inc, the world’s largest biotechnology company; and Dr. Russell Greig, who has held a number of executive positions at GSK, including President of Pharmaceuticals International and Senior Vice-President Worldwide Business Development. The ability of Ablynx to attract such high-level Board members is a testament to the strength of the Company’s technology and product pipeline. Jim Van heusden and Mats Pettersson will have resigned from the Board in February 2013, and Geert Cauwenbergh will have resigned from the Board at the General Assembly of 25 April 2013.

companies: ACP II SCA (Luxembourg) (Liquidator) and Zinner NV (Belgium). In the past five years, he has held positions as a member of the Board or administrative, management or supervisory bodies of the following companies: Hobbyrama NV (Belgium), Gondry SA (Belgium), Hout Van Steenberge NV (Belgium), Cometal NV (Belgium), Stock Van Wiemeersch NV (Belgium), Capital Markets Company NV (Belgium), Ardatis NV (Belgium), Afinia Plastics NV (Belgium), Euronext Holding N.V. (the Netherlands), Euronext Amsterdam N.V. (the Netherlands), IFB SPA (Italy), Cumerio NV (Belgium) and Ravago NV (Belgium), Devgen NV (Belgium). Remi Vermeiren holds a degree in commercial and financial sciences.

Name Year Position Term Board Committee of birth Memberships Edwin Moses(2) 1954 Chairman and 2015(1) - Chief Executive OfficerStephen Bunting 1953 Non-executive 2015(1) Member of the Director Nomination and Remuneration Committee Sofinnova Partners., 1957 Non-executive 2015(1) -S.A represented Directorby its permanent representative, Denis LucquinJim Van heusden 1971 Non-executive 2015(1) Member of the Audit Director CommitteeMats Pettersson 1945 Independent 2015(1) Chairman of the Director Nomination and Remuneration Committee and Member of the Audit Committee Remi Vermeiren 1940 Independent 2015(1) Chairman of the Audit Director CommitteeGeert Cauwenbergh 1954 Independent 2015(1) Member of the Director Nomination and Remuneration Committee Russell Greig 1952 Independent 2016(3) DirectorRoger Perlmutter 1952 Independent 2016(3) Director

Notes:(1) The term of the mandate of the Director will expire immediately after the Annual General Meeting

of Shareholders held in the year indicated. All Directors were re-appointed during the Annual General

Shareholders’ Meeting held on 28 April 2011


1.6.5.2. ACTIvITy REPORTThe Audit Committee met four times in 2012.

The attendance was as follows: Remi Vermeiren (100 %), Mats Pettersson (100 %) and Jim Van heusden (100 %).

The Audit Committee is responsible for the financial reporting, the internal control and risk management, the internal audit and the external audit, and for the reporting and communication between the statutory auditor and the Board. More detailed information on the responsibilities can be found on Ablynx’s website in the Corporate Governance Charter (Schedule D).

1.6.6. NOmiNATiON ANd REmUNERATiON cOmmiTTEE

The Board of Directors has set up a Nomination and Remuneration Committee. The Nomination and Remuneration Committee consists of three Directors. The Committee serves as a Remuneration Committee pursuant to article 526bis BCC.

All members are non-executive Directors and the majority of its members are independent. The CEO and the Vice-President Human Resources, the latter for specific agenda items only, attend the meetings of the Nomination and Remuneration Committee in an advisory and non-voting capacity on all matters except those concerning themselves.

All Directors are members of boards of other companies and as a result have knowledge of pay policies across the world. The Nomination and Remuneration Committee has the following minimum set of tasks:

• making recommendations to the Board on the appropriate remuneration (in respect of both amount and composition of the remuneration) of:

- the CEO and the other members of the Executive Committee, upon proposal by the CEO (except when it concerns his own remuneration), such as: (i) the principal contractual terms and arrangements for the termination of employment; and (ii) the principal components of the remuneration package (including, the relative importance of each component; the performance criteria applying to the variable elements; the benefits in kind; bonuses and long-term incentives, whether stock-related or not, in the form of stock options or other

At the time of their re-election, the Directors’ commitments and contributions are evaluated within the Board, and the Board ensures that any appointment or re-election allows an appropriate balance of skills and experience to be maintained in the Board. The same applies at the time of the appointment or the re-election of the Chairmen (of the Board and of the Board’s Committees). The Board shall act on the results of the performance evaluation by recognising its strengths and addressing its weaknesses. Where appropriate, this will involve proposing new members for appointment, proposing not to re-elect existing members or taking any measure deemed appropriate for the effective operation of the Board. Historically, the Board was always composed of men. The Company commits to build a diverse list of candidates for new positions in the future.

1.6.5. AUdiT cOmmiTTEE

As of 8 January 2009 (the date on which the Law of 17 December 2008 with regard to the incorporation of an Audit Committee in listed companies and financial companies entered into effect), “large” listed companies (as defined in Article 526bis of the Belgian Companies Code) are legally obliged to establish an Audit Committee within their Boards of Directors.

The Board of Directors has set up an Audit Committee. The Audit Committee in 2012 was composed of three members, which are exclusively non-executive Directors. The majority of its members are independent Directors and two of its members have an expertise in the field of accounts and audit. The Chairman of the Audit Committee is not the Chairman of the Board of Directors. In February 2013, two members resigned and one new member was appointed by the Board.

1.6.5.1. COMPOSITIONThe following Directors are members of the Audit Committee: Remi Vermeiren (Chairman), Jim Van heusden and Mats Pettersson. Remi Vermeiren and Mats Pettersson have expertise in the field of accounts and audit and are both independent Directors. In February 2013, Jim Van heusden and Mats Pettersson resigned and Russel Greig was appointed as a member of the Audit Committee.


1.6.7. ExEcUTivE cOmmiTTEE

1.6.7.1. COMPOSITIONThe Board of Directors has established an Executive Committee (“Directiecomité”) within the meaning of Article 524bis of the Belgian Companies Code and Article 24 of the Company’s Articles of Association. The Executive Committee consists of five members, the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Chief Scientific Officer (CSO), the Chief Business Officer (CBO) and the Chief Medical Officer (CMO). The current members of the Executive Committee are listed in the table below.

Name Function Year of birth NationalityEdwin Moses Chief Executive Officer 1954 BritishWim Ottevaere(1) Chief Financial Officer 1956 BelgianAndreas Menrad(2) Chief Scientific Officer 1958 GermanEva-Lotta Allan Chief Business Officer 1959 SwedishJosefin-Beate Holz Chief Medical Officer 1965 German

(1) Mr. Ottevaere acts as the permanent representative of Woconsult NV(2) Mr. Menrad joined the Company as from May 2012

financial instruments); - as well as directors (both the independent directors and the directors charged with special assignments, unless, in the latter case, if urgency does not allow so);

• drawing up the policy regarding warrant plans and oversee the general policy for the granting of warrants to employees, directors and members of the Executive Committee. The CEO shall propose the identity of the beneficiaries and the number of warrants to be allocated to each of them (individually in the case of Board members and members of the Executive Committee, and individually or per category in the case of other employees) to the Nomination and Remuneration Committee. The Nomination and Remuneration Committee shall evaluate such proposals. In the case of grants to the CEO, the initial proposal shall immediately be made by the Committee itself;

• ensuring that remuneration levels take into account risks involved, demands and time requirements of each role, and relevant industry benchmarks.

• preparing the annual remuneration report• explaining the remuneration report during the statutory general meeting

1.6.6.1. COMPOSITIONThe following Directors are members of the Nomination and Remuneration Committee: Mats Pettersson (Chairman) (independent), Geert Cauwenbergh (independent) and Stephen Bunting. In February 2013, Mats Petterson resigned.

1.6.6.2. ACTIvITy REPORTThe Nomination and Remuneration Committee met three times in 2012. Mats Pettersson, Geert Cauwenbergh and Stephen Bunting attended all meetings.

During the meetings, the goals of the Company, the performance against the goals of the Company and the goals of the Executive Committee, the warrant plans, the salary evolution, the minutes of the previous meetings, the benchmark of salaries in general and more specifically of the Executive Committee members and the nomination of new members of the Board of Directors, are discussed.


Only independent Directors shall receive a fixed remuneration in consideration of their membership of the Board and their attendance to the meetings of the Committees of which they are members. They will not receive, in principle, any performance-related remuneration, nor will any options or warrants be granted to them. However, upon advice of the Nomination and Remuneration Committee, the Board may propose to the Shareholders’ Meeting to deviate from the latter principle in the event that, in the Board’s reasonable opinion, the granting of warrants would be necessary or useful to attract or retain independent Directors with the most relevant experience and expertise.

The other Directors receive no compensation for serving as a member of the Board. Executive Committee members receive no additional compensation when invited to the Board.

The Directors’ mandate may be terminated ad nutum (at any time) without any form of compensation.

There are no employment or service agreements that provide for notice periods or indemnities between the Company and the members of the Board of Directors, who are not a member of the Executive Committee. In respect of the members of the Board of Directors, who are a member of the Executive Committee, reference is made to the section ‘Executive Committee’ below.

Remuneration policy applied during 2012

The Extraordinary General Meeting of Shareholders of 6 November 2012 decided to adapt the fixed remuneration of independent Directors.

The fixed annual remuneration of independent Directors as part of their membership of the Board of Directors, was increased by ten thousand euro to thirty thousand euro (except for Mats Pettersson and Geert Cauwenbergh), and the additional fixed annual remuneration of the Chairman of the Nomination and Remuneration Committee and the Chairman of the Audit Committee remained unchanged at ten thousand euro.

The additional fixed remuneration related to the membership of the Nomination and Remuneration Committee or the Audit Committee for the independent Directors remains unchanged at five thousand euro per

1.6.7.2. ACTIvITy REPORTIn principle, the Executive Committee meets once every month. Additional meetings may be called at any time by the CEO or at the request of two members. The Executive Committee shall constitute a quorum when all members have been invited and the majority of the members are present or represented at the meeting. The resolutions of the Executive Committee shall be passed unanimously. If unanimity cannot be reached, the matter shall be referred to the Board of Directors, which shall decide upon the matter in its next meeting.

1.6.8. REmUNERATiON REPORT

Directors

Procedure applied in 2012 in order to create a remuneration policy and to determine the individual remuneration

The Nomination and Remuneration Committee recommends the level of remuneration for Directors, including the Chairman of the Board, which is subject to approval by the Board and, subsequently, by the annual shareholders’ meeting.

All Directors are members of boards of other companies and as a result have knowledge of pay policies across the world.

The Nomination and Remuneration Committee benchmarks the Directors’ compensation against peer companies to ensure competitiveness. Without prejudice to the powers granted by law to the shareholders’ meeting, the Board sets and revises at regular intervals the rules and the level of compensation for Directors executing a special mandate or having a seat in one of the committees, as well as the rules for reimbursement of the Directors’ business-related out-of-pocket expenses. Apart from the remuneration for independent Directors, all Directors will be entitled to a reimbursement of out-of-pocket expenses actually incurred as a result of their participation in meetings of the Board of Directors.

The remuneration of the Directors will be disclosed to the Company’s shareholders in accordance with the applicable laws and regulations.

The level of remuneration should be sufficient to attract, retain and motivate Directors who match the profile determined by the Board.


by the members of the Board. This overview should be read together with the notes listed below.

Total shares Shares Warrants(i)

and warrants(i)

Name Number %(iii) Number %(iii) Number %(iii)

Edwin Moses 1,091,200 2.31% 29,200 0.06% 1,062,000(v) 2.25%Stephen Bunting 15,000 0.03% 15,000 0.03% 0 0.00%Sofinnova Partners 6,467,342 13.70% 6,467,342 13.70% 0 0.00%S.A., represented (ii) (ii)

by its permanentrepresentative, Denis LucquinJim Van heusden 5,000 0.01% 5,000 0.01% 0 0.00%Mats Pettersson 7,228 0.02% 3,657 0.01% 3,571(vi) 0.01%Remi Vermeiren 28,571 0.06% 25,000(vii) 0.05% 3,571(vi) 0.01%Geert Cauwenbergh 7,571 0.02% 4,000 (iv) 0.01% 3,571(vi) 0.01%Russel Greig 6,434 6,434(viii) Roger Perlmutter 6,434 6,434(viii)

(i) Reflecting the number of shares of the Company to which such warrants give right to subscription(ii) Held by Sofinnova Capital IV FCPR, a fund managed by Sofinnova Partners; based on the transparency declaration, they held 6,467,342 shares(iii) Percentage on a fully diluted basis(iv) Held by spouse(v) Warrants granted from 2004 onwards with an exercise price between €1.8 and €8.68(vi) Warrants granted in 2007 with an exercise price of €7.00(vii) Of which 7,500 held by spouse(viii) Warrants granted in 2012 with an exercise price of €5.44, and accepted in 2013.

With respect to the following two years, Ablynx does not foresee changes in its remuneration policy.

Executive Committee

Procedure applied in 2012 in order to create a remuneration policy and to determine the individual remuneration

The remuneration of the members of the Executive Committee is determined by the Board of Directors upon recommendation of the Nomination and Remuneration Committee and subsequent to the CEO’s recommendation to this Committee (except for his own

committee.

The total amount of the remunerations and the benefits paid in 2012 to the independent Directors (in such capacity) was € 119,583.33 (gross, excluding VAT), € 40,833.33 was paid to Mats Pettersson, € 35,833.33 to Remi Vermeiren, € 27,916.67 to Geert Cauwenbergh, € 7,500 to Russell Greig and € 7,500 to Roger Perlmutter.

There is no performance-related remuneration for non-executive Directors.

Mats Pettersson, Remi Vermeiren and Geert Cauwenbergh have each received 3,571 warrants in October 2007, and Roger Perlmutter and Russell Greig have been offered 6,434 warrants in November 2012(1), which have been accepted in January 2013.

The table below provides an overview of the shares and warrants held

(1) Pursuant to the decision of the Extraordinary General Meeting of 6 November 2012.

Name Position Remuneration Remuneration Remuneration received as received as received as member of the member of the member of the Board Audit Nomination and RemunerationEdwin Moses(2) Chairman and - - - Chief Executive OfficerStephen Bunting Non-executive - - - DirectorSofinnova Partners Non-executive - - -S.A., represented by Directorits permanent representative, Denis LucquinJim Van heusden Non-executive - - - DirectorMats Pettersson Independent 25,833 5,000 10,000 DirectorRemi Vermeiren Independent 25,833 10,000 Director Geert Cauwenbergh Independent 22,917 - 5,000 DirectorRussell Greig Independent 7,500 - - DirectorRoger Perlmutter Independent 7,500 - - Director


The specific yearly goals and the criteria for the variable remuneration of the CEO and members of the Executive Committee are in advance and explicitly spelled out in a software system, which automates the performance management and appraisal process at Ablynx and binds the Company and the individuals. The variable remuneration will only be paid when the KPIs are effectively met. The Remuneration Committee evaluates the performance and makes a proposal to the Board.

Schemes under which members of the Executive Committee are remunerated in shares, warrants or any other rights to acquire shares, shall be subject to prior shareholder approval by way of a resolution taken by the Annual General Shareholders’ meeting. The approval shall relate to the scheme itself and not to the grant to individuals of share-based benefits under the scheme. As a rule, 25% of the warrants granted vest after 1 year, 2.08% vest additionally after each full month, however, vested warrants shall in principle not be exercisable within less than three years.

The remuneration policy for the Executive Committee shall at least include the main contractual terms including the main characteristics of pension schemes and termination arrangements, the key elements for determining the remuneration, including (i) the relative importance of each component of the remuneration, (ii) the performance criteria chosen for the variable elements and (iii) the fringe benefits.

The total amount of remunerations and benefits paid to the CEO and the other members of the Executive Committee and to the persons they are represented by, amounted to approximately € 1.70 million (gross, excluding VAT and share-related payments) in 2012, of which a detailed breakdown is shown in the table below:

Total of which CEOBasic salary 1,308,429.52 425,000.04Variable remuneration (*) 237,392.27 116,875.01Group insurance (pension, 118,490.64 38,082.12invalidity, life)Other (car, cell phone, 29,001.15 5,111.54hospitalisation insurance) (**)

Total 1,693,313.58 585,068.71

(*) paid in cash(**) not including other share-based payments mentioned on page 143.

remuneration). Ablynx strives to be competitive in the biotech market.

Remuneration policy applied during 2012

In the compensation strategy of Ablynx, the starting salary is primarily based on input from the market and the merit increase on individual performance. Via external compensation and benefit consultants or own research, Ablynx annually receives market salary data. Biotech/Pharma industry, or if not available or less relevant, general industry data will determine the compensation market.

The level and structure of the remuneration of the members of the Executive Committee shall be such that qualified and expert professionals can be recruited, retained and motivated taking into account the nature and scope of their individual responsibilities.

An appropriate proportion of the remuneration package of a member of the Executive Committee shall be structured so as to link rewards to corporate and individual performance, thereby aligning on an annual basis the interests of a member of the Executive Committee with the interests of the Company and its shareholders.

An Executive Committee member can receive maximum 30% of the annual base remuneration as a performance-driven bonus.

The Extraordinary General Meeting of 26 April 2012 has approved that the CEO’s variable remuneration, which is part of his yearly remuneration, may include a bonus in cash which will not exceed 50% of his annual base remuneration and which will be spread over a period of one year. The Extraordinary General Meeting of 26 April 2012 has also approved that for executive Directors the variable remuneration, also if this variable remuneration equals or exceeds one fourth of the annual remuneration, will be based on objective performance criteria determined in advance, which are spread over a period that is shorter than the periods determined in article 520ter, second paragraph of the Belgian Companies Code.

The corporate and individual goals are based on the operation performance of the Company as measured by e.g. financial indicators, progress in the pipeline, the completion and/or extension of important collaborations and other measures.


warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.

Severance payments

Currently, all members of the Executive Committee are employed on the basis of a service agreement, which can be terminated at any time provided that a previously determined term of notice is observed, which, at the Company’s discretion, can be replaced by a corresponding termination allowance. There are no other termination remunerations foreseen. All service agreements contain non-competition clauses, as well as confidentiality obligations and obligations relating to the transfer of intellectual property. The Corporate Governance Charter requires that every contractual settlement agreed upon before or after 1 July 2009 concerning the remuneration of the CEO or any other member of the Executive Committee, clearly states that the amount of the exit remuneration, which is granted when the contract is prematurely terminated, should not exceed the basic and variable remuneration of twelve months. All existing contractual settlements reached with the CEO or any other member of the Executive Committee do not contain any exit remuneration higher than 12 months.

Claw-back provisions

There are no provisions allowing the Company to reclaim any variable remuneration paid to executive management based on incorrect financial information.

1.6.9. mOsT imPORTANT chARAcTERisTics Of ThE cOmPANy’s iNTERNAL cONTROL sysTEms ANd RisK mANAgEmENT

The Executive Committee should lead the Company within the framework of prudent and effective control, which enables to assess and manage risks. The Executive Committee should develop and maintain adequate internal control systems so as to offer a reasonable assurance concerning the realisation of the goals, the reliability of the financial information, the observance of applicable laws and regulations and to

The pension plan, for which the above amounts have been paid, is a defined contribution plan for which 10 % of the base salary is contributed on a yearly basis.The table below provides an overview of the shares and warrants held by the members of the Executive Committee, including the executive Director.

No warrants have been exercised or expired during the reported financial year.

Name Function Shares WarrantsEdwin Moses Chief Executive 29,200 1,650,000 warrants giving the right Officer to subscribe for 1,062,500 shares (of which 150,000 in 2012)Wim Ottevaere Chief Financial 6,605 456,250 warrants giving the right Officer to subscribe for 306,250 shares (of which 50,000 in 2012)Eva-Lotta Allan Chief Business 540,000 warrants giving the right Officer to subscribe for 390,000 shares (of which 75,000 in 2012)Josefin-Beate Holz Chief Medical 540,000 warrants giving the right Officer to subscribe for 390,000 shares (of which 75,000 in 2012).

The key features of the warrants attributed in 2012 are indicated below.



The warrants can in principle only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until October 2016 for consultants and as from 1 January 2016 until October 2018 for employees). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested


framework. In the course of 2012, the risks have been evaluated again and appropriate actions have been proposed to the Executive Committee.

The Group is potentially subject to the following inherent risks:

• Nanobody-based drug candidates must undergo rigorous pre-clinical and clinical testing, the results of which are uncertain and could substantially delay or prevent the drug candidates from reaching the market.

• Delays in clinical trials are common and may have many causes. Such delays could result in increased costs and jeopardise or delay the Group’s ability to achieve regulatory approval and commence product sales as currently contemplated.

• The Group’s drug candidates may not obtain regulatory approval when expected, if at all, and even after obtaining approval, the drugs will be subject to ongoing regulation. To date, none of the Group’s drug candidates have reached the stage of submission or evaluation for regulatory approval.

• The Group has a history of operating losses and an accumulated deficit; the Group may never become profitable or may not be able to sustain profitability in subsequent periods.

• The Group is reliant on collaborative partners for the development and commercialisation of most of its existing and future drug candidates.

• The Group’s patents and other intellectual property rights may not adequately protect its products and drug candidates, which may impede the Company’s ability to compete effectively.

• The Group may infringe the patents or other intellectual property rights of others and may face patent or other intellectual property litigation, which may be costly and time consuming.

• The Group faces, and will continue to face, significant competition and rapid technological change, which could limit or eliminate the market opportunity for its products and drug candidates.

• The Group relies on outsourcing arrangements with third parties for some of its activities including manufacturing and clinical trials management.

• The Group may not have adequate insurance cover, particularly in connection with product liability risk.

• The commercial success of the Group will depend on attaining significant market acceptance of its drug candidates among physicians, patients, healthcare payers and the medical community. The Group has not yet commercialised any product.

• If the Group fails to attract and retain qualified personnel, it may be

enable the execution of internal control procedures. The Audit Committee assists the Board of Directors in the execution of its task to control the Executive Committee.

The Company has opted for a “two-tier” governance structure. As a result, the principal governance structure of Ablynx is based on a distinction between:

• The management of Ablynx (including the daily management), a task conducted by the Executive Committee (“directiecomité”) within the meaning of Article 524bis of the Belgian Companies Code, within the framework of the general strategy defined by, and under the supervision of the Board; and

• The development of the general strategy of Ablynx, the supervision of the Executive Committee and the exercise of specific powers attributed by the Belgian Companies Code, the Articles of Association and the Corporate Governance Charter which fall within the powers of the Board.

Control Environment

The Executive Committee has organised the internal control environment, which is monitored by the Audit Committee. The role of the Audit Committee is stipulated in the Corporate Governance Statement.

The Audit Committee decided not to create an internal audit role for the time being, since the scope of the business does not justify a full-time role.

The role of the Audit Committee shall be to assist the Board in fulfilling its monitoring responsibilities in respect of control in the broadest sense, including responsibilities for the financial reporting process, the system of internal control and risk management (including the Company’s process for monitoring compliance with laws and regulations) and the external audit process.

Risk analysis

During 2011, the Management of the Company assessed its operational risks and challenged and compared these with a risk intelligence


Control activitiesThe Board of Directors yearly approves the strategy and the goals. Each year, a business plan is elaborated for the next three years, as well as a detailed budget for the next year, which is submitted to the Board of Directors for approval. The budget is systematically followed up at each Audit Committee and Board of Directors meeting, and regularly adjusted to changing prospects.

A process is in place which enables the finance department to prepare consolidated financial statements on a biannual basis.

ERP support systems have been implemented generating consistent financial and operational information.

Systems are in place in order to verify the accuracy of the reporting figures and are compared with the previous year, budgets and forecasts.

Supervision and monitoringSupervision and monitoring activities are performed by the senior management on a daily basis.

1.6.10. sTATUTORy AUdiTOR

Deloitte Bedrijfsrevisoren BV o.v.v.e. CVBA/SC s.f.d. SCRL, a civil company having the form of a co-operative company with limited liability (“burgerlijke vennootschap onder de vorm van een coöperatieve vennootschap met beperkte aansprakelijkheid”) and existing under the laws of Belgium, with registered offices at Berkenlaan 8b, 1831 Diegem, Belgium, represented by Gert Vanhees, was appointed as statutory auditor of Ablynx on 28 april 2011 for a term of three years ending immediately after the Shareholders’ meeting to be held in 2014 that will have deliberated and resolved on the financial statements for the financial year ended 31 December 2013.

1.7. TRANsAcTiONs WiThiN ThE AUThORisEd cAPiTAL

In 2012, one transaction has occurred within the authorised capital that is required to be reported in accordance with article 608 of the Belgian Companies Code.

During the Board meeting of 1 February 2012, the Board of Directors

unable to successfully develop its technologies, conduct its clinical trials and commercialise drug candidates.

• The Group may need additional funding, which may not be available on acceptable terms when required, if at all.

• The revenue is generated by a limited number of clients.

Our financial risk management consists of:

Liquidity risk managementThe Group makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of 1 year.

The Group has €2.7 million restricted cash related to a cash pledge.

The Group has limited financial debt relating to investments in the building and in equipment.

Interest rate riskAs the Group has no significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in the market interest rates.

Credit riskThe credit risk arises from outstanding transactions with customers. It is the Group’s policy to deal with creditworthy partners to avoid significant risk exposure. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default.

The financial institutions have credit ratings varying from A+ to A-.

Available liquidities are placed with several banks.

No cash credit lines were available.

Foreign exchange riskThe Group has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in GBP, SEK, CHF, AUD and USD. The Group did not enter into any currency hedging arrangements in order to cover this risk as the exposure is limited.


Extraordinary General Meeting held on 29 april 2010.

1.8. AcqUisiTiON Of OWN sEcURiTiEs

Neither Ablynx NV nor any direct affiliate or any nominee acting in his own name but on behalf of the Company or of any direct affiliate, have acquired any of the Company’s shares. Ablynx NV has not issued profit-sharing certificates or any other certificates.

1.9. UsE Of fiNANciAL iNsTRUmENTs by ThE gROUP

The Group did not use any financial instruments.

1.10. sTATEmENTs REqUiREd by ARTicLE 34 Of ThE ROyAL dEcREE Of 14 NOvEmbER 2007

All shares are ordinary shares and represent the entire capital. There are no preference shares.

Some of the important agreements that Ablynx has entered into may be amended or terminated in the event of a change of control over Ablynx.

The Boehringer Ingelheim Alzheimer’s disease Agreement signed in January 2007 states that in the event of a change of control over Ablynx, Boehringer Ingelheim is entitled to terminate the research (as a result of which each party is released from paying any research licence fees and Ablynx is no longer entitled to the research licence from Boehringer Ingelheim), and is no longer held to participate in joint committees or to share its development and commercialisation plans. This clause was approved by the Company’s Annual Shareholders’ Meeting held on 29 April 2010 in accordance with Article 556 of the Belgian Company Code.

Under the Boehringer Ingelheim Strategic Alliance Agreement signed in September 2007, in the event of a change of control over Ablynx, Boehringer Ingelheim is also entitled to terminate the research (without being released from the obligation to pay royalties on licensed products, if any) and is no longer held to participate in joint committees, to share its development and commercialisation plans or to start new programmes. However, Boehringer Ingelheim is entitled to continue the research independently, and Ablynx’s option to co-promotion rights

approved a warrant plan offering a maximum of eight hundred sixty thousand (860,000) warrants, of which (i) five hundred and five thousand (505,000) warrants for the benefit of certain employees, and (ii) a maximum of three hundred fifty-five thousand (355,000) warrants for the benefit of certain consultants. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price of €3.21 per warrant. The warrants vest rateably over four years: 25% of the warrants vest after one year; thereafter, the remaining 75% become vested on a monthly basis. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted. If the warrant plan would be fully exercised, this would lead to a 1.82% dilution of the existing shareholders as per year end.

Following the decision of the Extraordinary General Meeting of 29 april 2010, the Board of Directors was explicitly authorised to increase the share capital once or several times, including the issuance of warrants and convertible bonds, with a total amount that equals the amount of the share capital of the Company, i.e. eighty-one million four hundred and eighty-six thousand two hundred and sixty-four euro and fifty-nine cent (€ 81,486,264.59).The Board of Directors can execute this authorisation during a period of five (5) years counting from the announcement of the decision of the Extraordinary General Meeting of 29 April 2010 in the annexes of the Belgian State Gazette. This authorisation can be renewed in accordance with the relevant legal dispositions.

By virtue of the decision of the Extraordinary General Meeting held on 29 April 2010, the Board of Directors was also explicitly authorised to increase the share capital once or several times subsequently to the announcement of the Belgian Financial Services and Markets Authority (FSMA) that it had been notified of a public take-over bid relating to the financial instruments of the Company through contributions in cash with withdrawal or restriction of the pre-emptive right of the shareholders (including for the benefit of a certain or several persons who are not employees of the Company or its subsidiaries (insofar as the Company would set up subsidiaries)) or through contributions in kind with issuance of shares, warrants or convertible bonds in accordance with the imperative conditions stipulated by the Company Code. The Board of Directors can use this authority provided that the announcement of the Financial Services and Markets Authority (FSMA) was received within a period of three (3) years as from the decision of the


the same change of control clause as mentioned above. This clause was approved by the Company’s Annual Shareholders’ Meeting held on 26 April 2012 in accordance with Article 556 of the Belgian Company Code. The agreement Ablynx entered into in 2012 with Merck & Co (known as MSD outside the United States and Canada), through a subsidiary of Merck, states that in the event of a change of control over Ablynx, Merck is entitled to elect any one or more of the following options: (i) to immediately discontinue any or all then-ongoing research programmes under the agreement; (ii) terminate Ablynx’s involvement on any joint committees; (iii) limit Merck’s reporting obligations such that Merck is only required to provide reports relating to Merck’s obligation to pay royalties; and/or (iv) if such change of control involves a company that has initiated an IND enabling study for a competing product (i.e. a compound or molecule directed against the same target), to terminate the agreement. This clause will be approved by the Company’s Annual Shareholders’ Meeting on 25 April 2013 in accordance with Article 556 of the Belgian Company Code.

1.11. ciRcUmsTANcEs ThAT cOULd cONsidERAbLy AffEcT ThE dEvELOPmENT Of ThE gROUP

No special events have occurred that could considerably affect the development of the Group.

1.12. REsEARch ANd dEvELOPmENT

We are committed to fully exploiting our technology platform to develop a diverse and broad portfolio of therapeutic Nanobodies, and to exploring next generation Nanobody-based technologies. We will continue to leverage the advantages of the Group’s Nanobody technology in view of identifying potential drug candidates across a range of therapeutic areas and exploring and developing the potential of Nanobodies in areas where they have specific advantages. We will invest in further advancing the technology platform in terms of performance, applicability and scale.

We expect that research and development expenditures for the discovery, development and commercialisation of drug candidates will continue to increase as the Group progresses its clinical and pre-clinical programmes into the next phase. In addition, we intend to initiate new discovery programmes and we are committed to seek to maintain and

expires. This clause was approved by the Extraordinary Shareholders’ Meeting of 12 October 2007. The Agreement was extended with two years in March 2012 and the same change of control clause was approved by the Company’s Annual Shareholders’ Meeting of 26 April 2012.

The Merck Serono agreement signed in September 2008 states that a change of control may result automatically, in the case of early joint research and development programmes, in a full opt-out by Ablynx. In the event of further advanced joint research and development programmes, Merck Serono may at its sole discretion invite the controlling shareholder of Ablynx to continue to contribute to such joint research and development programme. If Merck Serono does not extend such invitation or if Ablynx’s controlling shareholder does not accept such invitation, the change of control results in a full opt-out by Ablynx. This clause was approved by the Company’s Annual Shareholders’ Meeting held on 29 April 2010 in accordance with Article 556 of the Belgian Company Code.

The Merck Serono agreement signed in October 2010 states that (i) in the event of a change of control over Ablynx during the research term, Merck Serono is entitled to terminate the programmes and to assume sole responsibility for further discovery, development and commercialisation; and (ii) in the event of a change of control over Ablynx (a) in respect of early programmes, Ablynx will be deemed to have exercised its opt-out right in full (if the first opt-out point had been reached; if the first opt-out point had not yet been reached, as of the time that the first opt-out point will have been reached); and (b) in respect of further advanced programmes, Ablynx will be deemed to have exercised its opt-out right under the agreement in full, provided that Merck Serono, at its sole discretion, invites the new controlling shareholder of Ablynx to continue to contribute to such programme. If Merck Serono does not extend such invitation or if Ablynx’s new controlling shareholder does not accept such invitation, the change of control results in an opt-out in full by Ablynx (in which case, however, the entitlement to royalties will be replaced by an entitlement to a share of net income calculated according to the percentage of resources provided by Ablynx to a programme until the first commercial sale). The clauses under (ii) cease to have effect, on a programme-by-programme basis, as of the first commercial sale of a product resulting from a programme. This clause was approved by the Company’s Extraordinary Shareholders’ Meeting of 11 January 2011.In November 2011, a third agreement with Merck Serono was signed with


Company loses the opportunity to claim against me and the other members of the Executive Committee, which may lead to potential negative financial consequences for the Company.

The exact amount of the financial impact on the Company of this decision cannot be determined at this time, as it cannot be known, at this time, whether the Company would wish, in the future, to assert any liability claim vis-à-vis myself or the Executive Committee and, if so, in what amount. The financial impact on the Company consists of the loss of this particular possibility.

However, I believe that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. Through such decision, the Company expresses its confidence in the members of the Executive Committee and offers such members a measure of security, which will allow the Company to attract and retain capable managers within the Company, as well as keep the current members of the Executive Committee motivated, committed and focused on their tasks.

The Company’s statutory auditor has been copied on this e-mail, thereby notifying him of this conflict of interest.”

The Board confirmed that the financial impact on the Company of the decision to grant discharge to the members of the Executive Committee cannot be determined at this time, but consists in the lapse of the right of the Company to submit a liability claim against the (members of the) Executive Committee.

The Board was of the opinion that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company, because it expresses the confidence in the members of the Executive Committee, which will allow the Company to attract and retain capable managers.

The Board of Directors considered that the decision to grant discharge is in the interest of the Company, because it keeps the current members of the Executive Committee motivated, committed and focused on their tasks.

In that perspective, the Board declared that it believes that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company.

After deliberation on the basis of the draft of the annual accounts

expand our proprietary Nanobody technology and intellectual property position.

1.13. cONfLicTiNg iNTEREsTs Of diREcTORs (ARTicLE 523 Of ThE bELgiAN cOmPANiEs cOdE)

The Directors report that during the financial year one decision has been taken that falls within the provisions of article 523 of the Belgian Companies Code.

As required by article 523 of the Belgian Companies Code, the full minutes of said meeting of the Board of Directors relating to such conflict of interests are to be reproduced hereunder:

Meeting of the Board of Directors of 1 February 2012

Mr. Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda.

Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Article 523 of the Belgian Companies Code, by e-mail dated 30 January 2012, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows:

“In accordance with Article 523 of the Belgian Company Code, I wish to report that I am faced with a conflict of interest of a financial nature in respect of the proposed decision of the Board of Directors to grant discharge to the members of the Executive Committee.

The decision to grant discharge to the members of the Executive Committee entails in principle a lapse of the right of the Company to submit a liability claim against (the members of) the Executive Committee in respect of the actions or decisions (in their capacity as members) of the Executive Committee during the 2011 fiscal year.

As I am a member of the Executive Committee, the decision to grant discharge to the members of the Executive Committee entails a conflict of interest of a financial nature between the Company and myself: as a result of such decision, I will no longer be subject to such liability claims in respect of my function as a member of the Executive Committee in the 2011 fiscal year, while the


warrant holders, and more in particular the dilution that would result from the exercise of all offered warrants, are clearly indicated in Article 4 of the special report of the Board in accordance with Article 583 of the Belgian Company Code.” Meeting of the Board of Directors of 26 February 2013 Mr. Edwin Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda. Mr Edwin Moses reported to the members of the Board of Directors that he is faced with a financial conflict of interest in respect of the proposed decision to create an additional exercise window in the framework of the ABO and the fundamental decision that, if need be, certain warrant holders will be allowed to offer existing shares in the framework of the ABO. He pointed out to the members of the Board of Directors that, as a beneficiary of the warrant issue referred to in these agenda items, he is faced with a financial conflict of interest. This statement will also be submitted to the statutory auditor of the Company. The financial consequences of the proposed decision is twofold: 1. The costs of organising the additional exercise window, and 2. The fact that the cost structure of the ABO has been set up in such a manner that the existing shareholders and warrant holders, who would possibly be invited to participate in the ABO, will only have to pay the underwriting fee and the selling fee of the supervising financial institutions (on the shares they have sold), while the Company (as initiating party of the ABO) will in addition have to pay a management fee and possibly a discretionary fee of 0.75% respectively on the shares placed. Insofar as the shareholders and warrant holders do not have to pay these fees, the existing shareholders and warrant holders acquire an indirect advantage from these fees paid by the Company. Also, the decision to extend the ABO with additional shares (depending on the structure of the offers received in the framework of the ABO), can have a negative influence on the final offer price granted during the entire ABO. Insofar as such an influence exists, the financial consequences of this decision will equal the price difference multiplied with the number of new shares which are issued. The Board of Directors is of the opinion that this decision and its financial consequences are justified with a view to enlarging the shareholders’ base of the Company, securing a stable shareholders structure in the future and decreasing ‘overhang’ (i.e. the risk, as perceived by the financial markets, that larger volumes would be put on the market in an uncontrolled manner). Moreover, the Board of Directors points out that it is in the interest of the

and the Annual Report of the fiscal year 2011, which counts as “Annual Activity Report” as described in the Charter of Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2011.

Meeting of the Board of Directors of 29 January 2013 Mr. Moses did not participate in the deliberations and resolution of the Board with respect to the above item on the agenda. Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Article 523 of the Belgian Companies Code, by e-mail dated 24 January 2013, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: “I write to you in my capacity of Chairman of the Board of Directors (the “Board”) of Ablynx NV (the “Company”). I refer to the meeting of the Board scheduled for 29 January 2013, which will resolve on the issue of warrants for the benefit of certain employees and consultants of the Company (the “Stock Option Plan”). In accordance with Article 523 of the Belgian Company Code, I would like to report that I have a financial conflict of interest in respect of this agenda item. In my capacity of member of the executive committee of the Company, I am selected as one of the beneficiaries of the Stock Option Plan and will accordingly be offered a certain number of warrants. However, I believe that the approval by the Board of the Stock Option Plan is in the interest of the Company, given the limited financial consequences for the Company (as the issue of the warrants shall have no immediate financial impact on the Company), as well as the purpose thereof. The purpose of this Stock Option Plan is (i) to create a long-term incentive for the selected employees, consultants and directors who are able to contribute substantially to the success and growth of the Company; (ii) to provide the Company with the necessary means to recruit and retain competent and experienced staff members; and (iii) to create a common interest between the selected participants on the one hand and the shareholders of the Company on the other, aimed at an increase in the value of the Company’s shares. The consequences of the Stock Option Plan for the existing shareholders and


However, I believe that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. Through such decision, the Company expresses its confidence in the members of the Executive Committee and offers such members a measure of security, which will allow the Company to attract and retain capable managers within the Company, as well as keep the current members of the Executive Committee motivated, committed and focused on their tasks. The Company’s statutory auditor has been copied on this e-mail, thereby notifying him of this conflict of interest.” The Board confirmed that the financial impact on the Company of the decision to grant discharge to the members of the Executive Committee cannot be determined at this time, but consists in the lapse of the right of the Company to submit a liability claim against the (members of the) Executive Committee. The Board was of the opinion that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company, because it expresses the confidence in the members of the Executive Committee, which will allow the Company to attract and retain capable managers. The Board of Directors considered that the decision to grant discharge is in the interest of the Company, because it keeps the current members of the Executive Committee motivated, committed and focused on their tasks. In that perspective, the Board declared that it believes that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. After deliberation on the basis of the draft of the annual accounts and the Annual Report of the fiscal year 2012, which counts as “Annual Activity Report” as described in the Charter of Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2012

1.14. RisKs

The Group is potentially subject to the following inherent risks:

Company to ensure that the warrant holders having larger volumes of warrants can put on the market shares in a controlled and centralised manner during an exercise period, and the ABO is an ideal opportunity to do so. After deliberation, the Board of Directors unanimously decided to grant discharge. Meeting of the Board of Directors of 25 March 2013 Mr. Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda. Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Article 523 of the Belgian Companies Code, by e-mail dated 18 March 2013, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: “In accordance with Article 523 of the Belgian Company Code, I wish to report that I am faced with a conflict of interest of a financial nature in respect of the proposed decision of the Board of Directors to grant discharge to the members of the Executive Committee. The decision to grant discharge to the members of the Executive Committee entails in principle a lapse of the right of the Company to submit a liability claim against (the members of) the Executive Committee in respect of the actions or decisions (in their capacity as members) of the Executive Committee during the 2012 fiscal year. As I am a member of the Executive Committee, the decision to grant discharge to the members of the Executive Committee entails a conflict of interest of a financial nature between the Company and myself: as a result of such decision, I will no longer be subject to such liability claims in respect of my function as a member of the Executive Committee in the 2012 fiscal year, while the Company loses the opportunity to claim against me and the other members of the Executive Committee, which may lead to potential negative financial consequences for the Company. The exact amount of the financial impact on the Company of this decision cannot be determined at this time, as it cannot be known, at this time, whether the Company would wish, in the future, to assert any liability claim vis-à-vis myself or the Executive Committee and, if so, in what amount. The financial impact on the Company consists of the loss of this particular possibility.


Our financial risk management consists of:

Liquidity risk managementThe Group makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of 1 year.


The Group has limited financial debt relating to investments in the leasehold improvements and in equipment.

Interest rate riskAs the Group has no significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in the market interest rates.





Foreign exchange riskThe Group has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in GBP, SEK, CHF, AUD and USD. The Group did not enter into any currency hedging arrangements in order to cover this risk as the exposure is limited.

1.15. iNdEPENdENcE ANd ExPERTisE Of AT LEAsT ONE mEmbER Of ThE AUdiT cOmmiTTEE

Remi Vermeiren has been appointed as independent Director of Ablynx. He is Chairman of the Audit Committee and holds a degree in Economic and Financial Sciences. Before he became an independent Director

• Nanobody-based drug candidates must undergo rigorous pre-clinical and clinical testing, the results of which are uncertain and could substantially delay or prevent the drug candidates from reaching the market.

• Delays in clinical trials are common and may have many causes. Such delays could result in increased costs and jeopardise or delay the Group’s ability to achieve regulatory approval and commence product sales as currently contemplated.

• The Group’s drug candidates may not obtain regulatory approval when expected, if at all, and even after obtaining approval, the drugs will be subject to ongoing regulation. To date, none of the Group’s drug candidates have reached the stage of submission or evaluation for regulatory approval.

• The Group has a history of operating losses and an accumulated deficit; the Group may never become profitable or may not be able to sustain profitability in subsequent periods.

• The Group is reliant on collaborative partners for the development and commercialisation of most of its existing and future drug candidates.

• The Group’s patents and other intellectual property rights may not adequately protect its products and drug candidates, which may impede the Company’s ability to compete effectively.

• The Group may infringe the patents or other intellectual property rights of others and may face patent or other intellectual property litigation, which may be costly and time consuming.

• The Group faces, and will continue to face, significant competition and rapid technological change, which could limit or eliminate the market opportunity for its products and drug candidates.

• The Group relies on outsourcing arrangements with third parties for some of its activities including manufacturing and clinical trials management.

• The Group may not have adequate insurance cover, particularly in connection with product liability risk.

• The commercial success of the Group will depend on attaining significant market acceptance of its drug candidates among physicians, patients, healthcare payers and the medical community. The Group has not yet commercialised any product.

• If the Group fails to attract and retain qualified personnel, it may be unable to successfully develop its technologies, conduct its clinical trials and commercialise drug candidates.

• The Group may need additional funding, which may not be available on acceptable terms when required, if at all.

• The revenue is generated by a limited number of clients.


the Group is, among others, dependent on sufficient financial funding, the results obtained from research and the Group’s capacity to obtain and maintain adequate protection of its intellectual property.

In addition, several clinical tests are planned in the next years, which will increase the operational costs. On the other hand, major commercial deals were closed which have already generated and which will generate important revenues as milestones have been achieved. In view of the above, the Company initiated an IPO on Euronext in November 2007 and raised €85.2 million and initiated an SPO on Euronext in March 2010 and raised €50 million. In addition, the Company initiated an ABO (Accelerated Bookbuilding procedure) on Euronext in February 2013 and raised €31.5 million.

The 2012 cash position of €62.8 million including cash, other investments, restricted cash and deposits will allow the Group to keep up with the financial obligations for at least the following twelve months. Consequently, the annual accounts have been prepared on the assumption that the Company is a going concern.

1.17. APPROPRiATiON Of REsULTs

Ablynx NV, the parent Company, ended the financial year 2012 with a net loss of €13,417,066.26.

The Board of Directors proposed to appropriate the loss of the year of €13,417,066.26 to retained losses, the latter amounting to €61,780,840.02.

This brings the total amount of retained losses to €75,197,906.28.

1.18. imPORTANT EvENTs sUbsEqUENT TO ThE AccOUNTiNg REfERENcE dATE

On 21 January 2013, the Company issued 61,812 new shares in exchange for €329,619.51 as the result of the exercise of warrants by some employees and consultants of the Company. On 13 February 2013, the Company announced efficacy and safety data for its anti-IL-6R Nanobody, ALX-0061, at the 24-week final analysis of the Phase II part of a combined Phase I/II study in patients with moderately to severely active rheumatoid arthritis (RA) on a stable

of Ablynx, he had a 43-year long career at Kredietbank NV, which in 1998 merged with Cera Bank and ABB Insurance into KBC Bank and Insurance Group. Currently, Remi is also a member of a number of quoted and non-quoted companies. He is currently a member of the Board or administrative management or supervisory bodies of the following companies: Foundation RV (charitable organization), ACP II SCA (Luxembourg) and Zinner NV (Belgium).

Mats Pettersson has been appointed as independent Director of Ablynx and resigned in February 2013. Mats Pettersson is a member of the Audit Committee and has obtained a BSc in economics and business administration. Mats Pettersson is the founder of Biovitrum AB, a spin-out company from Pharmacia and one of the largest biotech companies in Europe, and he was its first CEO from 2001 until 2007. After a career as a CPA (1968-1976), he joined the Pharmacia group in 1976 where he mainly worked in CFO and Business Development positions. He is currently Chairman of the Board Lundbeck A\S (Denmark), Board member of Photocure AS (Norway) and to-BBB technologies B.V. (the Netherlands) and Chairman of the Board of Moberg Derma AB (Sweden).

Russell Greig has been appointed as independent Director of Ablynx and will join the Audit Committee in February 2013. Dr. Greig has more than 30 years’ experience in the pharmaceutical industry, with knowledge and expertise in research and development, business development and commercial operations. He spent the majority of his career at GlaxoSmithKline, where he held a number of positions including GSK’s President of Pharmaceuticals International from 2003 to 2008 and Senior Vice-President Worldwide Business Development. From 2008 to 2010, Dr. Greig was also President of SR One, GSK’s Corporate Venture Group. He is currently Chairman of Syntaxin (UK), AM Pharma (The Netherlands) and Isconova (Sweden) as well as a Director of Tigenix (Belgium). He also acts as a consultant to Genocea (US), BigDNA (Scotland), Edinburgh BioQuarter (Scotland), and Kurma Life Sciences (France). He served as acting CEO at Genocea and Isconova for an interim period. He is also a member of the Scottish Scientific Advisory Committee.

1.16. JUsTificATiON Of ThE vALUATiON RULEs

Ablynx NV, established in 2001, is a biotechnology Company. For the further successful expansion of the research and development activities,


background of methotrexate.

On 25 February 2013, the Company announced a research collaboration with Spirogen to evaluate the potential of a novel anti-cancer drug conjugate combining Spirogen’s proprietary cytotoxic drugs, pyrrolobenzodiazepines (PBD), and associated linker technology, with Nanobodies® generated using Ablynx’s proprietary technology platform.

On 28 February 2013, the Company announces that it has raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure announced on Wednesday 27 February 2013 after the market closed. On 8 March 2013, the Company announced that the closing of its private placement (“Accelerated Bookbuild Offering”/ “ABO”) took place on 5 March 2013 and as a result, Ablynx issued 4,377,919 new shares. In addition, 348,400 new shares were issued that same day as a result of the exercise of 641,800 warrants.

1.19. gRANT Of dischARgE TO ThE diREcTORs ANd ThE sTATUTORy AUdiTOR

You are requested, for Ablynx NV, in accordance with the law and the Articles of Association, to grant discharge to the Directors and the statutory auditor for the duties carried out by them during the financial year ending 31 December 2012.

This report will be deposited according to the legal requirements and can be consulted at the Company’s address.

Ghent, 25 March 2013

For the Board of Directors,

Edwin MosesChairman


03.

STATuTORY AudiTOR’S REpORT

TO THE SHAREHOLDERS’ MEETING ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE yEAR ENDED 31 DECEMBER 2012

To the shareholders

As required by law, we report to you on the performance of our mandate of statutory auditor. This report includes our report on the consolidated financial statements as defined below together with our report on other legal and regulatory requirements.

Report on the consolidated financial statements – Unqualified opinion

We have audited the accompanying consolidated financial statements of Ablynx NV (“the company”) and its subsidiary (jointly “the group”), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. These consolidated financial statements comprise the consolidated balance sheet as at 31 December 2012, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of €74,995 (000) and the consolidated income statement shows a consolidated loss for the year then ended of €28,508 (000).

Responsibility of the Board of Directors for the preparation of the consolidated financial statements

The Board of Directors is responsible for the preparation and fair presentation of consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

02.

RESpONSiBiLiTY STATEmENT

We hereby certify that, to the best of our knowledge, the consolidated financial statements as of 31 December 2012, prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, and the legal requirements applicable in Belgium, give a true and fair view of the assets, liabilities, financial position and loss of the Group and the undertakings included in the consolidation taken as a whole, and that the management report includes a fair review of the development and the performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board of Directors

Edwin Moses NV Woconsult represented byChairman Wim Ottevaere, CFO


content of the Directors’ report on the consolidated financial statements.

In the framework of our mandate, our responsibility is to verify, for all significant aspects, the compliance with some legal and regulatory requirements. On this basis, we provide the following additional comment which does not modify the scope of our audit opinion on the consolidated financial statements:

• The directors’ report on the consolidated financial statements includes the information required by law, is, for all significant aspects, in agreement with the consolidated financial statements and is not in obvious contradiction with any information obtained in the context of our mandate. However, we are unable to express an opinion on the description of the principal risks and uncertainties confronting the group, or on the status, future evolution, or significant influence of certain factors on its future development. We can, nevertheless, confirm that the information given is not obvious contradiction with any information obtained in the context of our appointment.

Diegem, 26 March 2013

The statutory auditor

DELOITTE Bedrijfsrevisoren / Reviseurs d’EntreprisesBV o.v.v.e. CVBA / SC s.f.d. SCRLRepresented by Gert Vanhees

Statutory auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the group’s preparation and fair presentation of the consolidated financial statements 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 group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements. We have obtained from the company’s officials and the Board of Directors the explanations and information necessary for performing our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Unqualified opinion

In our opinion, the consolidated financial statements of Ablynx NV give a true and fair view of the group’s net equity and financial position as of 31 December 2012, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.

Report on other legal and regulatory requirements

The Board of Directors is responsible for the preparation and the


05.

CONSOLidATEd STATEmENT Of COmpREHENSivE iNCOmE

Year ended 31 December(€’000) 2012 2011Revenue: Research and development 25,645 19,861 Grants 1,082 2,008 Total revenue 26,727 21,869 Research and development expenses (46,868) (56,307) (Note 8.20)General and administrative expenses (9,409) (10,423) (Note 8.21)Total operating expenses (56,277) (66,730) Other operating income 204 38 (Note 8.22)Other operating expenses (426) (706) (Note 8.22)Operating result (29,772) (45,529) Finance income (net) 1,264 1,634 (Note 8.25) Finance income 1,452 1,737 Finance cost (188) (103) Loss before taxes (28,508) (43,895) Income tax expense 0 0 (Note 8.26)Loss for the year (28,508) (43,895) Other comprehensive loss Fair value gains/losses on available-for-sale 0 0financial assets, net of tax Total comprehensive income for the period (28,508) (43,895) Loss attributable to equity holders (28,508) (43,895) Total comprehensive loss attributable (28,508) (43,895)to equity holders Basic and diluted loss per share (0.65) (1.01) (Note 8.27)

The notes on pages 120. to 168. are an integral part of these financial statements.

04.

CONSOLidATEd BALANCE SHEET As at 31 December

(€’000) 2012 2011 Non-current assets 12,304 11,979 Intangible fixed assets 600 1,018 (Note 8.6) Property, plant and equipment 3,450 4,984 (Note 8.7) Restricted cash 2,660 3,000 (Note 8.8) Tax receivables 5,594 2,977 (Note 8.9)Current assets 62,691 86,550 Trade receivables 591 2,233 (Note 8.10) Other current assets 729 1,301 (Note 8.10) Tax receivables 608 489 (Note 8.10) Accrued income and deferred charges 656 1,705 (Note 8.10)Other short-term financial investments 55,810 77,500 (Note 8.11) Cash and cash equivalents 4,297 3,322 (Note 8.12)Total assets 74,995 98,529 Equity attributable to equity holders 31,722 58,630 Share capital 73,465 73,304 Share premium account 126,466 126,457 Share-based payment reserve 8,078 6,648 Retained earnings (176,287) (147,779) Non-current liabilities 927 1,752 Borrowings 927 1,752 (Note 8.16)Current liabilities 42,346 38,147 Borrowings 825 805 (Note 8.16) Trade payables 8,070 9,867 (Note 8.17) Other current liabilities 3,214 3,868 (Note 8.17) Deferred income 30,237 23,607 (Note 8.17)Total liabilities 43,273 39,899 Total equity and liabilities 74,995 98,529

The notes on pages 120. to 168. are an integral part of these financial statements.

consolidated Financial statements


07.

CONSOLidATEd STATEmENT Of CHANGES iN SHAREHOLdER’S EquiTY

(€’000) Share Share Share- Retained Total capital premium based loss Equity payments Balance at 73,076 126,421 5,177 (103,885) 100,78931 December 2010 Loss of the period (43,894) Other comprehensiveincome Available-for-sale financial assets Total ComprehensiveIncome Warrant plans Share-Based Payments 1,570 Transactions with owners Capital increase Issuance costs Exercise of warrants 228 36 (99) Balance at 73,304 126,457 6,648 (147,779) 58,63031 December 2011 Loss of the period (28,508) Other comprehensiveincome Available-for-salefinancial assets Total ComprehensiveIncome Warrant plans Share-Based Payments 1,542 Transactions with owners Capital increase Issuance costs Exercise of warrants 161 9 (112) Balance at 73,465 126,466 8,078 (176,287) 31,72231 December 2012

The notes on pages 120. to 168. are an integral part of these financial statements

06.

CONSOLidATEd CASH fLOw STATEmENT

Year ended 31 December (€’000) 2012 2011Cash flows from operating activities Loss before income tax (28,508) (43,895) Adjustments for: Amortisation 727 609 (Note 8.6) Depreciation 326 2.169 (Note 8.7) (Profit)/loss on disposal of property, plant and equipment Share-based payment expense 1,542 1,569 Finance income – net (1,337) (1,689) (Note 8.25) Net movement in trade and other receivables 527 734 Net movement in trade and other payables 4,179 8,201 Cash used in operations (22,544) (32,302) Interest paid (74) (23) (Note 8.25)Interest received 1,411 1,712 (Note 8.25)Income tax paid 0 0 (Note 8.26)Net cash used in operating activities (21,207) (30,613) Cash flows from investing activities Purchases of property, plant and equipment (700) (3,682) (Note 8.7)Proceeds from sale of property, plant and equipment 1,908 1,221 (Note 8.7)Purchases of intangible assets (309) (211) (Note 8.6)Purchases of short-term financial investments (Note 8.11)Sale of available-for-sale financial assets Sale of short-term financial investments 22,030 8,000 (Note 8.13)Transfer to non-current asset 0 0 Net cash used in investing activities 22,929 5,328 Cash flows from financing activities Proceeds from issuance of ordinary shares Proceeds from exercise of warrants 58 164 Proceed of borrowings 1,477 Repayments of borrowings (805) (376) Net cash generated from financing activities (747) 1,265 Net (decrease)/increase in cash 975 (24,020) and cash equivalents Cash and cash equivalents 3,322 27,342 at beginning of the period Cash and cash equivalents at end of the period 4,297 3,322

The notes on pages 120. to 168. are an integral part of these financial statements


8.2.1. bAsis Of PREPARATiON

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS), as adopted by the EU, IFRIC Interpretations and Belgian legal requirements applicable to the Group. The consolidated financial statements are presented in thousands of euro (unless stated otherwise). The consolidated financial statements for the financial year ended 31 December 2012 have been approved for issue by the Board of Directors on 26 February 2013.

The consolidated financial statements have been prepared under the assumption that the Group is a going concern and under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of consolidated financial statements in conformity with IFRS, as adopted by the EU, requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 8.4.

Changes in accounting policy and disclosures:

Standards and interpretations applicable for the annual period beginning on 1 January 2012

• Amendments to IFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets (applicable for annual periods beginning on or after 1 July 2011)

Standards and interpretations published, but not yet applicable for the annual period beginning on 1 January 2012

• IFRS 9 Financial Instruments and subsequent amendments (normally applicable for annual periods beginning on or after 1 January 2015)

• IFRS 10 Consolidated Financial Statements (applicable for annual periods beginning on or after 1 January 2014)

08.

NOTES TO THE CONSOLidATEd

fiNANCiAL STATEmENTS

8.1. gENERAL iNfORmATiON

The Company was incorporated on 4 July 2001 under the name “MatchX”. It changed its name to “Ablynx” on 12 June 2002. Ablynx is a public limited liability company (“naamloze vennootschap” or “NV”) organised and existing under the laws of Belgium with registered offices at Technologiepark 21, 9052 Zwijnaarde, Belgium (company number 0475.295.446 (RPR Ghent)).

Ablynx is focused on the discovery and development of Nanobodies, a novel class of antibody-derived therapeutic proteins based on single-domain antibody fragments, for a range of serious life-threatening human diseases.

Ablynx is developing a portfolio of Nanobody-based therapeutic programmes in a number of major disease areas, including inflammation, thrombosis, oncology and pulmonary disease. The unique structure and stability of Nanobodies has allowed Ablynx, and its partners, to pursue targets that are typically difficult to reach with conventional antibodies.

To date, the Company has raised €71.5 million private equity financing, raised an additional €85.2 million as a result of its IPO on Euronext in November 2007, and raised €50 million resulting from its SPO on Euronext in March 2010. In addition, the Company raised €31.5 million in February 2013 through an accelerated bookbuilding procedure. It has research facilities in Ghent (Belgium), and, as at 31 December 2012, it employed 262 staff members. The Board of Directors decided in the meeting of November 2011 to stop all operations in Porto. The site was operationally closed down in the first quarter of 2012.

8.2. sUmmARy Of sigNificANT AccOUNTiNg POLiciEs

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.


8.2.2. cONsOLidATiON scOPE

Ablynx NV controls a sole 100 %-owned subsidiary (Ablynx SA with registered offices in Rua do Campo Alegre 1021, 4150-180 Porto, Portugal). The consolidated financial statements are presented in euro and rounded to the nearest thousand.

8.2.3. sEgmENT REPORTiNg

The Group operates as a single operating segment.

8.2.4. fOREigN cURRENcy TRANsLATiON

Functional and presentation currencyItems included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in euro, which is the functional and presentation currency of the Group.

Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the carrying amount are recognised in other comprehensive income (OCI).

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.

• IFRS 11 Joint Arrangements (applicable for annual periods beginning on or after 1 January 2014)

• IFRS 12 Disclosures of Interests in Other Entities (applicable for annual periods beginning on or after 1 January 2014)

• IFRS 13 Fair Value Measurement (applicable for annual periods beginning on or after 1 January 2013)

• IAS 27 Separate Financial Statements (applicable for annual periods beginning on or after 1 January 2014)

• IAS 28 Investments in Associates and Joint Ventures (applicable for annual periods beginning on or after 1 January 2014)

• Improvements to IFRS (2009-2011) (normally applicable for annual periods beginning on or after 1 January 2013)

• Amendments to IFRS 1 First Time Adoption of International Financial Reporting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (applicable for annual periods beginning on or after 1 January 2013)

• Amendments to IFRS 1 First Time Adoption of International Financial Reporting Standards – Government Loans (normally applicable for annual periods beginning on or after 1 January 2013)

• Amendments to IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities (applicable for annual periods beginning on or after 1 January 2013)

• Amendments to IFRS 10, IFRS 11 and IFRS 12 – Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (applicable for annual periods beginning on or after 1 January 2014)

• Amendments to IFRS 10, IFRS 12 and IAS 27 – Consolidated Financial Statements and Disclosure of Interests in Other Entities: Investment Entities (applicable for annual periods beginning on or after 1 January 2014)

• Amendments to IAS 1 Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income (applicable for annual periods beginning on or after 1 July 2012)

• Amendments to IAS 12 Income Taxes – Deferred Tax: Recovery of Underlying Assets (applicable for annual periods beginning on or after 1 January 2013)

• Amendments to IAS 19 Employee Benefits (applicable for annual periods beginning on or after 1 January 2013)

• Amendments to IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (applicable for annual periods beginning on or after 1 January 2014)

• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (applicable for annual periods beginning on or after 1 January 2013)


at the end of the contract or at the actual termination date).• Research and development service fees are recognised as revenue over

the life of the research agreement as the required services are provided and costs are incurred. These services are usually in the form of a defined number of full-time equivalents (FTE) at a specified rate per FTE.

• Commercial collaborations resulting in a reimbursement of research and development (R&D) costs are recognised as revenue as the related costs are incurred. The corresponding research and development expenses are included in research and development expenses in the consolidated financial statements.

• Milestone payments are recognised as revenue upon the achievement of the milestone, when all conditions attached have been fulfilled.

Deferred revenue represents amounts received prior to revenue being earned.

Government grantsGrants related to research projects received from governmental agencies are recognised at their fair value over the period necessary to match them with the costs that they are intended to compensate, and when there is reasonable assurance the Group will comply with the conditions attached to the grants, but not prior to the formal grant approval. These grants are presented in the income statement as a separate category of revenues.

8.2.6. iNTANgibLE fixEd AssETs

Internally generated intangible assetsResearch expenses are charged to the profit and loss statement as incurred.

Development costs are only capitalised if the following conditions are met:

• The internally developed intangible asset is identifiable and controlled by the entity

• The asset will generate future economic benefits• The development costs can be reliably measured

At present, the current stage of development activities does not allow any capitalisation of intangible assets. The existing regulatory and clinical risks constitute an important uncertainty with respect to the capitalisation of development costs. In contrast to Belgian GAAP, the

Group companiesThe subsidiary has the same functional currency as the parent and no translation differences arise on consolidation.

The following foreign exchange rates have been used for the preparation of the accounts:

1 Euro = X foreign currency Closing rate Average rate 2012 2011 2012 2011US Dollar 1.3185 1.3449 1.2891 1.4406GB Pound 0.8112 0.8565 0.8123 0.8881

8.2.5. REvENUE REcOgNiTiON

The Group generates revenue from research collaboration agreements and from government grants.

The Group recognises revenue when the amount of revenue can be reliably measured, when it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Research collaboration agreementsThese research agreements typically contain license fees, non-refundable up-front access fees, research and development service fees and milestone payments. The revenue recognition policy for research projects can be summarised as follows:

• License fees are recognised when the Group has fulfilled all conditions and obligations. The license fee will not be recognised if the amount cannot be reasonably estimated and if the payment is doubtful. As the Group has a continuing involvement during the license period, license fees are recognised rateably over the term of the agreement.

• Non-refundable up-front fees for access to prior research results and databases are recognised when earned, if the Group has no continuing performance obligations and all conditions and obligations are fulfilled (this means after the delivery of the required information). If the Group has continuing performance obligations towards the client research fees, the fee will be recognised on a straight-line basis over the contractual performance period (with adjustment to the actual performance period


Property, plant and equipment under construction are not depreciated.

8.2.8. imPAiRmENT Of NON-fiNANciAL AssETs

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

8.2.9. dERivATivE fiNANciAL iNsTRUmENTs ANd hEdgiNg AcTiviTiEs

The Group has no derivative financial instruments, in all material respect, to hedge interest rate and foreign currency risks.

8.2.10. TRAdE REcEivAbLEs

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

8.2.11. OThER shORT-TERm iNvEsTmENTs

Term deposits with an initial term of more than three months are held to maturity.

R&D expenses are not capitalised because the criteria under IFRS are not met.

As no internally generated assets are recognised, all costs with respect to the protection of intellectual property are expensed as R&D expenses.

Purchased intangible assetsAcquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis over their estimated useful lives of maximum three years.

Acquired knowledge in the form of licenses and patents is recorded at cost less accumulated amortisation and impairment. It is amortised on a straight-line basis over the shorter of the term of the license agreement and its estimated useful life.

The Group does not have intangible fixed assets with an indefinite useful life.

8.2.7. PROPERTy, PLANT ANd EqUiPmENT

An item of property, plant and equipment is carried at historical cost less accumulated depreciation and impairment. Costs relating to the day-to-day servicing of the item are recognised in the income statement as incurred. Gains and losses on the disposal of property, plant and equipment are recognised in other income or expense.

A pro rata straight-line depreciation method is used to reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. The residual value and the useful life of an asset is reviewed each financial year-end for possible impairment. Depreciation is charged to the income statement on the following basis:

Equipment 3 yearsHardware 3 yearsFurniture 5 yearsEquipment the shorter of the useful life or the minimum leasing termunder leasingLeasehold the shorter of the useful life or the minimum rent termimprovements


neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

As such, a deferred tax asset for the carry forward of unused tax losses will be recognised to the extent that it is probable that future taxable profit will be available.

8.2.17. EmPLOyEE bENEfiTs

The Group offers several post-employment, death, disability and healthcare benefit schemes. All employees have access to these schemes. The death, disability and healthcare benefits granted to employees of the Group are covered by external insurance companies, where premiums are paid annually and charged to the income statement as they were incurred. The post-employment pension plans granted to employees of the Group are defined contribution plans. A defined contribution plan is a pension plan under which the Group pays a fixed contribution into a separate entity. The contribution obligations to the defined contribution plans are expensed by the Group in the income statement as they were incurred.

Although defined contribution plans in Belgium are legally subject to a minimum guaranteed return, the post-employment pension plans are accounted for as defined contribution plans, since the legally required return is basically guaranteed by the external insurance company.

8.2.18. PROvisiONs

A provision is recognised only when: the Group has a present obligation to transfer economic benefits as a result of past events; it is probable (more likely than not) that such a transfer will be required to settle the obligation; and a reliable estimate of the amount of the obligation can be made.

8.2.12. cAsh ANd cAsh EqUivALENTs

The cash and cash equivalents heading consists of cash, deposits held at call with banks and short-term deposits with an initial term not exceeding three months.

8.2.13. EqUiTy iNsTRUmENTs

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issuance costs.

8.2.14. TRAdE PAyAbLEs

Payables after and within one year are measured at amortised cost, i.e. at the net present value of the payable amount. Unless the impact of discounting is material, the nominal value is taken.

8.2.15. bORROWiNgs

Interest-bearing bank loans are initially recorded as the proceeds received, net of transaction costs, and subsequently carried at amortised cost: the financial charges are accounted for on an accrual basis using the effective interest rate method and added to the carrying amount of the borrowing to the extent that they are not settled in the period in which they occur.

8.2.16. iNcOmE TAxEs

Income taxes are accrued for in the same period as the related revenues and expenses. The taxable result can differ from the net profit or loss, because of revenues and expenses which are taxable in another fiscal year or that will never be taxable or deductible.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects


lease, are added to the amount recognised as an asset.

Assets acquired under financial leases are depreciated over the shorter of the lease term and their estimated useful life, if it is not reasonably certain that the entity will obtain ownership of the asset by the end of the lease term.

Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

8.2.20. shARE-bAsEd PAymENT TRANsAcTiONs

The Group has offered equity-settled, share-based compensation plans to its employees, executive management and consultants. The cost with respect to the employee services received in compensation for the grant of these warrants is recognised as an expense.

The total amount of the expense is recognised over the vesting period and determined on the basis of the fair value of the warrants at grant date. The fair value of each warrant is estimated on the date of grant using the Black-Scholes model. The total cost is initially estimated on the basis of the number warrants that will become exercisable. At each balance date, the Group revises its estimates of the number of warrants that will become exercisable. The impact of the revision is recognised in the income statement over the remaining vesting period with a corresponding adjustment to equity.

8.2.21. EARNiNgs PER shARE

Basic net profit/(loss) per share is computed on the basis of the weighted average number of ordinary shares outstanding during the period, excluding treasury shares.

Diluted net profit/(loss) per share is computed based on the weighted-average number of ordinary shares outstanding including the dilutive effect of warrants. Warrants should be treated as dilutive, when and only when their conversion to ordinary shares would decrease the net profit per share from continuing operations.

When the impact is likely to be material (for long-term provisions), the amount recognised as a provision is estimated on a net present value basis (discount factor). The increase in provision due to the passage of time is recognised as an interest expense.

A present obligation arises from an obligating event and may take the form of either a legal obligation or a constructive obligation (a constructive obligation exists when the Group has an established pattern of past practice that indicates to other parties that it will accept certain responsibilities and as a result has created a valid expectation on the part of those other parties that it will discharge those responsibilities). An obligating event leaves the Group no realistic alternative to settling the obligation, independently of its future actions.

Provisions for decommissioning costs and restoring sites are recorded as appropriate in application of the above.

Provisions for future operating losses are strictly prohibited.

If the Group has onerous contracts (the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it), the present obligations under the contract are recognised as a provision.

A provision for restructuring is only recorded if the Group demonstrates a constructive obligation to restructure at the balance sheet date. The constructive obligation should be demonstrated by: (a) a detailed formal plan identifying the main features of the restructuring; and (b) raising a valid expectation to those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features to those affected.

8.2.19. LEAsEs

A financial lease is a lease that substantially transfers all the risks and rewards incident to ownership of an asset.

The cost of assets acquired by way of a finance lease is measured at the lower of the fair value of the leased asset and the present value of the minimum lease payments, using the interest rate implicit in the lease as the discount rate, both determined at the inception of the lease. Initially incurred costs, directly attributable to the arrangement of the finance


Credit quality of financial assets

€ ‘000 Rating (*) 2012 2011 Cash and cash equivalents AA- 0 2,119 A+ 1,782 615 A- 2,515 588 Total 4,297 3,322 Short-term investments AA- 0 15,000 A+ 23,753 20,000 A- 32,057 42,500 Total 55,810 77,500

(*) source: Standard & Poor’s

Foreign exchange risk The Group has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in GBP, SEK, CHF, AUD and USD. The Group did not enter into any currency hedging arrangements in order to cover this risk as the exposure is limited.

As per 31 December 2012 , if the EUR had weakened 10 % against the GBP and strengthened 10 % against the USD with all other variables held constant, the loss of the period would have been €223,000 (2011: €147,000) higher. Conversely, if the EUR had strengthened 10 % against the GBP and weakened 10 % against the USD with all other variables held constant, the loss of the period would have been €203,000 (2011: €64,000) lower.

The table below provides an indication of the Group’s open net foreign currency position as per year end:

(€’000) 2012 2011Liabilities denominated in USD 143 194Liabilities denominated in GBP 67 109Liabilities denominated in ZAR 0 62

8.3. fiNANciAL RisK mANAgEmENT

8.3.1. fiNANciAL RisK fAcTORs

Liquidity risk managementThe Group makes use of term accounts and treasury notes.

The maturities of the term deposits are limited to a maximum of 1 year.


The Group has limited financial debt related to investments in the building.

Interest rate riskAs the Group has no significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in market interest rates.






The Company has accounted for a tax receivable of €5.6 million. The achievements of a number of assumptions may impact the recoverability, such as the future peak sales, the market share, the sales prices of the underlying R&D projects.

The Company has €128 million of available tax losses carried forward. Based upon a tax planning, the Company did not recognise a deferred tax asset as the mid-term planning demonstrated significant uncertainty to realise taxable profits in the foreseeable future.

The Company used the Black & Scholes model for share-based payment calculation purposes and based the volatility parameter on the volatility of the Ablynx share.

The Company has not identified at reporting date any sources of estimation uncertainty, which involve a significant risk of material adjustment to the financial statements in the following year.

8.5. sEgmENT iNfORmATiON

The Group does not distinguish different operating segments.

The income stems from four pharmaceutical partners, namely Boehringer Ingelheim, Merck Serono, Merck & Co and Novartis. Moreover, in 2012, more than 90% of the income originated from Boehringer Ingelheim, Merck Serono and Merck & Co. Finally, in 2011 and 2012, more than half of the income originated from Boehringer Ingelheim.

8.3.2. cAPiTAL RisK mANAgEmENT

The Company manages its capital to ensure that it will be able to continue as a going concern. The capital structure of the Company consists of limited financial debt, cash and cash equivalents, restricted cash and short-term investments and equity attributed to the holders of equity instruments of the Company, such as capital, reserves and results carried forward as mentioned in the consolidated statements of changes in equity. The Company makes the necessary adjustments in the light of changes in the economic circumstances, risks associated to the different assets and the projected cash needs of the current and projected research activities. The current cash situation and the anticipated cash generation and cash burn are the most important parameters in assessing the capital structure. The Company objective is to maintain the capital structure at a level to be able to finance its activities for at least twelve months. Cash income from existing and new partnerships is taken into account and, if needed and possible, the Company can issue new shares or enter into financing agreements.

8.4. cRiTicAL AccOUNTiNg EsTimATEs ANd JUdgEmENTs

At each reporting date, the Group makes assumptions and estimates with respect to the impact of past events on the future resulting in a number of accounting estimates, which at present have a very limited impact.

The Boehringer Ingelheim Strategic Alliance Agreement signed in September 2007 was extended with two years in March 2012.

On 2 October 2012 Ablynx and Merck & Co. announced a collaboration to develop and commercialise Nanobody® candidates directed towards a voltage gated ion channel with the option to develop and commercialise a Nanobody to a second target. Under the terms of the agreement, Merck gains exclusive global rights to Nanobodies against the selected target, with an option for similar rights to a second target. Upon signing, Merck has paid Ablynx a €6.5 million upfront payment and a €2 million fee for research funding. In addition, Ablynx will be eligible to receive up to €448 million in research, regulatory and commercial milestone payments associated with the progress of multiple candidates as well as tiered royalties on any products derived from the collaboration.


8.7. PROPERTy, PLANT ANd EqUiPmENT

8.8. REsTRicTEd cAsh

Restricted cash is related to a cash pledge the Company has provided in respect of the service agreement with NV Bio-Versneller (see point 8.29.3).

As at 31 December (€’000) 2012 2011Restricted cash 2,660 3,000

(€’000) Equipment Furniture Equipment Leasehold PPE under Totalunder leasing improvements construction

Year ended 31 December 2011 Opening net book amount 2,512 270 1,531 352 28 4,693Additions 1,631 371 1,665 5 9 3,681Disposals - acquisition value (1,133) (88) (1,221)Disposals - accumulated depreciation 197 8 205and impairment Depreciation charge (1,644) (254) (340) (136) (2,374)Transfer Closing net book amount 1,563 307 2,856 221 37 4,984As at 31 December 2011 Cost 11,845 1,005 3,657 809 625 17,941Accumulated depreciation and impairment (10,282) (698) (801) (588) (588) (12,957)Net book amount 1,563 307 2,856 221 37 4,984 Year ended 31 December 2012 Opening net book amount 1563 307 2856 221 37 4,984Additions 396 193 0 61 50 700Disposals - acquisition value (1,655) (108) (89) (6) (1,858)Disposals - accumulated depreciation 1,594 102 89 5 1,790and impairment Depreciation charge (977) (277) (730) (132) (2,116)Transfer* (50) (50)Closing net book amount 921 217 2,126 149 37 3,450As at 31 December 2012 Cost 12,241 1,198 3,657 870 675 18,641Accumulated depreciation and impairment (11,320) (981) (1,531) (721) (638) (15,191)Net book amount 921 217 2,126 149 37 3,450

(*) Transfer from PPE (Property, Plant and Equipment) under construction to software (Intangible Fixed Assets)

8.6. iNTANgibLE fixEd AssET

(€’000) Patents Software TotalYear ended 31 December 2011 Opening net book amount 487 929 1,416Additions 0 211 211Transfer 0 0 0Amortisation charge (136) (473) (609)Closing net book amount 351 667 1,018As at 31 December 2011 Cost 2,174 1,680 3,854Accumulated amortisation and impairment (1,823) (1,013) (2,836)Net book amount 351 667 1,018

Year ended 31 December 2012 Opening net book amount 351 667 1,018Additions 0 259 259Transfer* 0 50 50Amortisation charge (134) (593) (727)Closing net book amount 217 383 600As at 31 December 2012 Cost 2,174 1,989 4,163Accumulated amortisation and impairment (1,957) (1,606) (3,563)Net book amount 217 383 600

(*) Transfer from PPE (Property, Plan and Equipment) under construction to software (Intangible Fixed Assets)

The intangible fixed assets mainly consist of a portfolio of acquired patents and software licences.


partners. The nominal amount of both trade and other receivables approximates the fair value.

Other receivables mainly consist of intrests to be received and taxes to be recovered.

Trade receivables that were past due are not impaired. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. The ageing analysis of the past due trade receivables is as follows:

As at 31 December (€’000) 2012 2011Up to 1 month 0 1,000Over 3 months 211 0

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:

As at 31 December (€’000) 2012 2011€ 367 2,000

Accrued income consists mainly of earned income from government grants for which no payments have been received but for which the relating expenditures have been incurred.

8.11. OThER shORT-TERm iNvEsTmENTs

As at 31 December (€’000) 2012 2011Term deposits > 3 months 55,810 77,500

These are term deposits with banks with an initial term between 3 and 12 months.

8.9. TAx REcEivAbLEs

As at 31 December (€’000) 2012 2011Tax credit related to research expenditure 5,594 2,977capitalised under BE GAAP

The Company has accounted for a tax receivable of €5.6 million following an R&D incentive scheme in Belgium under which the tax can be refunded after five years if not offset against taxable basis over that period. The R&D incentives are recorded net against the relating R&D expenses in the consolidated statement of comprehensive income. The achievements of a number of assumptions may impact the recoverability, such as the future peak sales, the market share and the sales prices of the underlying R&D projects. We expect to receive this amount gradually as from 2014 onwards.

8.10. TRAdE REcEivAbLEs ANd OThER cURRENT AssETs

As at 31 December (€’000) 2012 2011Trade receivables Trade receivables 368 2,000Invoices to be made 223 233Total 591 2,233 Other current assets VAT receivables 363 760Other receivables 366 541

Tax receivables Witholding taxes on interest income 608 489Total 608 489 Accrued income and deferred expenses Accrued income 451 1,401Deferred expenses 205 304Total 656 1,705

Trade receivables consist of amounts due from research collaboration


On 18 October 2012, the Company issued 7,490 new shares in exchange for €21,204.64 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €13,997.48 and €7,207.16 respectively.

The share capital consists of shares, which are fully paid up, with a par value of €1.87 per share.

• Number of shares on 31 December 2011 43,689,895• Number of new shares (exercise of warrants) 27,490• Number of shares on 31 December 2012 43,717,385

As at 31 December 2012 the shareholding structure is as follows (based on the most recent transparency declarations):

Shareholder Address Number of % voting voting rights rights

GIMV NV, Adviesbeheer Karel Oomsstraat 37, 7,991,430 18.28% GIMV Life Sciences NV and 2018 Antwerp, BelgiumBiotech Fonds VlaanderenSofinnova Partners SAS 17, rue de Surène, 6,467,342 14.79% 75008 Paris, France Abingworth 38 Jermyn Street, 4,102,952 9.39%Management Limited SW1Y 6DN London, and Abingworth LLP United KingdomC.H. Boehringer Binger Strasse 173, 2,142,857 4.90%Sohn AG & Co. KG 55216 Ingelheim am Rhein, GermanyFree Float 23,012,804 52.64%

8.14.2. AUThORisEd cAPiTAL

The Extraordinary General Assembly of 29 April 2010 authorised the Board of Directors to carry out capital transactions during a period of five years for a total amount of €81,486,264.59.

In December 2010, the Board of Directors issued a new warrant plan with a total number of 97,500 warrants at an exercise price of €8.24 per warrant effective as from 2011.

In January 2012, the Board of Directors issued a new warrant plan with a total number of 860,000 warrants and 748,750 warrants were granted

8.12. cAsh ANd cAsh EqUivALENTs

As at 31 December (€’000) 2012 2011≤ 3 months 0 250Cash at bank and on hand 4,297 3,072

Total 4,297 3,322

The cash and cash equivalents heading consists of cash, deposits held at call with banks and short-term deposits.

8.13. fiNANciAL iNsTRUmENTs by cATEgORy

€ ‘000 2012 Loans and Receivables TotalRestricted cash 2,660 2,660Trade receivables - 7,523 7,523other current assetsOther short-term deposits 55,810 55,810Cash and cash equivalents 4,297 4,297

€ ‘000 2011 Loans and Receivables TotalRestricted cash 3,000 3,000Trade receivables - 7,000 7,000other current assetsOther short-term deposits 77,500 77,500Cash and cash equivalents 3,322 3,322

8.14. shARE cAPiTAL

8.14.1. cAPiTAL TRANsAcTiONs dURiNg ThE yEAR

The following capital increases took place in 2012:

On 18 January 2012, the Company issued 15,000 new shares in exchange for €30,000 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €28,050 and €1,950 respectively.

On 19 April 2012, the Company issued 5,000 new shares in exchange for €7,000 as a result of the exercise of warrants by some employees and consultants of the Company. The par value amounted to €7,000.


8.15. shARE-bAsEd PAymENTs

8.15.1. WARRANTs issUEd iN APRiL 2010 fOR EmPLOyEEs ANd cONsULTANTs



The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2014 until April 2015). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years as of the issue date of the warrants. Any warrants that have not been exercised within five years of their creation become null and void.

8.15.2. WARRANTs issUEd iN dEcEmbER 2010 fOR EmPLOyEEs ANd cONsULTANTs

During the Board meeting of 3 December 2010, the above-mentioned warrant plan was approved. The Board of Directors was allowed to issue a total number of 97,500 warrants to employees and consultants.

Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€8.24 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after

at an exercise price of €3.21 per warrant.

As per 31 December 2012, the remaining authorised capital amounts to €79,695,739.59.

8.14.3. vOTiNg RighTs

Each share gives right to one vote. If the share is encumbered by usufruct, the voting rights attached to the share shall be exercised by the usufructuary. The voting rights attached to pledged shares shall be exercised by the owner-pledgor.

8.14.4. dividENds ANd miNimUm shARE cAPiTAL

The Company has never distributed any dividends to its shareholders. According to Belgian company law, the Company is required to deduct at least 5 % from its profit to constitute the legal reserve until it reaches one-tenth of the Company’s statutory share capital. As of 31 December 2012, no profits were available for distribution. In accordance with Belgian company law, the minimum share capital of a public limited liability company is €61,500.

in € E.O. General Assembly of 29/4/2010 81,486,264.59 for five years from 20/4/2010 till 20/4/2015

warrants €/warrantissue of December 2010 (182,325.00) 97,500.00 1.87authorised capital 31/12/2011 81,303,939.59 issue of January 2012 (1,608,200.00) 860,000.00 1.87authorised capital 31/12/2012 79,695,739.59 issue of January 2013 (874,225.00) 467,500.00 1.87 78,821,514.59 ABO of February 2013 (8,186,708.53) 4,377,919.00 1.87 70,634,806.06


that have not been exercised within five or seven years of their creation become null and void.

8.15.4. WARRANTs issUEd iN fEbRUARy 2012 fOR EmPLOyEEs ANd cONsULTANTs



The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until October 2016 for consultants and as from as from 1 January 2016 until October 2018 for employees). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.



Each warrant gives the beneficiaries the right to subscribe to one share

one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month).

The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2014 until December 2017). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void.



Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€8.68 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month).The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2015 until April 2016 for consultants and as from 1 January 2015 until April 2018 for employees). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants


2019 for employees). In case of normal termination of the Director’s mandate or the employee contract, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for independent directors and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.

8.15.7. ExTENsiON Of cERTAiN WARRANT PLANs

The General Shareholders’ Meeting of 30 April 2009 and the Board of Directors meeting of 22 June 2009 approved the 5-year extension of certain warrant plans in accordance with Article 583 of the Belgian Company Code and in accordance with Article 21 of the “Economische Herstelwet”.

Because of this extension, the fair value of the warrants has changed. The incremental fair value was calculated as the difference between the fair value with and without extension at the date of extension.

of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€3.23 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month).

The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until January 2017 for consultants and as from as from 1 January 2016 until January 2019 for employees). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.

8.15.6. WARRANTs issUEd iN NOvEmbER 2012 fOR iNdEPENdENT diREcTORs ANd EmPLOyEEs

During the Extraordinary General Shareholders’ Meeting of 6 November 2012, the issuance of a maximum number of 35,000 warrants and a maximum number of warrants relating to a number of shares worth €35,000 was approved and 17,868 warrants have been issued in 2013.


The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until July 2017 for independent Directors and as from 1 January 2016 until July


Warrants 2005 2006 2006 2007 2007 2008 2009 2009 2009 2009 2010 2010 2011 2011 2012 2012 2012 2012

Number of warrants granted 509,500 1,750,000 135,000 425,000 10,713 375,000 135,000 187,500 205,400 170,000 287,700 85,500 175,000 212,050 350,000 398,750 150,000 12,500Number of warrants not vested 1,458 9,844 15,000 33,334 85,233 39,000 102,083 114,042 350,000 385,250 150,000 0at 31/12/2012Exercise price (in €)* 0.90 1.00 1.40 1.40 7.00 4.88 4.52 5.79 6.99 8.19 7.59 8.24 8.68 8.68 3.21 3.21 3.23 3.23 Expected dividend yield 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Expected stock price volatility 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 50% 50% 50% 50% 55% 55% 55% 55%Risk-free interest rate 3.20% 3.95% 3.95% 4.63% 4.22% 4.42% 3.79% 3.20% 3.14% 3.11% 2.75% 3.46% 3.65% 3.89% 2.35% 2.84% 3.65% 2.83%Expected duration 7.00 7.00 7.00 7.00 4.78 7.00 5.00 7.00 7.00 7.00 5.00 7.00 5.00 7.00 5.00 7.00 5.00 7.00Fair value (in Euro) at grant date 0.56 0.63 0.88 0.90 3.78 3.11 2.06 3.51 5.25 5.07 3.23 4.49 3.78 4.48 1.38 1.64 1.47 1.74 Incremental Fair Value 0.26 0.26 0.31 0.30 1.13 0.84 (in Euro) at extension Expected dividend yield 0 0 0 0 0 0 Expected stock price volatility 60% 60% 60% 60% 60% 60% Risk-free interest rate 3.35% 3.41% 3.46% 3.50% 3.33% 4.08% Expected duration at extension 8.71 9.29 9.75 10.21 8.54 11.17

(*) Equals the fair market value of the underlying shares on the grant date.


Warrants 2005 2006 2006 2007 2007 2008 2009 2009 2009 2009 2010 2010 2011 2011 2012 2012 2012 2012 Total “Average Exercise number price (in Euro)”At 31 December 2010 Outstanding 88,500 1,650,316 38,878 399,944 10,713 347,149 95,000 116,875 95,837 160,000 285,950 47,500 0 0 0 0 0 0 3,336,662 2.93Non-vested 39,063 137,500 49,479 59,740 66,791 113,333 285,950 47,500 799,356 6.57Exercisable 88,500 1,650,316 38,878 360,881 10,713 209,649 45,521 57,135 29,046 46,667 0 0 0 0 0 0 0 0 2,537,306 1.78 Granted 38,000 177,100 209,950 425,050 8.64Forfeited 4,030 4,843 11,536 20,409 6.91Exercised 3,000 316 17,378 69,130 122,824 1.01Expired 0 - At 31 December 2011 Outstanding 85,500 1,650,000 21,500 330,814 10,713 343,119 95,000 116,875 90,994 160,000 274,414 85,500 177,100 209,950 0 0 0 0 3,651,479 3.61Non-vested 53,334 25,729 36,615 39,134 73,333 157,558 64,125 177,100 209,950 836,878 7.82Exercisable 85,500 1,650,000 21,500 330,814 10,713 289,785 69,271 80,260 51,860 86,667 116,856 21,375 0 0 0 0 0 0 2,814,601 2.35 Granted 350,000 398,750 150,000 12,500 911,250 3.21Forfeited 13,000 37,286 25,000 5,730 3,324 6,461 5,000 2,100 10,555 13,500 12,500 111,456 5.86Exercised 3,000 30,000 10,314 833 44,147 1.16Expired 0 - At 31 December 2012 Outstanding 82,500 1,620,000 21,500 307,500 10,713 305,000 70,000 111,145 87,670 160,000 267,953 80,500 175,000 199,395 350,000 385,250 150,000 0 4,384,126 3.51Non-vested 0 0 0 0 0 0 1,458 9,844 15,000 33,334 85,233 39,000 102,083 114,042 350,000 385,250 150,000 0 1,285,244 4.77Exercisable 82,500 1,620,000 21,500 307,500 10,713 305,000 68,542 101,301 72,670 126,666 182,720 41,500 72,917 85,353 0 0 0 0 3,098,882 2.99

The weighted average share price at the date of exercise for warrants exercised during 2011 was €8.22 per share and for warrants exercised during 2012 €3.85 per share.


As at 31 December (€’000) 2012 2011Finance lease obligations Future lease payments Within one year 856 856In the second to the fifth year 1,044 1,794Total 1,900 2,650Less future finance charges (148) (93)Present value of lease obligations 1,752 2,557

8.17. TRAdE PAyAbLEs ANd OThER cURRENT LiAbiLiTiEs

Trade payables As at 31 December (€’000) 2012 2011Trade payables 2,820 4,341Accruals for invoices to be received 5,250 5,526Total 8,070 9,867

Other current liabilities As at 31 December (€’000) 2012 2011Taxes other than income taxes payable Social security 138 645Payroll accruals 3,101 3,216Other liabilities (25) 7Total 3,214 3,868

Deferred income As at 31 December (€’000) 2012 2011Deferred income 29,853 23,194Accrued expenses 384 413Total 30,237 23,607

Deferred income mainly relates to cash received from research collaboration agreements prior to completion of the earnings process.

8.16. bORROWiNgs

As at 31 December (€’000) 2012 2011Non-current Secured 927 1,752Total 927 1,752 Current Secured 825 805Total 825 805

Borrowings comprise the financial leasing, which has been secured with the asset it provides financing for. The asset is an investment in the building and equipment.

8.16.1. mATURiTy TAbLE

The maturity of non-current borrowings (including financial lease) is as follows:

As at 31 December (€’000) 2012 2011Borrowings Between 1 and 2 years 1,611 1,630Between 2 and 5 years 141 927Total 1,752 2,557

The details on the borrowings are summarised below:

The carrying amounts of borrowings approximate their fair value.

Year Nominal Amount Currency Secured (s) / First installments Number of Periodicity of Non secured (ns) installments installments2010 1,641,920 € s 18/06/10 60 Monthly2011 281,055 € s 18/10/11 36 Monthly2011 85,799 € s 6/12/11 36 Monthly2011 1,110,022 € s 6/12/11 36 Monthly


8.20. REsEARch ANd dEvELOPmENT ExPENsEs

Year ended 31 December (€’000) 2012 2011Consumables 2,697 3,733Outsourcing 20,584 28,084Patent costs 1,911 2,190Personnel costs 18,467 18,409Share-based payments 510 509Other operating expenses 5,663 5,221Withholding tax (Reduction Tax Scientist) (2,580) (2,484)R&D tax (2,613) (1,765)Subtotal 44,639 53,897Depreciation and amortisation 2,229 2,410 Total research and development expenses 46,868 56,307

The decrease in outsourcing is mainly related to reduced technology and preclinical development costs.

8.21. gENERAL ANd AdmiNisTRATivE ExPENsEs

Year ended 31 December (€’000) 2012 2011Personnel costs 3,357 3,391Share-based payments 1,033 1,061Executive Committee* compensation 2,026 2,042Consultancy 1,034 1,815Other operating expenses 1,509 1,784Retribution (163) (244)Subtotal 8,796 9,849Depreciation and amortisation 613 574Total general and administrative expenses 9,409 10,423

* The Executive Committee consists of key management members and the entities controlled by them.

8.18. dEfERREd iNcOmE TAx

As at 31 December (€’000) 2012 2011Tax loss carried forward (101,486) (85,817)Notional interest deduction(*) (26,865) (22,053)Other temporary differences 7,943 7,355Net book value of capitalised R&D assets (108,415) (94,000)Depreciation of tangible assets (538) (645)Total temporary differences (229,361) (195,160)

Unrecognised deferred tax asset (33,99%) (77,960) (66,335)

(*) The application of NID (notional interest deducation) is restricted as it has an expiry term of seven years.

The Group has unused tax losses carry forward. This, combined with the other temporary differences, results in a net deferred tax asset position.

Due to the uncertainty surrounding the Group’s ability to realise taxable profits in the near future, the Company did not recognise any deferred tax assets.

8.19. RETiREmENT bENEfiT ObLigATiONs

The Group has set up several post-employment benefit schemes covering all staff members. The major plan is a cafeteria plan in which the employees can opt to receive on top of their pension benefits an additional death and disability coverage (waiver of premium and disability annuity). The premiums needed to finance this additional coverage are limited to the total premium budget (4 % and 2 % of the annual salary for the employer and employee contributions respectively). This plan is to be considered as a defined contribution plan. The Group has recognised an expense of €794,520.11 in the year 2011 and €741,911.24 in the year 2012.


8.24. OPERATiNg LEAsEs

As at 31 December (€’000) 2012 2011Current lease payments 3,250 3,081

Future lease payments Within one year 3,247 3,212In the second to the fifth year 11,318 11,268 After five years 1,090 3,706

The majority of the lease arrangements concerns the leasing of company cars and office facilities.

8.25. fiNANcE iNcOmE ANd ExPENsEs

Year ended 31 December (€’000) 2012 2011Interest income on financial assets 1,411 1,712Other finance income 41 25Total 1,452 1,737 Finance expenses Interest charges on financial liabilities 74 23Other finance expenses 114 80Total 188 103

In 2012, the line ‘Other finance expenses’ included foreign exchange losses of €96,564.73 (2011: €60,493).

8.22. OThER iNcOmE ANd ExPENsEs

Year ended 31 December (€’000) 2012 2011Other operating income 204 38Other operating expenses 426 706Total (222) (668)

Changes in other operating expenses relate to the closing of the Porto site.

Other operating expenses mainly consist of expenses related to the closing of the Porto site and non-deductible VAT.

Other operating income mainly consists of gain on disposal of fixed assets.

8.23. EmPLOyEE bENEfiT ExPENsE

Year ended 31 December (€’000) 2012 2011Salaries, wages and bonuses 14,951 14,956Social security 4,272 4,184Group and hospitalisation insurance cost* 692 678Share-based payments 1,542 1,570Other employment costs 1,909 1,981Executive Committee** compensation 2,001 1,971Retribution (2,717) (2,657)Total 22,650 22,683 Headcount Executive Committee** 5 4R&D personnel 219 250General and administrative staff 39 38Average FTE 258 277

* Post-employment benefits**The Executive Committee consists of key management members and the entities controlled by them.


8.28. cONTiNgENciEs ANd ARbiTRATiONs

On 2 June 2010, Ablynx NV and reMYND NV reached a settlement concerning a dispute relating to a collaboration agreement to discover and commercialise new Nanobodies, which Ablynx and reMYND entered into in 2003.

In order to amicably resolve the dispute, Ablynx and reMYND have signed a settlement agreement which terminates the 2003 agreement and under which reMYND has received up to €2 million in payments based on the successful achievement of milestones in Ablynx’s Alzheimer’s collaboration with Boehringer Ingelheim, and could receive a 1 % royalty on sales of any products potentially arising from this collaboration.

8.29. cOmmiTmENTs

8.29.1. cOLLAbORATivE REsEARch AgREEmENTs ANd cLiNicAL REsEARch AgREEmENTs

a) Boehringer Ingelheim (B.I.) - Strategic Alliance B.I. and Ablynx announced a major global strategic alliance to discover, develop and commercialise up to 10 different Nanobody programmes. In return, Ablynx received an up-front payment and will receive research license payments, milestones and royalties. Additionally, Boehringer Ingelheim subscribed for €15 million in the IPO in November 2007. Ablynx will have certain co-promotion rights in Europe.

b) Boehringer Ingelheim Agreement Alzheimer’s disease B.I. and Ablynx agreed to collaborate to identify Nanobodies in a specific biological target believed to be relevant in Alzheimer’s disease and B.I. received an exclusive worldwide license to develop and commercialise such Nanobodies. In return, Ablynx received an up-front payment and will receive milestone payments, FTE payments and royalties as Nanobody drug candidates proceed through development and potentially reach the market. Ablynx will also participate in the relevant Steering Committees.

On 21 August 2008, the research funding was extended until 2009. The Agreement was extended with two years in March 2012.

8.26. iNcOmE TAx ExPENsE

The reconciliation between the expected income tax and the effective income tax reads as follows:

Year ended 31 December (€’000) 2012 2011Current income taxes 0 0Total 0 0 Loss of the year (28,508) (48,894)Stock issuance costs 0 0Share-based payments 1,542 1,570Other permanent differences 4,686 3,481 Expected income tax credit (11,625) (14,902)Impact unrecognised deferred tax asset (11,625) 14,902 Effective income taxes 0 0

8.27. LOss PER shARE

Year ended 31 December (€’000) 2012 2011Loss of the year (28,508) (43,895)Weighted average number of 43,708,227 43,677,539shares outstandingBasic and diluted loss per share after (0.65) (1.01)reverse split (in €)

Earnings per share are calculated by dividing the net result attributable to shareholders by the weighted average numbers of shares during the year.

As the Group is suffering operating losses, warrants have an anti-dilutive effect. As such, there is no difference between basic and diluted earnings per share.


basis and share the resulting profits, or to convert this collaboration into an exclusive, worldwide licensing deal with milestone payments and tiered royalties.

f) Merck Serono Third Co-discovery and Co-development AgreementOn 9 November 2011, Ablynx and Merck Serono announced that they have expanded their relationship and entered into a third agreement to co-discover and co-develop Nanobodies against two targets in osteoarthritis.

Under the terms of the agreement, Ablynx has received an up-front payment of €12 million in 2011 and €8 million in January 2012 and is responsible for all activities and costs, excluding manufacturing costs, up to the delivery of a pre-clinical package that will form the basis for the filing of an IND or IND equivalent. Upon acceptance of the package by Merck Serono, Ablynx will be eligible for a €30 million milestone payment. Ablynx has the option to continue with Merck Serono up to a 50:50 co-development basis and share the resulting profits, or to convert this collaboration into an exclusive, worldwide licensing deal with milestone payments and tiered royalties.

g) Merck & Co AgreementThe agreement Ablynx entered into in 2012 with Merck & Co (known as MSD outside the United States and Canada), through a subsidiary of Merck, states that in the event of a change of control over Ablynx, Merck is entitled to elect any one or more of the following options: (i) to immediately discontinue any or all then-ongoing research programmes under the agreement; (ii) terminate Ablynx’s involvement on any joint committees; (iii) limit Merck’s reporting obligations such that Merck is only required to provide reports relating to Merck’s obligation to pay royalties; and/or (iv) if such change of control involves a company that has initiated an IND enabling study for a competing product (i.e. a compound or molecule directed against the same target), to terminate the agreement.

h) Other collaborative research agreementsAblynx has entered into numerous agreements with universities, medical centers and external researchers for research and development work and for the validation of the Group’s technology and products. These agreements typically have durations of one to three years. Ablynx must pay fixed and variable fees to the collaborators and in exchange receives access and rights to the results of the work.

c) Novartis AgreementThe agreement with Novartis was signed in December 2005. Under this agreement, Ablynx will seek to discover Nanobodies against a number of targets nominated by Novartis in a collaborative research programme. The deal includes R&D payments, FTE payments, license fees, milestones and royalties. On 10 December 2007, the alliance was extended for another year and on 5 February 2009, it was extended again for another year. On 8 July 2010, two License, Development and Commercialisation Agreements were signed for two targets.

d) Merck Serono Co-discovery and Co-development AgreementAblynx and Merck Serono announced a co-discovery and co-development collaboration on 4 September 2008. They will collaborate to research and develop Nanobody-based therapeutics against two disease targets, one oncology and one immunology exploiting some of the key benefits Nanobodies have over conventional antibodies and other fragments.

Under the terms of the agreement, both companies will equally share all research and development costs. Should Ablynx contribute equally to each programme, it will be eligible to receive fifty percent of the resulting profits. In addition, Ablynx will have an option to opt-out partly or fully during the research and development programmes, in which case Ablynx would be eligible to receive either a reduced profit share, in the case of a partial opt-out, or milestones and royalties on potential sales in the case of a full opt-out. The agreement includes an up-front cash payment to Ablynx of €10 million.

e) Merck Serono Second Co-discovery and Co-development AgreementOn 11 October 2010, Ablynx and Merck Serono announced that they have expanded their relationship and entered into a second agreement to co-discover and co-develop Nanobodies against an inflammatory disease target.

Under the terms of the agreement, Ablynx has received an up-front payment of €10 million in 2010 and is responsible for all activities and costs, excluding manufacturing costs, up to the delivery of a pre-clinical package that will form the basis for the filing of an IND or IND equivalent. Upon acceptance of the package by Merck Serono, Ablynx will be eligible for a €15 million milestone payment. Ablynx has the option to continue with Merck Serono up to a 50:50 co-development


3) IWT 11: Pre-clinical and clinical development of an anti-IL-6R NanobodyGrantor: IWT

Start date: 1 September 2009End date: 30 June 2012Amount approved: €1,198,325Amount recognised: €1,198,325Amount received: €1,198,325

4) IWT 12: Expansion of the Nanobody platform to pulmonary delivery: pre-clinical and clinical development of an anti-RSV NanobodyGrantor: IWT

Start date: 1 February 2010End date: 31 July 2012Amount approved: €1,134,496Amount recognised: €1,134,496Amount received: €1,134,496

5) IWT 13: Grouped feasibility studies applicationGrantor: IWT

Start date: 1 May 2010End date: 30 April 2011Amount approved: €420,000Amount recognised: €375,943Amount received: €375,943

6) Generation of Nanobody libraries for targeting novel epitopes – LibLynxGrantor: Portuguese government

Start date: 15 November 2009End date: 31 March 2011Amount approved: €298,157Amount recognised: €223,442Amount received: €119,763

7) Exploration and development of Nanobody-based therapeutic solutions for disorders of the central nervous system - Brainiac 1Grantor: Portuguese government

Start date: 2 February 2010End date: 31 October 2012

8.29.2. PRiNciPAL gOvERNmENT gRANTs ANd iNcENTivEs

8.29.2.1 GRANTS

Grant Assigned Received at Recognised Recognised Still to 31/12/2012 as income as income receive 2011 2012IWT 7 1,808,138 1,808,138 1,808,138 398,004 106,630 0IWT 9 1,133,636 1,132,755 1,132,755 355,524 (881) 0IWT 11 1,198,325 1,198,325 1,198,325 443,893 277,433 0IWT 12 1,134,496 1,134,496 724,000 181,000 410,226 0IWT 13 420,000 375,943 375,943 375,943 0 0IWT 14 600,000 600,000 240,000 240,000 360,000IWT 15 157,773 157,773 62,000 0 38,603 95,773

The IWT, funded by the Flemish Government, awarded Ablynx two additional grants in 2012; the long-term S&P rating for the Flemish Government is AA.

Altogether, the Group received a fixed percentage of the expenses incurred in the following R&D projects:

1) IWT 7: Development of novel protein half-life extension technologies that result in long half-lives and favourable pharmacokinetic properties for small protein drugs.Grantor: IWT

Start date: 1 September 2008End date: 31 August 2011Amount approved: €1,808,138Amount recognised: €1,808,138Amount received: €1,808,138

2) IWT 9: Accelerating the development of pulmonary and oral delivery technologies for NanobodiesGrantor: IWT

Start date: 1 July 2009End date: 30 June 2011Amount approved: €1,133,636Amount recognised: €1,132,755Amount received: €1,132,755


as restricted cash. The pledge and the restricted cash of €1.3 million can be increased to a maximum of €3.2 million in relation to the cash position of the Company.

NV Bio-Versneller was granted a pledge of €1.7 million in the framework of additional investments which NV Bio-Versneller made in the Bio-Versneller building at the request of NV Ablynx. The pledge is being reduced every year over a period of five years as from January 2012. The amount of the pledge is considered as restricted cash.

Ablynx rents 25,322 m2 of land from BVBA Rootom in Belgium. The Company developed facilities on this land for the housing of Llamas.

Ablynx rents 470 m2 of laboratory and office space from UPTEC in Porto (Portugal). The Board of Directors decided in the meeting of November 2011 to stop all operations in Porto. The rent contract was terminated on 31 March 2012.

8.30. RELATEd PARTy TRANsAcTiONs

8.30.1. REmUNERATiON KEy mANAgEmENT ANd NON-ExEcUTivE diREcTORs

Key management consists of the members of the Executive Committee and the non-executive Directors and the entities controlled by any of them.

Amount approved: €205,470Amount recognised: €155,431Amount received: €69,233

8) IWT 14: Grouped Feasibility Studies ApplicationGrantor: IWT

Start date: 1 December 2011End date: 31 November 2013Amount approved: €600,000Amount recognised: €240,000Amount received: €240,000

9) IWT 15: Centibody ProjectGrantor: IWT

Start date: 1 May 2012End date: 30 April 2014Amount approved: €157,773Amount recognised: €38,603Amount received: €62,000

8.29.2.2 OTHER INCENTIvES• The Company received € 3.1 million in 2012 as a reduction in withholding

taxes for its personnel active in R&D.

• The Company has accounted for a tax receivable of € 5.6 million following an R&D incentive scheme in Belgium under which the tax can be refunded after 5 years, if not offset against the taxable basis over the period.

8.29.3. PRiNciPAL LEAsE ANd bORROWiNgs cONTRAcTs

Ablynx has signed contracts with NV Bio-Versneller, who provides the Company with 8,000 m2 of laboratory facilities within the Technologiepark as from June 2010, with an initial term of eight years which can be extended. Ablynx was granted by KBC Bank a credit commitment of €3.2 million for the guarantee clause, which is mentioned in the NV Bio-Versneller contract and of which end 2010 €1.3 million was withdrawn. For this same amount, a pledge was granted to KBC Bank NV and is constituted


On 13 February 2013, the Company announced efficacy and safety data for its anti-IL-6R Nanobody, ALX-0061, at the 24 week final analysis of the Phase II part of a combined Phase I/II study in patients with moderately to severely active rheumatoid arthritis (RA) on a stable background of methotrexate.

On 25 February 2013, the Company announced a research collaboration with Spirogen to evaluate the potential of a novel anti-cancer drug conjugate combining Spirogen’s proprietary cytotoxic drugs, pyrrolobenzodiazepines (PBD), and associated linker technology, with Nanobodies® generated using Ablynx’s proprietary technology platform.

On 28 February 2013, the Company announces that it has raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure announced on Wednesday 27 February 2013 after the market closed. On 8 March 2013, the Company announced that the closing of its private placement (“Accelerated Bookbuild Offering”/“ABO”) took place on 5 March 2013 and as a result, Ablynx issued 4,377,919 new shares. In addition, 348,400 new shares were issued that same day as a result of the exercise of 641,800 warrants.

Remuneration key management:

As at 31 December 2012 2011Number of management members 5 4

Short-term employee benefits (salaries, 1,390 1,340social security bonuses, lunch vouchers)Post-employment benefits (group insurance) 122 104Share-based compensation 1,033 1,061Other employee costs 97 127Management fees 326 366Retribution (26) (71) Total 2,942 2,927 Number of warrants granted (in units) 500,000 175,000Cumulative outstanding warrants (in units) 3,336,250 2,836,250Shares owned (in units) 39,805 35,805

Transactions with non-executive Directors:

As at December 31(€’000) 2012 2011Share-based compensation 0 0Management fees 92 105Total benefits 92 105 Number of warrants offered (in units)(*) 12,868 -Cumulative outstanding warrants (in units) 10,713 10,713Non-vested warrants - -Shares owned (in units) 5,978,845 6,765,487

(*) Offered in 2012, and accepted in 2013.

8.31. EvENTs AfTER ThE bALANcE shEET dATE

On 21 January 2013, the Company issued 61,812 new shares in exchange for €329,619.51 as the result of the exercise of warrants by some employees and consultants of the Company.


10.

CONdENSEd STATuTORY fiNANCiAL STATEmENTS

In accordance with Article 105 of the Belgian Companies’ Code, the condensed statutory financial statements of Ablynx NV are presented. These condensed statements have been drawn up using the same accounting principles for preparing the complete set of statutory financial statements of Ablynx NV at and for the year ending 31 December 2012.

The management report, the statutory financial statements of Ablynx NV and the report of the statutory auditor will be filed with the appropriate authorities and are available at the Company’s registered offices.

The statutory auditor has issued an unqualified report on the statutory financial statements of Ablynx NV. The complete set of the statutory financial statements of Ablynx NV is also available on the Company’s website www.ablynx.com.

SUMMARY BALANCE SHEET OF ABLYNX NV

(€’000) Assets as at 2012 2011Fixed assets 112,300 99,921Intangible fixed assets 108,851 95,018Tangible fixed assets 3,449 4,903Current assets 70,813 91,561Amounts receivable within one year 5,594 6,766Amounts receivable after more than one year 2,266Current investments 60,496 80,756Cash at bank and in hand 2,252 2,995Deferred charges and accrued income 205 1,044TOTAL ASSETS 183,113 191,482

OF ABLyNx Nv AS OF AND FOR THE yEAR ENDED 31 DECEMBER 2012

€Auditor’s fees 55,000 Fees for exceptional services or special missions executed in the Group by the auditor Other attestation missions 12,000Tax consultancy Other missions external to the audit Fees for exceptional services or special missions executed in the Group by people they are linked to Other attestation missions Tax consultancy 8,000Other missions external to the audit 39,000

09.

diSCLOSuREAudiT

fEES


APPROPRIATION ACCOUNT

(€’000) 2012 2011Profit (loss) to be appropriated 75,198 (61,782)Profit (loss) to be appropriated (13,416) (22,549)Profit (loss) to be carried forward (61,782) (39,233)Profit (loss) to be carried forward (75,198) (61,782)

CAPITAL STATEMENT (position as at 31 December 2012)

(€’000) Amounts Number of sharesA. Capital 1. Issued capital - At the end of the previous year 81,651 - Changes during the year 49 - At the end of this year 81,700 2. Capital representation 43,717,3852.1. Shares without par value - Bearer and dematerialised 43,717,385B. Own shares held by 0 C. Commitments to issue shares* 0 D. Autorised capital not issued 80,683

(*) See chapter 11, Additional Information, the number of outstanding warrants amounts to 4,384,126.

(€’000) Liabilities as at 2012 2011Equity 132,968 146,326Capital 81,700 81,651Share premium account 126,466 126,457Accumulated profits (losses) (75,198) (61,782)Amounts payable after more than one year 927 1,752Current liabilities 49,218 43,404Amounts payable within one year 12,479 14,114Deferred charges and accrued income 36,739 29,290TOTAL LIABILITIES 183,113 191,482

SUMMARY INCOME STATEMENT OF ABLYNX NV

(€’000) 2012 2011Operating Income 83,588 83,062Turnover 24,566 18,303Own construction capitalised 50,214 57,897Other operating income 8,808 6,862Operating charges 94,002 94,371Services and other goods 37,038 46,653Remuneration, social security costs and pensions 22,045 20,950Depreciation of and amounts written off formation 34,790 26,755expenses, intangible and tangible fixed assetsOther operating charges 129 13 Operating Profit (10,414) (11,309)Financial result 1,268 1,642Financial income 1,451 1,737Financial charges (183) (95)Gain (loss) on ordinary activities before taxes (9,146) (9,667)Extraordinary result (4,270) (12,882)Extraordinary cost (4,747) (12,905)Extraordinary income 477 23Profit (loss) for the year before taxes (13,416) (22,549)Profit (loss) for the period available for appropriation (13,416) (22,549)


Asset Method Basis Depreciation % L-D-O NR-R Principle costs (Min-Max) Subsequent costs (Min-Max)1 Formation Cost 2 Intangible Fixed Assets L NR 20-33.3% 3 Installations, machinery and equipment L NR 33.3% 4 Office equipment and furniture L NR 20% 5 Other tangible fixed assets L NR 33.3% 6 Leasehold improvements : the shorter of the useful life or the minimum rent term

L = linear D= degressive O = other NR = not revalued R = revalued

Financial Fixed AssetsGuarantees are measured at their acquisition price.

Amounts Receivable of more than One YearThe receivables are measured at their nominal value, no discount factor has been taken into account.

Amounts Receivable within One YearThe receivables are measured at their nominal value. Each receivable is individually valued. Devaluation of receivables is recorded, if the actual value is lower than their nominal value.

CashCash is measured at its nominal value.

Grants, Government Incentives and FTE incomeGrants and government incentives are recognised in the income statement when all the conditions of the grants and government incentives are fulfilled and costs are incurred.

Grants, government incentives and FTE income (as from 2011) related to capitalised research cost are recognised in the income statement in accordance with the depreciation rhythm of the asset to which they relate. In accordance with the CBN recommendation issued in 2010, the reduction in withholding tax has been directly recorded in other operating income.

11.

SummARY Of vALuATiON RuLES ANd

AddiTiONAL iNfORmATiON

11.1 PRiNciPLEs

The valuation rules have been prepared in agreement with the requirements of the Royal Decree of 30 January 2001 concerning the enforcement of the Commercial Code.

11.2. sPEcific RULEs

Company Formation ExpensesFormation expenses are charged directly to the profit and loss account.

Intangible Fixed AssetsConcessions, patents, licenses, know-how, trademarks. Software licenses and implementation costs are capitalised at their acquisition prices, and amortised straight-line at a ratio of 33.33 % per year. Other licenses are valued at their acquisition prices and amortised straight-line over the economic life of the patent to which they relate. The maximum amortised period for other licenses is five years.

Research and DevelopmentResearch costs have also been capitalised at cost price, insofar as the cost price does not exceed the value in use or the future return of these assets for the company. They are amortised straight-line over five years.

Other intangible fixed assets are capitalised at their cost price and amortised straight-line at a percentage that corresponds to their probable useful life for the company. These other intangible fixed assets include contributed technology. The contribution value of this technology is depreciated linearly over five years.

Tangible Fixed AssetsTangible fixed assets are capitalised at their acquisition price, including all subsequent direct costs required to make such assets operational.

The following depreciation percentages are used:


Amounts Payable within One YearAmounts payable are measured at their nominal value.

Foreign CurrenciesTransactions in foreign currencies during the year are booked at the current exchange rate. All outstanding payables and receivables at year end are recorded at the exchange rate on the balance sheet date. Exchange rate gains and losses are recognised in the results under the heading “Other Financial Charges and Income”.

TurnoverTurnover from research contracts is recognised over the duration of the contract in accordance with the progress of the work and contractual terms.


Warrants 2005 2006 2006 2007 2007 2008 2009 2009 2009 2009 2010 2010 2011 2011 2012 2012 2012 2012 Total “Average Exercise number price (in Euro)”At 31 December 2010 Outstanding 88,500 1,650,316 38,878 399,944 10,713 347,149 95,000 116,875 95,837 160,000 285,950 47,500 0 0 0 0 0 0 3,336,662 2.93Non-vested 39,063 137,500 49,479 59,740 66,791 113,333 285,950 47,500 799,356 6.57Exercisable 88,500 1,650,316 38,878 360,881 10,713 209,649 45,521 57,135 29,046 46,667 0 0 0 0 0 0 0 0 2,537,306 1.78 Granted 38,000 177,100 209,950 425,050 8.64Forfeited 4,030 4,843 11,536 20,409 6.91Exercised 3,000 316 17,378 69,130 122,824 1.01Expired 0 - At 31 December 2011 Outstanding 85,500 1,650,000 21,500 330,814 10,713 343,119 95,000 116,875 90,994 160,000 274,414 85,500 177,100 209,950 0 0 0 0 3,651,479 3.61Non-vested 53,334 25,729 36,615 39,134 73,333 157,558 64,125 177,100 209,950 836,878 7.82Exercisable 85,500 1,650,000 21,500 330,814 10,713 289,785 69,271 80,260 51,860 86,667 116,856 21,375 0 0 0 0 0 0 2,814,601 2.35 Granted 350,000 398,750 150,000 12,500 911,250 3.21Forfeited 13,000 37,286 25,000 5,730 3,324 6,461 5,000 2,100 10,555 13,500 12,500 111,456 5.86Exercised 3,000 30,000 10,314 833 44,147 1.16Expired 0 - At 31 December 2012 Outstanding 82,500 1,620,000 21,500 307,500 10,713 305,000 70,000 111,145 87,670 160,000 267,953 80,500 175,000 199,395 350,000 385,250 150,000 0 4,384,126 3.51Non-vested 0 0 0 0 0 0 1,458 9,844 15,000 33,334 85,233 39,000 102,083 114,042 350,000 385,250 150,000 0 1,285,244 4.77Exercisable 82,500 1,620,000 21,500 307,500 10,713 305,000 68,542 101,301 72,670 126,666 182,720 41,500 72,917 85,353 0 0 0 0 3,098,882 2.99

The weighted average share price at the date of exercise for warrants exercised during 2011 was €8.22 per share and for warrants exercised during 2012 €3.85 per share.

Additional informationWarrants


Warrants 2005 2006 2006 2007 2007 2008 2009 2009 2009 2009 2010 2010 2011 2011 2012 2012 2012 2012

Number of warrants granted 509,500 1,750,000 135,000 425,000 10,713 375,000 135,000 187,500 205,400 170,000 287,700 85,500 175,000 212,050 350,000 398,750 150,000 12,500Number of warrants not vested 1,458 9,844 15,000 33,334 85,233 39,000 102,083 114,042 350,000 385,250 150,000 0at 31/12/2012Exercise price (in €)* 0.90 1.00 1.40 1.40 7.00 4.88 4.52 5.79 6.99 8.19 7.59 8.24 8.68 8.68 3.21 3.21 3.23 3.23 Expected dividend yield 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Expected stock price volatility 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 50% 50% 50% 50% 55% 55% 55% 55%Risk-free interest rate 3.20% 3.95% 3.95% 4.63% 4.22% 4.42% 3.79% 3.20% 3.14% 3.11% 2.75% 3.46% 3.65% 3.89% 2.35% 2.84% 3.65% 2.83%Expected duration 7.00 7.00 7.00 7.00 4.78 7.00 5.00 7.00 7.00 7.00 5.00 7.00 5.00 7.00 5.00 7.00 5.00 7.00Fair value (in Euro) at grant date 0.56 0.63 0.88 0.90 3.78 3.11 2.06 3.51 5.25 5.07 3.23 4.49 3.78 4.48 1.38 1.64 1.47 1.74 Incremental Fair Value 0.26 0.26 0.31 0.30 1.13 0.84 (in Euro) at extension Expected dividend yield 0 0 0 0 0 0 Expected stock price volatility 60% 60% 60% 60% 60% 60% Risk-free interest rate 3.35% 3.41% 3.46% 3.50% 3.33% 4.08% Expected duration at extension 8.71 9.29 9.75 10.21 8.54 11.17

(*) Equals the fair market value of the underlying shares on the grant date.


AdREssEs

Ablynx’s registered office and headquarters

AbLyNx NvTechnologiepark 219052 ZwijnaardeBelgiumT. +32 (0)9 262 00 00F. +32 (0)9 262 00 01

[email protected]@[email protected]

www.ablynx.com

Independent registered public accounting firm

dELOiTTE bEdRiJfsREvisORENBerkenlaan 8b1831 DiegemBelgiumT. +32 2 800 20 00F. +32 2 800 20 01

www. Deloitte.com

Grants

Grant Assigned Received Recognised as income Recognised as Still to receive at 31/12/2011 of previous years income 2012IWT 7 1,808,138 1,808,138 1,446,000 1,701,508 106,630 0IWT 9 1,133,636 1,132,755 904,000 1,132,755 0 0IWT 11 1,198,325 1,198,325 795,000 920,892 277,433 0IWT 12 1,134,496 1,134,496 724,000 724,270 410,226 0IWT 14 600,000 600,000 0 0 240,000 360,000IWT 15 157,773 157,773 0 0 38,603 95,773

corporate governance and financial review / 1 ANNUAL REPORT 2012 / AbLyNx 181. cORPORATE gOvERNANcE ANd fiNANciAL REviEW / 1180.ANNUAL REPORT 2012 / AbLyNx

annual report - ablynx · class therapy to treat respiratory syncytial virus (rsv) infections in...

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