PROSPECTUS DATED SEPTEMBER 28, 2016

Transcription

1 PROSPECTUS DATED SEPTEMBER 28, 2016 Prospectus for the public offering in Germany and Luxembourg of 11,315,750 new ordinary bearer shares with no-par value (Stückaktien) from a capital increase against contribution in cash resolved by the Management Board on September 23, 2016, approved by the Supervisory Board on the same day, utilizing the Authorized Capital 2015 as resolved by the ordinary shareholders meeting on July 29, 2015 and for admission to trading on the regulated market segment (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment thereof with additional post-admission obligations (Prime Standard) of up to 11,315,750 ordinary bearer shares with no-par value (Stückaktien) from the above mentioned capital increase each such share with a notional interest in the share capital of 1.00 and full dividend rights from January 1, 2016 of Mologen AG, Berlin, Germany Subscription price: 1.20 International Securities Identification Number (ISIN): DE German Securities Code (Wertpapierkennnummer, WKN): Trading Symbol: MGN Bookrunner Dero Bank AG

2 Section CONTENTS 1. Summary of the Prospectus... S Section A Introduction and Warnings... S Section B Issuer... S Section C Securities... S Section D Risks... S Section E Offer... S German Translation of the Summary of the Prospectus/ Zusammenfassung des Prospekts... S Abschnitt A Einleitung und Warnhinweise... S Abschnitt B Emittent... S Abschnitt C Wertpapiere... S Abschnitt D Risiken... S Abschnitt E Angebot... S Risk Factors Risks Related to Our Business Risks Related to Shares and the Offering General Information Purpose of this Prospectus Statutory Auditor Documents Available for Inspection Forward-looking Statements Sources of Market Data Currency Presentation and Presentation of Figures The Offering General Expected Timetable Subscription Offer Subscription Rights Not Exercised and Transferability Lock-up Agreement Dilution Costs of the Offering and Net Issue Proceeds Additional Selling Restrictions Underwriting Agreement Interested Persons Participating in the Offering Page 5.11 Persons Having Committed to Subscribe for New Shares in the Offering i-

3 6. General Information about the Shares Legal Basis for the Creation of the New Shares Admission to Exchange Trading; ISIN; WKN; Common Code; Stock Exchange Symbol Form; Voting Rights Profit and Liquidation Participation Rights Transferability Settlement and Delivery Use of Proceeds and Reasons for the Offering Dividend Policy and Earnings Per Share General Provisions Relating to Profit Allocation and Dividend Payments Dividend Policy and Earnings per Share Capitalization and Indebtedness; Statement on Working Capital Capitalization and Indebtedness Indirect and contingent liabilities No Material Adverse Change Working Capital Selected Financial Information Selected Financial Information from the Statement of Comprehensive Income Selected Financial Information from the Statement of Financial Position Selected Financial Information from the Statement of Cash Flows Management s Discussion and Analysis of Financial Condition and Results of Operations Overview Key Factors Affecting our Results of Operations and Financial Condition Segment Data Results of Operations Statement of Financial Position Liquidity and Capital Resources Research and Development Quantitative and Qualitative Disclosures on Selected Risks Critical Accounting Policies Information from Our Audited Financial Statements Prepared in Accordance with the German Commercial Code (Handelsgesetzbuch) Recent Developments of Financial Position Markets and Competition Markets Competition ii-

4 13. Our Business Overview Our Strengths Our Strategy Our Principal Activities Intellectual Property Property, plant and equipment Employees Material Contracts Legal and Arbitration Proceedings Insurance Regulatory Environment Regulation and approval in the field of drug development Preclinical testing Clinical studies Regulatory inspections Applications for approval of new medicinal products General Information on the Company Formation, Incorporation, Commercial Name and Registered Office Purpose of the Company Duration of the Company and Fiscal Year History and Development Corporate Structure Publications Paying Agent Shareholder Structure Description of the Share Capital and Applicable Regulations Current Share Capital; Shares Development of Share Capital; Shares Authorized Capital Conditional Capital Convertible Bond 2016/ Purchase of Own Shares General Provisions Governing a Liquidation of the Company General Provisions Governing a Change in the Share Capital General Provisions Governing Subscription Rights Exclusion of Minority Shareholders iii-

5 16.11 Shareholder Notification Requirements; Mandatory Takeover Bids; Directors Dealings Description of the Governing Bodies of Mologen Overview Management Board Supervisory Board General Meeting Senior Management Certain Information about Members of the Management Board and the Supervisory Board Corporate Governance Certain Relationships and Related-Party Transactions Relationship with members of the Management Board and the Supervisory Board Other relationships Taxation in Germany Taxation of the company Taxation of shareholders Taxation of dividends Taxation of capital gains Inheritance and gift tax Other taxes Taxation in Luxembourg Withholding Taxes Income Tax Financial Information...F Glossary... G Recent Developments and Outlook... O Recent Developments in our Business... O Outlook... O Signature Page... X-1 -iv-

6 1. SUMMARY OF THE PROSPECTUS Summaries are made up of disclosure requirements known as elements ( Elements ). These Elements are numbered in Sections A - E (A.1 - E.7). This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of security and issuer, it is possible that no relevant information can be given regarding the Element. In such cases, the summary includes a short description of the Element with the words not applicable. 1.1 Section A Introduction and Warnings A.1 Warnings. This summary should be read as an introduction to this prospectus (the Prospectus ). Any decision to invest in the securities should be based on consideration of this Prospectus as a whole by the investor. A.2 Information regarding the subsequent use of the prospectus. 1.2 Section B Issuer In case a claim relating to the information contained in this prospectus is brought before a court, the plaintiff investor might, under the national legislation of the member states of the European Economic Area (the EEA ), have to bear the costs of translating this prospectus before the legal proceedings are initiated. Those persons who have assumed responsibility for the summary, including any translation thereof, or who have caused its publication (von denen der Erlass ausgeht), can be held liable but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this prospectus or if it does not provide, when read together with the other parts of this prospectus, all necessary key information. Mologen AG, Berlin, Germany (the Mologen, we, us, our, or the Company ) and Dero Bank AG, Munich, Germany, (the Bookrunner ) have assumed responsibility for the content of this summary and its German translation pursuant to section 5 para. 2b No. 4 of the German Securities Prospectus Act (Wertpapierprospektgesetz). Not applicable. Consent regarding the use of this Prospectus for a subsequent resale or placement of the shares has not been granted. B.1 Legal and commercial name. B.2 Domicile, legal form, legislation under which the issuer operates, country of incorporation. B.3 Current operations and principal The Company s legal name is Mologen AG. The Company primarily operates under the commercial name Mologen. The Company has its registered office at Fabeckstraße 30, Berlin, Germany, and is registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Charlottenburg, Germany (the Commercial Register ), under number HRB B. The Company is a stock corporation (Aktiengesellschaft) governed by German law. Mologen is an internationally operating biotechnology company. Apart from the focus on oncology, the research- and development S-1

7 business activities and principal markets in which the issuer competes. activities also concentrate on infectious diseases. Mologen has researched and developed various drug candidates in these fields primarily addressing diseases with substantial unmet needs. These are based on proprietary technologies enabling, or decisively facilitating, the use of DNA (deoxyribonucleic acid, carrier of genetic information for all living beings) as a drug to treat previously untreatable or only insufficiently treatable diseases. The technologies are patented and marketed under the brands MIDGE, dslim, and EnanDIM. In addition, Mologen has a unique tumor cell bank characterized according to pharmaceutical regulatory requirements, which is also used as a basis for drug development. Mologen investigates the proprietary product candidates and develops them within the framework of pre-clinical tests and clinical studies. In June 2016, we introduced our new strategy ( Next Level ) which aims at a strategic shift from a research to a product- and market-oriented company. We decided (i) to focus on Lefitolimod (MGN1703) EnanDIM /dslim2006, which are both supposed to be used as treatments in the area of cancer and human immunodeficiency virus ( HIV ), and (ii) to shelve the development and further clinical studies of all other products. The clear focus on Lefitolimod (MGN1703) and EnanDIM /dslim2006 as well as corresponding adjustments to our business organization is designed to help us achieving our main goal, i.e. a commercialization of our core products within a reasonable time frame. If such commercialization was successfully implemented in the future, the further development of MGN1601 would be resumed to secure the company s future business. The out-licensing of the product candidates to pharmaceutical companies after successful proof of clinical efficacy will therefore play an essential role in securing the company s profitability. With the help of licensing revenue that may consist of upfront and milestone payments as well as royalties future growth should be enabled and should make Mologen profitable. Our Key Competitive Strengths: We believe that the following competitive strengths, which have been key to our success to develop our lead compound to late stage phase III to date and will continue to distinguish us from our competitors, characterize our business: We pursue a new approach to the treatment of cancer (immune surveillance reactivators) and the development of a therapeutic vaccine. We have developed and patented platform technologies with extensive applications. We have established a close network with scientific institutions and research institutions including a broad Key Opinion Leader ( KOL ) network in Europe. We have a highly committed and skilled core team. Our Strategy: Based on the aforementioned competitive strengths, the key elements of our strategy include: S-2

8 B.4a Most significant recent trends affecting the issuer and the industry in which it operates. As part of our strategy program Next Level, we plan to prioritize the development of our cancer immunotherapy, the immune surveillance reactivator ( ISR ) Lefitolimod (MGN1703) for which we see an exceptional market potential. The implementation of these plans is already at an advanced stage as the company has established specific measures to focus on the further development of Lefitolimod (MGN1703) aiming to reach marketability in the midterm. EnanDIM /dslim2006 serve as pipeline products to support the life cycle management of our lead compound, Lefitolimod (MGN1703). We plan to position these compounds according to their characteristics in either cancer and/or HIV or even other indications. We plan to further keep MGN1601 which has a potential and has been tested in renal cancer on hold and use this product afterwards as a basis for the period after Lefitolimod (MGN1703) has been out-licensed or has reached marketability. We strive to conclude license agreements with pharmaceutical companies. We will continue to establish and intensify research and development alliances with scientific institutions in the private and public sector. We believe that the following trends have a significant impact on the Company, the industry and the competitive environment in which we operate: Oncology is a major and important focus of research for pharmaceutical and biotech companies, and it will remain so in the coming years. The World Health Organization (WHO) assumes a sharp increase in new cancer incidences in its latest World Cancer Report in This number could increase by 40% in the next decade, which means that by 2025, 20 million people could develop cancer each year across the globe especially due to the aging population in the developed world. The share of biotech product sales compared to worldwide prescription drug and OTC pharmaceutical sales is predicted to increase to 46 % in In this context the emerging field of cancer immunotherapy is promising and became the focus of cancer research over the last few years. With the help of cancer immunotherapy a significant prolongation of survival was observed for the first time in many years in some cancers, in a subset of the patient groups which received treatment. The combination of various cancer immunotherapies has already shown promising results in the first clinical studies. Although many of these promising new treatments are in clinical development, industry analysts have identified the immune-oncology field as a fast emerging field in which billion-dollar sales are expected in the next years (Source: Science, 20 December 2013, Vol. 342 no. 6165, pp ). However, despite good prospects, the industry continues to be faced with significant challenges. These include the broadening of market shares for generics, as well as stricter laws and approval regulations. Conditions for market approvals or subsequent market penetration are S-3

9 B.5 Description of the group and the issuer s position within the group. B.6 Persons who, directly or indirectly, have a (notifiable) interest in the issuer s capital and voting rights. also being complicated in many countries due to health care reforms which are almost always accompanied by cost cutting. New trends can be observed as pharmaceutical companies react to patent expirations and shrinking pipelines. Companies are developing new business segments, making increased investments in the development of niche products and personalized medicine or intensifying their activities in the area of mergers and collaborations. New opportunities are likewise arising for the biotechnology sector due to increased demand for innovative drugs and treatment methods, above all in the area of oncology. The Company does not have any subsidiaries. The Company s business is conducted by the Company. As of the date of this Prospectus, the Company has been notified pursuant to applicable provisions of the German Securities Trading Act (Wertpapierhandelsgesetz) ( WpHG ) that the shareholders described in the following table hold 3% or more of the shares and voting interests in the Company. Please note, however, that a shareholder is only required to notify the Company of his shares and voting rights if the latter reach, exceed or fall below the threshold of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75%. Thus the exact percentage notified may have changed between two thresholds since the date of notification without triggering a new notification requirement. Additionally a shareholder may validly acquire or dispose of shares in the Company without notifying the latter. Therefore, the column according to Company s estimate only contains an estimate by the Company of the voting rights held by the respective shareholder at the date of the Prospectus. This estimate has not been verified with the respective shareholder. Thus, it cannot be guaranteed that this estimate is correct. Name of shareholder Global Derivative Trading GmbH ( GDT ) (1)... Signal Iduna Asset Management GmbH (formerly Deutscher Ring Krankenversicherungsverein a.g.)... Directly or indirectly held shares/voting rights (in %) according to notification received by shareholder (notified on February 12, 2014) 9.99 (notified on March 6, 2008) Bâloise Holding AG (2) (notified on July 13, 2012) Deutsche Balaton Aktiengesellschaft (3) (notified on April 30, 2015) according to Company s current estimate approximately 24 approximately 6 approximately 6 approximately 5 S-4

10 Different voting rights. Whether the issuer is directly or indirectly owned or controlled and by whom and description of the nature of such (1) (2) (3) GDT is the direct shareholder. The voting rights held directly by GDT are attributed to Mr. Thorsten Wagner pursuant to section 22 para. 1 sent. 1 no. 1 WpHG. In total, 24,21% of the voting rights in the Company are held indirectly by Mr. Thorsten Wagner (according to the notification of February 12, 2014). Bâloise Holding AG is an indirect shareholder. The voting rights are attributed to Bâloise Holding AG through (i) Basler Lebensversicherungs-AG (formerly Deutscher Ring Lebensversicherungs-AG) which holds 4.11% of the voting rights directly (according to the notification of April 28, 2015), (ii) BASLER Versicherung Beteiligungen B.V. & Co. KG, and (iii) Bâloise Delta Holding S.à r.l., pursuant to section 22 para. 1 sent. 1 no. 1 WpHG. Deutsche Balaton Aktiengesellschaft is the direct (2.56% of the voting rights are held directly) and indirect (2.82% of the voting rights are held indirectly) shareholder (according to the notification of April 30, 2015). The voting rights held directly and indirectly by Deutsche Balaton Aktiengesellschaft are attributed to Mr. Wilhelm Konrad Thomas Zours through DELPHI Unternehmensberatung Aktiengesellschaft and VV Beteiligungen Aktiengesellschaft pursuant to section 22 para. 1 sent. 1 no. 1 WpHG. In total, 6.21% of the voting rights in the Company are held directly or indirectly by Mr. Wilhelm Konrad Thomas Zours (according to the notification of April 30, 2015). GDT has undertaken to subscribe for or purchase New Shares (as defined below under E.3) to the extent that GDT will continue to hold approximately 24% of the increased share capital after the registration of the implementation of the capital increase with the Commercial Register. In connection with this firm subscription commitment, the Company granted GDT the option for an oversubscription and corresponding allocation of up to 1,000,000 unsubscribed New Shares (as defined below under E.3). Assuming that all New Shares (as defined below under E.3) are placed and that GDT excises this option, GDT would hold a stake of approximately 27% in the increased share capital of the Company. In addition, GDT might fully excise its conversion rights under a convertible bond which would result in an additional stake of approximately 4.75% of the further increased share capital. TowerCrest Limited Liability Cooperation, Beijing, (China), ( TowerCrest ) has undertaken to purchase, directly or indirectly, 3,400,000 New Shares (as defined below under E.3) or, if a sufficient number of New Shares (as defined below under E.3) that are not subscribed for in the Subscription Offer (as defined below under E.3) is not available, the biggest possible number of New Shares (as defined under E.3). The Company has agreed to such an allocation depending on the New Shares (as defined under E.3) available. Assuming the placement of all New Shares (as defined under E.3), the acquisition of 3,400,000 New Shares (as defined below under E.3) by TowerCrest would correspond to a stake of about 10% in the increased share capital of the Company. Not applicable. Each share in the Company carries one vote at the Company s shareholders meeting (Hauptversammlung) ( General Meeting ). There are no restrictions on voting rights. Not applicable. Expect for the above-mentioned shareholders, the Company is currently not aware of any other shareholder that directly or indirectly holds 3% or more of the voting rights in the Company. There are no arrangements known to the Company, the operation of which may at a subsequent date result in a change in control of the Company. The management of the Company is neither under the S-5

11 control. B.7 Selected key historical financial information. direction of any other company nor to any other person, in particular on the basis of a domination agreement, and is not controlled by another company or another person. The financial information contained in the following tables is taken from our audited financial statements according to section 325(2a) German Commercial Code (HGB) as of and for the periods ended December 31, 2015 and 2014 and from our unaudited interim financial statement as of and for the period ended June 30, The audited and unaudited (interim) financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ( IFRS ). Baker Tilly Roelfs AG Wirtschaftsprüfungsgesellschaft, Leipzig, Germany ( Baker Tilly Roelfs ), audited and issued an unqualified audit opinion (Bestätigungsvermerk) with respect to each of the financial statements for the fiscal years ended December 31, 2015, 2014 and The aforementioned audited financial statements of the Company and the audit opinions thereon are included in this prospectus. All of the financial data presented in the text and tables below are shown in thousands of Euros (in thousand), except as otherwise stated. Certain financial data (including percentages) in the following tables have been rounded according to established commercial standards. As a result, the aggregate amounts (sum totals or subtotals or differences or if numbers are put in relation) in the following tables may not correspond in all cases to the aggregated amounts of the underlying (unrounded) figures appearing elsewhere in the Prospectus. Furthermore, in those tables, these rounded figures may not add up exactly to the totals contained in those tables. Financial information presented in parentheses in tables denotes the negative of such number presented. In respect of financial data set out in this Prospectus, a dash ( ) signifies that the relevant figure is not available, while a zero ( 0.0 ) signifies that the relevant figure is available but has been rounded to zero. The results of operations of the Company to date do not necessarily indicate future results of operations. Selected Financial Information from the Statement of Comprehensive Income The following table shows selected financial information from our statement of comprehensive income for the periods ended June 30, 2016 and 2015 (fiscal year half one) and for the fiscal years ended December 31, 2015, 2014 and 2013: For the period ended June 30, For the fiscal year ended December 31, (in thousand) (unaudited) (audited) Revenues Other operating income Cost of materials (5,087) (2,606) (1) (11,011) (8,687) (2,904) Personnel expenses (3,103) (2,617) (5,074) (5,113) (4,364) Depreciation and amortization (63) (52) (121) (110) (1,014) S-6

12 Other operating expenses (1,604) (1,669) (1) (4,378) (3,211) (2,813) Profit (loss) from operations (9,847) (6,903) (20,539) (17,097) (10,858) Finance costs (1) Finance income Profit (loss) before taxes (9,847) (6,901) (20,536) (17,078) (10,828) Tax result Profit (loss) for the half-year and year, respectively / Comprehensive income (9,847) (6,901) (20,536) (17,078) (10,828) Loss carried forward (104,771) (84,235) (84,235) (67,157) (56,329) Accumulated deficit (114,618) (91,136) (104,771) (84,235) (67,157) Basic earnings per share (in ) (0.44) (0.36) (0.99) (1.02) (0.70) Diluted earnings per share (in ) (1) Adjusted (change in presentation of expenses amounting to 89,000 regarding clinical trials between cost of material and other operating expenses) pursuant to IAS 1.45 in conjunction with IAS 8.14 et seqq. Selected Financial Information from the Statement of Financial Position The following table shows selected financial information from our statement of financial position as of June 30, 2016 and of December 31, 2015, 2014 and 2013: As of June 30, As of December 31, (in thousand) (unaudited) (audited) Assets Non-current assets Property, plant and equipment Intangible assets Other non-current assets Current assets 16,035 25,981 14,613 15,480 Cash and cash equivalents 15,327 24,592 13,563 8,765 Fixed-term deposits with a term of more than three months ,000 Trade receivables Inventories Other current assets 679 1,360 1, Income tax receivables Total 16,460 26,395 15,053 15,937 Equity and Liabilities Non-current liabilities Deferred income S-7

13 Current liabilities 6,707 6,886 1, Trade payables 5,606 6,390 1, Other current liabilities and deferred income 1, Liabilities to banks Shareholders equity 9,747 19,503 13,298 14,984 Issued capital 22,632 22,632 16,974 15,420 Capital reserves 101, ,642 80,559 66,721 Accumulated deficit (114,618) (104,771) (84,235) (67,157) Total 16,460 26,395 15,053 15,937 Selected Financial Information from the Statement of Cash Flows The following table shows selected financial information from our statement of cash flows for the periods ended June 30, 2016 and 2015 (fiscal year half one) and for the fiscal years ended December 31, 2015, 2014 and 2013: For the period ended June 30, For the fiscal year ended December 31, (in thousand) (unaudited) (audited) Cash flows from operating activities Earnings before taxes (9,847) (6,901) (20,536) (17,078) (10,828) Depreciation and amortization of non-current assets ,014 Profit (loss) from disposal of intangible assets and property, plant and equipment (1) Other non-cash expenses and income Change in trade receivables, inventories and other assets (352) (332) (1) (32) Change in trade payables and other liabilities (178) 1,469 5, Interest expenses/income 0 (2) (3) (19) (1) - Income tax expense/income (1) - Income tax payments (6) (1) - Net cash used in operating activities (9,190) (4,694) (15,086) (15,627) (1) (8,869) Cash flows from investing activities Proceeds from disposal of property, plant and equipment Cash payments to acquire property, plant and equipment (17) (36) (87) (86) (121) Cash payments to acquire intangible assets (58) (2) (8) (7) (25) Cash payments/proceeds ,000 (6,000) S-8

14 relating to financial investments within the cash management and forecast (fixed-term deposits with a term of more than three months) Interest received (1) - Net cash used in investing activities (75) (36) (92) 5,929 (1) (6,145) Cash flows from financing activities Cash proceeds from issuing shares 0 26,095 26,207 14,495 8 Interest paid (1) - Net cash used in financing activities 0 26,095 26,207 14,495 8 Effect of exchange rate changes on cash (6) Total changes in cash and cash equivalents (9,265) 21,365 11,029 4,798 (15,012) Cash and cash equivalents at the beginning of the period 24,592 13,563 13,563 8,765 23,777 Fixed-term deposits with a term of more than three months at the beginning of the period ,000 0 Cash and cash equivalents at the end of the period 15,327 34,928 24,592 13,563 8,765 Fixed-term deposits with a term of more than three months at the end of the period ,000 Liquid funds at the end of the period 15,327 34,928 24,592 13,563 14,765 (1) For the fiscal year ended December 31, 2015 the Company disclosed payments for income tax as well as for interests (paid or received) separately in the cash flow statements. In this regard, the cash flow statement for the fiscal year ended December 31, 2014 was adjusted. Thus, these aforementioned figures for 2014 differ from the cash flow statement which is included in the financial statements as of December 31, Significant changes to the issuer s financial condition and operating results during and subsequent to the period covered by the historical key financial Results of Operations The following significant changes in the Company s results of operations occurred in the fiscal years ended December 31, 2015, 2014 and 2013 as well as the interim period until June 30, 2016: Interim Period between January 1, 2016 and June 30, 2016 The cost of materials increased by 2.5 million, from 2.6 million during the fiscal half-year ended June 30, 2015 to 5.1 million in the S-9

15 information. fiscal half-year ended June 30, The increase in the cost of materials compared with the same period in the previous year resulted from an increase in costs for external services. This increase was primarily attributable to expenses arising from the progress made with the IMPALA study. The personnel expenses increased by 0.5 million, from 2.6 million during the fiscal half-year ended June 30, 2015 to 3.1 million in the fiscal half-year ended June 30, The increase is primarily attributable to the recruitment of additional employees from the second half of 2015 onwards and restructuring expenses. Despite restructuring and the issue of new stock options in the first half of 2016, this increase was offset by a reduction in non-cash personnel expenses from stock options granted. This is due to the fact that stock options issued in the recent past are by number and fair value below the recently expired stock option plans. Fiscal Years Ended December 31, 2015 and 2014 The Company s revenues rose by 0.03 million, from 0.01 million during the fiscal year ended December 31, 2014 to 0.04 million during the fiscal year ended December 31, Sources of revenue include the sale of goods for research. Decisive for the increase compared to the previous year were one-off effects from the sale of goods for research. The cost of materials increased considerably by 2.3 million, from 8.7 million during the fiscal year ended December 31, 2014 to 11.0 million in the fiscal year ended December 31, Raw material, supplies and goods as well as external services were obtained for the preparation and implementation of IMPULSE and IMPALA studies, which were not incurred to such an extent in the fiscal year ended December 31, Other operating expenses increased by 1.2 million, from 3.2 million in the fiscal year ended December 31, 2014 to 4.4 million in the fiscal year ended December 31, This is due to increased legal and consultancy costs, higher administration costs for personnel recruiting as well as higher travel expenses in connection with clinical trials and patents. Fiscal Years Ended December 31, 2014 and 2013 The Company s revenues declined by 0.22 million, from 0.23 million during the fiscal year ended December 31, 2013 to 0.01 million during the fiscal year ended December 31, Sources of revenue include the sale of goods for research. Decisive for the decrease compared to the previous year was the absence of one-off effects from the delivery of study medication as part of the cooperation for the product candidate for a cancer immunotherapy ( MGN1404 ) that occurred in the fiscal year ended December 31, The cost of materials increased considerably by 5.8 million, from 2.9 million during the fiscal year ended December 31, 2013 to 8.7 million in the fiscal year ended December 31, Raw material, supplies and goods as well as external services were obtained for the preparation and implementation of IMPULSE and IMPALA studies, which were not incurred to such an extent in the fiscal year ended S-10

16 December 31, Financial Position The following significant changes in our statements of financial position occurred in the fiscal years ended December 31, 2015, 2014 and 2013 as well as the interim period until June 30, 2016: Current Assets The most significant components of our current assets are cash and cash equivalents as well as fixed-term deposits with a term of more than 3 months. Cash and cash equivalents are fundamentally comprised of cash and bank deposits with a term to maturity of less than three months. Current bank balances yield variable rates of interest. The figures reflect the nominal value of the holdings in Euros and the value of an account denominated in a foreign currency as measured at respective reporting dates. The value of cash and cash equivalents increased by million during the fiscal year ended December 31, 2015 to million as of December 31, 2015 from million as of December 31, Net-deposits from capital increase in 2015 exceeded the cash used for operating activities. As of the June 30, 2016, the value of cash and short-term investments totaled 15.3 million. Current Liabilities The current liabilities as of December 31, 2015 amount to 6.89 million which reflects an increase of 5.14 million compared to 1.75 million as of December 31, 2014; due to carrying out the clinical studies IMPULSE and IMPALA. Issued Capital The Company s issued capital increased by 5,657,875.00, from 16,973, as of December 31, 2014 to 22,631, as of December 31, This increase in issued capital was due to a capital increase against cash contributions in April On July 11, 2016, the Management Board has publicly announced that, as of June 30, 2016, over half of our issued share capital of 22,631, has already been depleted in terms of section 92 para. 1 of the German Stock Corporation Act (Aktiengesetz) ( AktG ) as a result of losses incurred. The losses primarily result from our ordinary business activities as a biotech company that is still developing and has no material revenues of its own. Cash Flows Cash Flows from Operating Activities In the first half of 2016, cash flows used for operating activities in the amount of 9.2 million were higher than the previous year's figure (H1 2015: 4.7million) and were mainly committed to further development of the IMPULSE and IMPALA studies. The Company s cash flow resulting from operating activities slightly increased from million in the fiscal year ended December 31, 2014 to million in the fiscal year ended December 31, 2015 after a decrease from -8.9 million in the fiscal year ended December 31, The increase of cash used for operating activities in the S-11

17 B.8 Selected key pro forma financial information. B.9 Profit forecast and estimate. B.10 Qualifications in the audit report on the historical financial information. fiscal years ended December 31, 2015 and 2014 compared to 2013 is due to the carrying out of the clinical studies IMPULSE and IMPALA. Cash Flows from Investing Activities In the fiscal year ended December 31, 2014, cash flows from investing activities increased to 5.93 million from million in the fiscal year ended December 31, This was as a result of a fixed-term deposit of 6.0 million reaching maturity in the fiscal year ended December 31, 2014 and the payment of a fixed-term deposit of the same amount (term of more than three months) in the same period of the previous year. Due to a lack of such payment in 2015 in the fiscal year ended December 31, 2015, cash flows from investing activities decreased to million from 5.93 million in the fiscal year ended December 31, Cash Flows from Financing Activities At 14.5 million, cash flows from financing activities in the fiscal year ended December 31, 2014 were considerably higher than in the fiscal year ended December 31, 2013 with million and were influenced by the fund inflows from the cash increase carried out in February In the fiscal year ended December 31, 2015, cash flows from financing activities totaling 26.2 million increased once again which was mainly due to the cash capital increase carried out in April Recent Developments On September 23, 2016, the Management Board resolved, with the approval of the Supervisory Board, to issue a convertible bond with a total nominal value of 2.54 million with expected net proceeds of approximately 2.5 million. Without conversion of the convertible bond into shares of the company the financial position changes insofar that, contrary to the past, the company (i) discloses (a) the main portion of the gross proceeds as a non-current debt in the financial statements and (b) the remaining gross proceeds the conversion premium within the capital reserve and (ii) has to recognize interest expenditure amounting to 6.0 % p.a. in the profit and loss statement. No other significant change in the Company s financial or trading position has occurred since June 30, Not applicable. No pro forma financial information has been prepared by the Company. Not applicable. No profit forecast or estimate is being presented by the Company. Not applicable. The auditor s reports on the historical financial information of the Company included in this Prospectus have been issued without qualification. The auditor s reports regarding the financial statements according to IFRS, as adopted by the EU, for the periods ended December 31, 2015 and 2014 and regarding the financial statement according to the German Commercial Code (Handelsgesetzbuch) for the period ended December 31, 2015 were S-12

18 B.11 Insufficiency of the issuer s working capital for its present requirements. issued with additional notes stating that the Company`s existence is threatened ( 322 Abs. 2 S. 3 und Abs. 3 S. 2 HGB); these additional notes do not qualify these auditor s opinions. The auditor s review confirmation (no auditor s opinion) regarding the review of the halfyear financial statement according to IFRS, as adopted by the EU, includes also an additional note stating that the Company`s existence is threatened; this additional note does not qualify this review confirmation. The additional notes regarding the audit opinions and the review confirmation refer in each case to the Management Boards description of the financial risks within the management report respectively the interim management report. There is stated that the Company`s existence is threatened. The relevant paragraphs of the interim management report and the management reports containing the description of the financial risks are reproduced in section 21 ( Financial Information ) behind the auditor s review report or the auditor s report for the relevant financial year. The Company does not have sufficient working capital for its present requirements. In order to be able to meet all of its payment obligations within the twelve months following the date of this Prospectus, the Company believes to require additional financing in the amount of approximately 14 million. On September 23, 2016, the Management Board resolved, with the approval of the Supervisory Board, to issue a convertible bond with a total nominal value of 2.54 million with expected net proceeds of approximately 2.5 million. The remaining amount of 11.5 million required for financing the Company s business shall be raised through this public offering. The Company intends to use the net proceeds from the convertible bond as well as the net proceeds from this offering to primarily cover the working capital shortfall in an amount of approximately 10.7 million. Such amount includes the funds which the Company intends to spend on the further development of the running clinical studies of the product candidate Lefitolimod (MGN1703): a pivotal phase III study in colorectal cancer, a randomized phase II study in small cell lung cancer, an early stage phase I study in HIV and an early stage phase I study in advanced solid malignancies (combination therapy). The Company intends to spend a further amount of approximately 1.5 million to 2.0 million of the net proceeds to pursue pre-clinical and clinical activities to further develop the product candidates EnanDIM /dslim2006, as well as approximately 1.0 million to 2.0 million of the net proceeds to fund the transfer and upscaling (as regards Lefitolimod (MGN1703)) of the production of the company s compounds. Without any additional measures, the Company expects to run out of working capital by January The Company believes it will be able to secure sufficient additional working capital through the sale of the New Shares (as defined below under E.3) in the context of this offering. Assuming the placement of all New Shares (as defined below under E.3), the total net proceeds from this offering would amount to about 12.7 million. If the Company is not in the position to place all New Shares (as S-13

19 defined below under E.3) in this offering, the Company expects that it will be able to place new shares in the amount of up to 10% (approximately 2.2 million shares) of the currently existing share capital in the context of subsequent private placements using the remaining Authorized Capital 2015 (as defined below under E.3) after the Company has received and published new clinical data which is expected to occur in the first half of Besides such private placements of new shares using the remaining Authorized Capital 2015 (as defined below under E.3) (if any), the Company could exercise its remaining authorization to issue equity linked instruments (e.g. convertible bonds) which are covered by the Company s existing conditional capital pursuant to section 4 para. 8 of the Company s Articles of Association. Additionally, the Company has recently decided to reduce its work force by approximately 25% thus streamlining its operations by end of the year, is in the process of outsourcing relevant parts of its business (production, quality control and basic research) making the Company s cost basis more flexible. The Company is convinced that it will be able, through these measures, to ensure the fulfillment of its payment obligations within the twelve months following the date of this Prospectus. However, to fully finance the clinical development of its most promising product candidate Lefitolimod (MGN1703), the Company will need further financial resources thereafter. If the Company is unable to place a sufficient number of New Shares (as defined below under E.3) in the context of this offering, the Company s continued existence could be at risk. 1.3 Section C Securities C.1 Type and class of the securities being admitted to trading. Security identification number. Ordinary bearer shares with no par value (Stückaktien), each with a notional value of 1.00 and full dividend rights from January 1, International Securities Identification Number (ISIN): DE German Securities Code (Wertpapierkennnummer, WKN): Trading Symbol: MGN C.2 Currency. Euro. C.3 The number of shares issued and fully paid. Par value. C.4 A description of the rights attached to the securities. C.5 A description of any restrictions on the free transferability of the securities. 22,631,501 ordinary bearer shares with no par value (Stückaktien). The share capital has been fully paid up. The shares have no par value (Nennwert). Each of the shares of the Company represents a notional share of 1.00 in the Company s share capital. Each share in the Company carries one vote at the Company s General Meeting. There are no restrictions on voting rights. The shares carry full dividend rights as from January 1, Not applicable. The Company s shares are freely transferable in accordance with the legal requirements for bearer shares. There are no prohibitions or restrictions on disposals with respect to the transferability of the Company s shares. S-14

20 C.6 Application for admission to trading on a regulated market and identity of regulated markets where the securities are to be traded. The Company expects to apply for admission of the New Shares (as defined below under E.3) to trading on the regulated market segment (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) and, simultaneously, to the sub-segment thereof with additional post-admission obligations (Prime Standard) on or about October 21, The listing approval is expected to be announced on October 26, The New Shares (as defined below under E.3) are expected to be included in the existing quotation of the Company s shares as of October 27, C.7 Dividend policy. The Company currently intends to retain all available funds and any future earnings to support operations and to finance the growth and development of its business and does not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be made in accordance with applicable laws, and will depend upon, among other factors, the Company s results of operations, financial condition, contractual restrictions and capital requirements. The Company s future ability to pay dividends may be limited by the terms of any existing and future debt or preferred securities. 1.4 Section D Risks No distributions in the form of dividends have been made to date. D.1 Key risks specific to the issuer and its industry. An investment in the shares of the Company is subject to risks. Therefore, investors should carefully consider the following risks and the other information contained in this Prospectus when deciding whether to invest in the Company s shares. The market price of the Company s shares could fall if any of these risks were to materialize, in which case investors could lose some or all of their investment. The following risks, alone or together with additional risks and uncertainties not currently known to the Company, or that the Company may currently deem immaterial, could materially adversely affect the Company s business, net assets, financial condition and results of operations. The order in which the risks are presented is not an indication of the likelihood of the risks actually materializing, or the significance or degree of the risks or the scope of any potential harm to the Company s business, net assets, financial condition or results of operations. The risks mentioned herein may materialize individually or cumulatively. Risks Related to Our Business Our business operations are predominantly the research and clinical development of innovative drugs. Hence, we do not generate any significant earnings. Our financing model requires significant additional external financing from current and/or future investors by way of equity funding. Until the date of this Prospectus, our business activities have mainly been financed by way of capital increases against contribution in cash. Should we not manage to raise the necessary funds, this may result in the Company becoming insolvent. Until the date of this Prospectus, we have generated considerable losses and may never or not permanently become profitable. Should we not manage to generate positive cash flows and profits from our own business S-15

21 activity, we will ultimately be threatened with insolvency and our shareholders with the loss of their total capital investment. We depend upon the success of the research and development programs for our drug candidates. If such programs are delayed or cancelled, our considerable expenditures for such programs may not result in corresponding future profits or future profits might be lower than originally anticipated. Our drug candidates must go through strict and lengthy test procedures, such as preclinical and clinical studies, the results of which are uncertain and may lead to considerable delays in introducing products based on the drug candidates to market, or in them not being introduced at all. To date, we have not fully completed all of the clinical studies necessary for the market approval of any of our drug candidates. We depend on approvals from the authorities and ethics commissions in order to conduct these clinical studies. There may be delays in us receiving the necessary approvals, we may receive them with restrictions in place, or we may not receive them at all. On 9 June 2016, we decided to concentrate our business strategy on our clinical drug candidate Lefitolimod (MGN1703) and the preclinical product pipeline EnanDIM /dslim2006, to put on hold our clinical drug candidate MGN1601 and to dispose of our MIDGE platform technology as part of our strategy program Next Level. We cannot guarantee that the implementation of the strategy program Next Level will be successful. We are largely depended on the success of Lefitolimod (MGN1703) and the clinical studies relating to it. We are subject to risks resulting from the reduction of headcount resulting from the implementation of the strategy program Next Level. We rely on contract research organizations ( CROs ) for the planning and conducting of our preclinical and clinical development work. If we are not able to find suitable CROs or if the CROs engaged by us do not provide their services in time or as contractually agreed or only provide them with poor quality, it might adversely affect the development of our drug candidates and delay or prevent their market approval. We rely on third party research institutions for the planning and conducting of some of our clinical development work. If we are not able to find suitable third party research institutions or if the third party research institutions with which we cooperate do not provide their services in time or as contractually agreed or only provide them with poor quality, it might adversely affect the development of our drug candidates and delay or prevent their market approval. We depend on contract manufacturing organizations ( CMOs ) for manufacturing, formulating, bottling, labeling and packaging the drug candidates to be used in clinical studies. If we are not able to find suitable CMOs or if the CMOs engaged by us do not provide their services in time or as contractually agreed or only provide them with poor quality, it might adversely affect the development of our drug candidates and delay or prevent their S-16