Nanobodies. delivering therapeutics beyond antibodies. annual report 20

Transcription

1 Nanobodies delivering therapeutics beyond antibodies 08 annual report 20

2 Key figures Revenues (million ) Cash (million ) ( * ) ( * ) including subscribed capital 20M called up in 2007 Number of employees m 2 Occupied Different nationalities

3 Glossary Affinity Antibody Anti-platelet agent Camelidae Epitope GPCRs Half-life time Heavy-chain antibody IBD IND Multi-valency Nanobody Phase I clinical trial Phase II clinical trial Small molecule TNF-alpha V HH VUB Measure of the binding strength between an antibody and its antigen. Y shaped protein that is produced as the result of the introduction of an antigen into the body and that has the ability to specifically bind said antigen, triggering an immune response. Substance that prevents the adhesion and aggregation of blood platelets, thereby preventing the formation of blood clots. Belonging to the class of mammals, this family comprises camels, llamas, alpacas, vicunas and guanacos. Site on an antigen recognized by an antibody. G-Protein Coupled Receptors. Cell membrane proteins of high medical and pharmacological importance. The length of time it takes for half of the drug molecules to get cleared from systemic circulation. Antibody which consists of two heavy chains only. Inflammatory bowel disease. Group of chronic intestinal diseases characterized by inflammation of the bowel. The most common types of inflammatory bowel disease (IBD) are ulcerative colitis and Crohn s disease. Investigational New Drug Application. An application that a drug sponsor must submit to FDA before beginning tests of a new drug on humans. The IND contains the plan for the study and is supposed to give a complete picture of the drug, including its structural formula, animal test results, and manufacturing information. The equivalent in Europe is called Request for Authorization (RfA). Having more than one binding site. A protein that is composed of one or more binding domains with the structural and functional characteristics of naturally occurring heavy chain variable domains (V HH s) from Camelidae. Clinical trial to test a new biomedical intervention in a small group of people for the first time to evaluate safety (e.g. to determine a safe dosage range and to identify side effects). Clinical trial to study a new biomedical intervention in a larger group of people to determine efficacy and to further evaluate its safety. Low molecular weight non-protein molecule drug. Protein named Tumor Necrosis Factor-alpha produced by several of the body s cell types, involved amongst others in systemic inflammation. Variable or binding domain of a naturally occurring heavy chain antibody. Free University of Brussels ( Vrije Universiteit Brussel ). 01 introduction ablynx annual report 2008

4 Quick guide to Nanobodies C H 1 V H V HH VL V HH C L C H 2 C H 2 C H 3 C H 3 Ablynx s nanobody The smallest functional fragment of a naturally occuring single-chain antibody. conventional antibody Heavy and light chains. Both chains required for antigen binding and stability. heavy-chain antibody Only heavy chains. Full antigen binding capacity and highly stable. What are Nanobodies? Nanobodies, a new class of novel therapeutic proteins that are derived from naturally occurring single-chain antibodies. The basis for Nanobody technology was originally discovered in 1992 at the VUB. The invention was based on the observation that Camelidae (the family which includes camels and llamas) are the only mammals which, in addition to conventional antibodies, also possess antibodies that lack light chains but still have the full antigen-binding capacity of conventional antibodies. In these heavychain only antibodies, antigen binding occurs through a single variable domain (V HH ) (from which Nanobodies are derived) which is the smallest functional antibody fragment of a naturally occurring heavy-chain antibody. How are Nanobodies different? Nanobodies have a number of important competitive advantages which differentiate them from conventional monoclonal antibodies and small molecule drugs. They combine some of the best features of conventional monoclonal antibodies with those of small molecule drugs. These advantageous characteristics include : P high affinity binds specifically to one disease target P small size kd, 1/10 of the size of a conventional antibody P high stability stable to enzymes, various ph s and high and low temperatures P ease of manufacture cost of goods advantage with microbial manufacturing P formatting tailoring of the duration of pharmacological activity for both acute and chronic indications multi-valency and bi-specificity allowing more than one disease target or epitope to be blocked with one therapeutic entity P broad applicability applications in a broad range of therapeutic disease areas 01 introduction ablynx annual report 2008

5 Contents Key Figures Quick guide to Nanobodies Glossary contents introduction 2008 Highlights 03 Letter to the Shareholders progress The Nanobody Platform 07 Building the Pipeline 09 Partnerships and Business Update corporate information Investor Relations 17 Corporate Governance 19 Financial Calendar financial review Financial Information 21 Addresses 08 annual report 2008 contents ablynx annual report

6 An excellent group of people on an extraordinary journey excellence 01 introduction ablynx annual report

7 Introduction 2008 Highlights Delivering on our promises and beyond 1 january 2008 February P Received milestone payment in Novartis alliance. P Boehringer Ingelheim extended research collaboration for Alzheimer s disease. august october P Awarded 1.8 million grant to explore novel methods for uses of Nanobodies (a total of 2.3 million in 2008). P Successfully generated Nanobodies against GPCRs. P Announced new preclinical development programme, ALX-0141, a Nanobody against RANKL, an important target in osteoporosis. P Secured future access to 7,000m² of a new facility to support long-term growth. december P Initiated Phase I study for ALX-0681 in healthy volunteers. P Received $3 million milestone from Wyeth as their TNF-alpha Nanobody entered Phase I clinical development. P Reported positive Phase Ib results as ALX-0081 reached primary endpoint. P 69% increase in revenues to 16.8 million and million cash at year end. MAY P Initiated Phase Ib study for ALX-0081 in patients with coronary heart disease. september P Entered into agreement to co-discover and co-develop Nanobodies with Merck Serono, including a cash payment to Ablynx of 10 million. NOVEMBER P Filed an IND equivalent for ALX-0681, a subcutaneous delivery form of ALX december introduction ablynx annual report

8 These programmes span a wide range of indication areas, including cardiovascular, inflammation, oncology, musculoskeletal, neurology and pulmonary disease, illustrating the broad applicability of the Nanobody platform in both acute and chronic settings. We are confident that this strong developing pipeline will ensure that we meet one of our key goals to have taken five new products into clinical development by the end of Dear Shareholders, 2008 has been another transformational year for Ablynx. It was our first full year as a company listed on Euronext in Brussels [ABLX], and by year-end, we had three Nanobody-based products in the clinic, over 20 R&D programmes in progress and the resources in place, including a very significant cash balance, to support our strategy to aggressively develop Ablynx as one of Europe s most exciting biotechnology companies. We continue to invest in and fully exploit the tremendous potential of our unique Nanobody technology platform to deliver a stream of clinical candidates, both to fuel our own pipeline and to secure strategic collaborations. Our reputation within the pharmaceutical industry continues to grow as evidenced by the risk and reward sharing partnership we secured this year with Merck Serono, as well as extensions of funding support for existing collaborations. The funds raised at the time of the IPO, together with revenues received from pharmaceutical partners, have enabled us to expand our R&D pipeline from 13 programmes at the end of 2007 to 24 by the end of In May, we initiated the Phase Ib clinical trial of our lead compound, ALX-0081, an anti-thrombotic and, in December, we reached the primary endpoint of this study. In December, we also initiated the Phase I study of the subcutaneous delivery formulation of our antithrombotic, ALX December was also the month when our partner, Wyeth Pharmaceuticals, started Phase I trials in the USA of a Nanobody directed against TNFalpha - a programme we had licensed to them in In addition to the significant progress in developing our clinical pipeline, in October, we also nominated our next preclinical development candidate ALX ALX-0141 is a Nanobody to RANKL, an important target in osteoporosis. Underpinning the product pipeline is the unique Nanobody technology platform and we are committed to continuing investment in this key asset and further exploring the potential of Nanobodies as powerful new protein therapeutics. In October, we announced that we had successfully generated functional Nanobodies against a number of GPCRs, an important class of proteins that are extremely difficult to target with monoclonal antibodies. Post year end, we published important scientific developments in the shape of a novel proprietary half-life extension technology together with encouraging data on the pulmonary delivery of Nanobodies. We continue to demonstrate the substantial advantages that Nanobodies have over other technology platforms. 01 introduction ablynx annual report

9 Our strong cash position and our ability to generate income from non-equity sources have given us a significant competitive advantage. Edwin Moses Chief Executive Officer and Chairman In our commercial relationships, we placed considerable focus on our existing collaborations with Boehringer Ingelheim, Novartis and Wyeth Pharmaceuticals, which in total have the potential to generate up to 1.7 billion in payments together with attractive royalties. During the year, we signed our first co-discovery/co-development partnership with Merck Serono. This two-target deal included an up-front fee to Ablynx of 10 million with Ablynx having the right to contribute 50% of the costs of discovery and development in return for 50% of the profits on commercialization of products. If we choose, however, we have the flexibility to opt-out at certain pre-agreed points and then convert this partnership into a classic licensing deal with the potential to generate 325 million plus royalties. This agreement provides an important opportunity to participate in a greater way in the success of our partnered programmes and demonstrates Ablynx s increasing maturity as a discovery and development organization. During 2008, our revenues increased by 69% to 16.8 million, with research and development expenses increasing by 11.2 million to 29.9 million, resulting in a loss for the year of 15.2 million. At the year-end Ablynx had million in cash, cash equivalents and available for sale financial assets, having had a net burn of just 12.9 million during the year, a notable achievement when set against the substantial progress made in growing our pipeline and developing our Nanobody technology. We remain intent on attracting the best talent from around the world and during the year staff numbers grew from just under 150 to over 200, with 13 nationalities represented within the Company. More recently, in 2009 we were very pleased to announce the recruitment of a new Chief Scientific Officer, Dr Debbie Law, with extensive senior experience from the US biotechnology industry. To support our planned growth, we announced our commitment to leasing about 7,000 m 2 in a state-of-the-art facility to be completed on the Technologiepark in Zwijnaarde, Ghent by mid This new facility should be sufficient to house all our activities in Belgium for the foreseeable future. Our strong cash position and our ability to generate income from non-equity sources have meant that the huge changes in the financial world during 2008 have not directly negatively affected Ablynx. Indeed these events have given us a significant competitive advantage over the many biotechnology companies around the world who need to rely heavily in the short-medium term on accessing finance from the private and public capital markets. We remain focused on our proven approach to value creation while being mindful of the imperative to remain independent of the need to raise cash from the capital markets for the foreseeable future. In 2008, we met all the key goals that we had set for ourselves at the IPO and in fact achieved more than anticipated. Our intention is to continue to set and achieve stretching goals during 2009, and to continue developing Ablynx as one of Europe s leading biotechnology companies, thereby exploiting our value potential even in difficult financial markets. We look forward to the next year with great anticipation and thank all our staff for their commitment and dedication as well as our shareholders for their support. Sincerely yours, Edwin Moses Chief Executive Officer and Chairman 01 introduction ablynx annual report

10 ambition Crossing boundaries, facing and overcoming hurdles, keeping perspective 02 Activities ablynx annual report

11 2008 Progress The Nanobody Platform A unique product engine Ablynx made significant progress during 2008 in its evolution from a technology platform company to a product company with a rapidly growing pipeline. At the beginning of 2008, Ablynx had a total of 13 Nanobodybased therapeutic programmes in the portfolio, composed of partnered and in-house programmes. At the end of 2008, the Company had expanded its portfolio of Nanobody-based therapeutic programmes to a total of 24, over half of them currently wholly owned by Ablynx. The Nanobody platform is a unique product-generating engine. In 2008, we continued to demonstrate the broad applicability of the platform by generating Nanobodies against complex target classes including GPCRs, chemokines and certain viruses. We demonstrated the speed with which the platform allows us to bring new Nanobodies forward by progressing our lead Nanobody against Receptor Activator for Nuclear Factor kappa B Ligand (RANKL), an important target for bone disorders such as osteoporosis, into preclinical development. We anticipate this programme will take only three and a half years from programme initiation to start of Phase I. There were a total of 13 Nanobody programmes in December This had almost doubled by December 2008 to a total of 24 programmes. During 2008 Ablynx filed a total of 39 new priority applications in a total of 25 new patent families. Of these 25 new patent families, 11 families were filed in new target classes. This demonstrates the speed at which we can advance potential new drug candidates into our pipeline and how a strong patent portfolio has been generated in a short period of time. P Target classes for which Nanobodies have been raised GPCRs P Growth factors & receptors P Transporters P Chemokines P Cytokines & receptors P Fc receptors P Integrins P T-cell co-activator ligands/receptors P Proteases P ANGIOPOIETINS P Ephrin/eph receptors P Enzyme targets P AdamAlysins P Toll like receptors P Immunoglobulins P Micro-organisms 02 Activities ablynx annual report

12 P NANOBODY PLATFORM Tailor-making drugs The ability to format the Nanobodies into multi-specific constructs, thus interacting with more than one epitope or target, has opened up new opportunities in treatment for certain multi-factorial diseases such as cancer and inflammation. With the small size (only kd) of a monovalent Nanobody, a bispecific Nanobody construct is still significantly smaller than a conventional antibody (150 kd). Ablynx is developing several bispecific constructs and will continue to exploit this unique formatting feature. A Nanobody has a short half-life of a few hours, which is often required for acute conditions where it is desirable for the drug to clear quickly from the body. The half-life of a Nanobody can be extended when aimed to treat chronic diseases for up to two to three weeks by half-life extending the Nanobody using a range of different technologies available to Ablynx. The ability to tailor the half-life of the Nanobodies depending on whether a short or long-acting drug is required allows Ablynx to differentiate against both conventional antibodies and small molecule drugs. During 2008, Ablynx discovered and developed a novel proprietary half-life extension technology and demonstrated in vivo results which show considerable potential to significantly increase the half-life of its Nanobodies in humans. Alternatives to injection Biologics can typically only be administered to patients via injection, either intravenously or subcutaneously. With their inherent stability, Nanobodies offer the opportunity for alternative delivery routes beyond injection, including oral and pulmonary administration. Advances in this area could significantly impact a number of Ablynx s therapeutic programmes resulting in a superior product profile. in vivo that anti-viral Nanobodies protect against viral infection and presence of active virus when delivered via an intra-pulmonary route. Following a single administration of the Nanobodies via the lungs, neutralization of virus was observed for up to 72 hours. Furthermore, we showed that Nanobodies are suitable for systemic delivery via the lungs where their extended bioavailability is increased by a factor of five to ten times compared with intravenous administration. Pulmonary intranasal delivery of anti-viral Nanobodies Number of viruses in the lung Avian influenza Anti-viral Nanobody Control Nanobody Saline RSV Ablynx has demonstrated in vivo that anti-viral Nanobodies protect against viral infection and presence of active virus when delivered via an intra-pulmonary route. We concluded our first feasibility study in December 2008 and were able to demonstrate in vivo that anti-viral Nanobodies protect against viral infection and presence of active virus, influenza or respiratory syncytial virus (RSV), when delivered via an intra-pulmonary route. Several hours prior to being exposed to virus, mice were treated with Nanobodies. Following a single administration of the Nanobodies via the lungs, both the anti-influenza and anti-rsv Nanobodies were able to significantly reduce the levels of virus (see figure). During 2008, Ablynx continued to investigate alternative routes of administration for Nanobodies. We initiated feasibility studies to assess whether Nanobodies can be administered via an oral, needleless or pulmonary route. As an example, we concluded our first feasibility study in December 2008 and were able to demonstrate Our Nanobody platform is well validated as a source of novel high quality drug candidates that can be progressed into the clinic at very high speed. We continue to invest in this proprietary product engine as our driver of innovation and competitive advantage progress ablynx annual report

13 Building the Pipeline Three Nanobodies in the clinic Ablynx has a broad pipeline of 24 active therapeutic programmes spanning over six therapeutic areas, more than half of which are Ablynx s in-house programmes. During 2008, the Company initiated six novel therapeutic programmes and is on track to reach the corporate goal of taking five new Nanobody-based products into the clinic by Today there are three Nanobodies in clinical development. The anti-thrombotics ALX-0081 and ALX-0681 are both novel first-in-class drugs targeting von Willebrand Factor (vwf). ALX-0081 has completed Phase I development and we started Phase I development for ALX-0681 in December The third programme is one licensed by Ablynx to Wyeth Pharmaceuticals, who is developing Nanobodies against TNF-alpha. Wyeth entered into Phase I development in healthy volunteers in December 2008 with its lead TNFalpha Nanobody. As a result of these clinical advances, regulatory authorities in five countries have now positively reviewed and approved the progression of Nanobodies into the clinic. At this point, Ablynx has chosen to exploit the Nanobody advantage without a specific therapeutic area focus. Therefore, our current portfolio includes candidates in areas targeting thrombosis, inflammation/autoimmune disease, oncology, neurology and pulmonary disease. As we continue to expand our pipeline over the next few years, we aim to build up in-house expertise in certain therapeutic areas and to collaborate in areas where we could benefit from a partner s resources and expertise. Ablynx s internal and funded programmes target selection lead identification lead optimization preclinical phase I Ia Ib phase II phase III registration IND Phase II initiation Q launch cardiovascular ALX-0081 ALX-0681 WYETH immunology / infection / inflammation MERCK SERONO musculoskeletal ALX-0141 neurology boehringer ingelheim pulmonary disease boehringer ingelheim Ablynx-led programme Partner-led programme oncology boehringer ingelheim MERCK SERONO various boehringer ingelheim novartis progress ablynx annual report

14 P BUILDING THE PIPELINE Thrombosis Thrombosis is the formation or presence of an unwanted clot or thrombus inside a blood vessel, obstructing the flow of blood through the circulatory system. Thrombosis can be divided in two main groups; venous thrombosis, which occurs when the clot obstructs a vein, and arterial thrombosis, which occurs when the blood clot obstructs an artery. vwf is involved in the genesis of unwanted blood clots in arteries where the blood flows much faster than in veins. Coronary artery disease is the most common cause of heart attacks. Coronary artery disease is the end result of a complex process called atherosclerosis (commonly called hardening of the arteries) and it is characterized by the build-up of so called plaques. Upon spontaneous rupture of a plaque, a white blood clot can form causing blockage of arteries (ischemia) and prevent oxygen-rich blood from reaching the heart. Anti-platelet agents are used primarily for arterial thrombosis where clots are formed by aggregation of platelets. An important feature of current anti-platelet agents is that they are indiscriminate in their activity; they prevent both the unwanted thrombosis in injured or stenosed arteries and the desirable hemostasis that is part of wound healing. Therefore, a common side effect of their use is the occurrence of bleeding complications including bleeding at the site of injection, gastro-intestinal bleeding and cerebral bleeding. mechanically open. However, PCI has also become an important cause of arterial thrombosis, as the insertion of the stent often results in damage of the arterial wall leading to platelet adhesion to the damaged blood vessel. Hence, there is a need for stronger and safer antithrombotic agents to be used in conjunction with PCI. Thrombotic Thrombocytopenic Purpura (TTP) is a rare and potentially life-threatening disorder of the blood-coagulation system, causing extensive microscopic blood clots to form in the small blood vessels throughout the body. vwf is a blood protein that mediates thrombus formation via binding of platelets and vascular structures, and it is considered the major pathogenic factor in TTP. Estimates of the incidence of TTP are in the range of 4 to 6 per million population with a peak incidence between the ages of 35 and 50. Plasma exchange and transfusions are regarded the mainstay of treatment as they have reduced the mortality rate from almost 90% to about 10-30%. However, no specific treatment is currently available targeting the cause of the disease (hyper-coagulation caused by vwf activation) and up to 50% of patients relapse after plasma exchange and transfusion and require repetitive treatment for their disease episodes. The anti-thrombotic market is expected to grow to $22 billion by The growth will mainly be due to the introduction of new agents onto the market, which will offer significant improvements over the current standards of care. Acute Coronary Syndrome (ACS) is expected to afflict approximately 2.9 million people in the Unites States, Japan and certain European countries in 2009, and is the leading cause of mortality in the area of cardiovascular disease. Experts believe that the prevalence and incidence of acute infarcts due to arteriosclerosis will increase further, due to the ageing population. Percutaneous Coronary Intervention (PCI) (sometimes called PTCA, angioplasty or stenting) is rapidly becoming the standard procedure of care in ACS. PCI is a surgical technique that widens narrowed arteries, usually by inflating a balloon and often followed by the placement of a stent a device that keeps the artery A 3-dimensional structure of ALX-0081, a bivalent, 28 kd Nanobody (modeled by Cambillau et al) currently in clinical development in patients with coronary heart disease undergoing PCI progress ablynx annual report

15 With the excellent safety and impressive efficacy seen to date, I believe ALX-0081 opens up new opportunities to treat coronary thrombosis. Professor Jozef Bartunek OLVZ Aalst, Belgium From discovery to Phase Ib completion for a first-in-class anti-thrombotic in 4 years ALX-0081 Ablynx s lead development programme, ALX-0081, is a novel first-in-class anti-thrombotic targeting von Willebrand Factor (vwf), administered via intravenous infusion. This bivalent Nanobody is being developed to reduce the risk of thrombosis in patients with ACS. Current platelet aggregation inhibitors are indiscriminate in their activity (preventing both unwanted thrombosis in arteries and the desirable hemostasis in healthy blood vessels) while ALX-0081 effectively inhibits thrombosis in arteries without interfering with hemostasis and wound healing in vessels with slower blood flow (i.e. veins). This unique drug profile has the potential to translate into a safer drug with little or no bleeding side effects. ALX-0681 Ablynx added to its anti-thrombotic portfolio by progressing ALX-0681 into a Phase I clinical study in December ALX-0681 also targets vwf but is administered subcutaneously instead of intravenously. The convenience of subcutaneous delivery and the possibility of self-administration should allow access to additional patient populations including patients with thrombotic thrombocytopenic purpura (TTP) who may need repeated treatment with the drug. Ablynx believes that ALX-0081 targets a key opportunity in the anti-thrombotic market as it may provide a solution to the cardiologist s current dilemma in ACS which typically involves achieving a balance between the prevention of unwanted blood clots and potentially life-threatening bleeding complications. ALX-0681 may offer the first effective and convenient drug treatment for patients with TTP, leading to a significant improvement in quality of life. Other potential indications for ALX-0081 and ALX-0681 include myocardial infarction (MI) and stroke. ALX-0081 and ALX-0681 Clinical progress In May 2008, we initiated, with ALX-0081, a doubleblind, randomized, placebo-controlled multiple dose study in patients with coronary heart disease undergoing PCI. The objectives of this Phase Ib study were to determine safety and tolerance when adding ALX to a standard anti-thrombotic regimen in patients undergoing PCI and to determine its biological efficacy by using a biomarker and clinical response to the therapy. The speed at which Ablynx s discovery platform can generate a therapeutic product is demonstrated by the fact that in December 2008, we announced that the Phase Ib study had reached its primary endpoint demonstrating the desired pharmacological effect and was shown to be safe and well tolerated. Impressively, it has taken Ablynx only four years from discovery to completion of this Phase Ib study. These positive Phase Ib results support the progress into Phase II clinical study which we anticipate to start in Q In December 2008, Ablynx progressed ALX-0681 into a Phase I study in healthy volunteers. This study will investigate the safety, tolerability and pharmacokinetics of single and repeated subcutaneous administrations of ALX We aim to rapidly progress this candidate in TTP and have applied for orphan drug status. Orphan drugs generally follow the same regulatory guidance as any other pharmaceutical product regarding quality, safety and efficacy. However, the scarcity of the patient population is appreciated by the regulatory agencies and certain statistical burdens are lessened in an effort to allow clinical development in a rare disease indication and to maintain development momentum. The Phase II clinical development will likely address symptomatic patients with TTP episodes, evaluating the efficacy of ALX-0681 as well as its safety profile progress ablynx annual report

16 P BUILDING THE PIPELINE Bone disorders Osteoporosis is a systemic, degenerative skeletal condition characterized by low bone mass and micro architectural deterioration of bone, leading to reduced bone strength. Healthy bone is maintained by the balance of degradation and formation. It most commonly affects postmenopausal women, where this balance is lost, but also occurs in premenopausal women, and in men, and can be induced by a variety of secondary causes. The resultant low bone mineral density (BMD) makes osteoporotic patients prone to fractures which require considerable treatment resources if complications, including fatality, are to be avoided. The osteoporosis global market is estimated to be >$8 billion and growing rapidly. Denosumab, a monoclonal antibody for which Amgen has submitted marketing applications in USA and Europe is estimated to reach annual sales of $2 billion (Chase, Marylin. Osteoporosis Drug Is Amgen s Hope For a Strong Future. The Wall Street Journal, December 14, 2007). ALX-0141 ALX-0141 is a Nanobody that specifically targets Receptor Activator for Nuclear factor Kappa B Ligand (RANKL), a key mediator of bone resorption and an essential regulator of osteoclasts, the cells involved in the breakdown of bone. ALX-0141 has been designed to inhibit bone loss caused by post-menopausal osteoporosis, rheumatoid arthritis, cancer and certain medications. Advancing ALX-0141, a preclinical development candidate against RANKL During 2008, Ablynx advanced ALX-0141, a novel Nanobody therapeutic programme, against RANKL. It is now in preclinical development and Ablynx will progress the programme towards clinical development for osteoporosis with the goal to initiate a Phase I healthy volunteer study by the end of This means this programme will have taken only three and a half years from start to initiation of Phase I progress ablynx annual report

17 In the lab, the Nanobodies have actually performed spectacularly. Davinder Gill Vice President Biological Technologies at Wyeth Research Rheumatoid Arthritis (RA) RA is a chronic, systemic autoimmune disorder that most commonly causes inflammation and tissue damage in joints and tendon sheaths, together with anemia. It can be a disabling and painful condition, which can lead to substantial loss of functioning and mobility. Various treatments are available. Analgesics and anti-inflammatory drugs, as well as steroids, are used to suppress the symptoms, while disease-modifying anti-rheumatic drugs (DMARDs) are often required to inhibit or halt the underlying immune process and prevent long-term damage. Over the last decade, the newer group of biologics has increased treatment options. When looking at the seven major rheumatoid arthritis markets it is expected they will grow from $7 billion in 2007 to over $12 billion in 2017 with continued uptake of anti-tnfs. Wyeth in the clinic At the end of 2008 Wyeth Pharmaceuticals filed an IND and entered into Phase I clinical development in healthy volunteers with its lead candidate Nanobody against TNF-alpha. Ablynx entered into the partnership with Wyeth, announced in November 2006, on our TNFalpha Nanobody programme. This licensing agreement has a potential value of $212.5 million to Ablynx. Wyeth markets the TNF-alpha-directed blockbuster product Enbrel together with Amgen. In 2008 Enbrel reached total sales of $6.5 billion worldwide. Wyeth has very significant experience in this complex and competitive area and we are confident that our partnership with Wyeth will help accelerate the development and commercialization of Nanobodies targeting TNF-alpha. Tumour Necrosis Factor alpha (TNF-alpha) TNF-alpha is a protein involved in systemic inflammation. TNF-alpha causes apoptotic cell death, cellular proliferation, differentiation, inflammation, tumorigenesis and viral replication. TNF-alpha s primary role is in the regulation of immune cells while overproduction of TNF-alpha has been implicated in a variety of human diseases such as RA, psoriasis, Crohn s disease and cancer. Biopharmaceuticals that are antagonists for TNF-alpha, have had a dramatic impact on the treatment of TNF-alpha related diseases. The 2007 global sales for the anti-tnf-alpha biopharmaceuticals Enbrel, Remicade and Humira were in excess of $12 billion for indications including adult RA, juvenile RA, ankylosing spondilitis, psoriatic arthritis, psoriasis and IBD progress ablynx annual report

18 Partnerships and Business Update Ablynx s key partnerships BOEHRINGER INGELHEIM BOEHRINGER INGELHEIM MERCK SERONO Research and licensing collaboration focussed on Alzheimer s disease target, potentially worth $265 million Strategic alliance including 10 programmes with a potential value of 1.3 billion, co-promotion options in EU Two-target 50/50 co-discovery/co-development collaboration (oncology & immunology) with profit share on commercialized products, including 10 million upfront Potential value: 2.2 billion + royalties NOVARTIS Multi-target collaboration across several indications WYETH TNF-alpha research and licensing collaboration, potentially worth $212.5 million Balanced value creation Ablynx Partners 70% of Ablynx s R&D staff dedicated to Ablynx s in-house programmes Only 30% of Ablynx s R&D staff dedicated to partnerships 98% of accessible targets available for in-house pipeline ~2,000 targets < 2% of accessible targets partnered to date progress ablynx annual report

19 Ablynx is focused on developing a strong Nanobody pipeline. We do so independently or together with our partners to ensure Nanobodies progress successfully towards the clinic and towards the market. Over the last years, we have established significant partnerships with leading pharmaceutical companies including Boehringer Ingelheim, Novartis and Wyeth Pharmaceuticals. During 2008 we also entered into an important co-discovery and co-development partnership with Merck Serono. We will continue to focus around 70% of our R&D resources to advance in-house programmes, while investing around 30% of Ablynx s R&D resources to advance and build on our key partnerships where our partners contribute significant resources and capabilities. To date, Ablynx has only partnered approximately two percent of the disease targets accessible by Nanobodies. Business progress Boehringer Ingelheim extended the research collaboration focusing on Alzheimer s disease in August 2008 and we continued to make advances in our strategic alliance with them. Progress was made in the Novartis collaboration and we reached a milestone payment from Novartis. Wyeth entered a Phase I study with the lead Nanobody targeting TNF-alpha, which generated a $3 million milestone to Ablynx. In September 2008 we entered into the new partnership with Merck Serono. The structure of this partnership demonstrates that Ablynx has matured as a discovery and development organization. Together with Merck Serono we will co-discover and co-develop Nanobodies against two targets; one inflammation target and one oncology target. Merck Serono paid a 10 million cash payment to Ablynx. We have the right to contribute 50% of the cost of discovery and development in return for 50% of the profits on any commercialized product. Ablynx has the flexibility to carry on 50/50 until commercialization of the products or we have the opportunity to opt-out and to convert this partnership into a classical licensing arrangement with pre-agreed milestones and royalties. This deal offers the maximum flexibility for Ablynx as we continue to expand our portfolio of Nanobody-based therapeutics. Focused business strategy Ablynx seeks to successfully discover, develop and commercialize Nanobody-based drugs for a range of important human diseases. Key elements of the Company s strategy include: P continue to leverage the cost-effective nature, broad applicability and flexibility of the Company s Nanobody technology to rapidly identify potential drug candidates with unique advantages across a range of therapeutic areas; P selectively partner Nanobody programmes with companies possessing the resource and expertise to maximize the market opportunity; P maintain and expand Ablynx s proprietary Nanobody technology and intellectual property position. Expanding to support the rapid growth To support Ablynx s rapid growth, the Company expanded from 144 staff to 205 during There are now 13 nationalities within Ablynx. Ablynx is based on the Technologiepark in Zwijnaarde (outside Ghent) in Belgium. The Company also secured access to 7,000 m 2 of a new 10,000 m 2 facilities to support longterm growth. A consortium, comprising DG Infra+, B.S.I. and Foremost Immo, has committed to invest in the development of a 10,000 m² cutting-edge laboratory facility (the Bio-Accelerator) on the Technologiepark. This facility will be close to Ablynx s existing facilities and is expected to be completed by mid progress ablynx annual report

20 Learning, building on expertise, creating and finding solutions to problems drive 03 corporate info ablynx annual report

21 Corporate Information Investor Relations Board of Directors Ablynx s Board of Directors from left to right : Edwin Moses, Remi Vermeiren, Frank Bulens, Geert Cauwenbergh, Stephen Bunting, Mats Pettersson and Denis Lucquin. Edwin Moses, Chairman of the Board Frank Bulens, GIMV (1) Stephen Bunting, Abingworth Management (2) (2) (3) Geert Cauwenbergh Denis Lucquin, Sofinnova Partners (1) (2)* (3) Mats Pettersson (1)* (3) Remi Vermeiren (1) Audit Committee (2) Remuneration Committee and Nomination Committee (3) Independent Director (*) Chairman of the Committee 03 corporate info ablynx annual report

22 P investor relations Executive Committee from left to right : Wim Ottevaere, Eva-Lotta Allan, Edwin Moses, Josi Holz and Debbie Law. Executive Committee Edwin Moses, Chief Executive Officer Eva-Lotta Allan, Chief Business Officer Josefin-Beate (Josi) Holz, Chief Medical Officer Debbie Law, Chief Scientific Officer Wim Ottevaere, Chief Financial Officer 03 corporate information ablynx annual report

23 Corporate Governance The application of Corporate Governance rules at Ablynx are in line with the recommendations of the Belgian Code on Corporate Governance which came into effect as of 1 January Ablynx stands by the principles of this Code. We refer to the Ablynx website ( for the full Corporate Governance Chapter. The following documents are available on the Ablynx website for download: P Corporate Governance Charter P Dealing Code P Articles of Association Financial Calendar Full year results Annual General Meeting Quarterly report Half year results Quarterly report 03 corporate information ablynx annual report

24 Committed to achieving the best outcome passion 20

25 Financial review Consolidated financial statements as per 31 December 2008 prepared in accordance with IFRS as adopted by the EU. 21

26 contents 01. Report of the Board of Directors Responsibility Statement Statutory Auditor s Report to the General Shareholders Meeting on the Consolidated Accounts of the Company Ablynx NV as of and for the year ended 31 December Consolidated Balance Sheet Consolidated Income Statement Consolidated Cash Flow Statement Consolidated Statement of Changes in Shareholders Equity Notes to the Consolidated Financial Statements Condensed Statutory Financial Statements of Ablynx NV as of and for the Year ended 31 December Summary Of Valuation Rules and Additional Information Disclosure Audit Fees 70 22

27 01 Report of the Board Of Directors Dear Shareholders, We are pleased to present the consolidated financial statements for the fiscal year ended 31 December Strategic Highlights During 2008, our revenues increased by 69% to 16.8 million, with research and development expenses increasing by 11.2 million to 29.9 million, resulting in a loss for the year of 15.2 million. At year-end Ablynx had million in cash, cash equivalents and available-forsale financial assets, having had a net burn of just 12.9 million during the year, a notable achievement when set against the substantial progress made in growing our pipeline and developing our Nanobody technology. We remain intent on attracting the best talent from around the world and during the year staff numbers grew from just under 150 to over 200, with 13 nationalities represented within the Company. More recently, in 2009 we were very pleased to announce the recruitment of a new Chief Scientific Officer, Dr Debbie Law, with extensive senior experience from the US biotechnology industry. To support our planned growth, we announced our commitment to leasing about 7,000 m 2 in a state-of-the-art facility to be completed on the Technologiepark in Zwijnaarde, Ghent by mid This new facility should be sufficient to house all our activities in Belgium for the foreseeable future. In our commercial relationships, we placed considerable focus on our existing collaborations with Boehringer Ingelheim, Novartis and Wyeth Pharmaceuticals. During the year, we signed our first co-discovery/co-development partnership with Merck Serono. This two-target deal included an up-front fee to Ablynx of 10 million with Ablynx having the right to contribute 50% of the costs of discovery and development in return for 50% of the profits on commercialization of products. If we choose, however, we have the flexibility to opt-out at certain pre-agreed points and then convert this partnership into a classic licensing deal. In May, we initiated the Phase Ib clinical trial of our lead compound, ALX-0081, an anti-thrombotic and, in December, we reached the primary endpoint of this study. In December, we also initiated the Phase I study of the subcutaneous delivery formulation of our anti-thrombotic, ALX December was also the month when our partner, Wyeth Pharmaceuticals, started Phase I trials in the USA of a Nanobody directed against TNF-alpha - a programme we had licensed to them in In addition to the significant progress in developing our clinical pipeline, we have also recently nominated our next preclinical development candidate, ALX-0141, which is a Nanobody to RANKL, an important target in osteoporosis. 1.2 Analysis of Results of Operations Ablynx s consolidated financial statements have been prepared in accordance with IFRS, as adopted by the EU and have been approved for issue by the Board of Directors on 24 February Revenue Revenue increased 69% to 16.8 million in 2008 (2007: 9.9 million). This increase was primarily attributable to a 6.8 million increase in research and development revenue, resulting mainly from the collaborative agreements with Novartis, Wyeth, Boehringer Ingelheim and Merck Serono. In addition, Ablynx had an 0.1 million increase in grant revenue due to two new grants from the government from which the Company will receive 2.3 million funding between 2008 and Research and development expenses Research and development expenses increased by 59% to 29.9 million for 2008 (2007: 18.7 million). This increase was primarily attributable to an 4.6 million increase in external development costs and an 3.7 million increase in personnel costs as research and development staff increased to 176 as at the end of It also reflects a 3.3 million increase in laboratory expenses, depreciations and other operating expenses; patent costs decreased to 1.2 million from 1.6 million in General and administrative expenses General and administrative expenses increased 2.0 million from 5.5 million in 2007 to 7.5 million in This increase primarily resulted from a 1.3 million increase in consultancy costs, including lawyers, and from 23

28 P 01 REPORT OF THE BOARD OF DIRECTORS a 0.2 million increase in personnel costs, including share based payments Other operating income and expenses Other operating income and expenses amounts to 6,000 in 2008 (2007: 5,000) Operational result As a result of the foregoing, the loss from continuing operations before tax and net finance income increased from 14.3 million in 2007 to 20.6 million in Finance income (net) relates to the increase in equipment as the Company has increased the scope of its research activities. The Company s current assets of million essentially consist of trade receivables, available-for-sale financial assets and cash and cash equivalents. The decrease in 2008 primarily relates to the decrease in cash and cash equivalents (1). The Company s current liabilities of 32.6 million primarily relate to deferred income from collaborative arrangements and trade payables. The increase in deferred income is related to new deals with partners. The Company s non-current liabilities relate to a leasing contract. Finance income primarily comprises interest from deposits and floating and fixed rate notes. Finance income increased 3.6 million to 5.4 million in 2008 (2007: 1.8 million). The increase was principally due to increased income from deposits following the proceeds from the IPO ( 85.2 million) in November Loss for the period As a result of the foregoing, the Company s loss increased to 15.2 million in 2008 (2007: 12.5 million). 1.3 Balance sheet analysis The Company s intangible assets of 0.8 million include a portfolio of patents which are being depreciated over approximately 12 years and a technology license that is depreciated over 18 years. The Company has not capitalized any other patents and it expenses all of its research and development activities. The intangible assets also include software licenses acquired primarily over the last two years. The Company s non-current tangible assets of 4.2 million include the Company s laboratory and office equipment. The Company does not own any real estate property. The increase in non-current assets essentially 1.4 Cash flow analysis Cash flow from operating activities represented a net inflow of 3.0 million in 2007 and a net outflow of 9.6 million in 2008 respectively. Unlike last year, the increased operating expenses were only partially offset by the positive impact of new collaborative agreements on revenue and working capital. Cash flow from investing activities represented a net outflow of 39.5 million in 2008 (2007: net outflow of 2.0 million). These changes primarily reflected increased investments in laboratory and office equipment during the periods. Available-for-sale financial assets include 36 million investments in floating and fixed rate notes (1). Cash flow from financing activities was a net inflow of 0.3 million in 2008 (2007: 99.7 million). The decrease is primarily because 85.2 million was raised as part of the IPO in Outlook 2009 Based on the positive Phase Ib results for ALX- 0081, Ablynx intends to initiate a multi-centre Phase II clinical trial in PCI patients during the third quarter of In order to gain additional information on optimal dosing and scheduling in preparation for the Phase II trial, Ablynx has extended its Phase Ib study to look at biological markers, optimization of concurrent treatment with the (1) The treatment of 36 million investments in available-for-sale financial assets has an unfavourable effect on the reported cash flow per IFRS and the amount of cash and cash equivalents apparently available. The Board of Directors of Ablynx believes that inclusion of this amount in the cash flow (increasing it from million to million and the addition to the amount of available cash (increasing it from 77.6 million to million) better reflects the actual situation. 24

29 P 01 REPORT OF THE BOARD OF DIRECTORS standard anti-thrombotic regimen, tolerance and administration. The Company also aims to start a Phase I study for ALX-0141 (anti-rankl) by the end of In line with its stated strategy, Ablynx will continue to develop its product pipeline by advancing other Nanobodies towards the clinic either alone or with partners. The Company will continue to initiate new research programmes during the year as well as further developing its own technology platform and exploiting the key Nanobody advantages in areas such as alternative routes of administration. Ablynx also anticipates obtaining additional milestones from its current partnerships during Capital increase and issuance of financial instruments The following capital increases took place in The Company increased its share capital on 17 January 2008 due to the exercising of 410,500 warrants for an amount of 285,150 and is fully booked in share capital. The Company increased its share capital on 24 April 2008 due to the exercising of 49,062 warrants for an amount of 44, and is fully booked in share capital. The Company increased its share capital on 30 July 2008 due to the exercising of 2,000 warrants for an amount of 1,000 and is fully booked in share capital. The Company increased its share capital on 15 October 2008 due to the exercising of 103,124 warrants for an amount of 54, and is fully booked in share capital. Taking into consideration the outstanding warrants at the end of 2008, the Company has in total 38,585,464 fully diluted shares. 1.7 Important events after the accounting reference date 8 January 2009: Ablynx strengthens management team with the appointment of Dr Debbie Law as Chief Scientific Officer. 20 January 2009: Ablynx announced that it has expanded its musculoskeletal research portfolio by transferring in-house full ownership of a bone disorder R&D programme initiated under its collaboration with Procter & Gamble Pharmaceuticals. 23 January 2009: The Extraordinary General Shareholders meeting of Ablynx approved the issue of a new warrant plan for members of the Executive Committee and consultants. Under the new warrant plan, a total of 135,000 warrants can be issued at an exercise price of 4.52 per warrant. 3 February 2009: Ablynx announced that it will receive milestone payments totalling 3 million from Boehringer Ingelheim triggered as part of its strategic alliance for the development and commercialization of Nanobodies. 5 February 2009: Ablynx announced that its drug discovery and development alliance with Novartis has been extended for another year. 24 February 2009: Ablynx announced that the research collaboration, which forms part of the Company s TNF-alpha license agreement with Wyeth Pharmaceuticals, has been extended for another year. 1.8 Circumstances that could considerably affect the development of the Company No special events have occurred that could considerably affect the development of the Company. 1.9 Research and Development We continue to invest in and fully exploit the tremendous potential of our unique Nanobody technology platform to deliver a stream of clinical candidates, both to fuel our own pipeline and to secure strategic collaborations. We have expanded our R&D pipeline, from 13 programmes at the end of 2007 to 24 by the end of These programmes span a wide range of indication areas, including cardiovascular, inflammation, oncology, musculoskeletal, neurology and pulmonary disease, illustrating the broad applicability of the Nanobody platform in both acute and chronic settings. Underpinning the product pipeline is the unique Nanobody technology platform and we are committed to continuing investment in this key asset and further exploring the potential of Nanobodies as powerful new protein therapeutics. 25