Merus announced financial results for the first quarter ended March 31

OREANDA-NEWS. Merus N.V., a clinical-stage immuno-oncology company developing innovative bispecific antibody therapeutics, today announced financial results for the first quarter ended March 31, 2016 and provided an update on recent accomplishments and clinical development plans.

“The past few months have been transformational for Merus, highlighted by our successful initial public offering in May that strengthens our balance sheet and allows us to further advance our promising pipeline of novel cancer therapeutic candidates,” said Ton Logtenberg, PhD, Chief Executive Officer of Merus. “Additionally, the dosing of the first patient in our Phase 1/2 clinical trial of MCLA-117, our CLEC12A x CD3 bispecific, in patients with AML represents a significant milestone for this program. I look forward to reporting on our continued progress in the coming quarters, including interim results from Part 2 of our Phase 1/2 study of our lead candidate, MCLA-128, our HER2 x HER3 bispecific, in the second half of 2016.” 

Recent Clinical Developments

• Announced that the first patient has been dosed in a Phase 1/2 clinical trial evaluating Merus’ second Biclonics® therapeutic candidate, MCLA-117, in patients with acute myeloid leukemia (AML).
   
• Presented interim Phase 1/2 clinical data in a poster presentation at the American Association for Cancer Research (AACR) 2016 Annual Meeting demonstrating a favorable safety profile and early signs of anti-tumor activity of MCLA-128 in patients with advanced solid tumors. 

Upcoming Milestones

• By the end of 2016, Merus expects to report interim results from Part 2 of a Phase 1/2 clinical trial of MCLA-128 in breast cancer.
   
• Also by the end of 2016, Merus expects to file an Investigational New Drug application to the U.S. Food and Drug Administration for a Phase 1/2 trial of MCLA-128.
   
• During the second half of 2017, Merus expects to report topline data from its Phase 1/2 monotherapy trial of MCLA-128 in patients with solid tumors in multiple indications.
   
• By the end of 2017, Merus expects to report interim results from Part 1 of its Phase 1/2 clinical trial evaluating MCLA-117 in patients with AML.

Corporate Highlights

• Closed a successful initial public offering which raised net proceeds to Merus, after deducting underwriting discounts and commissions and offering expenses, of $53.3 million.
   
• Issued three patents related to the generation of bispecific antibodies and high-throughput functional screening methods of large collections of bispecific antibodies.
   
• Formed a strategic collaboration with Institut Gustave Roussy, a leading Comprehensive Cancer Centre in Europe, to jointly develop bispecific antibodies for therapeutic immuno-oncology applications.

First Quarter 2016 Financial Results
(Euros in millions)

Total revenue for the three months ended March 31, 2016 was €0.8 million compared to €0.1 million for the same period in 2015. Revenue is comprised primarily of research funding and income from grants on research projects.

Research and development expenses for the three months ended March 31, 2016 were €4.4 million compared to €3.4 million for the same period in 2015. The increase in research and development expenses period-over-period was due to higher R&D headcount and other costs related to the development of Merus’ two lead bispecific antibody candidates, MCLA-128 and MCLA-117, as well as manufacturing costs related to MCLA-158.

For the three months ended March 31, 2016, Merus reported a net loss of €(5.5) million, or €(0.63) per basic and diluted share, compared to a net loss of €(4.8) million, or €(1.19) per basic and diluted share, for the same period in 2015.

Merus ended the quarter with cash and cash equivalents of €26.2 million. Subsequent to the end of the quarter, Merus completed an initial public offering of common shares that raised total net proceeds of $53.3 million.

About MCLA-128
MCLA-128 is an ADCC-enhanced Biclonics® that binds to HER2- and HER3- expressing solid tumor cells. MCLA-128 is designed to overcome the inherent and acquired resistance of tumor cells to HER2-targeted therapies using two mechanisms: 1) blocking growth and survival pathways to stop tumor expansion while preventing tumor cells escaping through activation of the HER3/heregulin pathway and 2) recruitment and enhancement of immune effector cells to directly kill the tumor.

About MCLA-117
MCLA-117 is a Biclonics® that is designed to bind to CD3 expressed by T-cells and CLEC12A expressed by acute myeloid leukemia (AML) tumor cells and stem cells. In preclinical studies, MCLA-117 has been shown to recruit and activate the immune system’s own T-cells to kill AML tumor cells and stem cells.

About MCLA-158
MCLA-158 is an ADCC-enhanced Biclonics® being developed for the treatment of colorectal cancer and other solid tumors. MCLA-158 is designed to bind to Lgr5 and EGFR expressing cancer stem cells, block growth and survival pathways and enhance the recruitment of immune effector cells to directly kill cancer stem cells that persist in solid tumors causing relapse and metastasis.

About Merus N.V.
Merus is a clinical-stage immuno-oncology company developing innovative full length human bispecific antibody therapeutics, referred to as Biclonics®. Biclonics® are based on the full-length IgG format, are manufactured using industry standard processes and have been observed in preclinical studies to have several of the same features of conventional monoclonal antibodies, such as long half-life and low immunogenicity. Merus' lead bispecific antibody candidate, MCLA-128, is being evaluated in a Phase 1/2 clinical trial in Europe as a potential treatment for HER2-expressing solid tumors. Merus' second bispecific antibody candidate, MCLA-117, is being developed as a potential treatment for acute myeloid leukemia. The Company also has a pipeline of proprietary bispecific antibody candidates in preclinical development, including MCLA-158, which is designed to bind to cancer stem cells and is being developed as a potential treatment for colorectal cancer and other solid tumors, and Biclonics® designed to bind to various combinations of immunomodulatory molecules, including PD-1 and PD-L1.

Forward Looking Statement
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding the impact of our initial public offering on our financial position and pipeline of cancer therapeutic candidates,   the timing of results from our clinical trials and of regulatory filings, each statement under “Upcoming Milestones,” and the treatment potential for bispecific antibody candidates.

These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: we have incurred significant losses, are not currently profitable and may never become profitable; our need for additional funding, which may not be available and which may require us to restrict out operations or require us to relinquish rights to our technologies or bispecific antibody candidates; potential delays in regulatory approval, which would impact the ability to commercialize our product candidates and affect our ability to generate revenue; the unproven approach to therapeutic intervention of our Biclonics® technology; potential difficulties in validating and developing companion diagnostics, which could harm our development strategy; our limited operating history; economic, political, regulatory and other risks involved with international operations; exchange rate fluctuations or abandonment of the euro currency; the lengthy and expensive process of clinical drug development, which has an uncertain outcome; the unpredictable nature of our early stage development efforts for marketable drugs; potential adverse public reaction to the use of cancer immunotherapies; potential delays in enrollment of patients, which could affect the receipt of necessary regulatory approvals; our potential exposure to costly and damaging liability claims; post-marketing restrictions or withdrawal from the market; failure to obtain marketing approval internationally; compliance with environmental, health, and safety laws and regulations; anti-kickback, fraud, abuse, and other healthcare laws and regulations exposing us to potential criminal sanctions; recently enacted or future legislation; failure to compete successfully against other drug companies; potential competition from other drug companies if we fail to obtain orphan drug designation or maintain orphan drug exclusivity for our products; the possibility that governmental authorities and health insurers may not establish adequate reimbursement levels and pricing policies to support our products; the potential failure of our product candidates to be accepted on the market by the medical community; our lack of experience selling, marketing and distributing products and our lack of internal capability to do so; potential competition from biosimilars; our reliance on third parties to conduct our clinical trials and the potential for those third parties to not perform satisfactorily; our reliance on third parties to manufacture our product candidates, which may delay, prevent or impair our development and commercialization efforts; protection of our proprietary technology; our patents being found invalid or unenforceable; potential lawsuits for infringement of third-party intellectual property; adequate protection of our trademarks; our potential failure to obtain extensions of the terms of patents covering our products; potential difficulties protecting our intellectual property rights in certain jurisdictions; changes in United States patent law; protection of the confidentiality of our trade secrets; claims asserting that we or our employees misappropriated a third-party’s intellectual property or otherwise claiming ownership of what we regard as our intellectual property; compliance with patent regulations; potential system failures; our ability to attract and retain key personnel; managing our growth could result in difficulties; the price of our common stock may fluctuate substantially; certain of our shareholders and members of our management board own a majority of our outstanding shares and exercise significant control over us; a significant portion of our total outstanding shares are eligible to be sold into the market; provisions of our Articles of Association or Dutch corporate law might deter favorable acquisition bids for us or prevent a beneficial change of control; we may lose our foreign private issuer status and incur significant expenses as a result; and unfavorable or lacking analyst research or reports might cause the price of our common shares to decline.

These and other important factors discussed under the caption “Risk Factors” in our final prospectus filed with the Securities and Exchange Commission, or SEC, on May 20, 2016 relating to our Registration Statement on Form F-1, and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Merus N.V.  Unaudited Condensed Consolidated Statement of Financial Position  (after appropriation of result for the period)
	Note	March 31,  2016				December 31, 2015
		(euros in thousands)
Non-current assets
Property, plant and equipment			330				325
Intangible assets			420				435
Restricted cash			204				218
Total non-current assets			954				978
Current assets
Trade and other receivables	5		1,635				1,665
Cash and cash equivalents			26,153				32,851
Total current assets			27,788				34,516
Total assets			28,742				35,494
Shareholders’ equity
Issued and paid-in capital			776				775
Share premium account			90,931				90,909
Accumulated loss			(68,514	)			(63,382	)
Total equity	9		23,193				28,302
Non-current liabilities
Borrowings	7		458				486
Deferred revenue	8		335				390
Current liabilities
Borrowings			167				167
Trade payables			1,590				2,419
Taxes and social security  liabilities			-				142
Deferred revenue	8		223				223
Other liabilities and accruals	6		2,776				3,365
			4,756				6,316
Total liabilities			5,549				7,192
Total equity and liabilities			28,742				35,494

Unaudited Condensed Consolidated Statement of Profit or Loss and Comprehensive Loss
		Note	Three month period ended March 31,
				2016			2015
		(euros in thousands, except per share data)
Revenue		10		847			107
Research and development costs		11		(4,362	)		(3,448	)
Management and administration costs		11		(362	)		(192	)
Other expenses		11		(1,613	)		(1,295	)
Total operating expenses				(6,337	)		(4,935	)
Operating result				(5,490	)		(4,828	)
Finance income				33			-
Finance costs				(5	)		(7	)
Total finance income / (expenses)				28			(7	)
Result before tax				(5,462	)		(4,835	)
Income tax expense				-			-
Result after taxation				(5,462	)		(4,835	)
Other comprehensive income
Exchange differences on the translation of foreign operations				3			-
Total other comprehensive income for the period				3			-
Total comprehensive loss for the period				(5,459	)		(4,835	)
Basic (and diluted) loss per share				(0.63	)		(1.19	)

 The results for the period and the comprehensive loss for the period are fully attributable to the owners of the Company.

Unaudited Condensed Consolidated Statement of Changes in Equity
(euros in thousands)		Note	Common share capital	Class A pref. share capital	Class B pref. share capital	Class C pref. share capital	Common share premium	Class A pref. share premium	Class B pref. share premium	Class C pref. share premium	Accumulated loss			Total equity
Balance at January 1, 2015			30	21	231	-	1,564	1,334	34,026	-		(40,765	)		(3,559		)
Result			-	-	-	-	-	-	-	-		(4,835	)		(4,835		)
Other comprehensive income			-	-	-	-	-	-	-	-		-			-
Total comprehensive loss			-	-	-	-	-	-	-	-		(4,835	)		(4,835		)
Transactions with owners of  the Company:
Issuance of shares (net)		9	-	-	120	-	-	-	4,866	-		-			4,986
Equity settled shared-based payments		12	-	-	-	-	-	-	-	-		83		83
Total contributions by and distributions to owners of the Company			-	-	120	-	-	-	4,866	-		83			5,069
Balance at March 31, 2015			30	21	351	-	1,564	1,334	38,892	-		(45,517	)		(3,325		)
Balance at January 1, 2016			30	21	351	373	1,564	1,334	38,906	49,105		(63,382	)		28,302
Result			-	-	-	-	-	-	-	-		(5,462	)		(5,462		)
Other comprehensive loss			-	-	-	-	-	-	-	-		3			3
Total comprehensive loss			-	-	-	-	-	-	-	-		(5,459	)		(5,459		)
Transactions with owners of  the Company:
Issuance of shares (net)		9	1	-	-	-	22	-	-	-		-			23
Equity settled shared-based payments		12	-	-	-	-	-	-	-	-		327			327
Total contributions by and distributions to owners of the Company			1	-	-	-	22	-	-	-		327			350
Balance at March 31, 2016			31	21	351	373	1,586	1,334	38,906	49,105		(68,514	)		23,193

Unaudited Condensed Consolidated Statement of Cash flows
		Three month period ended March 31,
			2016			2015
		(euros in thousands)
Cash flows from operating activities
Result after taxation			(5,462	)		(4,835	)
Adjustments for:
Depreciation and amortization			51			50
Share option expenses			327			83
Net finance (income) costs			(28	)		7
			(5,112	)		(4,695	)
Changes in working capital:
Trade and other receivables			30			195
Trade payables			(829	)		382
Other liabilities and accruals			(589	)		(342	)
Deferred revenue			(55	)		(55	)
Taxes and social security liabilities			(142	)		83
Cash used in operations			(6,697	)		(4,432	)
Interest paid			(5	)		(7	)
Tax paid			-			-
Net cash used in operating activities			(6,702	)		(4,439	)
Cash flow from investing activities
Acquisition of property, plant and equipment			(40	)		(14	)
Interest received			33			-
Net cash used in investing activities			(7	)		(14	)
Cash flow from financing activities
Proceeds from issuing shares			23			4,986
Repayment of borrowings			(28	)		(27	)
Movement in restricted cash			13			14
Net cash from financing activities			8			4,973
Net (decrease)/increase in cash and cash equivalents			(6,701	)		520
Cash and cash equivalents as at January 1			32,851			1,568
Effects of exchange rate changes on cash and cash equivalents			3			-
Cash and cash equivalents as at March 31			26,153			2,088

Notes to the Unaudited Condensed Consolidated Financial Statements

1. General information

Merus N.V. is a clinical-stage immuno-oncology company developing innovative bispecific antibody therapeutics, headquartered in Utrecht, the Netherlands. Merus US, Inc. is a wholly-owned subsidiary of Merus N.V. located in Boston, Massachusetts, United States. These condensed consolidated interim financial statements as at and for the three month period ended 31 March 2016 comprise Merus N.V. and Merus US, Inc. (together, the “Company”).

On 24 May 2016, the Company closed the initial public offering of 5,500,000 of its common shares and, on 26 May 2016, of an additional 639,926 of its common shares, at a price to the public of US$10 per share (the “IPO”). Net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were US$ 53.3 million. On 19 May 2016, the Company’s common shares were listed on the NASDAQ Global Market (“NASDAQ”). In connection with the IPO the Company’s legal structure under Dutch law was changed from a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) to a public company with limited liability (naamloze vennootschap). In addition, in connection with the IPO, all of the Company’s preferred shares converted into common shares.

The Company was incorporated in the Netherlands, with its statutory seat in Utrecht. In connection with becoming a public company, on 19 May 2016, the Company’s name changed from “Merus B.V.” to “Merus N.V.” The address of the Company’s registered office is Padualaan 8, 3584CH Utrecht, the Netherlands.

2. Significant accounting policies

These unaudited interim condensed consolidated financial statements (the “interim financial statements”) have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” as issued by the International Accounting Standards Board. Certain information and disclosures normally included in financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) have been condensed or omitted. Accordingly, these interim financial statements should be read in conjunction with the Company’s annual financial statements for the year ended 31 December 2015. In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for a fair presentation have been included in the interim financial statements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment on the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to these interim financial statements are disclosed in Note 4. The results of operations for the three month period ended 31 March 2016 are not necessarily indicative of operations to be expected for the full fiscal year ending 31 December 2016.

Items included in each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The interim financial statements are presented in euros, which is Merus N.V.’s functional and presentation currency. All amounts are rounded to the nearest thousands of euros, except where otherwise indicated.

The Company’s financial results have varied substantially, and are expected to continue to vary, from period to period. The Company believes that its ordinary activities are not linked to any particular seasonal factors per IAS 34.16.

The Company operates in one reportable segment, which comprises the discovery and development of innovative bispecific therapeutics.

3. Adoption of New and Revised International Financial Reporting Standards

Except as otherwise indicated, the accounting policies adopted in the preparation of the interim financial statements are consistent with those applied in the preparation of the Company’s annual financial statements for the year ended 31 December 2015. A number of new standards, amendments to standards and interpretations will be effective for annual periods beginning on or after 1 January 2018 or 2019 and may be relevant to the Company. The Company does not plan to adopt new standards early.

4. Critical Accounting estimates and Judgments

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively. No changes were identified compared to previous financial statements.

The following are the critical judgments and assumptions that management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognized in the interim financial statements.

(a) Equity settled share-based payments

Share options granted to employees and consultants providing similar services are measured at the grant date fair value of the equity instruments granted. The grant date fair value is determined through the use of an option-pricing model considering the following variables:

a) the exercise price of the option;

b) the expected life of the option;

c) the current value of the underlying shares;

d) the expected volatility of the share price;

e) the dividends expected on the shares; and

f) the risk-free interest rate for the life of the option.

For the Company’s share option plans, management’s judgment is that the Black-Scholes valuation formula and the binomial option pricing model are the most appropriate methods for determining the fair value of the Company’s share options considering the terms and conditions attached to the grants made and to reflect exercise behaviour. Since the Company was not listed on a national securities exchange during the three month period ended 31 March 2016, there is no published share price information available for the period included in the interim financial statements. Consequently, the Company needs to estimate the fair value of its shares and the expected volatility of that share value.

The result of the share option valuations and the related compensation expense that is recognized for the respective vesting periods during which services are received, is dependent on the model and input parameters used. Even though management considers the fair values reasonable and defensible based on the methodologies applied and the information available, others might apply a different fair value for the Company’s share options.

(b) Income tax

Deferred tax assets in respect of tax losses have not been recognized, because the Company has no history of generating taxable profits and at the balance sheet date, there is no convincing evidence that sufficient taxable profit will be available against which the tax losses can be utilized.

(c) Foreign currency translation

Foreign currency transactions are translated using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the exchange rate at the reporting date are generally recognized in profit or loss.

The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
• income and expenses for each statement of profit or loss and comprehensive income or loss are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates at the dates of the transactions), and
• all resulting exchange differences are recognized in other comprehensive income.  

(d) Capitalization of development costs

The criteria for capitalization of development costs have been considered by management and determined not to have been met in the first quarter of 2016. Therefore, all development expenditures relating to internally generated intangible assets in the first quarter of 2016 were expensed as incurred.

(e) Accounting for upfront license fees

The Company entered into a research and license agreement with ONO Pharmaceuticals Co., Ltd (“ONO”) in April 2014. In connection with this arrangement, the Company received an upfront fee, which relates to the integrated package of deliverables under the contract (one single performance obligation). The applicable period over which to recognize the upfront payment is a significant judgment. Revenue related to this upfront fee is deferred and amortized on a straight-line basis over the contract period, as that is the period over which the Company provides its integrated service activities to ONO.

(f) Treatment of expenses relating to an equity transaction

The Company incurred costs, relating to the preparation of the IPO. The costs of the IPO, which involved both issuing new common shares and listing on NASDAQ, have been accounted for as follows:

• Incremental costs that are directly attributable to issuing new shares are included as prepaid expenses and were deducted from equity on the date of the closing of the IPO (net of any income tax benefit); and
• Costs that relate to listing on NASDAQ, or are otherwise not incremental and directly attributable to issuing new shares, are recorded as an expense in the statement of profit or loss and comprehensive loss.
• Costs that relate to both share issuance and listing are allocated between those functions on a rational and consistent basis.

(g) Going concern

During the year ended 31 December 2015 and the three month period ended 31 March 2016, the Company suffered losses from its operations, which further weakened the shareholders’ equity. 

The Company expects to incur significant expenses and operating losses for the foreseeable future as its bispecific antibody candidates advance from discovery through preclinical development and into clinical trials, and it seeks regulatory approval and pursues commercialization of any approved bispecific antibody candidate. In addition, the Company may incur expenses in connection with the licensing or acquisition of additional bispecific antibody candidates.

As a result, the Company will need additional financing to support its continuing operations. Until the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through public equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to the Company on acceptable terms, or at all. The Company’s inability to raise capital as and when needed would have a negative impact on the financial condition and ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability and may never do so.

The Company expects that its existing cash and cash equivalents, together with funds raised from the IPO which closed in May 2016, will enable the Company to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the date of these interim financial statements.

5. Trade and other receivables

All trade and other receivables are short-term and due within one year.

	March 31, 2016		December 31, 2015
	(euros in thousands)
Taxation and social security premiums	320			296
Prepaid general expenses	346			500
Prepaid IPO costs	903			814
Interest receivable	-			45
Other receivables	66			10
	1,635			1,665

6. Other liabilities and accruals

All amounts are short-term and payable within one year.

	March 31, 2016			December 31, 2015
	(euros in thousands)
Accrued auditor?s fee	354			335
Accrual for holiday expenses	77			50
Personnel	199			141
R&D studies	716			741
IP – Legal fee	374			170
Bonuses	174			391
Subsidy advance received	555			1,294
Other accruals	327			243
	2,776			3,365

7. Borrowings

The Company entered into a financing agreement with Rabobank Utrechtse Heuvelrug U.A. (“Rabobank”) on 29 December 2005, which provided for total borrowings of € 1.5 million for the financing of its business activities. The duration of this agreement is 12 years.

Under the agreement, the loans are to be repaid in monthly instalments of € 14 thousand, beginning on 31 January 2009. Repayments were deferred in January 2010 for a period of two years. Repayment recommenced in January 2012. The loans bear interest at an annual rate equal to 4.45% and were fixed until 1 April 2016. From that date the interest rate has been fixed at 3.55% until 31 March 2017.

In connection with the financing agreement, the following securities have been issued:

• a right of pledge on the account of €500 thousand, in the Company’s name in a new savings account for the benefit of Rabobank; and
• a suretyship of €1 million within the framework of the Royal Decree “Borgstelling MKB?krediet.”

The pledged amount decreases in relation to the outstanding balance. At 31 March 2016, an amount of   €204 thousand (at 31 March 2015: € 218 thousand) related to the abovementioned pledge, has been included as non-current assets on the balance sheet.

Movements in the Company’s borrowings with Rabobank were as follows:

	(euros in thousands)
Balance January  1, 2015		819
Repayments		(27	)
Balance portion 31 March 2015		792
Short term portion 31 March 2015		(167	)
Long term portion 31 March 2015		625
	(euros in thousands)
Balance 1 January 2016		653
Repayments		(28	)
Balance 31 March 2016		625
Short term portion 31 March 2016		(167	)
Long term portion 31 March 2016		458

8. Deferred revenue

On 8 April 2014, the Company entered into a research and license agreement with ONO. As part of this agreement, the Company received a non-refundable upfront payment of €1.0 million. This upfront payment is being amortized on a straight-line basis, and presented as revenue, over a period from 8 April 2014 through 30 September 2018, the end of the agreement term.  The Company is eligible to receive milestone payments upon achievement of specified research and clinical development milestones. For products commercialized under this agreement, if any, the Company is also eligible to receive a mid-single digit royalty on net sales. ONO also provides funding for the Company’s research and development activities under an agreed-upon plan. ONO has the right to terminate this agreement at any time for any reason, with or without cause.

Deferred revenue under the agreement with ONO is as follows:

	March 31, 2016		December 31, 2015
	(euros in thousands)
Deferred revenue – current portion	223		223
Deferred revenue – non-current	335		390
	558		613

9. Shareholders’ equity

Issued and paid-in share capital

Common shares

For the three month period ended 31 March 2016, 12,107 options were exercised at an exercise price of €1.93 per share.  As a result, 12,107 common shares were issued, share capital increased by €1,090 and share premium increased by €22,228. For the three month period ended 31 March 2015 no common shares were issued.

Situation as at 31 March 2016

At 31 March 2016, a total of 4,149,884 Class C preferred shares, 3,899,104 Class B preferred shares, 229,055 Class A preferred shares and 349,669 common shares with a nominal value of €0.09 per share were issued and paid up. At 31 March 2015, a total of 3,899,104 Class B preferred shares, 229,055 Class A preferred shares and 337,562 common shares with a nominal value of €0.09 per share were issued and paid up.