annual report 2012 - evolva · folio in terms of both production method ... consumer health and...
TRANSCRIPT
AnnuAl RepoRt 2012
2
title | 2011
CONTENTS
letter to our Shareholders 5
Mission & Strategy 7
Financial Review 8
Stock Review 10
products 13
legacy products 18
partnerships 20
technology 23
Corporate Governance 27
Consolidated Financial Statements 43
Statutory Financial Statements of evolva Holding SA 81
this annual report contains certain forward-looking statements. these forward-looking statements may be identified by words such as “believes”, “expects”, “anticipates”, “projects”, “should”, “seeks”, “estimates”, “future” or similar expres-sions or by discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ materially from those reflected in the forward-looking statements contained in this annual report. this annual report is available in english only. A German summary is available on request.
5
Letter to Our Shareholders
letter to our Shareholders
Dear Evolva shareholder,
In 2012, and even more so in early 2013, the strategic shift that we embarked upon some three years ago delivered tangible results.
particularly notable were:
� new deals with IFF and Roquette
� Milestones for BASF and Roquette
� A major collaboration with Cargill on our stevia product
� A collaboration with Ajinomoto – applying our technology to new applications in personal care
� the entry of our vanillin product into pre-production in collaboration with IFF
� A lower cash outflow than in previous years
In late 2012 we also acquired our first marketed product – resveratrol – which perfectly complements the rest of our product port-
folio in terms of both production method (fermentation in yeast) and market focus (ingredients for health, wellness and nutrition).
Another key event completed in March 2013 was the raising of CHF 31.3 million in funds from existing and new shareholders. We
thank our existing shareholders for their confidence in the company as evidenced by their high level of participation and are pleased to
welcome several high quality new investors including Cargill and some well-respected Swiss and uS institutions.
the capital increase was significantly oversubscribed and the funds provide a solid basis to carry our company towards profitability
over the next few years. the proceeds will primarily be invested in the development and commercialisation of our products, as well as our
technology platform.
of course not everything went quite so well during 2012. Although we obtained good efficacy results from our phase IIa study on
eV-077, we were disappointed to also observe transient liver enzyme elevations in some individuals. We do see this sort of result, which
is of course very common in drug development, as validating our shift in strategy towards innovative, high value ingredients for health,
wellness and nutrition.
the last 12 months has seen a number of management team changes. Alexandra Santana Sorensen, one of the founders of the
company, left in March 2012, after eight years helping build the company. norbert Bender will leave as Chief Medical officer at the end
of May 2013, and recently Jutta Heim, our Chief Scientific officer, decided to step down. We would like to thank all of them for their
contribution to evolva’s development. We are very pleased that Jutta will remain as an advisor, as well as being willing to join the Board
of Directors. Jutta will be replaced as CSo by Jørgen Hansen, who has run evolva’s Danish research team for the last eight years, during
which time he has been in particular responsible for our vanillin and stevia projects.
In early 2013 the approval of the “Minder initiative” paved the way to changes in Swiss corporate governance over the next few years.
overall evolva is ready to implement the key elements of the initiative that we believe will strengthen the links between companies and
their shareholders. Accordingly at our AGM this May we will start to pro-actively implement some of the envisaged changes.
We are proud of the progress that our company has achieved during the first eight years of its existence but recognise that we are
now entering a crucial period. over the next three years, we will be working hard to launch and drive the sales of several products – some
with a partner, some, like resveratrol, ourselves. As our products enter commercialisation we will face many new challenges, but ones that
we are privileged to have.
once again, we thank our employees for their immense contribution and you, our shareholders, for your support for evolva and hope
you will continue to accompany us on our journey.
With best regards,
Sir Tom McKillop Neil GoldsmithChairman of the Board of Directors Ceo and Managing Director
Reinach, Switzerland, 9 April 2013
7
Mission & Strategy
Mission & Strategy
evolva follows a business-to-business
model, providing ingredients (and technolo-
gies for making ingredients) to other compa-
nies, in particular in the food and beverage,
consumer health and pharmaceutical sec-
tors. We aim to be excellent at the discovery
and implementation of new ingredient pro-
duction routes, as well as the discovery of
novel functional ingredients
our internal focus is on high-value in-
gredients with relatively low production vol-
umes – tonnes or hundreds of tonnes per
year, rather than hundreds of thousands of
tonnes. We see this focus as best fitting our
competitive strengths as a small, highly in-
novative company. In line with this we do
not ourselves pursue low-margin, low-price
sectors such as biofuels or bulk chemicals –
though we are happy to help companies who
do have such a focus, in return for a share of
the value we bring.
our strategy has been developed with
reference to three key factors, namely:
1. Evolva’s competitive strengths
our key competitive strengths lie in our
innovative technologies, as well as an entre-
preneurial mindset. At the same time our
background in highly regulated, science-
driven, sectors means we are comfortable
with the regulation of products that are
consumed by people – whether as foods,
personal care products or pharmaceuticals.
2. Favourable global macrotrends
the number of “medium-affluent” con-
sumers across the world is increasing sharp-
ly. Such individuals typically desire better
health and better quality food at an afford-
able price. this coincides with generally in-
creased consumer awareness of health and
nutrition, and the fact that we are all (not
only as individuals, but as populations) get-
ting older – again increasing our focus on
health. Similar trends are, to a lesser extent,
driving demand for products that are envir-
onmentally sustainable. Yet at the same time
consumers want such benefits without com-
promising on the intrinsic appeal (taste,
smell, look) of a product, or its cost, or indeed
its ease of use. Finally pressures in the de-
veloped world for governments to reduce
expenditure are creating demand (from both
governments and consumers) for products
that can provide health benefits without the
high costs of novel pharmaceuticals.
3. Risk-adjusted returns
the discovery and provision of ingredi-
ents for nutrition and consumer products
have much lower development costs and
risks, and much shorter timelines to market
than is the case for novel chemical entity
pharmaceuticals. At the same time margins
can still be very attractive. Further there are
often major synergies in the discovery and
development of apparently different ingredi-
ents. thus the work we have put into vanillin
also can be used to create capsaicinoids (the
active ingredients of chilli peppers) with ap-
plications ranging from analgesia to weight
loss. Combined, these factors mean a focus
on ingredients that has, we believe, the po-
tential for a better risk-adjusted return than
the conventional biotech emphasis on novel
pharmaceuticals.
Evolva discovers and provides innovative, high-value, sustainable ingredients – in particular for
health, wellness and nutrition.
8
Financial Review
Financial Review | 2012
Overview
Despite a drop in total revenues (as fore-
cast in August 2012), evolva posted a signifi-
cantly lower net loss in 2012 than in the
previous year as it managed to significantly
reduce total costs. As a consequence, the
Company had a relatively solid cash position
at the end of 2012 as it was actively prepar-
ing for the financing round.
total revenues in 2012 reached CHF 7.0
million compared with CHF 11.1 million in
2011. the decrease is primarily due to the ex-
piry (as per contract) in 2011 and early 2012 of
two biodefence projects performed for the uS
Department of Defense. In contrast, revenues
from corporate partnerships increased from
CHF 4.1 million to CHF 6.4 million.
operating expenses decreased by 27% to
CHF 27.1 million. the net loss decreased from
CHF 22.9 million to CHF 16.7 million, below
the estimated loss in november 2012.
At the end of 2012, the total cash
position amounted to CHF 9.1 million
(2011: CHF 22.7 million).
Income statement
During 2012, the Company completed
the shift of its revenue base from projects for
the uS Department of Defense (2% of total
revenues in 2012 versus 51% in 2011 and
80% in 2010) to revenues from corporate cli-
ents such as IFF, Roquette and Roche which
accounted for 90% of total revenues in 2012.
About 10% of the revenues in 2012 origin-
ated from research grants from national and
eu institutions.
total operating expenses declined from
CHF 37.0 million to CHF 27.1 million, a drop
of CHF 9.9 million of which CHF 1.8 million
represented lower charges for the Compa-
ny‘s option programme.
technology and discovery costs (excl.
option charges) declined from CHF 17.7 mil-
lion to CHF 15.0 million primarily due to the
expiry (as per contract) of a biodefence pro-
ject in early 2012, which led to the closure of
the Company’s subsidiary in palo Alto,
California, in March 2012.
Costs for development (excl. option
charges) dropped from CHF 8.2 million in
2011 to CHF 3.5 million. this reflected partly
the expiry in 2011 of a major biodefence pro-
ject, partly that costs for the clinical develop-
ment of eV-077 were not recurring, and fi-
nally a reduction in development staff costs
in 2012.
the Company incurred non-cash ex-
penses of CHF 3.3 million in 2012 for its in-
centive option plans, compared with CHF 5.0
million in 2011.
Both financial income and financial ex-
penses declined during 2012 mainly because
of significantly lower currency fluctuations
during the reporting period compared to
2011.
Key financials1
CHF million 2008 2009 2010 2011 2012
Revenues 11.9 18.9 18.6 11.1 7.0
R&D costs -16.2 -21.2 -30.9 -27.5 -19.5
G&A costs -3.8 -6.6 -10.8 -9.5 -7.5
Net result -8.7 -9.6 -23.3 -22.9 -16.7
equity financing 4.0 45.6 3.6 0.9 1.9
Cash (year-end) 6.2 52.9 37.7 22.7 9.12
Net cash flow -1.1 +46.7 -15.2 -15.0 -12.62
Net equity (year-end) 3.3 67.9 53.0 73.2 61.2
earnings per share (CHF) -0.39 -0.15 -0.17 -0.14 -0.09
1 the financials for 2008 - 2009 (prior to the combination with Arpida) only include evolva SA and its subsidiaries.2 Cash at year-end 2012 and net cash-flow of 2012 do not include CHF 1 million in restricted cash.
9
Financial Review | 2012
the Company posted a gain of CHF 2.6
million in 2012 because of the expiry of the
earn-out commitment to the former Abunda
shareholders.
total general & administrative costs
(excl. option charges) declined from CHF 7.1
million to CHF 5.7 million. this drop reflects
partly the transaction costs in 2011 in con-
nection with the Abunda acquisition and the
SeDA agreement, partly a general reduction
in facility and administration costs across
the evolva Group.
Balance sheet and cash flow
evolva’s cash balance decreased from
CHF 22.7 million at the end of 2011 to CHF
9.1 million at the end of 2012. Including the
CHF 1 million in restricted cash at year-end
2012, the total net cash burn in 2012
amounted to CHF 12.6 million, which was
CHF 2.4 million or 16% lower than in 2011.
the cash outflow from operating activ-
ities was reduced from CHF 17.4 million to
CHF 13.4 million, reflecting lower expenditure
in all major expense categories. Cash inflow
from financing declined from CHF 3.5 million
in 2011 (when proceeds from the Abunda
acquisition represented the major part) to
CHF 1.5 million (before allocation to restricted
cash). proceeds from SeDA financing amount-
ed to CHF 1.9 million compared to CHF 0.8
million in 2011.
total assets declined from CHF 106.5
million to CHF 90.4 million largely reflecting
the decline in the cash position and depreci-
ation of intangible assets.
non-current liabilities declined because
one of the mortgage loans has been trans-
ferred to current liabilities. Deferred income
increased due to the signing of contracts
with Roquette and IFF and deferred income
related to these contracts.
equity decreased from CHF 73.2 million
to CHF 61.3 million at the end of 2012 main-
ly as a result of the net loss in 2012.
Outlook 2013
the Company expects revenues in 2013
to increase to CHF 10-13 million (2012:
CHF 7 million) as a result of new R&D part-
nerships, incl. the agreement with Ajinomoto
(signed in January 2013). existing R&D part-
nerships are expected to continue through-
out the year.
operating costs are expected to increase
as a consequence of new R&D partnerships,
additional investment in internal projects
(incl. the stevia project partnered with Cargill)
as well as financing costs. the net cash out-
flow from operating and investing activities is
expected to be approx. CHF 12-15 million.
the Company conducted an equity
financing in March 2013 which provided
net proceeds of approx. CHF 28.3 million.
taking into account the cash available
before the financing and the projected
operating cash flow, the Company expects
the cash position at the end of 2013 to be at
least CHF 25 million.
10
Stock Review | 2012
10
Key data (as at 31 December 2012)
Stock exchange SIX Swiss exchange
total number of shares 173,343,279
nominal value per share CHF 0.20
ISIn CH0021218067
Symbol eVe
number of registered shareholders 4,939
Stock Review
the evolva stock price ended the year
2012 at CHF 0.36, compared with CHF 0.54 at
the end of 2011. this performance was in line
with the negative trend among other biosyn-
thetic companies. on average, some 202,000
evolva shares were traded per day in 2012
(2011: 98,000).
0
0.10
0.20
0.30
0.40
0.50
0.60
Jan Feb Mar April May June July Aug Sept Oct Nov Dec0
100,000
200,000
300,000
400,000
500,000
600,000
CHF
Num
ber o
f sha
res
Share price (end of month, LH scale) Average daily volume (RH scale)
Development of the Evolva stock in 2012
Source: SIX
11
Stock Review | 2012
The table below gives an overview of the shareholdings before and after the rights issue.
Million shares Year-end 2012
Changes Q1 2013
Share issue March 2013
End-March 2013
End-March 2013 as %
Investors >3%
Abunda 25.3 - 1.8 27.1 11.3%
Sunstone 16.8 3.0 2.5 22.3 9.3%
Wellington 11.0 - - 11.0 4.6%
Aravis 9.4 -3.0 1.6 8.0 3.3%
entrepreneurs Fund 7.4 - 2.2 9.6 4.0%
Cargill - - 7.5 7.5 3.1%
Total >3% 69.9 0.0 15.5 85.4 35.6%
treasury shares 0.2 0.0 14.0 14.2 5.9%
Smaller and unregistered investors 103.2 0.0 36.7 139.9 58.4%
Total 173.3 0.0 66.2 239.6 100.0%
During 2012, the total number of shares
outstanding rose from 172.9 million to 173.3
million. A detailed overview of the changes
during 2012 is available on page 29 of this
report. As per year-end 2012, the stock mar-
ket capitalisation was CHF 62.4 million on an
undiluted basis.
evolva Holding has only registered com-
mon shares outstanding. A total of 4,939
shareholders, including nominees, were
entered in the share register as per year-end
2012, representing 73% of the total out-
standing capital.
Capital increase March 2013
In March 2013, evolva successfully
raised additional funds through a rights is-
sue to existing investors. Due to the high
level of demand from international institu-
tional investors, evolva increased the size of
the financing from the level indicated in Au-
gust 2012 (CHF 10-20 million) to CHF 31.3
million. As part of the collaboration on ste-
viol glycosides with evolva, Cargill, Inc. in-
vested CHF 4.5 million in the financing.
Based on the 3-for-10 subscription
ratio, the maximum number of shares to be
issued was 52.2 million. At a subscription
price of CHF 0.60 per share, the maximum
proceeds were CHF 31.3 million.
the subscription period ran from 12
March until 19 March. the rights were not
tradable.
existing shareholders took up 24.2 million
shares, or 46.3% of the total of 52.2 million
shares, available in the rights offering. After
allowing for the subscription of existing
shareholders, 28.0 million new shares were
placed with Cargill, Inc. and institutional
investors. As reported on 6 March 2013,
Cargill, institutional investors as well as evolva
Board and management had pre-committed
to purchase up to 47.4 million shares
(CHF 28.5 million), so that not all pre-commit-
ments by new investors could be satisfied.
the capital increase also included the
issuance of 14 million treasury shares to
evolva. these will be used to satisfy part of
evolva’s obligations towards ApIDC/Ventur-
east (conversion agreement as explained in
the 2012 annual report, page 27) and the
SeDA arrangement with YA Global (see press
release 11 August 2011).
Source: evolva share register and SIX reporting of significant shareholders
13
Products
Products
Evolva has a proprietary, fermentation-based platform that allows radically different approaches
to the production of ingredients for the food, beverage and consumer health sectors.
Although evolva historically has derived
its revenues from its R&D partnerships and
expects these R&D partnerships to contribute
the majority of its revenues for at least the
next two to three years, it is a key part of evol-
va’s strategy to gradually build an additional
and, ultimately, primary revenue base through
the commercialisation of its own products,
either with or without partners. evolva’s prod-
ucts at the most advanced stages of develop-
ment and/or commercialisation include fer-
mentation-derived resveratrol, vanillin, stevia
and saffron, which it considers to be its “core
products”.
Resveratrol
Resveratrol is a compound produced in
grapes and other plants. It occurs in red wine,
albeit at low concentrations. Scientific re-
search indicates that resveratrol may have
protective benefits against age-related health
conditions. In particular, several animal stud-
ies have shown positive effects of resveratrol
on diabetes, inflammation and cardiovascular
conditions. Currently, several clinical studies
are being conducted in order to demonstrate
the potential effects of resveratrol on
humans. A recent study by professor David
Sinclair, Harvard Medical School professor of
genetics, demonstrates where and how
resveratrol works. these findings are
published in the 8 March 2013 issue of the
journal Science.
Most resveratrol products on the market
today are sourced from grapes or from the
Japanese knotweed plant, but there is also a
synthetic version. evolva’s resveratrol is pro-
duced by yeast fermentation.
Market opportunity
A 2012 report by market research firm
Frost & Sullivan, estimated total resveratrol
sales at approximately uSD 50 million in 2011,
with north America representing approxi-
mately 88% of global revenues. In the same
report, Frost & Sullivan estimated that sales in
Asia-pacific and europe will grow by more
than 20% p.a. in the 2013-2018 period. Res-
veratrol is currently consumed primarily as a
nutritional supplement, however, evolva be-
lieves that resveratrol can also be commercial-
ised as an ingredient in beverages and other
consumer goods. Based on the research by
Frost & Sullivan as well as its own estimates
regarding potential market expansion, evolva
estimates that the total addressable market
for its resveratrol product (i.e. the size of the
total market in which evolva’s resveratrol
product will compete) will amount to approxi-
mately uSD 400 million in the year 2020.
As compared to agriculturally derived res-
veratrol, evolva’s fermentation-derived res-
veratrol production has the benefits of a
traceable supply chain and potentially lower
production costs and is expected to result in a
high-quality product. In contrast to synthetic
resveratrol, evolva believes that fermentation-
derived resveratrol addresses an increasing
consumer demand for products that are con-
sidered ‘‘natural’’.
Status and plans
evolva acquired its resveratrol product
from Fluxome Sciences A/S (Denmark) (‘‘Flux-
ome’’) in november 2012. the Fluxome prod-
uct has been on the uS market since 2010, but
primarily due to Fluxome’s high production
costs has not generated significant sales. It
has Self-Affirmed GRAS (“Generally Recog-
nised As Safe”) status in the united States and
obtained novel Foods authorisation from the
european Commission in January 2012
through the notification procedure.
evolva expects to leverage the technology
platform to reduce production costs, and
thereby further strengthen the competitive
position of its resveratrol product. the product
will be toll-manufactured by specialised third-
party manufacturers. evolva expects to be
able to bring down the cost of goods of its
resveratrol product to an economically viable
level, so that it may generate a positive cash
flow by 2014. evolva does not intend to build
a significant sales and marketing organisation
for resveratrol but will instead work with dis-
tributors and major consumer goods compa-
nies to drive sales of the product once the cost
of goods reaches an economically viable level.
Resveratrol
14
Products
Stevia (steviol glycosides)
Stevia (Stevia rebaudiana) is a leafy green
plant that is widely grown around the world
and used in a variety of forms as a natural,
zero-calorie, high-intensity sweetener, espe-
cially in beverages. Stevia leaves contain a
number of individual molecules (steviol glyco-
sides) that give the leaves of the plant their
sweet taste. purified stevia extract can contain
one steviol glycoside, such as Rebaudioside A
(“Reb A”), or a combination of several. Reb A is
a popular steviol glycoside due to its sweet-
ness and abundance in the stevia leaf. Accord-
ing to the International Stevia Council, the
sweetness intensity of Reb A is approximately
200 times that of sugar.
Steviol glycosides are used as a sweetener
either alone or in combination with other in-
gredients such as sugar. Steviol glycosides are
used in a wide variety of food and beverages,
as well as tabletop sweeteners. Stevia has gar-
nered attention because of the strong rise in
consumer demand for natural, low-calorie al-
ternatives to sugar. Hundreds of products
sweetened with steviol glycosides have been
launched in recent years. Steviol glycosides do
not raise blood glucose, which makes it par-
ticularly suitable for diabetic or obese indi-
viduals who have to strictly adhere to a carbo-
hydrate-reduced diet.
A growing number of health and nutrition
authorities, including the American Academy
of nutrition and Dietetics, International Food
Information Council, european Food Informa-
tion Council, and the Calorie Control Council,
support the use of stevia-based and other non-
nutritive sweeteners as tools for calorie reduc-
tion for weight loss management. Steviol gly-
cosides have been approved as sweetening
ingredients for use in foods and beverages by
major governing bodies, including the europe-
an Commission and the uS DA.
the only commercially available steviol
glycosides available today are derived from ste-
via plants grown and harvested in an agricul-
tural setting. evolva believes it is the first com-
pany to successfully adapt fermentation
technology to produce a range of commercially
relevant steviol glycosides, using sustainable,
low-cost, carbohydrate feedstocks, which can
be sourced virtually anywhere on the planet.
Market opportunity
evolva aims to develop and commercial-
ise a range of high-purity steviol glycosides
produced through yeast fermentation.
evolva has already succeeded in making
some of the key steviol glycosides using low-
cost, natural carbohydrate feedstocks.
Fermentation-derived steviol glycosides
will benefit food and beverage manufacturers
in a number of ways: � First, it will allow better tasting steviol-
glycoside-based products (the best-tast-
ing stevia leaf molecules, known as mi-
nor steviol glycosides, are not currently
commercially available due to their very
low concentrations in the plant).
� Second, it will allow steviol glycosides to
become a more economic product for
companies and consumers alike.
� Finally, it will allow steviol glycosides to
be produced using a simplified and scal-
able supply chain.
Fermentation allows the large-scale pro-
duction of minor steviol glycosides, opening
up the possibility of new formulations for
the food and beverage industry that were
previously not possible due to limitations as-
sociated with taste and cost. Based on these
advantages, evolva believes that fermenta-
tion-derived steviol glycosides have the po-
tential to accelerate the adoption of steviol
glycosides and significantly expand the mar-
ket for such sweeteners.
Based on sales volume data published in
2011 by the industry research group lMC Inter-
national and data published by other sources,
evolva estimates that total sales of all sweet-
eners amount to approximately uSD 60 billion
p.a., with sugar representing an estimated
85% of total sales. Stevia-based sweeteners
are believed to be the fastest-growing seg-
ment because of increasing consumer de-
mand for products that are low-carbohydrate
and low-sugar. Steviol glycosides can already
be found in hundreds of food and beverage
products, including carbonated soft drinks,
teas, juices, flavoured milks, yogurts, baked
goods, cereals, salad dressings, confectionery,
and as a tabletop sweetener.
STEvIa
15
Products
According to one analyst report (Mira-
baud Securities llp, october 2012), the value
of retail sales in the uS of stevia-sweetened
food and beverage products increased by 45%
from the second quarter of 2011 to the second
quarter of 2012. the same report estimates
that more than 56 million uS households pur-
chased products made with stevia-based
sweeteners in the twelve months to August
2012.
A landmark development in September
2012 was the launch of a stevia- and sugar-
sweetened, 30%-reduced-calorie version of
pepsi next in Australia. According to Beverage
Daily, the launch is significant because it
marks the first time that stevia components
have been used in a front-line cola brand. Also
noteworthy were the launches in the uK and
France of Sprite reformulated with steviol gly-
cosides.
Based on data published in 2012 by Mira-
baud Securities llp and in 2011 by industry
research group lMC International, as well as
other third-party sources and its own market
forecasts, evolva estimates that the total ad-
dressable market for its steviol glycoside
product (i.e. the size of the total market in
which its steviol glycoside product will com-
pete) will amount to approximately uSD 4 bil-
lion in the year 2020.
Status and plans
In 2009, evolva entered a R&D partner-
ship with Abunda nutrition, Inc. (“Abunda”)
for the discovery and development of certain
food ingredients, with a particular focus on
producing the key steviol glycosides by fer-
mentation. In July 2011, evolva acquired
Abunda and gained full ownership of Abun-
da’s steviol glycoside programme, which at
that time was in an early research phase.
evolva’s steviol glycoside R&D is primarily
conducted at its Copenhagen site, with com-
mercial business development activities in the
united States.
on 5 March 2013, evolva entered into a
product partnership with Cargill to jointly de-
velop and commercialise fermentation-de-
rived steviol glycosides. Cargill will be respon-
sible for commercialisation and has agreed to
make a CHF 4.5 million (approximately uSD
4.8 million) equity investment in evolva. Add-
itionally, evolva stands to receive up to uSD
7.5 million in milestone payments and has the
right to a 45% participation in the final busi-
ness. If evolva decides not to exercise this op-
tion it will receive royalty payments from
global sales of the co-developed steviol glyco-
side products; these royalties will scale from
mid-single digit to low double-digit percent-
ages as a function of sales volume and other
parameters. pursuant to the terms of the
partnership, Cargill has the exclusive right to
commercialise any fermentation-derived
steviol glycosides developed as a result of the
partnership.
the steviol glycoside product is expected
to progress into pilot scale in 2014. Based on
current plans and expectations, the first fer-
mentation-derived steviol glycoside product
is expected to be available for commercial
launch in 2015/2016.
vanillin
Vanilla is a complex blend of flavour and
fragrance compounds extracted from the
seed pods of the vanilla orchid. Commercially,
the most widely used compound in the blend
is vanillin, and because of the cost and supply
chain variability of natural vanilla, most prod-
ucts that contain “vanilla” in fact just contain
synthetic vanillin made from petrochemical or
other feedstocks.
Both natural vanilla extract and synthetic
vanillin are used as flavouring agents, primar-
ily in foods and beverages, including, for ex-
ample, in confectionery and dairy products.
Vanillin is also used in the fragrance industry
(for example in perfumes and cleaning prod-
ucts) and to mask unpleasant tastes in medi-
cines or livestock fodder as well as an inter-
mediate in the manufacture of certain
pharmaceuticals. evolva’s vanillin product is
fermentation-derived.
Market opportunity
Vanilla and vanillin are among the most
widely used flavouring products in the world,
with current total annual sales and produc-
tion volumes estimated by evolva to be ap-
proximately uSD 650 million and 16,000 met-
ric tons, respectively. natural vanilla represents
less than 1% of total sales by volume. Sales
prices range from about uSD 1,500 per kg for
natural vanilla extract to uSD 10-20 per kg for
synthetic vanillin.
evolva sees a market opportunity in pro-
viding a competitively priced product with
taste and fragrance superior to, and an inher-
ently greater naturalness than, synthetic
16
Products
vanillin. evolva believes such properties will al-
low fermentation-derived vanillin to be used in
a wide variety of food and other products and
evolva’s product to penetrate a meaningful
part of the total vanillin market. evolva does
not believe that its product will significantly
replace vanilla obtained from the orchid.
Based on the above estimated sales vol-
umes, evolva expects that the total addressa-
ble market for its vanillin product (i.e. the size
of the total market in which its vanillin prod-
uct will compete) will amount to approxi-
mately uSD 600 million in the year 2020.
Status and plans
In January 2011, evolva entered into a
product partnership with IFF with the purpose
of collaborating on the implementation of a
commercial viable biosynthetic route for the
production of vanillin. pursuant to the terms
of the partnership, IFF has the exclusive right
to commercialise any fermentation-derived
vanillin product developed as a result of the
partnership in certain market segments.
evolva has successfully constructed the
production route to vanillin and has filed a
number of patent applications (some already
granted) for this production approach. As of
February 2013, evolva has achieved the pro-
duction yield, titre (i.e. concentration) and
productivity that will allow the commercial
launch of its vanillin product. evolva is con-
tinuing to research ways to further improve
the production process with the aim of
lowering the cost of goods over time.
on 5 February 2013, evolva and IFF an-
nounced that they have entered into the pre-
production phase to develop and scale up,
via a third-party, fermentation-derived van-
illin for commercial application through a
cost-effective, natural and sustainable route.
the two companies are working to confirm
scalability and yield targets through a yeast-
based fermentation route during the pre-
manufacturing phase.
Based on current plans and expectations,
evolva expects its fermentation-derived van-
illin product to be available for commercial
launch in 2014.
vanillin pathway products
Based on the production route for vanil-
lin, evolva believes that it will be able to de-
velop and commercialise other products that
are derived from the same pathway as vanil-
lin. the aim is to launch the first such prod-
ucts by 2016.
Saffron
Saffron is one of the world’s most ex-
pensive spices by weight, as well as one of
the oldest. It comes from the stigma of the
saffron crocus and is used for colouring
and flavouring (e.g. in soups, bread and rice
dishes) as well as for its aroma properties
(such as in soaps and candles).
the characteristic flavour, colour and
odour of saffron come from several com-
ponents, of which the most important are
picrocrocin, crocin and safranal. evolva aims
to develop and commercialise saffron pro-
duced by yeast fermentation.
Market opportunity
Saffron is grown by mostly small farm-
ers in a few regions of the world, with an
estimated 90% or more of the world’s pro-
duction (estimated at about 300 tonnes a
year in 2012) in Iran. the Company estimates
current total annual saffron sales to be ap-
proximately uSD 450 million. Cultivation is
highly labour-intensive (approximately
150,000 crocuses need to be picked, and
their stigma removed, to produce 1 kilo of
saffron), which is the main reason for the
high cost of saffron.
the saffron market is poorly document-
ed, as much of the trade in saffron occurs in
informal markets (most notably in the Mid-
dle east) and there can be significant alter-
ation of the product as it flows through the
supply chain. Both the amount of saffron
and the price of saffron can vary significant-
ly from year to year. evolva believes that
prices for agriculturally derived saffron cur-
rently average around uSD 1,500 per kg with
significant variation depending on the grade.
evolva believes that by providing saffron
at significantly lower prices and with a ro-
bust and stable supply chain that is free of
both geopolitical and adulteration issues, use
of saffron in the world can be significantly
expanded. In particular:
� evolva believes that a significant latent
demand for saffron exists, mainly in
Asia. providing a more affordable, fer-
mentation-derived form of saffron to
mid-market consumers in, for example,
India and other Asian countries can po-
tentially lead to increased use.
� evolva believes that many potential uses
of saffron in mass market consumer
goods (such as skin creams, teas, air
fresheners, baked and savoury goods) are
SaFFRON
vaNIllIN
17
inhibited by a combination of the price,
supply chain and physical form (which
comes in threads) of saffron today. pro-
viding a form of saffron that removes
these constraints should allow such use.
� producing the key components of saf-
fron on an individual basis will allow
the production of customised varieties
of saffron that are particularly rich in
aroma, taste and/or colour and that can
be adapted to specific food formulations
and regional preferences.
the saffron market is poorly document-
ed, however, based on 2012 statements
made by a representative of the national
Saffron Council, information published in
The Hindu Business Line and other third-
party sources, as well as its own estimates
regarding potential market expansion, evol-
va estimates that the total addressable mar-
ket for its saffron product (i.e. the size of the
total market in which its saffron product will
compete) will amount to approximately uSD
800 million in the year 2020.
Status and plans
Research on saffron is primarily con-
ducted at evolva’s Chennai site. After identi-
fying pathways and filing multiple patent
applications, evolva has introduced the
pathway into yeast and produced individu-
ally the key saffron components responsible
for the three prime attributes of saffron,
namely flavour, fragrance and colour. evolva
is currently optimising the production pro-
cess in order to enable commercial produc-
tion of these components.
evolva expects fermentation-derived
saffron to be available for commercial
launch in 2016. evolva’s current aim is to
bring its saffron product as far as possible
towards manufacturing and commercialisa-
tion before it considers entering into a prod-
uct partnership with respect to the product.
Pomecin™
pomecinstM are evolva’s proprietary
compounds, originating from plants, for
the prevention of mould and yeast growth,
with potential uses in crop protection, per-
sonal care, food preservation and consumer
health care.
evolva has conducted pre- and post-
harvest field studies with two pomecintM
compounds that indicate a potential to pre-
vent fungal attacks in various crops. evolva
has also developed an innovative formula-
tion of pomecintM for topical treatment of
onychomycosis (nail fungus). one family of
patents is granted and in force and other
related subject matter is covered in currently
pending patent applications.
evolva has decided to exploit the
pomecintM family of antifungals in collabor-
ation with partners, with only limited further
investment by evolva beyond their current
stage. A number of early-stage partnering
discussions are in progress, but evolva has no
certainty that any of these discussions will
result in a signed agreement.
POMECIN™
18
Legacy Products
Legacy Products
Although it believes these legacy prod-
ucts are potentially highly attractive and
have significant value, any continuing devel-
opment of these products would be done ei-
ther via out-licensing or a spin-off and evol-
va does not plan to make any further
material investment with respect to such
products, with the exception of certain small
investments to maintain their value.
eV-077 and eV-035, the two pharma-
ceutical product families constituting these
legacy products are described below.
Ev-077 for treatment of complications of diabetes
eV-077 is a novel, reversible antagonist
of isoprostanes and prostanoids. It is an oral,
small-molecule compound, belonging to a
new chemical class. the compound is in clin-
ical phase IIa for treatment of vascular in-
flammation and complications of diabetes.
In August 2012, evolva announced top-
line results for 32 patients enrolled in a
phase IIa study for eV-077. the study showed
promising efficacy data, indicating that
300 mg eV-077 given orally twice daily to
patients with type 2 diabetes provided anti-
platelet (anti-thrombotic) activity, reduced
exercise-induced proteinuria (excess protein
in the urine) and increased blood flow in the
forearm.
the analysis also indicated that eV-077
was generally well tolerated, though some
adverse events were observed with respect to
increases in liver enzymes, which were tran-
sient or resolved after discontinuation.
In December 2012, evolva discussed the
future clinical development programme of
eV-077 with BfArM (the German drug au-
thority), in particular with respect to the ob-
served adverse events. the proposed clinical
development programme was perceived as a
reasonable approach by BfArM and the next
clinical trial is intended to be a dose range-
finding study in diabetic patients, investigat-
ing lower doses of eV-077 than the one ad-
ministered in the initial phase IIa study with
the intention to find a dose level for eV-077
that retains the efficacious effects observed
to date, whilst avoiding the increases in liver
enzymes. Consistent with evolva’s strategy, it
is intended to partner eV-077 via out-licens-
ing or spin-off, prior to conducting this
study.
evolva owns all rights to eV-077.
Multiple patent applications have been filed
regarding the compositions and uses of
eV-077, some of which have already been
granted.
Until 2010, the activities of Evolva were primarily focused on the discovery and clinical devel-
opment of novel pharmaceutical products. However, Evolva gradually refocused its strategy to
discovering, developing and producing innovative ingredients that have application in the health,
nutrition and wellness sectors. Evolva has a small number of clinical-stage or preclinical pharma-
ceutical product candidates, which, due to this strategy shift, it considers to be “legacy products”.
Ev-077
19
Legacy Products
Ev-035 for the treatment of bacterial infections
Marketed antibiotics are increasingly los-
ing their efficacy primarily because of bacter-
ial resistance and new antibacterial agents are
urgently needed to close this widening gap in
medical practice. particularly problematic is
the rise of multidrug-resistance among po-
tentially life-threatening pathogens.
eV-035 is a novel bacterial type II topoi-
somerase inhibitor, belonging to the chem-
ical class of 2-pyridones, showing excellent
broad-spectrum activity against pathogens
such as Staphylococcus, Streptococcus, en-
terococcus, escherichia, pseudomonas, Aci-
netobacter and Haemophilus, as well as sev-
eral potential biothreat agents. Most
importantly, eV-035 shows activity not only
on drug-sensitive strains, but also on those
resistant to marketed antibiotics (including
quinolones), and has a very low propensity of
developing new resistance. eV-035 has a
very favourable in vitro safety profile and its
pharmacokinetic properties allow for intra-
venous as well as oral dosing.
In early in vivo infection models, eV-
035 has shown an efficacy comparable or
better than gold standard drugs against
both Gram-positive and Gram-negative
strains, including e. coli and MRSA, as well
as other multidrug-resistant pathogens. In
2012, further biochemical and microbio-
logical profiling of the selected lead com-
pound confirmed its broad range of activ-
ity on multidrug-resistant pathogens, in
combination with excellent tolerability. In
September 2012, evolva presented exten-
sive preclinical data on eV-035 at ICAAC, the
world’s premier international conference on
antimicrobial agents and infectious diseases.
Ev-035
20
Partnerships
Partnerships
Evolva has, and intends to maintain, a number of partnerships around its technology and research
capabilities – deploying its technology to provide a competitive edge to partner companies and
sharing in the returns they make. 2012 saw additional partnerships in food and nutrition, as well
as good progress on existing projects. The first quarter of 2013 brought several breakthroughs in
our partnering portfolio.
evolva’s revenues to date have been de-
rived from research and development pro-
jects with partners in the uS, europe and
Asia. these R&D partnerships involve the
use of the technology platform to develop
new products and production methods for
new and existing products that are of inter-
est to our partners. We expect these R&D
partnerships to continue to contribute the
majority of revenues for at least the next
two to three years. However, it is a key part
of our strategy to gradually build an add-
itional and, ultimately, primary revenue
base through the commercialisation of our
products, either with or without partners.
evolva has been working with Inter-
national Flavors & Fragrances (IFF) since
January 2011 on the implementation of a
commercially viable biosynthetic route for
the production of vanillin. IFF has the exclu-
sive right to commercialise any fermenta-
tion-derived vanillin product developed as a
result of the partnership in certain market
segments. evolva achieved a key milestone
on this project, prompting a payment by IFF
in the first half of 2012. on 5 February 2013,
evolva and IFF announced entering into the
pre-production phase to develop and scale
up, via a third-party, fermentation-derived
vanillin for commercial application through
a cost-effective, natural and sustainable
route. the two companies are working to
confirm scalability and yield targets through
a yeast-based fermentation route during
the pre-manufacturing phase.
In May 2012, we added a second project
with IFF. Just as in the first IFF project, the
objective is to implement a commercially vi-
able biosynthetic route for the sustainable
production of a flavouring ingredient.
In the early days of 2012, we announced
a partnership with Roquette. this project
aims to find novel and optimised biosyn-
thetic production routes for an ingredient
with important applications in food prod-
ucts. the Roquette collaboration involves
some 7% of evolva’s R&D headcount. evol-
va achieved the first milestone in the pro-
ject in September 2012.
the collaboration with BaSF, which got
underway in March 2011, is now focusing
on the more promising of the initial two
projects. evolva has produced a yeast strain
that achieves a fermentation yield that sig-
nificantly exceeds the requirement for this
project. Based on this achievement, BASF
has made a low six-digit Swiss franc mile-
stone payment to evolva.
the active part of the research collabor-
ation with Roche came to an end during the
first half of 2012, with Roche taking certain
compounds forward internally. More
recently Roche has decided to reprioritise
its focus indications, and rights to these
compounds have been returned to evolva.
evolva is evaluating how to progress the
compounds, whether internally or with
third parties.
the partnerships with the US Depart-
ment of Defense came to a successful con-
clusion, leading to a new series of antibac-
terials which was presented at several
scientific conferences.
We made good progress on the smaller
projects, such as Divinocell and Diabat and
evolva landed an additional project within
the IMI framework. the Innovative Medi-
cines Initiative (IMI) is europe’s largest
public-private initiative aiming to speed up
the development of better and safer medi-
cines for patients.
In the first quarter of 2013 alone, evolva
announced the following partnerships:
In March 2013, evolva entered into a
product partnership with Cargill, Inc., a
global producer and marketer of food, agri-
cultural, financial and industrial products,
for the development of fermentation-
derived stevia components (steviol glyco-
sides) and their subsequent commerciali-
sation. In connection with this partnership,
Cargill also invested CHF 4.5 million in
evolva’s capital increase that was complet-
21
Partnerships
ed on 27 March 2013. Additionally, evolva
stands to receive up to uSD 7.5 million in
milestone payments and has the right to a
45% participation in the final business. If
evolva decides not to exercise this option, it
will receive royalty payments from global
sales of the co-developed steviol glycoside
products; these royalties will scale from mid-
single digit to low double-digit percentages
as a function of sales volume and other
parameters.
Cargill brings to the collaboration
its vast manufacturing and commercial ex-
pertise in bulk sweeteners, food ingredients,
and of course stevia sweeteners. Cargill is a
global market leader in the stevia-based
sweetener category with consumer prod-
ucts and as an ingredient, which can be
found in a variety of branded food products
and beverages sold in the uS, europe,
Mexico, and South America.
In January 2013, evolva entered into an
R&D partnership with ajinomoto Co., Inc.
(Japan), a global manufacturer of season-
ings, processed foods, beverages, amino
acids, pharmaceuticals and speciality chem-
icals, pursuant to which Ajinomoto will
fund evolva’s R&D activities focused on
developing new production routes for a
natural ingredient for use by Ajinomoto in
products for personal care.
the partnership is designed to run for
three and half years and involves evolva’s
application of the technology platform ini-
tially to build a new pathway for the ingredi-
ent and subsequently to improve production
yield through scale-up and manufacturing
phases. evolva expects that on average seven
of its full-time scientists will be working on
this partnership at any given time.
Ajinomoto paid evolva an upfront ex-
clusivity and technology access fee and will
pay evolva quarterly research fees during
the partnership. evolva will receive add-
itional payments from Ajinomoto upon
achieving certain milestones in terms of
yield, productivity and production costs.
the aggregate exclusivity and technology
access and research fees as well as mile-
stone payments made to evolva during the
partnership are expected to amount to
more than CHF 10 million. If Ajinomoto
commercialises a product using the rele-
vant ingredient, it will pay evolva royalties
as a percentage of the product sales.
22
Technology
23
Technology
Technology
Evolva’s technologies are based on yeast. Every day, all over the world, yeast is used to make
food and drink. Breads, beers, wines and many other products are made using yeast. Many soci-
eties have been using yeast for such purposes for thousands of years. Yeast forms a normal part
of our daily diet.
Yeast’s importance has led to it being
well studied scientifically, and in recent years
this has led it to being used in the production
of not only food and food ingredients, but
also pharmaceuticals and vaccines.
evolva’s approach bridges the modern
and the traditional uses of yeast. on the
modern side, we create yeasts with the abil-
ity to make existing and new ingredients. on
the traditional side, our production methods
would be recognisable to any brewer.
Despite the fact that our technology is
rather complex, we use it for just two things:
We create new ways to make “tried and
tested” natural ingredients – for example
the ingredients that make saffron look, taste
and smell like saffron. the existing produc-
tion methods for many such ingredients
have significant problems (too expensive, too
variable, not pure enough, too limited in
scale, not ecologically sustainable, etc.) and
by solving these problems we can widen the
number of people who can enjoy, and benefit
from these ingredients.
We create novel functional compounds.
using our technologies yeast can be used to
make diverse, novel, functional compounds
with potential utility as novel pharmaceut-
icals, crop protection products, etc. Manu-
facture of these compounds can then take
place either by fermentations, or by chemical
synthesis.
Benefits
Improving existing ingredients
Making natural ingredients by fermenta-
tion confers a series of important benefits.
Improved product quality
Many natural ingredients contain un-
desirable elements – for example elements
that make the product bitter, that discolour it,
or that make it difficult to formulate. By mak-
ing pure ingredients by fermentation, evolva
can avoid such contaminants, improving
product quality. For example with stevia, the
bitter tasting components that occur in agri-
culturally produced stevia can be avoided
when using fermentation. the increased
standardisation of products from fermenta-
tion can also be an important quality benefit.
Improved supply chain integrity
Many natural ingredients involve long
and complex supply chains, including mul-
tiple groups in multiple countries. this not
only raises costs, but makes ensuring the in-
tegrity of the supply chain challenging. With
fermentation the supply chain can be greatly
shortened and simplified (being located close
to key customers, if desired). this makes it
less costly, intrinsically more robust, and far
easier to safeguard.
In addition many natural ingredients
vary sharply in their annual production, with
drought, floods, pests or similar “events” fur-
ther complicating supply chains and prices.
For many specialty crops a shortfall in one
year’s harvest cannot be made up until the
next year. By contrast fermentation is far
more stable, and a shortfall in one batch can
be made up the next week.
Reduced cost
nature has not evolved to maximise the
efficiency of production. the saffron crocus
produces very little saffron per crocus; musk
cannot be obtained from the musk deer
without killing it, and so on. this inefficiency
imposes cost, and this cost in turn often lim-
its the potential uses of many ingredients.
Fermentation allows for far more efficient
production of such ingredients, reducing the
cost (often substantially) and making them
affordable to many more individuals all over
the world.
Improved sustainability
Many agricultural production systems
are perfectly sustainable. But not all. the in-
efficiency of nature (see above) can mean
that growing the plant, or raising the animal,
takes more land, more water or more energy
24
Technology
than it really should. extracting the ingredi-
ent from its original source may require solv-
ents or other processes which generate
significant waste. In such cases making the
ingredient by fermentation can improve a
product’s sustainability, freeing land or other
resources for other uses.
Improved product “customisation”
Many natural ingredients (for example
saffron or stevia) are mixtures of different
components. these components each con-
tribute their own taste, smell, colour, func-
tionality, etc. to the mixture. But not all of
these properties may be desirable in all prod-
ucts, or desired by all consumer demograph-
ics – a blue colour may be desirable in a
sweet, but not in a meat coating, etc. Fer-
mentation allows ingredients to be broken
down to their individual components, and
hence allows companies to customise their
offer more precisely to the needs and desires
of particular customers.
Improved solubility and bio-availability
evolva’s glycosylation technologies allow
many ingredients to be improved in terms of
their solubility and bio-availability. this can
improve their efficacy, make them easier to
formulate and reduce their cost of production.
Making “impossible” ingredients possible
In some cases the ingredients we make
occur in nature, but only in settings that have
made their commercialisation to date “impos-
sible”. evolva’s approach can liberate the avail-
ability of such ingredients. two examples: � natural product drugs, scents and crop
protection products. Many interesting
compounds are made by plants, marine
organisms and other species. However,
often they are made in such small
amounts, or the species is so rare, or dif-
ficult to harvest (corals for example) that
the compounds remain out of reach.
Many of these compounds can be fer-
mented using evolva technologies, mak-
ing them accessible to the world.
� endogenous human metabolites. Many
fascinating and important molecules oc-
cur naturally in humans. Yet harvesting
these molecules from humans (or our
relatives) is often ethically unacceptable
and/or economically impractical. pro-
duction of many of these metabolites by
chemical synthesis is often impossible.
Such molecules can be made by fermen-
tation in our yeasts.
Creating new active ingredients
Whilst much of our work focuses on find-
ing new ways to make existing ingredients, we
also create new compounds, based on the
creation of biosynthetic pathways that do not
occur in nature, or that use non-natural
building blocks as their starting point. Very
often, though not always, this approach is
combined with functional selection for ingre-
dients that have particularly desirable proper-
ties (break a protein:protein interaction, stop a
virus replicating through a cell, etc.).
Such novel active ingredients have their
primary utility in the pharmaceutical indus-
try, but are also relevant to crop protection,
specialty chemicals and some other sectors.
Importantly the compounds that we ob-
tain in this manner have highly attractive
structural characteristics, in particular: � A high level of novelty (c. 80% novelty,
including c. 20% core scaffold novelty);
� A low molecular weight, averaging
around 300 daltons;
� Relatively high three-dimensional com-
plexity despite the small size;
� Good observance of all drug-likeness
rules (lipophilicity, number of rotatable
bonds, etc).
Technical implementation
evolva has four significant technology
capabilities, all associated with getting yeast
to make valuable products.
Combinatorial genetics
Evolva can create billions of different
yeast cells expressing multiple new gene
combinations.
We have an array of technologies that
allow us to rapidly insert and express tens to
hundreds of genes in billions of individual
yeast cells in a highly combinatorial fashion.
this allows us to explore large numbers of
gene combinations and hence find those
gene combinations that are necessary to
make (biosynthesise) a given ingredient. It
also allows us to find those gene combina-
tions that give the highest production rate
(and hence the lowest production cost). the
same approach can create novel pathways
that generate diverse small molecules for
drug discovery and similar activities. the
genes that we use are either sourced (in
compliance with the CBD) from various spe-
cies or constructed de novo based on online
databases or other sequence data.
25
Technology
Screening and analytical technologies
Evolva has an array of advanced screen-
ing tools that can select those yeast cells that
produce desirable ingredients from a back-
ground of a large number of cells.
We have both function-led and struc-
ture-led screening tools that allow us to rap-
idly identify which yeasts are making desired
ingredients and/or which have acquired de-
sired functions (as a result of making certain
ingredients).
� Function-led screens are typically based on
fluorescence- or survival-based read-outs
and have throughputs of up to 1 billion
screening events per day. We have used
such screens to discover novel molecules
with potential utility against cancer and
infectious disease, amongst others. the
approach can also be used to find new
functionalities for food ingredients.
� Structure-led screens use state-of-the-
art capabilities that combine ultra-high
performance liquid chromatography
with time-of-flight mass spectroscopy,
nMR and a large internal database for
the identification. they are primarily used
to elaborate production pathways for
known ingredients.
Pathway optimisation technologies
Evolva has a number of tools that can
improve the efficiency with which yeast pro-
duces the desired product, which results in a
lower cost as well as other benefits.
once a biosynthetic route has been
established, it is important to improve it with
respect to purity of product, yield, speed of
conversion and final titre. the more these
elements are optimised, the lower the cost of
production of the ingredient. In addition to
our combinatorial genetics approach, one
important tool is the ability to simultan-
eously insert (and test) multiple (>10) genes
into the yeast genome. We also optimise
pathways using a combination of molecular
engineering, enzyme co-factor balancing,
metabolic engineering and pathway flux
analysis.
Decoration technologies
Evolva has proprietary technologies that
allow it to enhance the properties of ingredi-
ents, as well as their economics.
We have multiple collections of enzymes
that allow us to “decorate” ingredients and
hence enhance their properties. one particu-
lar focus is glycosylation (the process of
attaching glucose or other sugars to mol-
ecules). Glycosylation allows us to: � Make ingredients (such as stevia and
saffron) whose natural properties de-
pend on their glycosylation patterns.
� Improve the bio-availability of certain
molecules, hence improving their
effectiveness in nutritional or pharma-
ceutical use (or allowing a reduced
amount of the relevant molecule to have
the same effect as the larger amount).
� Improve manufacturing efficiencies by
orders of magnitude, resulting in reduc-
tions in the relevant ingredient’s manu-
facturing cost.
other decoration technologies allow us
to functionalise molecules for further
chemical derivatisation, alter lipophilicity or
stability, etc.
26
27
Corporate Governance
Evolva Holding SA is a Swiss stock corporation established under the laws of Switzerland with
registered office in Reinach (Canton Basel-Landschaft). Its business purpose is to to engage
in the research, development and marketing of products and processes with applications in
food, nutritional, pharmaceutical and other areas. The Company is listed on the SIX Swiss Stock
Exchange and is therefore subject to the rules of SIX, including the Directive on Information
Relating to Corporate Governance.
Group structure year-end 2012
Name Domicile Issued share capital Shareholder % of equity capital held
evolva SA Switzerland CHF 6,369,540 evolva Holding SA 100%
evolva Biotech A/S Denmark DKK 4,311,583 evolva SA 100%
evolva Biotech private limited India InR 169,930 evolva SA 60% 1
evolva nutrition, Inc. uSA uSD 0.01 evolva SA 100%
evolva, Inc. uSA uSD 0.01 evolva SA 100%
Arpida uK ltd. united Kingdom GBp 1,000 evolva Holding SA 100%
Corporate Governance
Group structure and shareholders
Group structure
As of 31 December 2012, the evolva
group (“evolva”) consisted of evolva Holding
SA (“the Company”) as holding company and
the following non-listed direct or indirect
subsidiaries:
Shareholder structure
the section “Stock review” on page 10-11
of this annual report contains extensive infor-
mation on evolva’s shareholder structure.
During 2012, shareholders submitted a
limited number of disclosures regarding their
crossing of reportable thresholds under the
Swiss disclosure rules (Art. 20 Stock exchange
Act, SeStA). the detailed notifications are
available on the evolva website
www.evolva.com and on the SIX website
www.six-swiss-exchange.com.
Cross-shareholdings
As of 31 December 2012, no cross-share-
holdings existed.
Capital structure
Issued share capital
As of 31 December 2012, 173,343,279
registered common shares were issued and
outstanding with a nominal value of CHF
0.20 each, representing a nominal share
capital of CHF 34,668,655.80. All shares are
1 Ventureast trustee Company (p) limited (“Ventureast”) and ApIDC Venture Capital (p) limited (“ApIDC”) hold, collectively, 40% of the shares (i.e. 6,683 shares) in evolva Biotech private limited. pursuant to a conversion agreement entered into by the Company, evolva SA, evolva India, ApIDC and Ventureast in December 2009 (and amended in September 2011), (i) ApIDC and Ventureast shall contribute their shares in evolva Biotech private limited to evolva SA in exchange for 27,813 newly issued shares of evolva SA, with a nominal value of CHF 20 each, and (ii) thereafter, ApIDC and Ventureast shall contribute such shares in evolva SA to the Company in exchange for 10,697,260 shares, in each case subject to the terms and conditions of such agreement, including approval of the relevant Indian governmental authorities. once approved and completed, evolva Biotech private limited will become a wholly owned direct subsidiary of evolva SA.
28
Corporate Governance
fully paid up. An overview of changes in is-
sued capital during 2012 is included in the
notes to the Consolidated Financial State-
ments on page 68 of this report.
Treasury shares
As of 31 December 2011, evolva held
7,508,346 shares in treasury. In 2012, 4.67
million of these treasury shares were de-
livered to YA Global and 1.08 million served
as consideration for the purchase of the
resveratrol-related assets from Fluxome
Science A/S. A description of the SeDA
arrangement with YA Global is available in
the notes to the Consolidated Financial
Statements on page 70 of this report.
Overview treasury shares 2012
Number of shares
Start of year 7,508,346
Consideration for purchase of resveratrol assets -1,077,006
SeDA advances -4,667,480
end of year 1,763,860
Conditional capital for incentive option
plans
As of 31 December 2011, conditional
capital of CHF 5,622,977.60 was available for
the issuance of 28,114,888 shares under the
incentive option plan to employees of the
Company or its subsidiaries, Board members
and other key persons. During 2012, 98,648
shares were issued under the 2009 evolva
plan. on balance, conditional capital of CHF
5,603,248.00 was available for the issuance
of 28,016,240 shares under the incentive op-
tion plans as of 31 December 2012. For de-
tails regarding the terms and conditions of
such options, please refer to the notes to the
Consolidated Financial Statements on pages
71-72.
authorised capital for internal Group
reorganisation purposes
Article 3b of the Articles of Association
was related to the intended conversion of a
direct participation of Ventureast trustee
Company (p) limited (“Ventureast”) and
ApIDC Venture Capital (p) limited (“ApIDC”) in
evolva Biotech private limited (“evolva India”)
into a participation in evolva SA, immediately
followed by a conversion of this new partici-
pation in evolva SA into a participation in
evolva Holding SA. this authorisation expired
on 9 June 2012 and was not extended.
Capital for financing purposes
A small part of the conditional capital
for financing purposes has been used in
2012 for an earn-out payment related to the
acquisition of Abunda nutrition, Inc.
29
Corporate Governance
Development of share capital for financing purposes, available in the Articles
(in million shares) Combined capital authorised capital Conditional capital Total
Articles of Association old 3a new 3a new 3abis
Year-end 2009 14.0 - - 14.0
AGM 2010 +8.5 - - +8.5
Year-end 2010 22.5 - - 22.5
AGM 2011 -22.5 +60.0 +32.0 +69.5
Abunda acquisition - -25.0 - -25.0
Issue treasury shares - -8.0 - -8.0
Year-end 2011 0.0 27.0 32.0 59.0
Abunda earn-out - - -0.3 -0.3
AGM 2012 - +50.0 +23.0 +73.0
Year-end 2012 0.0 77.0 54.7 131.7
For detailed information regarding the
capital structure, reference is made to the
Articles of Association, which are available
on the evolva website.
Changes in capital
For changes in capital that took place in
2009 or earlier, reference is made to the 2009
annual report.
Development issued share capital
Number of shares Nominal value (CHF)
Year-end 2009 139,178,594 27,835,718.80
option exercise 381,531 76,306.20
Year-end 2010 139,560,125 27,912,025.00
Abunda acquisition 25,000,000 5,000,000.00
Issue treasury shares from authorised capital 8,000,000 1,600,000.00
option exercise 344,885 68,977.00
Year-end 2011 172,905,010 34,581,002.00
Issue from conditional capital, related to Abunda earn-out 339,621 67,924.20
option exercise 98,648 19,729.60
Year-end 2012 173,343,279 34,668,655.80
30
Corporate Governance
Description of the shares
As of 31 December 2012, the Company
had only common shares outstanding. no
bearer shares or participation certificates
have been issued. All shares have a nominal
value of CHF 0.20. each share carries one
vote at the shareholders’ meetings of the
Company – subject to limitations as de-
scribed below. the shareholders’ meeting
may at any time convert registered shares
into bearer shares and bearer shares into
registered shares through an amendment of
the Articles of Association.
limitations on transferability and nom-
inee registration
A transfer of shares is effected by a cor-
responding entry in the books of a bank or
depository institution following an assign-
ment in writing by the selling shareholder
and notification of such assignment to the
Company by the bank or the depository insti-
tution. A transfer of shares further requires
that a shareholder file a share registration
form in order to be registered in the share
register of the Company with voting rights.
Failing such registration, a shareholder may
not vote at or participate in a shareholders’
meeting.
A purchaser of shares will be recorded in
the Company’s share register as a sharehold-
er with voting rights if the purchaser dis-
closes its name, citizenship or registered of-
fice and address and gives a declaration that
it has acquired the shares in its own name
and for its own account.
the Articles of Association (Art. 5) pro-
vide that a person or entity not explicitly
stating in its registration request that it will
hold the shares for its own account (“nom-
inee”) may be entered as a shareholder in the
share register with voting rights for shares
up to a maximum of 5% of the outstanding
nominal share capital. Shares held by a nom-
inee that exceed this limit are only registered
in the share register with voting rights if
such nominee declares in writing to disclose
name, address and shareholding of any per-
son or legal entity for whose account it is
holding 1% or more of the outstanding
nominal share capital. the limit of 5% shall
apply correspondingly to nominees who are
related to one another through capital own-
ership or voting rights or have a common
management or are otherwise interrelated.
the Company has nominee agreements with
two nominees. this should facilitate share-
holder identification and the voting proced-
ure for shareholders’ meetings.
A share being indivisible, the Company
will only recognise one representative for
each share. Furthermore, shares may only be
pledged to the bank that administers the
bank entries of such shares for the account
of the pledging shareholders; in such case,
the Company must be notified.
Convertible bonds and options
As of 31 December 2012, the Company
did not have any convertible bonds or war-
rants outstanding.
evolva Holding SA has established sev-
eral incentive option plans in order to at-
tract, motivate and retain key staff and thus
enhance the value of the Company by giving
key people an opportunity to become share-
holders of the Company. the terms of the
incentive option plans are determined by the
Board of Directors.
At year-end 2012, conditional capital for
the issuance of 28,016,240 shares under op-
tion plans remains. the majority of the in-
centive options vest over four to five years.
In case of termination of contract, non-vest-
ed options are generally forfeited. pre-emp-
tive subscription rights of the shareholders
are excluded in case of exercise of the op-
tions. For further information about the in-
centive option plans, reference is made to
the notes to the Consolidated Financial
Statements on pages 71-72.
In addition, ApIDC and Ventureast hold
conversion options for 10,679,260 shares
(6.2% of the issued share capital at year-end
2012) in evolva Holding SA.
Board of Directors
the Articles of Association (Statuten)
(the “Articles”) provide that the Board of
Directors (Verwaltungsrat) of the Company
(the “Board of Directors”) may consist of a
minimum of five directors and a maximum
of eleven directors. As of 31 December 2012,
the Board of Directors consists of nine
directors (including the Chief executive
officer of the Company). Directors are
appointed to and removed from the Board
of Directors exclusively by a shareholders’
resolution. the maximum term of office for
a member of the Board of Directors is three
years. A year means, in this context, the
period running between one ordinary share-
holders’ meeting (Generalversammlung) and
the next. Re-election is allowed.
31
Corporate Governance
the Board of Directors is entrusted with
the ultimate direction of the Company’s
business and the supervision of the persons
entrusted with the Company’s management.
It represents the Company towards third
parties and manages all matters which have
not been delegated to another body of the
Company by law, the Articles or by other
regulations. the Board of Directors’ non-
transferable and irrevocable duties include:
� the ultimate direction of the Company
and the power to issue the necessary
directives in this regard;
� the determination of the organisation of
the Company;
� the administration of its accounting sys-
tem, its financial controls as well as its
financial planning;
� the appointment and removal of the
persons entrusted with the management
and representation of the Company, as
well as the determination of their signa-
tory power;
� the ultimate supervision of the persons
entrusted with the management of the
Company, in particular with respect to
their compliance with the law, the Art-
icles, regulations and directives;
� the preparation of the annual report and
the shareholders’ meeting, including the
execution of its resolutions;
� the notification of the judge in case of
over-indebtedness;
� the passing of resolutions regarding the
subsequent payment of capital with re-
spect to non-fully paid-in shares;
� the passing of resolutions confirming
increases of the share capital and the
respective amendments of the Articles;
� the examination of the professional
qualifications of the auditors; and
� the non-delegable and inalienable duties
and powers of the Board of Directors
pursuant to the Federal Act on Merger,
Demerger, transformation and transfer
of Assets (the “Swiss Federal Merger Act”) and any other applicable law.
In accordance with Swiss law, the Art-
icles and the organisational Regulations, the
Board of Directors has delegated evolva’s
executive management to the Chief execu-
tive officer (the “Ceo”) who is supported by
the Group Management team.
the Board of Directors constitutes itself.
It elects from among its members a Chair-
man and, if necessary, one or several Vice-
chairmen. It further appoints a secretary
who need not be a member of the Board of
Directors. According to the Company’s Board
Regulations (organisationsreglement) enacted
by the Board of Directors and revised most
recently on 11 December 2009, the Board of
Directors meets at the invitation of the
chairman or the secretary as often as re-
quired, but in any event at least four times
per year.
In 2012, the Board of Directors met eight
times (as compared to seven times in 2011),
of which four meetings were held by way of
conference call. the average duration of the
regular meetings of the Board of Directors in
2012 was six hours (as compared to six hours
in 2011).
the agenda for the meetings of the
Board of Directors is prepared by the Chair-
man and the Ceo of the Company. In general,
the main agenda items are the progress of
the R&D pipeline, the Company’s financial
situation, risks and strategic opportunities.
the Board of Directors receives an extensive
reporting set ahead of each meeting, con-
sisting of activity reports and financial re-
ports. In most cases, the Chief Financial of-
ficer of the Company and other members of
the Group Management team attend meet-
ings of the Board of Directors, except when
the Board of Directors reviews the Group
Management team’s performance. the Board
of Directors may ask for additional informa-
tion and consult with external experts if it
deems necessary.
Resolutions of the Board of Directors are
passed by way of simple majority of the
votes cast. In the case of a tie, the acting
Chairman has the casting vote. to validly
pass a resolution, a majority of the members
of the Board of Directors must attend the
meeting. Absent members cannot be repre-
sented. no quorum is required for confirma-
tion resolutions and amendments of the Art-
icles in connection with capital increases
pursuant to articles 652g and 653g of the Co
as well as approvals pursuant to articles 23
and 70 of the Swiss Federal Merger Act in
case that the transferred assets do not ex-
ceed 10% of the total assets of the Company.
Board committees
In accordance with good corporate gov-
ernance, the Board of Directors has estab-
lished an Audit Committee (the “AC”) and a
nomination and Compensation Committee
(the “NCC”).
audit committee
As of 31 December 2012, the AC consists
of Martin Gertsch (Chairman), Stuart Strath-
dee and erich Schlick. In 2012, the AC met
three times (as compared to three times in
2011).
the AC assists the Board of Directors in
the supervision of the financial management
Claus Braestrup
Martin Gertsch
Ganesh Kishore
erich Schlick
nicole Dubois
33
Corporate Governance
of the Company. It is responsible for the
guidelines for the Company’s risk manage-
ment and internal control system, the review
of the compliance system, the review of the
auditors’ audit plans, the review of annual
and interim financial statements, the moni-
toring of the performance and independence
of external auditors (including the authorisa-
tion of non-audit services by the auditors
and their compliance with applicable rules),
the review of the audit results and the moni-
toring of the implementation of the findings
by management. After examination by the
AC, the (interim) accounts are approved, and
recommended to the shareholders of the
Company for approval, by the Board of
Directors.
Nomination and Compensation Committee
As of 31 December 2012, the nCC con-
sists of the following non-executive mem-
bers: Claus Braestrup (Chairman), nicole
Dubois and thomas Videbaek. In 2012, the
nCC met two times (as compared to three
times in 2011). In addition the nCC held a
number of discussions by telephone.
the nCC assists the Board of Directors in
nomination and compensation related mat-
ters. It provides the Board of Directors with
recommendations on the nomination and
compensation of members of the Board of
Directors and the Ceo, policies for the nom-
ination and compensation of the Group
Management team and the Group’s other
employees and the basic principles for the
establishment, amendment and implemen-
tation of incentive plans.
Composition of the Board of Directors
the following table sets forth the name,
function and committee membership of
each member of the Board of Directors as of
31 December 2012, followed by a short de-
scription of each member’s nationality, busi-
ness experience, education and activities. As
of 31 December 2012, all members of the
Board of Directors are non-executive, except
for neil Goldsmith. other than disclosed
below, none of the non-executive directors
have any significant business connections
with the Company or its subsidiaries.
Composition of the Board of Directors year-end 2012
Name Function Committee membership First elected End current period
Sir tom McKillop Chairman - 2010 2013
Claus Braestrup Vice-Chairman nCC (Chair) 2010 2014
nicole Dubois Member nCC 2010 2013
Martin Gertsch Member AC (Chair) 2012 2015
neil Goldsmith Managing Director and Ceo - 2009 2015
Ganesh Kishore Member - 2011 2013
erich Schlick Member AC 2009 2013
Stuart Strathdee Member AC 2011 2014
thomas Videbaek Member nCC 2012 2015
the business address for each member of
the Board of Directors is Duggingerstrasse 23,
4153 Reinach, Switzerland.
34
Corporate Governance
Sir Tom McKillop,
British national, born in 1943.
Sir tom has been a member of the Board of
Directors since 10 June 2010 and its Chair-
man since May 2012.
Sir tom was educated at Irvine Royal
Academy, Glasgow university (where he took
a BSc Hons and phD in Chemistry), and Cen-
tre de mécanique ondulatoire appliquée
(paris). He had a long and successful career at
ICI, where he held a number of increasingly
senior R&D positions until his appointment
in 1989 as technical Director and Deputy
Chairman of ICI pharmaceuticals, a role in
which he had global responsibility for
research, development, medical and produc-
tion. In 1994, he was appointed Chief execu-
tive officer of Zeneca pharmaceuticals –
Zeneca having demerged from ICI in 1993 –
and, on completion of the merger of Astra
and Zeneca in April 1999, he became Chief
executive of AstraZeneca plc, a position he
held until retiring on 31 December 2005. He
was president of the Science Council in the
uK 2007-2011 and is currently a non-execu-
tive director of Almirall SA, uCB SA and
theravectys SAS. During his career he has
received many scholarly awards and fellow-
ships and was knighted in 2002 for services
to the pharmaceutical industry.
Claus Braestrup,
Danish national, born in 1945.
Claus Braestrup has been a member of the
Board of Directors since 10 June 2010 and its
Vice-Chairman since May 2012.
Mr Braestrup holds a Master’s degree in
Chemical engineering and an MSc in Bio-
chemistry. He is Doctor of Medical Science
and former Adjunct professor in neuroscience
at the university of Copenhagen. He started
his career in research and consultancy posi-
tions. He then moved to novo nordisk A/S,
where he served as Vice-president of pharma-
ceutical Research, president of the CnS Divi-
sion and president of the Diabetes Care Divi-
sion. He subsequently took the post of Head
of preclinical Drug Research at Schering AG,
before joining H. lundbeck A/S as executive
Vice-president, Research and Development.
From 2003 to 2008 he was president and Ceo
of H. lundbeck A/S. Claus Braestrup is mem-
ber of the Board of Bavarian nordic A/S, San-
taris pharma A/S, probiodrug AG (chair) Gyros
AB and Aniona (chair).
Nicole Dubois,
French national.
nicole Dubois has been a member of the
Board of Directors since 10 June 2010.
Ms Dubois is a strategy and manage-
ment consultant to major european and uS
corporations, in particular in the health care
sector. She has worked for BCG and later in-
dependently and in partnership with other
strategy consulting groups. She has worked
with Ceos and executive committees of For-
tune Global 500 companies, as well as with
entrepreneurial entities and non-profit insti-
tutions, spanning widely diverse organisa-
tions in fields ranging from telecommunica-
tions to health care. For the past ten years,
her main focus has been on the pharma-
ceutical sector. Her areas of expertise include
strategy implementation, global marketing,
executive leadership and post-merger inte-
gration and transformation. Ms Dubois holds
a phD from the Sorbonne, an MBA from Har-
vard, and is a graduate of ecole normale su-
périeure (ulm). At various times in her career,
she has also taught at these institutions or at
other universities. She is the author of the
book “les Multinationales”. Ms Dubois has no
other Board memberships.
Martin Gertsch,
Swiss national, born in 1965.
Martin Gertsch has been a member of the
Board of Directors since May 2012.
Martin Gertsch is an experienced Board
member and Chief Financial officer (CFo) in
the life science industry and currently serves
as Vice-president of the Board and Chairman
of the Audit Committee of Santhera pharma-
ceuticals. He has been appointed CFo of
Acino Holding AG effective 1 April 2013. He
is former Vice-president Head of Finance
eMeA at DepuySynthes and former Chief Fi-
nancial and Chief operating officer of Dele-
nex therapeutics and eSBAtech, two private-
ly held biotech companies. From 2002 to the
beginning of 2006, he was Chief Financial
officer of Straumann, which he had joined in
1997 as head of group controlling and re-
porting. Between 1986 and 1997, Mr Gertsch
was an audit engagement manager at price-
waterhouseCoopers, Basel, Switzerland. Mr
Gertsch is a Swiss certified fiduciary and
Swiss certified public accountant. He has
also completed several executive-level devel-
opment programmes at IMD (International
Institute for Management Development) in
lausanne, Switzerland.
Neil Goldsmith,
British national, born in 1963.
neil Goldsmith is a co-founder of evolva SA
and has been a member of the Board of
Directors and Ceo since the combination
between Arpida ltd. and evolva SA in 2009,
and, prior to the combination, a member of
the Board of Directors and Ceo of evolva SA
since its founding in April 2004.
35
Corporate Governance
neil Goldsmith
Mr Goldsmith has a 25-year track record
in building successful biotech companies
from the ground up. He was a co-founder of
topotarget A/S and personal Chemistry AB
(now called Biotage AB), which are now list-
ed on the Copenhagen and Stockholm ex-
changes, respectively. prior to that, Mr Gold-
smith was Chief executive officer of Auda
pharmaceuticals (acquired by phytera, Inc.),
GX Biosystems and pnA Diagnostics (ac-
quired by Boehringer Mannheim). previously,
he was Vp Business Development for phar-
macia Biosensor (later BIAcore AB), and a
Board member of Quadrant Healthcare. Mr
Goldsmith started his career in biotech at
Scientific Generics in Cambridge, uK after a
short spell in consumer marketing. He re-
ceived a First Class Honours BA degree in
Zoology from Balliol College, university of
oxford, and is a graduate of the new enter-
prise programme at the Scottish enterprise
Foundation, university of Stirling. Mr Gold-
smith does not hold any significant external
Board memberships.
Ganesh M. Kishore,
US national, born in 1953.
Mr Kishore has been a member of the Board
of Directors since May 2011.
Dr. Kishore received his phD in biochem-
istry from the Indian Institute of Science
after which he pursued postdoctoral research
in chemistry and biology at the university of
texas at Austin. In 1980, he joined Monsanto
where he held senior positions in the areas of
biotechnology and in the nutrition and Con-
sumer products division. During his tenure at
Monsanto he was involved in the develop-
ment of major products such as Aspartame
(the active ingredient of several major sweet-
ener products) as well as a key agricultural
crop protection technology. Dr. Kishore joined
Dupont in 2002 as the Chief technology of-
ficer for its Agriculture and nutrition plat-
form and took over the role of Chief Biotech-
nology officer for the company in 2005. He
left Dupont in 2007 to join Burrill & Company
as a Managing Director for Burrill life Sci-
ences Venture Fund. Dr. Kishore is currently
Ceo of MlSCF (Malaysian life Sciences Capi-
tal Fund), which is an indirect shareholder in
evolva through Abunda SR llC. His other
Board mandates include Advanta ltd., Kaiima,
Gevo, Inc., Glori energy, Sentinext, Mogene lC
and Akermin. Moreover he is on the Board of
several academic institutions.
Erich Schlick,
German national, born in 1952.
prof. Dr. erich Schlick has been a member of
the Board of Directors since 11 December
2009 and was its Chairman from 11 Decem-
ber 2009 until May 2012.
prof. Dr. Schlick has over 25 years of
experience in the health care sector. He spent
five years at the uS national Cancer Institute,
and over 15 years with BASF pharma, includ-
ing ten years as the executive Board member
responsible for worldwide R&D. prof. Dr.
Schlick established BASF pharma’s immunol-
ogy business, and its uS biotech centre spe-
cialising in immunology and monoclonal anti-
bodies. From 2001 to September 2005, prof.
Dr. Schlick worked for 3i, where his last posi-
tion was Head of 3i’s Healthcare team in Ger-
many and Deputy Head of 3i Healthcare
Worldwide. In September 2005, prof. Dr.
Schlick joined Wellington partners as a Gen-
eral partner of the Wellington life Science
Fund, which is a principal shareholder in the
Company. prof. Dr. Schlick is a qualified medi-
cal doctor (university of Heidelberg) and a
Sir tom McKillop
36
Corporate Governance
Stuart Strathdee
professor of immune pharmacology at the
university of Heidelberg. His other Board
memberships include Immatics (Germany),
Sensimed (Switzerland), Symetis (Switzerland)
and Zentralinstitut für Seelische Gesundheit
Mannheim, university of Heidelberg (univer-
sity Centre for psychiatry).
Stuart Strathdee,
British national, born in 1951.
Mr Strathdee has been a member of the
Board of Directors since May 2011.
Having completed his phD in Applied
physics, Mr Strathdee joined tate & lyle plc
in 1977 as a management trainee. He retired
from the company in July 2009, having
served on the main Board as an executive
Director in various roles for 14 years. During
his time at tate & lyle, Mr Strathdee held a
variety of senior management positions in-
cluding Group treasurer, Managing Director
of both united Molasses and tate & lyle’s
International Division and was Corporate
Development Director reporting to the Chief
executive officer from July 2003. leadership
highlights include: the development of tate
& lyle’s sucralose ingredient business; crea-
tion of Vietnam’s leading sugar business; the
public takeover of Australia’s largest sugar
farming company; creation of a joint venture
to construct the Middle east’s largest sugar
refinery; the acquisition of publicly listed
Zambia Sugar Company, now Africa’s leading
sugar milling company. Dr. Strathdee has a
phD in Atomic and Molecular physics from
Queens university Belfast. He is currently
member of the Board of James Finlay ltd.
Thomas videbaek,
Danish national, born in 1960.
Mr Videbaek has been a member of the Board
of Directors since May 2012.
thomas Videbaek has been novozymes’
executive Vice-president of BioBusiness since
September 2007, responsible for all new busi-
ness ventures outside of novozymes’ estab-
lished areas. He is also a member of the novo-
zymes executive Management group. Mr
Videbaek joined novo nordisk as a chemist in
1988 and worked in various positions in the
textiles and Starch divisions, both in Denmark
and in the uS. In 1996, he also assumed re-
sponsibility for Food and Feed enzymes and
was appointed Director for Strategic Market-
ing, Food and Feed enzymes. At the end of
1998, thomas was appointed General Man-
ager for novozymes Switzerland and also
Vice-president for Cereal Food and Beverage
Marketing. He returned to Denmark in 2003
and became Vice-president for Supply Chain
operations where he was responsible for es-
tablishing a global organisation in charge of
the supply chain at novozymes. thomas
Videbaek holds a Master of Chemical
engineering from Dtu, Dept. of nutrition and
Biochemistry, Copenhagen 1986, and a phD
from Dtu in 1990. He also holds a BCom (In-
ternational Business) from the Copenhagen
Business School (1992). thomas Videbaek has
no other Board memberships.
Information and control instruments
the Company employs an extensive re-
porting framework in order to secure an effi-
cient information and risk management sys-
tem. Risk management is applied in all
functional areas, but particularly in the areas
of discovery, product development and finan-
cial management.
Management information is secured via
regular updates on the status of the R&D pro-
jects and detailed project plans are discussed
at least on a monthly basis. From each sub-
sidiary and on a Group basis, management
receives liquidity updates on a biweekly basis
as well as monthly, quarterly and annual fi-
nancial reports. Deviations from budgets are
analysed by the Company’s financial staff and,
if necessary, adjustments to operating
budgets are made. Management reports
usually monthly on the overall progress to the
Board of Directors. At the meetings of the
Board of Directors, detailed reports of the
various functional areas are discussed.
external auditors review the Company’s
risk management and financial reporting sys-
tems on a regular basis and recommend
changes if required.
Executive management
In accordance with Swiss law, the Art-
icles and the organisational Regulations, the
Board of Directors has delegated the execu-
tive management of the Company to the
Ceo. the Ceo heads the executive manage-
ment team of evolva (the “Group Manage-ment Team”), which comprises the Senior
executive officers of the Company, the Chief
executive officer of evolva nutrition, Inc.,
one of evolva’s uS subsidiaries, and the Man-
aging Director of evolva Biotech private lim-
ited, the Company’s Indian subsidiary.
37
Corporate Governance
Composition of the Group Management Team
Name appointed Position
neil Goldsmith 2004 Chief executive officer and Managing Director
norbert Bender* 2011 Chief Medical officer
Jakob Dynnes Hansen 2007 Chief Financial officer
Jutta Heim 2009 Chief Scientific officer
pascal longchamp 2005 Chief Business officer
panchapagesa Murali 2006 Chief executive officer of evolva Biotech private ltd. (India)
Simon Waddington 2011 Chief executive officer of evolva nutrition, Inc.
* Mr Bender resigned in February 2013 and will take up a position at another company on 1 June 2013.
thomas Videbaek
under the control of the Board of Direct-
ors, the Group Management team conducts
the operational management of evolva pur-
suant to the organisational Regulations and
reports to the Board of Directors on a regular
basis. the Ceo is also a member of the Board.
Composition of the Group Management
Team
the following table sets forth the name
and principal position of each member of the
Group Management team as of 31 December
2012, followed by a short description of each
member’s nationality, birth year, business ex-
perience, education and activities. With the
exception of norbert Bender and Simon
Waddington, all members of the Group Man-
agement team as of 31 December 2012 were
(i) appointed upon consummation of the
combination on 11 December 2009, and (ii)
members of evolva SA’s management team
immediately prior to the combination. Con-
sequently, the date of each such member’s
appointment to the Group Management
team set forth in the table below, as well as
in the short descriptions that follow there-
after, is the date of such member’s appoint-
ment to the management team of evolva SA.
the business address for each member of
the Group Management team is Dugginger-
strasse 23, 4153 Reinach, Switzerland.
Neil Goldsmith, please refer to “Board of
Directors” beginning on page 34.
Norbert Bender,
German national, domiciled in Switzerland,
born in Germany in 1949.
Dr. Bender has been the Company’s Chief
Medical officer since May 2011. He resigned
in February 2013 and will take up a position
at another company on 1 June 2013.
norbert Bender is an M.D. from the uni-
versity of Frankfurt, Germany, and has a phD
in Biochemistry and pharmacy from the
same institution. He practiced for ten years
as a medical doctor in internal medicine at
the Frankfurt university Hospital. He subse-
quently worked for more than 20 years in
various senior functions in pharmaceutical
(Hoechst, Knoll) and biotech companies (Car-
dion, trigen, Virologik), in both europe and
north America. During his career, he also
worked for pRA International, a leading
clinical research organisation, managing its
Mannheim office. Dr. Bender has particular
expertise in the cardiovascular space and has
been involved in the successful development
of Ramipril and its fixed combinations, Revi-
parine, Sibutramine and Adalimumab. He has
worked as a medical consultant to evolva
between october 2010 and May 2011. nor-
bert Bender does not hold any significant
external Board mandates.
norbert Benderpascal longchamp
38
Corporate Governance
Simon Waddington
Jutta Heim
Jakob Dynnes Hansen,
Danish national, born in 1955.
Mr Hansen has been the Chief Financial of-
ficer of evolva since September 2007.
Mr Hansen has 25 years of experience in
biotech/pharmaceuticals and financing. prior
to joining evolva, he was CFo of nuevolution
A/S and before that Zealand pharma A/S,
where he led several financing rounds and
major partnership agreements. prior to Zea-
land pharma, Mr Hansen was Senior Vice-
president, at unibank (now nordea), where
he was involved in more than 50 corporate
finance transactions. prior to unibank, Mr
Hansen was Head of Market Research at
novo nordisk and he has worked for the
united nations (unIDo) in Jakarta, Indone-
sia. Mr Hansen holds an MSc in economics
from university of Copenhagen and an MBA
from Insead. Mr Hansen does not hold any
significant external Board memberships.
Jutta Heim,
German national, born in 1951.
prof. Dr. Jutta Heim has been the Company’s
Chief technology/Scientific officer since
August 2009. prof. Dr. Heim was a member
of the Board of Directors of evolva SA from
April 2005 until november 2009.
until 2009, prof. Dr. Heim was Chief
Scientific officer of Basilea pharmaceutica
AG, a Swiss biopharmaceutical company,
where she was in charge of all anti-infective,
dermatology and oncology discovery acti-
vities. prior to joining Basilea pharmaceutica,
prof. Dr. Heim worked for 22 years in
Switzerland and the united States for Ciba-
Geigy/novartis, where she was involved in
the successful development and launch of
biopharmaceutical anti-thrombotic and
fibrinolytic products, initiated a molecular
genetics department in oncology and be-
came novartis’ Senior Scientific expert in
Molecular Biology and a member of the Re-
search Management Board. Most recently,
she headed the novartis lead Discovery
Center with worldwide responsibility. prof.
Dr. Heim has published numerous papers in
the areas of natural products, recombinant
proteins and applied molecular biology, in
particular in the area of oncology. She re-
ceived a phD from the university of tübingen
in 1981 and holds a professorship in Bio-
technology at the Biocentre of the university
of Basel. prof. Dr. Heim is a member of the
Advisory Board of “Jubiläumsstiftung uni-
versität Zürich”. prof. Dr. Heim does not hold
any significant external Board memberships.
Pascal longchamp,
Swiss national, born in 1962.
Dr. pascal longchamp was appointed the
Company’s Chief Business officer in 2010.
prior to that, Dr. longchamp was Vice-
president Business Development since March
2005.
Dr. longchamp has spent over 15 years
in the biotechnology and pharmaceutical in-
dustries, covering R&D, Management and
Business Development positions on the West
Coast (uSA) and in Switzerland. previously,
he was the Director of Business Development
at phyllom (2003), and a part of Maxygen’s
successful Ipo. At Maxygen, Dr. longchamp
was in charge of two corporate alliances and
promotion of its gene shuffling platform
technology to third parties. At phistem,
Maxygen and phyllom, Dr. longchamp was
responsible for corporate development, stra-
tegic alliances, in- and out-licensing, leading
international research collaboration and uS
government contract with the Department
panchapagesa Murali
Jakob Dynnes Hansen
39
Corporate Governance
of Defense. He received a phD in Genetics
and Microbiology from the university of
lausanne, followed by postdoctoral re-
searches at uC Berkeley in Molecular Biology
and at lawrence Berkeley national labora-
tory in Biodefence. Dr. longchamp has an
MBA from HeC Business School, lausanne.
Dr. longchamp is a founder and Chairman of
the Board of phistem sarl.
Panchapagesa Murali,
Indian national, born in 1961.
Dr. panchapagesa Murali has been the Chief
executive officer of evolva Biotech private
limited, the Company’s Indian subsidiary,
since September 2006.
Dr. Murali has over 20 years of experi-
ence in pharmaceutical & health care R&D,
including management of more than ten
clinical trials, in particular in respiratory
diseases. previously, he was Founder and
Director (for 16 years) of Dalmia Centre for
Research and Development, developing and
launching natural product-based therapeut-
ics, and Founder and Chairman of MlC &
netpeople group of It & telecom companies
(networking solutions, banking security and
communication services). Dr. Murali is a for-
mer Indo-uS scientist at Battelle-Kettering,
ohio, and fellow of unilever India. He re-
ceived a phD in Microbiology and Microbial
technology from Madurai Kamaraj univer-
sity. Dr. Murali is the president of the Asso-
ciation of Biotechnology led enterprises in
India. He is on the Board of Dalmia Research
and Development limited and a member of
the Governing Board of Dalmia Centre for
Research and Development. Dr. Murali is
Vice-president and treasurer of the Indian
Red Cross Society. He is also Chairperson of
the Biotech panel of the Confederation of
Indian Industrys tamil nadu and a member
of the Vision Group of the Government of
Karnataka.
Simon Waddington,
British national, born in 1964.
Simon Waddington is Ceo of evolva nutri-
tion, Inc., a wholly owned subsidiary of the
Company.
He was previously president and Ceo of
Abunda nutrition, Inc. which was acquired
by evolva SA in July 2011, and entrepreneur-
in-Residence at the uS life science venture
capital firm Burrill & Company, where he sup-
ported the formation and management of
start-ups across the life sciences. prior to that,
he spent more than a decade as a venture
capitalist. He was a managing partner at poly-
technos Venture partners, based in Munich,
Germany, where he led and supported invest-
ments in numerous life science and advanced
materials-related companies in europe, Israel
and the uS. prior to that, he started and ran
Monsanto’s european corporate venturing
activities from Brussels, Belgium, where he
sourced and supported innovations across the
medical, agricultural, nutrition, health care
services and advanced materials sectors. Be-
fore that he was product Development Man-
ager for Zeneca’s biopolymers business, which
pioneered the fermentation-based production
of biodegradable polymers from renewable
feedstocks. prior to that, he served as a Senior
Research Scientist for ICI specialising in sur-
face and interface science. Simon earned his
phD in physics from liverpool university and
his MBA from the Harvard Business School.
He does not hold any significant external
Board memberships.
Compensation, shareholding and loans
evolva’s remuneration system is gov-
erned by the Board of Directors, upon rec-
ommendation of the nomination and Com-
pensation Committee. In the year under
review, evolva did not involve external con-
sultants in this process.
the nomination and Compensation
Committee evaluates the system on a regular
basis in the light of remuneration changes
occurring in other international biotech
companies. the system was extensively re-
vised in 2010. During 2012, no adjustments
took place.
the system is designed to remunerate
existing and future employees in a way that
incentivises them to an excellent perfor-
mance and that competes with remunera-
tion offered by other public biotech compa-
nies in countries where evolva is active
(Switzerland, Denmark, uSA, India).
the compensation of Group Manage-
ment consists of a base salary plus a variable
bonus of up to 20% of the base salary (more
in exceptional circumstances) and incentive
options. the bonus is linked to specific Com-
pany goals (and not to individual or team
goals) that are agreed with the Board at the
start of a year. Depending on the achieve-
ment of the agreed Company goals, all em-
ployees receive a bonus in proportion to the
individual base salary. If only few Company
goals have been achieved, no bonus will be
paid. For 2012, the key company goals were
related to total revenues, cash position at
year-end, performance in partnerships, pro-
gress on product development and enhance-
ment of technology base. In 2012, about
70% (2011: 70%) of the company goals were
40
Corporate Governance
achieved. In 2013 the Board intends to award
both cash bonuses and stock options in line
with this performance and overall company
remuneration policy. priority was given to
completing the recent fundraise before final-
ising plans in this respect.
evolva does not include any severance
packages in employment contracts, apart
from the salaries paid during the notice pe-
riod. notice periods for management team
members do not exceed six months.
options are granted to incentivise and
retain people with the right professional and
personal skills and to ensure that the inter-
ests of management and other employees
are aligned with those of the shareholders.
All full-time staff members (incl. manage-
ment) are granted options after six months’
employment. the size of the individual op-
tion grant is determined by the individual
employee’s position in the Company. In addi-
tion, employees may at the end of a year be
granted options based on their performance
during the previous year. performance is
measured as the achievement of key results
such as discovery breakthroughs, clinical
milestones, partnerships, improvement of
administrative procedures, etc. the options
vest over 4 to 5 years in order to retain valu-
able talent and to secure that employees fo-
cus on value generation over the medium to
longer term.
In January 2012, a new share-based op-
tion plan (eVe IV) was established. options
under this plan were granted on 1 January
2012 and will vest over four years. options
under this plan were granted to Board mem-
bers, management team and other employees.
In addition, evolva established a second
share-based option plan (eVe V) in 2012.
under this plan, all members of Board and
management and some staff members vol-
untarily agreed to purchase share options
with a part of their salary. the option plan
was launched in July 2012 with the aim to
reduce the Company’s cash outflow over a
twelve-month period. options for this plan
were purchased as at 1 July 2012, and they
vest over a period of six to twelve months.
the compensation of the non-executive
members of the Board of Directors includes a
fixed annual fee, a fee per attended Board
meeting and (if relevant) an annual fee for
membership of the two Board committees
(nomination and Remuneration Committee
and Audit Committee). the cash fees are the
same for all Board members except for the
Chairman of the Board, who receives a high-
er compensation. Furthermore, non-execu-
tive directors receive a fixed number of op-
tions at the start of each calendar year. As
described in the previous paragraph, Board
and management waived all or part of their
cash compensation in the period between
July 2012 and June 2013, in exchange for op-
tions under the eVe V plan. extensive infor-
mation regarding compensation can be
found in the 2012 Financial Statements and
in the ‘Remuneration report 2012 evolva
Holding SA’ which is available on evolva’s
website.
Shareholders’ participation
voting rights
each share in evolva carries one vote.
the execution of voting rights is limited only
if a shareholder is not properly registered in
relation to a share transfer (see further under
“limitations on transferability and nominee
registration”). each shareholder may author-
ise in writing another shareholder, a Com-
pany representative, a specially designated
independent shareholder representative or a
depositary representative to represent him
or her at the shareholders’ meeting. A share-
holder wanting to vote at a shareholders’
meeting has to be entered in the register no
later than seven days before the meeting
takes place.
Quorum
the Articles of Association do not pre-
scribe a quorum for shareholders’ meetings.
unless the law requires otherwise, the
General Meeting of shareholders passes
resolutions and elections with a simple
majority of the votes represented. Swiss law
requires a two-thirds majority of the votes
represented for resolutions concerning: � changes to the Company’s business
purpose
� the creation of shares with privileged
voting rights
� restrictions on the transferability of
registered shares
Option series 2012 EvE Iv EvE v
Directors (excl. Ceo) 792,000 1,181,250
Group Management team 2,164,000 1,134,005
employees and consultants 2,201,650 1,355,033
Total 5,157,650 3,670,288
41
Corporate Governance
� an authorised or conditional increase in
the share capital
� an increase in the share capital by way of
capitalisation of reserves, against contri-
bution in kind for the acquisition of
assets or involving the grant of special
privileges
� the restriction or elimination of pre-
emptive rights of shareholders
� a relocation of the registered office
� the dissolution of the Company other
than by liquidation (for example, by way
of merger)
the introduction or abolition of any pro-
vision in the Articles introducing a majority
greater than that required by law must be
resolved in accordance with such greater
majority.
Convocation
under Swiss law, an annual ordinary
shareholders’ meeting must be held within
six months after the end of the Company’s
financial year. Shareholders’ meetings may
be convened by the Board of Directors or, if
necessary, by the Company’s auditors. the
Board of Directors is further required to con-
vene an extraordinary shareholders’ meeting
if so resolved by a shareholders’ meeting or if
so requested by holders of shares holding in
at least 10% of the nominal share capital.
A shareholders’ meeting is convened by
publishing a notice in the Swiss Official
Gazette of Commerce (Schweizerisches
Handelsamtsblatt) at least 20 days prior
to such a meeting. In addition, holders of
registered shares may be informed by a letter
sent to the address indicated in the share
register.
agenda
Shareholders holding shares represent-
ing the lower of 10% of the share capital or
a nominal value of CHF 1 million have the
right to request that a specific proposal be
discussed and voted upon at the next share-
holders’ meeting, setting forth the item and
proposal. According to the Articles of Asso-
ciation, the request to put an item on the
agenda has to be made at least 45 days prior
to the meeting.
Changes of control and defence measures
Duty to make an offer
A shareholder that, either directly, indir-
ectly or acting in concert with third parties,
controls 33 1⁄3 % of the voting rights
(whether exercisable or not), is obliged to
make an offer to acquire all listed shares.
Swiss law allows a corporation to deviate
from this rule in its Articles of Association. the
Company has opted not to use this possibility.
Clauses on changes of control
the Company has no special arrange-
ments taking effect in the event of a change
of control, other than the customary clauses
concerning the exercise of stock options.
auditors
At the extraordinary General Meeting on
26 november 2009, the shareholders ap-
pointed ernst & Young AG, Basel, Switzerland
as auditors of the Company starting from the
business year 2009 with effect on 11 Decem-
ber 2009. ernst & Young was re-elected by
the evolva shareholders’ meetings on 10
June 2010, 18 May 2011 and 9 May 2012.
ernst & Young have been auditors to evolva
SA since 2005. the lead auditor is Mr Jürg
Zürcher since business year 2009. During
2012 ernst & Young charged CHF 249,000
(2011: CHF 320,000) for audit and audit-relat-
ed fees and CHF 16,000 (2011: CHF 120,000)
for tax services.
the monitoring of the performance and
independence of external auditors (including
the authorisation of non-audit services by
the auditors and their compliance with ap-
plicable rules) is the responsibility of the
Audit Committee. this committee reviews
the external auditor’s audit plan and over-
sees its execution. the external auditor
ernst & Young was present in two meetings
of the Audit Committee in 2012.
Information policy
the Company puts much weight on
keeping its shareholders informed. Many dif-
ferent channels are used, including the
twice-yearly financial results releases,
ad hoc news releases, the annual report, the
website, shareholders’ meetings, roadshows,
conferences and press contacts. the website
www.evolva.com offers interested parties the
possibility to subscribe to the Company’s
news releases. the Company is at the share-
holders’ service to respond to questions or
requests. the Company’s website offers the
possibility to subscribe to press releases via
email distribution.
42
Consolidated Financial Statements
43
Consolidated Financial Statements
Consolidated Statement of Financial positionCHF Note 31 December 2012 31 December 2011
aSSETSNon-current assets
property, plant and equipment 12 9,941,669 10,821,705
Intangible assets 14 66,669,116 68,825,619
Rent deposits - 2,303,086 2,333,308
Total non-current assets 78,913,871 81,980,632
Current assets
Inventory 15 59,654 45,964
prepayments and accrued income 16 495,013 756,455
other receivables 17 302,042 500,950
trade receivables 18 496,929 517,684
Restricted cash 19 1,000,000 -
Cash and cash equivalents 19 9,105,251 22,693,641
Total current assets 11,458,888 24,514,694
Total assets 90,372,760 106,495,327
EQuiTY AND liAbiliTiESEquity
Share capital 20 34,668,656 34,581,002
treasury shares 22 (313,623) (1,247,119)
Share premium - 64,589,077 63,131,938
other reserves - 20,508,362 17,203,540
Cumulative translation differences - 2,944,579 4,056,083
Accumulated loss (61,136,006) (45,046,058)
Total equity attributable to equity holder of the parent before NCi 61,261,047 72,679,386
non-controlling interests (nCI) - (22,349) 541,270
Total equity 61,238,698 73,220,655
Non-current liabilities
Deferred tax liabilities 11 11,089,224 12,949,184
pension liabilities 27 343,798 17,066
Contingent consideration 6 - 2,806,250
Mortgage loans 13 - 2,200,000
preferred redeemable shares 25 3,972,494 3,974,072
long-term lease liabilities 30 3,594,500 3,764,604
Total non-current liabilities 19,000,017 25,711,177
Current liabilities
trade accounts payables 4 1,015,113 1,741,072
Accrued and other current liabilities 28 2,143,648 2,221,762
Deferred income 29 1,989,136 634,692
Short-term portion of mortgage loans 13 4,740,000 2,628,000
Short-term portion of lease liabilities 30 246,146 337,970
Total current liabilities 10,134,042 7,563,495
Total equity and liabilities 90,372,760 106,495,327
the accompanying notes form an integral part of these consolidated financial statements.
44
Consolidated Financial Statements
Consolidated Statement of Financial performance
Consolidated Statement of Comprehensive Income
CHF Note Period from 1 January to 31 December
2012 2011
Income from research & development partnerships - 6,354,772 10,543,828
Income from research & development grants - 659,670 536,392
Total income 7/29 7,014,442 11,080,221
Research & development expenses 8 (19,524,405) (27,493,461)
General & administrative expenses - (7,543,794) (9,521,813)
Total operating expenses (27,068,199) (37,015,274)
Operating loss (20,053,757) (25,935,053)
Financial income 9 211,568 1,813,512
Financial expenses 9 (956,653) (2,573,087)
Change of fair value of contingent consideration 6 2,643,232 2,640,000
Net loss before tax (18,155,610) (24,054,628)
Income tax (expenses) 10 1,502,044 1,122,344
Net loss for the period (16,653,566) (22,932,284)
Attributable to:
Shareholders of the parent (16,089,948) (22,451,971)
non-controlling interests (563,618) (480,314)
Basic and diluted loss per share attributable to ordinary shareholders of parent 24 (0.09) (0.14)
CHF Period from 1 January to 31 December
2012 2011
net loss for the period (16,653,566) (22,932,284)
translation differences (1,111,503) 4,476,664
Other comprehensive (loss) / income (1,111,503) 4,476,664
Total comprehensive loss (17,765,069) (18,455,620)
the accompanying notes form an integral part of these consolidated financial statements.
45
Consolidated Financial Statements
Consolidated Statement of Cash FlowCHF Note Period from 1 January to 31 December
2012 2011
Operating activities
net loss for the period (16,653,566) (22,932,284)
Non-cash adjustments to reconcile net loss for the period to net cash flows
- Changes in deferred tax assets 11 (807,399) (347,536)
- Changes in deferred tax liabilities 11 (1,052,561) (764,523)
- Depreciation of tangible assets 12 1,325,188 2,475,912
- Impairment of assets under IFRIC 18 - - 1,353,319
- Amortisation of intangible assets 14 1,960,041 1,012,190
- Interest income 9 (29,771) (156,011)
- Interest expenses 9 689,093 770,039
- Share-based compensation charges 26 3,253,602 5,042,889
- other share-based charges1 - - 600,000
- Change in current assets - 471,074 2,165,639
- Change in current liabilities - 143,552 (3,180,138)
- Change in contingent consideration 6 (2,643,232) (2,640,000)
- Change in pension liabilities / prepaid pension 27 326,732 (427,558)
- Interest payments received 9 26,113 156,011
- Interest expenses paid 9 (454,631) (530,384)
Net cash flow from operating activities (13,445,766) (17,402,435)
investing activitiespurchases of property, plant and equipment 12 (491,132) (965,325)
purchases of intellectual property rights3 14 (89,156) -
Change in rent deposit - 30,222 14,254
Cash flow from investing activities (550,066) (951,071)
Financing activities
Finance lease payments 30 (264,038) (304,584)
Cash inflow from acquisition of Abunda nutrition - - 3,108,347
proceeds from exercise of stock options 26 32,554 96,172
proceeds from sales of treasury shares 23 1,894,995 824,998
Amortisation of mortgage loans 13 (88,000) (88,000)
Restricted cash allocation 19 (1,000,000) -
proceeds from sales of treasury shares Ventureast2 - - 515,502
purchase of non-controlling interests in evolva India - - (515,502)
Capital increase costs - - (100,000)
Cash flow from financing activities 575,511 3,536,933
Net change in cash position (13,420,321) (14,816,573)
Net decrease in cash and cash equivalents (13,420,321) (14,816,573)
exchange gains/(loss) on cash and cash equivalents - (168,070) (204,615)
Cash and cash equivalents, beginning of period - 22,693,641 37,714,829
Cash and cash equivalents, end of period 19 9,105,251 22,693,641
the accompanying notes form an integral part of these consolidated financial statements.
1 non-cash financing expenses regarding issuance of 664,967 shares as payment of SeDA commitment fee in 2011 – equivalent to CHF 600,0002 In 2011, evolva acquired an additional 1.2% shareholding of evolva India Biotech private ltd. from Indian Investor Ventureast/ApIDC in exchange for the sale of treasury shares.
proceeds of CHF 515,502 were transferred directly to Ventureast/ApIDC.3 In 2012, evolva acquired Ip from Fluxome A/S for a total value of CHF 1,295,589. CHF 1,206,433 has been settled with evolva shares, whereas CHF 89,156 has been paid in cash.
46
Cons
olid
ated
Sta
tem
ent o
f equ
ity
CHF
Not
eSh
are
capi
tal
Shar
e pr
emiu
mTo
tal c
apita
l pa
id in
Trea
sury
sh
ares
Oth
er r
eser
ves
Cum
ulat
ive
tran
slat
ion
diff
eren
ces
accu
mul
ated
lo
ssTo
tal
Non
-co
ntro
lling
in
tere
sts
Tota
l equ
ity
At 1
Jan
uary
201
127
,912
,025
37,5
99,6
3265
,511
,657
-
9,45
1,13
2(4
20,5
81)
(22,
623,
693)
51,9
18,5
161,
051,
189
52,9
69,7
05
loss
for t
he p
erio
d24
–
–
–
–
–
–
(22,
451,
971)
(22,
451,
971)
(480
,314
)(2
2,93
2,28
4)
tran
slat
ion
diff
eren
ce –
–
–
–
–
4,
476,
664
–
4,47
6,66
4 –
4,
476,
664
Tota
l com
preh
ensi
ve lo
ss –
–
–
–
–
–
–
(1
7,97
5,30
7)(4
80,3
14)
(18,
455,
620)
Capi
tal i
ncre
ase
from
issu
ance
of t
reas
ury
shar
es20
1,60
0,00
0 –
1,
600,
000
(1,6
00,0
00)
–
–
–
–
–
–
Capi
tal i
ncre
ase
from
acq
uisi
tion
65,
000,
000
25,0
00,0
0030
,000
,000
–
2,2
42,5
12
–
–
32,2
42,5
12 –
32
,242
,512
exer
cise
of s
tock
opt
ions
26 6
8,97
7 2
7,19
5 9
6,17
2 –
–
–
–
96
,172
–
96,1
72
effe
cts
of IF
RS s
hare
-bas
ed p
aym
ents
26 –
–
–
–
5,
042,
889
–
–
5,04
2,88
9 –
5,
042,
889
SeDA
com
mitm
ent f
ee23
–
–
–
132,
993
467
,007
–
–
60
0,00
0 –
60
0,00
0
proc
eeds
from
sal
e of
trea
sury
sha
res
25 –
6
05,11
0 6
05,11
0 2
19,8
87
–
–
–
824,
998
–
824,
998
equi
ty fu
ndin
g co
sts
–
(100
,000
)(1
00,0
00)
–
–
–
–
(100
,000
) –
(1
00,0
00)
Acqu
isiti
on o
f non
-con
trol
ling
inte
rest
s ev
olva
Indi
a22
–
–
–
–
–
–
29,
606
29,6
06(2
9,60
6) –
At 1
Jan
uary
201
234
,581
,002
63,1
31,9
3897
,712
,940
(1,2
47,1
19)
17,2
03,5
404,
056,
083
(45,
046,
058)
72,6
79,3
8654
1,27
073
,220
,655
loss
for t
he p
erio
d–
––
––
–(1
6,08
9,94
8)(1
6,08
9,94
8)(5
63,6
18)
(16,
653,
566)
tran
slat
ion
diff
eren
ce–
––
––
(1,11
1,50
3)–
(1,11
1,50
3)–
(1,11
1,50
3)
Tota
l com
preh
ensi
ve lo
ss –
–
–
–
–
(1
,111
,503
)(1
6,08
9,94
8)(1
7,20
1,45
1)(5
63,6
18)
(17,
765,
069)
exer
cise
of s
tock
opt
ions
2619
,730
12,8
2432
,554
––
––
32,5
54–
32,5
54
effe
cts
of IF
RS s
hare
-bas
ed p
aym
ents
26–
––
–3,
253,
602
––
3,25
3,60
2–
3,25
3,60
2
proc
eeds
from
sal
e of
trea
sury
sha
res
23–
961,
499
961,
499
933,
496
––
–1,
894,
995
–1,
894,
995
Stoc
k ea
rn-o
ut p
aym
ent A
bund
a6
67,9
2495
,094
163,
018
––
––
163,
018
–16
3,01
8
equi
ty c
onsi
dera
tion
Flux
ome
asse
ts5
–38
7,72
238
7,72
2–
––
–38
7,72
2–
387,
722
liqu
idat
ion
of t
lt M
edic
al
––
––
51,2
20–
–51
,220
–51
,220
At 3
1 De
cem
ber
2012
34,6
68,6
5664
,589
,077
99,2
57,7
33(3
13,6
23)
20,5
08,3
622,
944,
579
(61,
136,
006)
61,2
61,0
47(2
2,34
9)61
,238
,698
the
acco
mpa
nyin
g no
tes
form
an
inte
gral
par
t of t
hese
con
solid
ated
fina
ncia
l sta
tem
ents
.
47
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
1. The company
evolva Holding SA (the “Company”) together with its subsidiaries (collectively “evolva” or the “Group”) is an international biosynthetic com-
pany which discovers and develops ingredients and processes for food, nutrition and pharmaceutical products.
evolva Holding SA is incorporated in Switzerland and has been the parent company of the evolva Group since 11 December 2009. the shares
of the Company are listed on the Swiss Stock exchange (SIX). the Group comprises the following subsidiaries: evolva SA (Reinach, Switzerland),
evolva nutrition (San Francisco, uSA), evolva Biotech private limited (Chennai, India), evolva Biotech A/S (Copenhagen, Denmark) and Arpida
uK (london, united Kingdom) as inactive entity. evolva, Inc. (palo Alto, uSA) has been wound down in 2012 as the contract with the uS Depart-
ment of Defense expired in early 2012.
As at 31 December 2012, the total headcount in evolva amounts to 82 full-time employees (Fte), of which 61 Fte are directly involved in R&D
activities while the remaining staff are employed with managerial, commercial and administrative tasks.
the legal domicile of the Company is:
evolva Holding SA
Duggingerstrasse 23
4153 Reinach, Switzerland
these consolidated financial statements were authorised for public disclosure in accordance with a resolution of the Board of Directors of
the Company dated 5 April 2013. they are recommended by the Board for approval by the shareholders at the Annual General Meeting on
7 May 2013.
2. Summary of significant accounting policies
2.1. Basis of preparationthe financial statements of evolva are prepared in accordance with the historical cost convention except for the revaluation to fair value of
certain financial assets and liabilities. evolva’s financial statements comply with the International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB) as well as with the following significant accounting policies. the financial
statements are presented in Swiss francs (CHF) and all values are rounded to the nearest CHF 1 except where otherwise stated.
2.2. Critical accounting estimates and judgementsthe preparation of the consolidated financial statements requires management to use certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Company’s accounting policies. Such estimates and assumptions
affect the reported amounts and disclosures in the consolidated financial statements and accompanying notes. Management evaluates on
an ongoing basis its estimates and assumptions on revenue recognition for contract revenue, allowances on current assets, valuation of
tangible assets, impairment of long-lived intangibles and goodwill, share-based compensation, provisions and income taxes. Management
bases its estimates and assumptions on historical experience, input from advisors and on various market and non-market specific assump-
tions that management believes to be reasonable under the circumstances. Based on the result of these estimates, management makes its
judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual outcomes could
differ from those estimates.
48
Notes to the Consolidated Financial Statements
the following areas involve assumptions and estimates that can have a significant impact on the consolidated financial statements:
� evolva is subject to income taxes in several jurisdictions. Judgement is required in determining the current and deferred assets and liabil-
ities for income taxes. the assessment as to whether deferred tax assets relating to tax loss carry-forwards and temporary differences have
to be recognised requires significant judgement.
� Actuarial valuations in connection with defined benefit pension plans where various assumptions (i.e. discount rates, expected return on
assets and mortality rates) bear significant uncertainties due to the long-term nature of the plans (refer to note 27).
� In connection with the acquisition of Abunda nutrition, Inc. and the purchase price accounting in accordance with IFRS 3, evolva had to
establish the fair value of the acquired assets and liabilities using management assumptions and estimates (refer to note 6).
� In accordance with IFRS 3, the contingent consideration related to the purchase price allocation is recognised at fair value. the fair value
is based on the estimated number of earn-out shares in evolva Holding SA which the Company may transfer to the former shareholders
of Abunda. the number of earn-out shares will depend on the impact of public announcements related to the assets acquired from
Abunda within 19 months after the acquisition. the estimated number of shares is multiplied by the evolva share price at the reporting
date. As a result, the value of the contingent consideration will be subject to changes over time reflecting changes in the fair value.
� evolva measures the cost of equity-settled transactions with key employees and directors by reference to the fair value of the equity in-
struments at the date at which they are granted and subtracting any payment by the recipient. estimating the fair value requires deter-
mining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the
grant. In case of options, this also requires determining the most appropriate inputs to the valuation model including the expected life of
the option, volatility and dividend yield and making assumptions about them. the assumptions and models used are disclosed in note 26.
the following areas involve a higher degree of judgement or complexity and can have a significant impact on the consolidated financial
statements:
� Acquisitions of companies are deemed as business combinations or as asset deals. the Company always performs detailed analyses of the
operational and financial implications before taking over a company. nevertheless, an acquisition or a merger with a company involves a
high degree of judgement.
2.3. Principles of consolidationSubsidiaries
Subsidiaries in which the Company has a controlling interest, directly or indirectly, are consolidated. Control is defined as the power to govern
the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is normally evidenced when the
Company owns, either directly or indirectly, more than 50% of the voting rights or potential voting rights of a company’s share capital that
are currently exercisable. Investments in which the Company does not exercise significant influence (generally ownership of less than 20% of
voting rights) are accounted for at cost. As of 31 December 2012, the Company holds only subsidiaries with more than 50% of the voting
rights.
Intra-Group transactions
Intercompany balances and transactions have been eliminated in the consolidation process. Intercompany transactions result from one
company providing services to another Group company or the transfer of assets within the Group.
49
Notes to the Consolidated Financial Statements
Basis of consolidation
the consolidation commences from the date on which control is transferred to the Company and subsidiaries are no longer consolidated
from the date that control ceases. the consolidated financial statements include the accounts of evolva Holding SA (Switzerland), evolva SA
(Switzerland), evolva, Inc. (uSA), evolva nutrition Inc. (uSA), evolva Biotech A/S (Denmark), evolva Biotech private limited (India) and Arpida
uK (united Kingdom).
Changes in the scope of consolidation
tlt Medical AG in liq. has been liquidated and deconsolidated as of the reporting date.
Business combinations
Business combinations are accounted for using the acquisition method. the cost of an acquisition is measured as the aggregate of the con-
sideration transferred, measured at the acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each
business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of
the acquiree’s identifiable net assets. Acquisition costs incurred are expensed.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combina-
tion is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair
value as of the acquisition date through profit and loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39 in
profit or loss. If the contingent consideration is classified as equity, it shall not be remeasured until it is finally settled within equity.
Goodwill
Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually iden-
tified and separately recognised.
Goodwill is initially measured at cost being the excess of the aggregate of consideration transferred, non-controlling interests and the ac-
quirer’s previously held equity interests in the acquiree over the net identifiable assets acquired and liabilities assumed. If this consideration is
lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised as a gain in the statement of financial per-
formance (badwill).
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill
acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to
benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
the carrying amount of goodwill will be tested annually for impairment or when events or changes in circumstances indicate that the carrying
amount is not recoverable. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating
units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (higher of value in use or fair value less
cost to sell) is less than their carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed
in future periods.
50
Notes to the Consolidated Financial Statements
Foreign currency translation
the consolidated financial statements are expressed in Swiss francs (CHF). each company in the Group uses its corresponding functional cur-
rency and items in the financial statements of each entity are measured using that functional currency. transactions in foreign currencies are
initially recorded in the functional currency using the exchange rate at the date of the transaction. Monetary assets and liabilities denom-
inated in foreign currencies are translated in the functional currency using the exchange rate at the reporting date. non-monetary items that
are measured at historical cost in a foreign currency are translated using the exchange rates as of the dates of the initial transactions.
upon consolidation, assets and liabilities of all subsidiaries reporting in foreign currency are translated into Swiss francs using the exchange
rate at the reporting date. their statement of financial performance and cash flow statement are translated at the average exchange rates in
which the transactions have taken place. the exchange differences arising on the translation into Swiss francs are recognised in the statement
of comprehensive income. on disposal of a foreign operation, the deferred cumulative amount recognised within equity relating to that par-
ticular foreign operation is recognised in the statement of financial performance as gain or loss on sale of that foreign operation.
Revenue recognition
Revenue from conducting research and development for a third-party is based on the stage of completion of research performed to date as a
percentage of total research to be performed and/or by the milestones achieved.
Revenue received from R&D partners as payment for access to evolva’s technology is recognised over the period during which the technology
is being applied to the relevant partner project.
Funding received from partners as compensation for evolva’s purchase of partner-specific related assets is presented in the statements of
financial position as deferred income and released over the period in which the Company is providing services with the particular asset. As
evolva has full control over these assets, evolva capitalises and depreciates these assets over their useful life in accordance with IFRIC 18.
public R&D grants (from the european union or national organisations or national governments) are recognised as income from R&D grants
over the relevant project period to match the related costs they are intended to compensate, on a cost-to-cost basis. public grants are recog-
nised, if there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates
to an expense item, it is recognised as income over the defined period to match the grant on a systematic basis to the costs that it is intended
to compensate.
Interest income is recognised on a time proportion basis using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments which are
readily convertible to known amounts and have a maturity of three months or less from the date of acquisition. this definition is also used for
the definition of cash and cash equivalents in the consolidated statement of cash flow.
Financial assets and liabilities
Financial instruments carried on the statement of financial position include cash and cash equivalents, receivables, financial investments (rent
deposits), trade accounts payable, certain accrued and other current liabilities as well as contingent consideration.
Cash and cash equivalents, accounts receivable, other receivables and rent deposits represent financial assets classified as loans and receiva-
bles whereas trade accounts payable, selected accrued and other current liabilities are financial liabilities at amortised cost, respectively, with
fixed or determinable payments that are not quoted in an active market. they arise when the Company provides or receives money, goods or
services directly to a supplier or from a client, respectively, with no intention of trading the receivable or payable. they are included in current
assets and current liabilities, except for maturities longer than twelve months after the reporting date, in which case they are classified as
non-current assets and non-current liabilities and shown separately in the statement of financial position. non-current assets/liabilities are
51
Notes to the Consolidated Financial Statements
Group of assets useful life (years)
Buildings 50
leasehold & building improvements 5-20
Furniture & fixtures 5-8
laboratory equipment 4-6
office & It equipment 3-8
measured at amortised cost, i.e. the amount at which the financial asset or liability is measured at initial recognition minus principal
repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and
the maturity amount.
Financial liabilities designated upon initial recognition as at fair value through profit or loss include contingent considerations. Gains or
losses on contingent considerations are recognised in the statement of financial performance.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
the Company assesses at each reporting date whether there is objective evidence that the financial assets are impaired. Impairment losses are
recognised in the statement of financial performance.
Plant and equipment
plant and equipment are recorded at historical cost less accumulated depreciation and amortisation. Depreciation expense is recorded utilising
the straight-line method over the estimated useful life of the assets or, if shorter, the term for the leasehold improvements. Assets are written
down to their estimated residual value, which usually is determined as zero. the useful lives are summarised as follows:
Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. the carrying
amount of the replaced part is derecognised. Repairs and maintenance costs are expensed as incurred.
Intangible assets
Costs of purchasing intellectual property rights are capitalised as intangible assets when it is probable that future economic benefits will be
generated. Costs of applying for patents for internally developed products and costs of defending existing patents are considered discovery
expenses and are expensed as incurred.
Intangible assets (other than goodwill) are initially valued at cost or, if acquired within the context of a business combination, recorded at fair
value. Generally, intangible assets are amortised over their useful lives on a straight-line basis. Intellectual property on acquired in-process
research and development is amortised on a straight-line basis once commercialisation of related products starts. patents and patent
applications are amortised over their patent lifetime.
Inventory
Inventory consists of chemical and biological agents as well as not used laboratory consumables. Inventory is measured at weighted average cost.
Impairment of long-lived assets
property, plant and equipment and intangible assets (other than goodwill) are reviewed for impairment whenever events or changes in cir-
cumstance indicate that the carrying amount of such assets may not be recoverable. When the recoverable amount of the property, plant and
equipment, being the higher of its fair value less costs to sell or its value in use, is less than its carrying amount, then an impairment in the
52
Notes to the Consolidated Financial Statements
carrying amount is recorded. evolva estimates its value in use based on the future cash flows expected to result from the use of the asset. For
purposes of assessing impairment, assets are grouped at the lowest level at which cash inflow can be separately identified. property, plant and
equipment to be disposed of are not depreciated and reported at the lower of carrying amount or fair values less cost to sell.
leases
leases are classified as operating leases where a significant portion of the risks and rewards of ownership are retained by the lessor. payments
made under operating leases (net of any incentives received from the lessor) are charged to the statement of financial performance on a
straight-line basis over the period of the lease.
leases of tangible fixed assets are classified as finance lease if evolva retains substantially all the risks and rewards of ownership. Finance
leases are capitalised at the lease commencement at the lower of the fair value of the leased asset and the present value of minimum lease
payments. each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance
outstanding. the corresponding rental obligations, net of finance charges, are included in other short-term and other long-term payables. the
interest element of the finance cost is charged to the statement of financial performance over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. the asset acquired under finance lease is depreciated over
the shorter of the useful life of the asset and the lease term.
Provisions
evolva recognises provisions when it has a present legal or constructive obligation to transfer economic benefits as a result of past events and
if a reasonable estimate of the obligation can be made and an outflow of resources is probable.
Share-based compensation
Key persons of evolva are eligible to participate in incentive option plans. the fair value of these options is estimated at the grant date and
recorded as an expense over the vesting period. the expense is charged to the statement of financial performance within operating expenses
and a corresponding increase is recorded in equity. At each reporting date, evolva revises its estimates of the number of options that are
expected to vest. It recognises the impact of the revision of original estimates, if any and significant, in the statement of financial performance
and a corresponding adjustment to equity. Any subsequent cash flows from exercises of vested options are recorded as an increase in equity.
the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when
the options are exercised.
Treasury shares
own equity instruments which are reacquired (treasury shares) are recognised at cost and deducted from equity. no gain or loss is recognised
in the statement of financial performance on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference
between the carrying amount and the consideration received or paid is recognised in equity.
Pension and other past employment benefits
In accordance with employment contracts, some of the evolva companies pay a monthly contribution to private pension plans. Contributions
are recognised as employee benefit expenses when they are due.
For the defined benefit plans the pension liability is calculated regularly by an independent actuary using the projected unit credit method. the
defined benefit obligation is measured as the present value of the estimated future cash flows using a discount rate based on the interest rate
of high-quality corporate bonds. the charge for such pension plans, representing the net periodic cost, is included in the staff costs. plan as-
sets are recorded at their fair values. Actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are
53
Notes to the Consolidated Financial Statements
recognised over the average remaining service lives of the related employees. they are recorded if these differences exceed 10% of the higher
amount of the present value of the defined benefit obligation and the fair value of plan assets at the beginning of the year (corridor method).
Research and development expenses
expenses for research and development comprise:
� Technology and discovery expenses: Salary and other compensation to discovery staff and consultants; intellectual property costs; labora-
tory costs and other expenses directly related to the technology and discovery activities, including corresponding depreciation of property and
equipment.
� Product development expenses: Salary and other compensation to development staff and consultants; intellectual property costs; costs
related to trials and other development of evolva’s product candidates, including costs of manufacturing; expenses for services under col-
laboration agreements as well as outsourced development at contract research institutions and the corresponding depreciation of property
and equipment.
Research and development expenses are fully charged to the statement of financial performance as incurred. evolva considers that regula-
tory and other uncertainties inherent in the development of its products preclude it from capitalising development costs under IFRS. Costs
incurred related to products which have achieved regulatory approval by the uS Food and Drug Administration or comparable regulatory body
are likely to be capitalised because it is probable that these costs will give rise to future economic benefits.
General and administrative expenses
General and administrative expenses consist of salary and other compensation to management, Board as well as commercial and administra-
tive staff; costs related to business development, investor relations, legal services, auditing, tax, financial advice and other expenses related to
general and administrative functions.
Deferred income taxes
Deferred taxes are provided using the liability method for all temporary differences between the tax bases of assets and liabilities and their
carrying values for financial reporting purposes, except for those temporary differences related to investments in entities where the timing of
their reversal can be controlled and it is probable that the difference will not reverse in the foreseeable future. Deferred tax assets relating to
the carry-forward of unused tax losses and other deductible temporary differences are recognised to the extent that future taxable profit is
expected to be available. the recognition and utilisation of deferred tax assets is assessed on an annual basis. Deferred taxes are based on tax
rates currently enacted or substantially enacted and which are expected to apply when the related deferred tax asset is realised or the deferred
tax liability is settled.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes relate to the same tax jurisdiction.
Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the net profit/(loss) attributable to ordinary shareholders of the parent by the weighted
average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing the net profit attributable to the
ordinary shareholders of the parent by the weighted average number of shares outstanding during the period adjusted for the conversion of all
dilutive potential ordinary shares.
54
Notes to the Consolidated Financial Statements
Borrowing costs
Borrowing costs which are directly attributable to an acquisition, construction or production of a qualifying asset as part of the cost of that
asset are capitalised. All other borrowing costs are recognised as expenses in the period in which they are being incurred.
Dividends
the Company may declare dividends upon the recommendation of the Board of Directors and the approval of shareholders at their Annual
General Meeting. the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable
future.
Segment reporting
evolva reports the financial performance of its operating segments according to the “management approach” required by IFRS 8. Generally,
the information to be disclosed is what management uses internally for evaluating segment performance and deciding how to allocate re-
sources. evolva operates in one segment of research and development. the Board of Directors and the Group Management being the chief
operating decision makers assess the performance of the operating segment and allocate resources on a consolidated level. evolva generates
revenue from R&D partnerships and the Company expects to generate revenues from commercialisation of its product candidates in future.
2.4. Changes in accounting policiesthe accounting policies which were adopted are consistent with those of the previous year, except for those described below.
Various standards and interpretations of the IFRS have been revised or were introduced with effective date 1 January 2012, or before. the follow-
ing changes in standards had neither an effect on accounting policies nor on reported amounts or disclosures in these financial statements:
� IAS 12 Amendment - Deferred tax: Recovery of underlying Assets.
� IFRS 7 Amendment - Disclosures: transfers of Financial Assets.
the Group will apply the following rules for the first time as of the dates stated in the respective standard. Currently being evaluated are the
following relevant standards and interpretations:
Various Annual Improvements to IFRSs. effective for annual periods beginning on or after 1 January 2013.
IAS 1 Amendment - presentation of Items of other Comprehensive Income. effective for annual periods beginning on or after 1 July 2012. employee Benefits. effective for annual periods beginning on or after 1 January 2012.
IAS 19 (revised) upon application of IAS 19R retrospectively as at 1 January 2012, evolva will recognise accumulated actuarial losses against opening equity and any movements therein immediately in other comprehensive income. According to IAS 19R, evolva would report a pension liability of CHF 1.3 million as at 1 January 2012, resp. CHF 1.1 million as at 31 December 2012, which would result in a decrease of equity of the same amount. CHF 0.1 million would impact evolva’s oCI.
IAS 27 (revised) Separate Financial Statements. effective for annual periods beginning on or after 1 January 2013.
IAS 28 (revised) Investments in Associates and Joint Ventures. effective for annual periods beginning on or after 1 January 2013.
IAS 32 Amendment – offsetting Financial Assets and Financial liabilities. effective for annual periods beginning on or after 1 January 2014.
55
Notes to the Consolidated Financial Statements
IFRS7 Amendment – Disclosures-offsetting Financial Assets and Financial liabilities. effective for annual periods beginning on or after 1 January 2013.
IFRS 9 Financial Instruments (issued in 2009 and 2010). effective for annual periods beginning on or after 1 January 2015.
IFRS 10 Consolidated Financial Statements. effective for annual periods beginning on or after 1 January 2013.
IFRS 11 Joint Arrangements. effective for annual periods beginning on or after 1 January 2013.
IFRS 12 Disclosure of Interests in other entities. effective for annual periods beginning on or after 1 January 2013.
IFRS 13 Fair Value Measurement. effective for annual periods beginning on or after 1 January 2013.
IFRIC 20 Stripping Costs in the production phase of a Surface Mine. effective for annual periods on or after 1 January 2013.
3. Risk management disclosure in accordance with Swiss Code of Obligations
Management regularly evaluates the Group’s identified operating and financial risks in regard to their probability and potential impact. With
the consent of the Board of Directors, appropriate measures are taken to eliminate or to mitigate the risks identified. the remaining risks for
the Group are continuously being monitored. the Board of Directors reviews the Group’s risk management on a regular basis.
4. Financial risk management
Financial risk factors
Financial risk management is governed by policies and guidelines approved by management. these policies cover foreign exchange risk,
interest rate risk, liquidity risk and credit risk.
liquidity risk
evolva’s objective when managing its liquidity is to secure sufficient funding for its operating activities, to ensure the Company’s ability to
continue as going concern and to preserve capital on the required statutory level.
Management regularly updates its cash flow projections to enable the Group companies to finance its research, development and commercialisa-
tion activities for at least one to two years. to date, evolva has financed its cash requirements primarily from revenues and equity financing.
the interest rates on the mortgage loans (related to the former facility in Allschwil) are either fixed to maturity or variable. Refer to note 13
for further details on mortgages and related interest rates. Standard mortgage covenants have been agreed with the bank. the Group is in
compliance with the bank covenants as at 31 December 2012 and the previous year.
the table below analyses evolva’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of
financial position to the contractual maturity date. the amounts disclosed in the table are the contractual undiscounted cash flows.
56
Notes to the Consolidated Financial Statements
Market risk
the evolva Group sources supplies of materials as well as discovery, development, consulting and other services in several countries and
operates three non-Swiss subsidiaries with significant operational activities. the Group is therefore exposed to foreign currency movements
affecting its net result and financial position, as expressed in Swiss francs. evolva monitors its currency exposures by regularly assessing future
spending plans in foreign currencies.
Foreign currency sensitivity analysis
evolva applies a sensitivity analysis to assess its foreign exchange exposure risks. evolva’s sensitivity analysis provides an approximate
quantification of the exposure in the event that certain parameters were to be met under a specific set of circumstances. the risk estimates
provided herein assume a simultaneous, parallel foreign exchange rates shift in which the CHF gains in value against all currencies by 5%.
less than 3 months
between 3 months
and 1 year
between 1 year
and 5 years Over 5 years TotalCarrying amount
31 December 2012
lease liabilities 120,907 362,721 1,787,540 3,596,873 5,868,041 3,840,646
Accrued and other current liabilities 775,242 1,029,229 339,178 – 2,143,648 2,143,648
trade accounts payables 1,015,113 – – – 1,015,113 1,015,113
Mortgage loans – 4,910,345 – – 4,910,345 4,740,000
preferred redeemable shares – – 1,661,986 6,451,398 8,113,384 3,972,494
Total 1,911,261 6,302,295 3,788,703 10,048,271 22,050,531 15,711,901
31 December 2011
lease liabilities 148,266 444,801 2,355,006 2,676,711 5,624,783 4,102,574
Accrued and other current liabilities 851,441 252,988 1,117,332 – 2,221,762 2,221,762
trade accounts payables 1,695,774 45,298 – – 1,741,072 1,741,072
Mortgage loans – 2,721,044 2,272,600 – 4,993,644 4,828,000
Contingent liability – – 2,806,250 – 2,806,250 2,806,250
preferred redeemable shares – – – 7,877,860 7,877,860 3,974,072
Total 2,695,480 3,464,131 8,551,188 10,554,571 25,265,369 19,673,730
2012 uSD EuR GbP Other Total
Monetary assets 83,094 196,149 372 4,184 283,800
Monetary liabilities (5,418) (42,550) (1,636) (6,407) (56,012)
Net exposure 77,675 153,599 (1,264) (2,223) 227,787
2011
Monetary assets 201,538 233,048 253 9,447 444,286
Monetary liabilities (26,469) (99,767) (6,936) (792) (133,964)
Net exposure 175,070 133,280 (6,683) 8,655 310,322
57
Notes to the Consolidated Financial Statements
the sensitivity analysis includes financial assets and liabilities related to third parties. As of 31 December 2012 and 2011, no hedge accounting
has been applied.
Interest rate risk
Interest rate risk arises from movements in interest rates, which could have adverse effects on evolva’s net result or financial position. loans
secured by property have either long-term fixed interest rates or if the interest rate is variable, evolva has the option of swapping into fixed
interested rates within a notice period of six months. other than cash and time deposits, the Group has no other material assets or liabilities
subject to interest income or expense.
Credit risk
Credit risk results mainly from counterparty’s failure to meet its obligation towards evolva. the major part of the Group’s revenues is derived
from commercial contracts with large international companies and government contracts for which the credit risk is limited. Cash and cash
equivalents are held with financial institutions with BBB- or better rating (Standard & poor’s long-term credit rating).
Fair value estimate of financial assets and liabilities
the carrying amount of the financial assets such as account receivables and other receivables as well as the financial liabilities such like trade
accounts payables and accruals and other liabilities are recorded at cost approximating fair value due to the short-term nature.
the fair value of the contingent consideration is calculated using valuation techniques that are not exclusively based on observable market
data / unobservable inputs (level 3 fair value measurements). See further information in note 6.
Capital management
the key objective of the Group’s capital management is to ensure evolva’s funding for its key activities planned on a mid-term basis, typically
two to three years. to maintain or adjust the capital structure, the Group may issue new shares, obtain convertible loans or extend existing
loans. until now, the company has been primarily financed with equity. In future new funding may also come as equity but the company will
pursue other types of financing if it deems the relevant terms and conditions to be attractive.
net debt includes interest-bearing loans and borrowings, loans from venture partners, trade and other payables, less cash and cash equiva-
lents. Capital includes convertible preference shares, equity attributable to equity holders of the parent less net unrealised gains reserve.
no changes were made to objectives, policies or processes during the years ending as at 31 December 2012 and 2011.
5. Changes in operation
As at 28 november 2012 (signing date), evolva SA acquired all scientific and technical assets related to fermentation-derived resveratrol from
Fluxome Sciences A/S (Fluxome), a private Danish company. under the asset deal, evolva SA acquired all patents, patent applications and
other intellectual property rights of resveratrol (CHF 1,295,589) as well as laboratory equipment (CHF 155,961).
In addition, evolva shall make the following payments to Fluxome A/S:
� 6 months after signing CHF 0.4 million in cash - calculated as 5% of the net cash raised by evolva in its public offering up to CHF 8 million;
� 12 months after signing, additional CHF 0.4 million in cash - calculated as 5% of the additional net cash raised by evolva in its public of-
fering up to CHF 16 million.
58
Notes to the Consolidated Financial Statements
If evolva raises less than CHF 8 million resp. CHF 16 million, the remainder shall be paid in evolva Holding SA shares.
Based on the transaction details above, the Company has accounted for a financial liability of CHF 0.8 million as at reporting date.
In addition, royalties of 5% on resveratrol sales up to accumulated royalties of DKK 20 million (c. CHF 3.2 million) shall be paid to the seller.
there is no time limit on the royalty. During the reporting period, the company did not pay any royalties as no sales occurred.
6. Business combinations
there have been no business combinations in 2012.
on 17 May 2011, evolva Holding SA entered into an agreement with the shareholders of Abunda nutrition, Inc. (“Abunda”), a privately-held
biotech company domiciled in San Francisco, uSA, for the acquisition of 100% of the shares in Abunda.
the acquisition was conducted as a two-step merger process between Abunda and two newly created subsidiaries of evolva. After the merger
process, Abunda (renamed evolva nutrition, Inc.) was the sole surviving entity. All shares and other securities in Abunda were cancelled and in
exchange Abunda shareholders received at closing of the acquisition 25 million evolva Holding SA shares. In addition former Abunda share-
holders may receive up to 12 million evolva Holding SA shares depending on the impact on the evolva stock of potential public announcements
related to the assets acquired from Abunda as well as certain cash payments depending on revenues generated by the assets acquired from
Abunda. Moreover, evolva Holding SA granted at closing of the acquisition 2,643,626 options to key staff and advisors of Abunda in replace-
ment for existing options in Abunda.
the acquisition was consummated on 8 July 2011 whereupon evolva nutrition became a direct wholly owned subsidiary of evolva Holding SA
and the latter gained full control over evolva nutrition.
evolva’s primary reasons for the acquisition were to gain access to a synergistic combination of Ip, certain promising product candidates and
an experienced team with a successful track record in the nutrition industry.
At closing of the acquisition, former Abunda shareholders held in total 15.2% of the shares of evolva Holding SA.
the fair values of the identifiable assets and liabilities of the acquired company at the date of acquisition were determined as follows:
Final purchase price allocation Fair value recognised on acquisition Previous carrying value
CHF uSD uSD Cash & cash equivalents 3,108,347 3,692,851 3,692,851
prepayments and other receivables 130,712 155,292 155,292
Financial investments (rent deposits) 5,926 7,040 7,040
It & telecom 4,155 4,937 4,937
Ip rights (patents, patent applications) 34,492,724 40,978,857 -
trade accounts payables (99,113) (117,750 ) (117,750)
Accruals and other payables (141,742) (168,396) (168,396)
Deferred tax liabilities (12,072,453 ) (14,342,600 ) -
Fair value of net assets acquired 25,428,556 30,210,231 3,573,974
Goodwill arising on acquisition 12,260,206 14,565,659 -
Total purchase consideration 37,688,762 44,775,890 -
Fair value of share consideration 30,000,000
Fair value of earn-out consideration 5,446,250
Fair value of options consideration 2,242,512
Total consideration transferred 37,688,762
59
Notes to the Consolidated Financial Statements
Fair value of intellectual property (IP)
the primary reason for the acquisition was to gain ownership of Abunda’s Ip portfolio in the food and nutrition area, in particular patents and
patent applications covering stevia. Based on cash flow projections for the relevant products over the next 20 years, evolva estimates the total
value of acquired patents and patents applications to be CHF 34.5 million.
Consideration transferred
the consideration transferred to Abunda shareholders comprised the initial transfer of 25 million evolva Holding SA shares at a closing price
of CHF 1.20 per share 1, in total CHF 30 million. In addition evolva estimated a fair value of CHF 5.4 million for the contingent consideration,
which consisted of
a. up to 12 million evolva Holding SA shares (stock earn-out) depending on the impact on the evolva stock of potential announcements
related to the assets acquired from Abunda within 19 months after the closing. the fair value was estimated using a probability weighted
average approach of stock earn-outs associated with a range of potential outcomes and combined with the share price at the closing date
of the acquisition.
b. cash payments (cash earn-out) related to potential revenues linked to agreements entered into for the assets contributed by Abunda
within 19 months after the closing. the cash earn-out amounted to a low two-digit percentage of the relevant revenues. the fair value
was estimated using a probability weighted average approach of cash earn-outs associated with a range of potential outcomes.
Moreover, evolva was obliged to replace existing options in Abunda with options in evolva with basically the same financial value. As
practically all Abunda options fully vested with the change of control, the fair value of these fully vested options was considered as part of the
consideration transferred.
Fair value of contingent consideration
As the contingent consideration is classified as a financial liability, evolva measures the fair value of the contingent consideration at each re-
porting date using partly unobservable inputs (level 3). the fair value is determined using a probability weighted average approach of the as-
sociated stock earn-out and cash earn-outs. Changes in fair value are presented in the consolidated statement of financial performance as
Change of fair value of contingent consideration.
on 14 March 2012, evolva issued 339,621 shares as stock earn-out payment in connection with a public announcement in December 2011
related to assets acquired from Abunda. the transaction results in a decrease of the contingent consideration of CHF 163,018.
As at 31 December 2012, the fair value of the contingent consideration amounts to CHF 0 compared to CHF 2.8 million as at 31 December 2011.
As the earn-out period expires as at 7 February 2013, the management does not expect any announcements related to the assets acquired from
Abunda between the year-end date and 7 February 2013. As a consequence the contingent consideration has fully been removed from the
Company’s liability resulting in a gain of CHF 2.6 million.
1 SIX closing price of evolva Holding SA share as at 8 July 2011.
60
Notes to the Consolidated Financial Statements
Goodwill
Goodwill is recognised as an asset from the acquisition date and is measured as the excess of the consideration transferred over the interest
in the net fair value of the identifiable net assets acquired.
the estimated goodwill reflects expected synergies of combining the activities and the teams of evolva and Abunda, in particular the access
to an extensive industry expertise of the Abunda team members and their network in the food and nutrition industry.
none of the goodwill is expected to be deductible for tax purposes.
additional information to the acquisition of abunda
For the period from 1 January to 31 December 2011, evolva nutrition has generated losses of CHF 2,784,583, of which CHF 1,412,374
incurred since acquisition date. the acquisition costs for evolva nutrition amount to approximately CHF 633,334 and are recorded as part of
the general and administrative costs.
7. Segment and geographical information
the Group has identified one segment, namely research and development of novel food, nutritional and pharmaceutical products.
the geographical breakdown of total revenues below reflects the location where evolva’s invoices are generated:
until end of 2011, the Group generated the majority of its income from contracts with two agencies under the uS Department of Defense.
During the last three years, evolva has signed several new contracts with international commercial partners. Since 2012, evolva generates its
revenues only from contracts with commercial clients, compared with 2011, when 51% of evolva’s revenues were derived from the Department
of Defense. there was no income from transfer of assets from the Department of Defense in 2012 (2011: 17%).
the geographical breakdown of non-current assets (excluding rent deposits) is as follows:
CHF 2012 2011
invoicing entity
Switzerland 6,354,772 5,783,073
united States of America - 4,351,470
Rest of the world 659,670 945,678
Total income 7,014,442 11,080,221
CHF 2012 2011
Switzerland 26,848,341 26,157,573
Rest of the world 49,762,443 53,489,751
Total non-current assets 76,610,784 79,647,324
61
Notes to the Consolidated Financial Statements
8. Research and development
Research and development expenses include the following functions:
9. Financial result
10. Income taxes
Consolidated income tax statement comprises:
CHF 2012 2011
Charges related to bank accounts (45,490) (317,018)
Interest expenses (643,603) (453,022)
SeDA commitment fee - (600,000)
Foreign exchange loss (267,560) (1,203,048)
Total financial expenses (956,653) (2,573,087)
Interest income 29,771 156,011
Foreign exchange gain 181,797 1,657,501
Total financial income 211,568 1,813,512
Net financial result (745,085) (759,575)
CHF 2012 2011
Current income taxes of which corresponding to the current period (1,652) (11,385)
Deferred income taxes of which related to the origination or reversal of temporary differences 1,503,696 1,133,729
Total income tax (expense) 1,502,044 1,122,344
CHF 2012 2011
technology & discovery 16,034,794 19,304,782
product development 3,489,611 8,188,679
Total R&D expenses 19,524,405 27,493,461
62
Notes to the Consolidated Financial Statements
the main elements contributing to the difference between the Company’s overall expected tax rate (as a weighted average of the tax rates in
the tax jurisdictions in which evolva operates) and the effective income tax expense are:
Impact of expenses not entitled for deduction for tax purposes includes mainly expenses for evolva’s share option plan, pension accounting
and SeDA expenses (note 23) under IFRS which are not deductible under any jurisdiction where evolva currently has operations.
11. Deferred tax assets and liabilities
net deferred tax liabilities resulted from capitalisation of intellectual property rights in evolva nutrition, Inc.
CHF 2012 2011
tax loss carried forward 1,154,935 347,536
Total deferred tax assets 1,154,935 347,536
temporary differences on patents and patent applications (12,244,159) (13,296,720)
Total deferred tax liabilities (12,244,159) (13,296,720)
Total net deferred tax liabilities (11,089,224) (12,949,184)
CHF 2012 2011
Accounting loss before income tax (18,155,610) (24,054,628)
expected tax rate (27.9%) (26.0%)
expected tax income at Group level 5,065,099 6,253,017
Impact of expenses not entitled for deduction for tax purposes (1,299,484) (1,488,468)
Impact of current losses for which no deferred tax is recognised (2,816,021) (4,257,907)
Change in contingent consideration 737,416 686,270
Impact of different tax rates (184,965) (70,568)
Effective income tax (expense) 1,502,044 1,122,344
63
Notes to the Consolidated Financial Statements
the movement of net deferred income taxes and liability position is as follows:
evolva has tax loss carry-forwards, which are available to offset future taxable income. the loss carry-forwards with their expiry dates are as
follows:
unrecognised tax loss carry-forwards and deductible temporary differences would give rise to deferred tax assets of CHF 19,635,279 in 2012
and CHF 19,796,241 in 2011.
CHF 2012 2011
Within one year 18,291,228 14,143,741
later than one year and no later than five years 132,385,733 105,315,431
More than five years 39,539,137 43,421,497
Total tax loss carry-forwards 190,216,098 162,880,669
- of which recorded 3,339,869 821,682
- of which unrecorded 186,876,229 162,058,987
CHF 2012
1 January 2011 (446,458)
tax income during the period 1,133,729
Deferred taxes acquired in business combination (12,072,453)
translation effects (1,564,002)
31 December 2011 (12,949,184)
tax income during the period 1,480,089
translation effects 379,871
31 December 2012 (11,089,224)
64
Notes to the Consolidated Financial Statements
12. Property, plant and equipment
CHFlaboratoryequipment
Furnitures and fixtures
Office and iT equipment
leaseholdimprovements building land Other Total
Historical cost
1 January 2011 8,338,997 1,409,909 1,091,556 4,663,190 - - 304,048 15,807,700
Additions 416,007 4,400 153,282 118,475 - - 321,643 1,013,806
Disposals (42,020) (8,962) (32,340) - - - (2,422) (85,744)
Acquisition - 337 3,818 - - - - 4,155
Reclass from assets held for sale - - - - 4,874,694 445,500 - 5,320,194
transfers (1,570) (445,100) 1,570 445,100 - - - -
translation effects (88,584) (51,397) (46,942) (39,857) - - 186 (226,595)
31 December 2011 8,622,829 909,270 1,174,636 5,186,908 4,874,694 445,500 623,455 21,837,293
Accumulated depreciation
1 January 2011 (4,473,310) (214,078) (679,830) (602,357) - - (229,068) (6,198,643)
Additions (1,297,231) (87,623) (190,225) (447,247) (327,557) - (126,029) (2,475,912)
Impairment assets under IFRIC 18 (1,353,319) - - - - - - (1,353,319)
Disposals 2,373 4,337 30,553 - - - - 37,263
Reclass from assets held for sale - - - - (977,541) - - (977,541)
transfers - - - - - - - -
translation effects (111,754) 4,146 24,398 39,857 - - (323) (43,677)
31 December 2011 (7,233,242) (293,302) (818,797) (1,009,747) (1,305,098) - (355,419) (11,015,605)
Net book value at 31 December 2011 1,389,587 615,968 355,840 4,177,161 3,569,596 445,500 268,036 10,821,705
Historical cost
1 January 2012 8,622,829 909,270 1,174,636 5,186,908 4,874,694 445,500 623,455 21,837,293
Additions 375,419 - 39,725 30,090 - - 45,898 491,132
Disposals - - - - - - - -
transfers 364,450 - - - - - (364,450) -
translation effects (139,441) (14,387) (19,989) (18,702) - - (7,552) (200,071)
31 December 2012 9,223,258 894,883 1,194,372 5,198,296 4,874,694 445,500 297,351 22,128,354
Accumulated depreciation
1 January 2012 (7,233,243) (293,302) (818,797) (1,009,747) (1,305,098) - (355,419) (11,015,605)
Additions (417,126) (74,728) (186,698) (363,790) (218,372) - (64,473) (1,325,188)
Disposals - - - - - - - -
transfers (116,173) - - - - - 116,173 -
translation effects 116,672 3,562 13,305 14,183 - - 6,368 154,090
31 December 2012 (7,649,870) (364,469) (992,190) (1,359,354) (1,523,470) - (297,351) (12,186,703)
Net book value at 31 December 2012 1,573,388 530,415 202,182 3,838,942 3,351,224 445,500 - 9,941,669
65
Notes to the Consolidated Financial Statements
transfers in 2012 are related to reclassification of laboratory equipment, which initially was used for other purposes and has been reclassified
as laboratory equipment in 2012.
the Group recorded depreciations of CHF 1,183,554 in 2012 (2011: CHF 2,340,950) as part of technology and discovery expenses, CHF 25,027
(2011: CHF 11,883) as product development expenses and CHF 116,607 (2011: CHF 123,080) as part of general and administrative expenses in
the statement of financial performance.
13. Mortgages and loans
evolva’s property in Allschwil, Switzerland, has a book value of CHF 3,796,724 (2011: CHF 4,015,096) and associated mortgages amount to CHF
4,740,000 (2011: CHF 4,828,000) as at 31 December 2012. the value of the premises has been assessed by an independent real estate expert as
at 31 December 2011. the valuation did not result in any impairment. evolva deems the value of its building to be not below market value as
at 31 December 2012.
CHF 2,200,000 of the mortgage loans are due to repayment by 31 December 2013. the remaining credit facility of CHF 2,540,000 is agreed on
a short-term credit contract which can be swapped into a fixed credit contract within a notice period of six months.
14. Intangible assets
patents and patent applications are amortised in accordance with the patent life of 20 years. evolva has previously acquired certain rights to
intellectual property that has been developed by other companies but which can be used in combination with evolva’s technology platform
(“Ip assets”). they are amortised over a period of ten years.
As at 28 november 2012, evolva acquired intellectual property rights from Fluxome Sciences A/S related to a product called resveratrol at a
value of CHF 1,295,589 (note 5).
CHF 2012 2011
Current (short-term) 4,740,000 2,628,000
non-current - 2,200,000
Total 4,740,000 4,828,000
66
Notes to the Consolidated Financial Statements
CHF iP assets Patents & patent applications Goodwill Total
Historical cost
1 January 2011 280,717 - 16,848,598 17,129,315
Additions from acquisition - 34,492,724 12,260,207 46,752,931
translation effects - 4,472,023 1,589,550 6,061,573
31 December 2011 280,717 38,964,747 30,698,355 69,943,819
Accumulated amortisation
1 January 2011 (105,750) - - (105,750)
Amortisation of the year (38,072) (908,757) - (946,829)
translation effects - (65,361) - (65,361)
31 December 2011 (143,822) (974,118) - (1,117,940)
Net book value at 31 December 2011 136,895 37,990,629 30,698,355 68,825,619
Historical cost
1 January 2012 280,717 38,964,747 30,698,355 69,943,819
Additions from acquisition - 1,295,589 - 1,295,589
translation effects - (1,144,950) (406,965) (1,551,914)
31 December 2012 280,717 39,115,386 30,291,390 69,687,494
Accumulated amortisation
1 January 2012 (143,822) (974,118) - (1,117,940)
Amortisation of the year (38,072) (1,921,969) - (1,960,041)
translation effects - 59,603 - 59,603
31 December 2012 (181,894) (2,836,484) - (3,018,377)
Net book value at 31 December 2012 98,823 36,278,903 30,291,390 66,669,116
Amortisation of intangible assets is fully recorded as technology and discovery expense.
Impairment testing of goodwill
Goodwill is tested for possible impairment annually at Group level. Management deems the Group with its technology platform as one cash-
generating unit (CGu). evolva performed the impairment test determining the recoverable amount based on the CGu’s fair value less costs to
sell represented by the market capitalisation. As at 31 December 2012, evolva’s market capitalisation is higher than the carrying value of the
cash-generating unit resulting in no impairment.
67
Notes to the Consolidated Financial Statements
Sensitivity analyses
Depending on the future development of the market price of its shares, evolva may be required to record impairment to the goodwill. If, based
on the share price at year-end of CHF 0.36 (2011: CHF 0.54), the share price was to drop more than 2% (2011: 22%), an impairment of the
goodwill position would be required. Since reporting date evolva’s share price has increased to a level, which makes impairment of the goodwill
position unlikely for the time being.
15. Inventory
As at reporting date, no write-down of inventories has been recognised.
16. Prepayments and accrued income
17. Other receivables
18. Trade receivables
Accounts receivables result from partnership collaboration contracts with commercial clients. As at reporting date, no trade receivables are
overdue and no allowance for bad debt has been recognised.
CHF 2012 2011
laboratory consumables 45,965 35,622
Chemical agents 13,689 10,342
Total inventory 59,654 45,964
CHF 2012 2011
prepayments 81,000 343,541
Accrued income 265,686 411,781
other accruals 148,327 1,133
Total 495,013 756,455
CHF 2012 2011
Withholding tax 5,501 48,093
Credit balance VAt 210,675 308,298
other receivables 85,867 144,559
Total 302,042 500,950
68
Notes to the Consolidated Financial Statements
19. Cash and cash equivalents
1 CHF 150,000 is pledged as security for credit card debts.
the Group has, in addition to the total cash and cash equivalents disclosed above, CHF 1 million restricted cash to fulfil collateral requirements
of its outstanding mortgage loans.
the effective interest rate received on cash and cash equivalents amounts to 0.18% (2011: 0.52%).
20. Share capital
the development of issued share capital over the past two years is as follows:
Total number of shares Evolva Holding Sa CHF
1 January 2011 139,560,125 27,912,025
Share issue from conditional capital 344,885 68,977
Share issue from authorised capital 33,000,000 6,600,000
Share issue from capital increase - -
31 December 2011 172,905,010 34,581,002
Share issue from conditional capital 438,269 87,654
Share issue from authorised capital - -
Share issue from capital increase - -
31 December 2012 173,343,279 34,668,656
CHF 2012 2011
Cash at bank and in hand1 8,922,822 21,881,702
Short-term bank deposits 182,429 811,939
Total cash and cash equivalents 9,105,251 22,693,641
69
Notes to the Consolidated Financial Statements
21. Conditional and authorised capital
the development of conditional and authorised capital over the past two years is as follows:
22. Treasury shares
the development of treasury shares held by the Group over the past two years is as follows:
Conditional shares Authorised shares
Number of shares CHF Number of shares CHF
1 January 2011 43,386,144 8,677,229 31,906,510 6,381,302
Approved by AGM 2011 17,073,629 3,414,726 37,500,000 7,500,000
Issued (344,885) (68,977) (33,000,000) (6,600,000)
expired - - - -
31 December 2011 60,114,888 12,022,978 36,406,510 7,281,302
Approved by AGM 2012 23,000,000 4,600,000 50,000,000 10,000,000
Issued (438,269) (87,654) - -
expired - - (9,406,510) (1,881,302)
31 December 2012 82,676,619 16,535,324 77,000,000 15,400,000
bonus shares1 SEDA & other financing4 Total treasury shares
Shares CHF Shares CHF Shares CHF
1 January 2011 1,557,018 - - - 1,557,018 -
Issuance - - 8,000,000 1,600,000 8,000,000 1,600,000
Sale2 (284,268) - (1,764,404) (352,881) (2,048,672) (352,881)
31 December 2011 1,272,750 - 6,235,596 1,247,119 7,508,346 1,247,119
Issuance - - - - -
Sale3 (1,077,006) - (4,667,480) (933,496) (5,744,486) (933,496)
31 December 2012 195,744 - 1,568,116 313,623 1,763,860 313,623
1 treasury shares presented as at 1 January 2011 arose from an issuance of bonus shares by evolva SA before the reverse acquisition of Arpida AG in 2009. Hence their book value is nil.
2 As part of a coordinated share sale by the key shareholders of evolva, 284,268 shares were sold on behalf of Ventureast/ApIDC in 2011. the proceeds from the sale of these treasury shares were directly transferred to Ventureast/ApIDC. In exchange for the treasury shares sold, evolva SA increased its participation in evolva India by 1.2% to 60%
3 In 2012, 1,077,006 shares have been transferred to Fluxome Science A/S as part of the consideration for intellectual property and laboratory equipment acquired (note 5). 4 Refer to note 23 for further information on SeDA.
70
Notes to the Consolidated Financial Statements
23. Standby equity financing (SEDa) and treasury shares
on 15 August 2011, evolva entered into a Standby equity Distribution Agreement (SeDA) with YA Global Master SpV ltd. (YA Global) as part of the
medium-term funding of evolva’s operations. under the terms of the agreement, YA Global has committed to provide up to CHF 30 million in
equity financing over a 36-month period in individual advances of up to CHF 600,000. In exchange for the funds to be provided, YA Global will
receive evolva Holding SA shares. It remains at the sole discretion of evolva to determine when to draw the advances and the amount to draw.
evolva Holding SA created eight million treasury shares out of its authorised capital in 2011 to be used for the share issues under the SeDA
agreement as well as for other financing purposes.
Within the reporting period, evolva has drawn CHF 1,894,955 (net proceeds) from SeDA, leading to delivery of 4,667,480 shares to YA Global.
In 2011, evolva delivered 1,099,437 shares to YA Global for total net proceeds of CHF 824,998.
24. loss per share
Basic loss per share is calculated by dividing the net loss attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year. For the calculation of diluted loss per share, profit and loss and the weighted average number of ordinary
shares are adjusted for the effects of all dilutive potential ordinary shares outstanding during the year.
For the years ended 31 December 2012 and 31 December 2011, basic and diluted loss per share is based on the weighted average number of
shares issued and outstanding, and excludes shares to be issued upon the exercise of options or conversion of preferred shares as these po-
tential ordinary shares would be anti-dilutive. In case evolva shows a profit in the future, the options may have a dilutive effect on the net
profit per share and will need to be considered for the purpose of this calculation.
25. Preferred redeemable shares
evolva Biotech private limited (India) received financing from 2005 to 2010 from Ventureast and ApIDC, two Indian venture capital funds. At
each investment, the investors have been issued with convertible preference shares that are redeemable after ten years unless they have been
converted to shares in evolva Holding SA. Based on the terms of the preference shares and a discount rate of approximately 6%, part of these
compounded instruments has been recognised as long-term debt while the remainder has been recognised as part of equity / non-controlling
interests.
CHF 2012 2011
net loss attributable to shareholders of the parent (CHF) (16,089,948) (22,451,971)
Weighted average number of shares outstanding 173,323,434 156,426,918
Basic and diluted loss per share (CHF) (0.09) (0.14)
71
Notes to the Consolidated Financial Statements
Since 2007, the two investors provided additional financing of totally CHF 6,565,000, of which CHF 2,941,000 (45%) has been recognised in
equity as increase of non-controlling interests while the remainder has been accounted for as long-term debt. In 2011, CHF 515,502 from sales
of treasury shares were transferred to the two investors in connection with the acquisition of 1.2% of interests in evolva India (note 22).
Interests charged on behalf of these preferred redeemable shares amount to CHF 234,462 in 2012 and to CHF 239,655 in 2011.
26. Incentive share and option programmes
the Board of Directors administers the Group’s option plans. the granting of options to management, employees and members of the Board
of Directors is done according to the Company’s option plan regulations.
In January 2012, a new share-based option plan (eVe IV) was established. options under this plan were granted on 1 January 2012 and will
vest over four years. options under this plan were granted to Board members, Management team and other employees.
In addition, evolva established a second share-based option plan (eVe V) in 2012. under this plan, all members of Board and management and
some staff members voluntarily agreed to exchange part of their cash compensation into share options. the option plan was launched in July
2012 with the aim to reduce the Company’s cash outflow over a twelve-months period. options for this plan were purchased as at 1 July 2012
and vest over a period of six to twelve months.
the table below illustrates the number-weighted average exercise price in CHF (WAep), the number of options outstanding (options) and the
weighted average years remaining contractual life (WAYCl) as at 31 December 2012.
A summary of options granted, exercised, forfeited and outstanding for the above plans is as follows:
Year of grant WAEP Options WAYCl
2009 - eVe I 0.33 13,635,891 6.9
2010 - eVe Ib 1.08 160,000 7.0
2011 - eVe II 1.64 2,731,505 8.3
2011 - eVe III (Abunda replacement) 0.20 2,543,626 7.0
2012 - eVe IV 0.55 5,157,650 9.0
2012 - eVe V 0.37 3,670,288 10.5
Total 0.50 27,898,960 7.9
Number of options WAEP
2012 2011 2012 2011
outstanding at 1 January 19,450,350 14,617,809 0.51 0.33
Granted 8,985,298 5,695,251 0.48 0.96
exercised 98,648 344,885 0.33 0.29
Forfeited 438,040 517,825 0.70 0.69
expired - - - -
Outstanding at 31 December 27,898,960 19,450,350 0.50 0.51
- of which exercisable 17,578,314 10,047,505 0.43 0.38
72
Notes to the Consolidated Financial Statements
In 2012 and 2011, the following share-based payment expense for evolva option plans was recorded in evolva’s statement of financial perfor-
mance:
the fair value of the granted options has been determined by using a binomial option valuation model. the resulting expenses for the Com-
pany are recognised over the vesting period. the key parameters in the valuation model were as follows:
In addition to all eVe plans, a total of 1,058,714 former Arpida options are outstanding and exercisable. the exercise price is between CHF 0.67
and CHF 22.00. All former Abunda option plans expire between 2017 and 2019. there have been no exercises of former Arpida options during
the reporting period.
27. Employee benefits and compensation
evolva maintains retirement plans covering its employees in Switzerland, Denmark and India. the plans for evolva Biotech A/S (DK) and evolva
Biotech private limited (India) are considered to be defined contribution plans and therefore no actuarial calculations under IAS 19 have been
performed. expenses of CHF 134,653 (2011: CHF 107,311) were recognised for the Danish plan and expenses of CHF 61,644 were recognised
for the Indian plan in 2012 (2011: CHF 66,600).
the Swiss plan is considered a defined benefit plan in accordance with IAS 19. the plan is structured according to the principles of the Swiss
occupational Benefits law (BVG) and is substantially identical to the BVG programme except that the Company plan also covers salaries above
the salary limit of the BVG. the Company and its employees pay retirement contributions, which are defined as a percentage of the employees’
insured salaries, to a collective pension fund operated by an insurance company. Interest is credited to the employees’ accounts at the min-
imum rate provided in the plan, payment of which is guaranteed by the insurance contract. Additionally, the plan provides benefits on the
death or long-term disability of plan participants.
2012 2011
technology & discovery 947,917 1,651,984
product development 508,403 923,546
General & administrative 1,797,282 2,467,359
Total expenses 3,253,602 5,042,889
Evolva option plans EVE V EVE iV EVE iii EVE ii EVE ib EVE i
Grant date 1.7.2012 1.1.2012 8.7.2011 31.3.2011 1.1.2010 8.12.2009
expiration date 31.12.2022 31.12.2021 31.12.2019 30.3.2021 31.12.2019 7.12.2019
Share price at grant CHF 0.40 CHF 0.54 CHF 1.20 CHF 1.50 CHF 1.04 CHF 1.35
exercise price CHF 0.37 CHF 0.55 CHF 0.20 CHF 1.64 CHF 1.08 CHF 0.33
Volatility 52.5% 52.5% 60.0% 60.0% 60.0% 60.0%
expected dividend yield 0% 0% 0% 0% 0% 0%
Risk-free rate 0.68% 1.117% 2.095% 2.329% 1.888% 1.888%
Fair value per option at grant CHF 0.23 CHF 0.26 CHF 1.02 CHF 0.82 CHF 0.65 CHF 0.98
73
Notes to the Consolidated Financial Statements
For accounting purposes, this insurance contract represents the sole asset of the plan. the fair value of plan assets is the estimated cash
surrender value at the respective reporting date.
the amounts recognised in the statement of financial position for the Swiss plan are determined as follows:
Change in plan assets
Funding status
CHF 2012 2011
benefit obligation at 1 January 6,450,637 4,960,686
Current service costs 521,226 155,370
Interest costs 136,552 142,754
plan participants' contributions 299,480 439,788
Benefits paid / transfers in/out (1,062,840) 20,933
Actuarial (gains)/losses (602,940) 731,106
benefit obligation at 31 December 5,742,115 6,450,637
CHF 2012 2011
Fair value of plan assets at 1 January 4,918,763 3,846,937
expected return on plan assets 117,171 109,853
Actuarial gains/(losses) (133,188) (132,364)
employer contributions 299,480 633,616
plan participants' contributions 299,480 439,788
Benefits paid / transfers in/(out) (1,062,840) 20,933
Fair value at 31 December 4,438,866 4,918,763
CHF 2012 2011
Fair value of plan assets 4,438,866 4,918,763
present value of funded obligations 5,742,115 6,450,637
Over/(under)funding (1,303,249) (1,531,874)
unrecognised actuarial (gains)/losses 959,451 1,514,808
Net recognised asset/(liability) (343,798) (17,066)
74
Notes to the Consolidated Financial Statements
The net periodic costs recognised in the statement of financial performance
of the total charge, CHF 225,445 (2011: CHF 117,452), CHF 29,406 (2011: CHF 22,667) and CHF 71,881 (2011: CHF 65,938) were included in
technology and discovery, product development, and general and administrative expenses, respectively. the actual return on pension plan
assets is presented below:
the Company expects to contribute approximately CHF 320,000 to the plan in 2013.
Overview and experience adjustments
CHF 2012 2011
Service costs 521,226 155,370
Interest costs 136,552 142,754
expected return on plan assets (117,171) (109,853)
Recognition of actuarial (gains)/losses 85,605 17,786
Net periodic cost 626,212 206,057
2012 2011
expected return on plan assets 117,171 109,853
Actuarial loss on assets (133,188) (132,364)
actual return on plan assets (16,017) (22,511)
CHF 2012 2011 2010 2009 2008
plan assets 4,438,866 4,918,763 3,846,937 3,413,577 1,164,360
Defined benefit obligation 5,742,115 6,450,637 4,960,646 3,989,816 1,728,308
Over/(under)funding (1,303,249) (1,531,874) (1,113,709) (576,239) (563,948)
experience adjustments:
- Fair value of plan assets 117,171 109,853 85,339 65,746 31,612
- Defined benefit obligation (loss) (823,516) 737,392 (127,105) (268,627) (19,952)
75
Notes to the Consolidated Financial Statements
the principal actuarial expectations used for the Swiss plans were as follows:
Assumptions regarding the mortality experience are based on published statistics (BVG 2010).
Staff costs
28. accrued and other current liabilities
29. Deferred income
Some of the Company’s R&D partnering contracts include a technology access fee payment to evolva. these technology access fee payments
are presented in the statement of financial position as deferred income and are released over the period during which the Company is provid-
ing the services. As at 31 December 2012, evolva reports deferred income of CHF 1,989,136 (2011: CHF 634,692).
2012 2011
Discount rate 1.90% 2.25%
Return on plan assets within the period 1.90% 2.50%
Future salary increases 2.00% 2.00%
price inflation rate 1.00% 1.00%
long-term interest on retirement savings 1.90% 2.50%
Future pension increases 0.00% 0.00%
CHF 2012 2011
Wages and salaries 8,854,637 9,780,429
Share-based compensation 3,253,602 5,042,889
Social security costs 619,588 734,284
pension costs 559,616 612,633
other staff-related costs 386,049 477,517
Total staff-related costs 13,673,491 16,647,752
CHF 2012 2011
Accrued R&D costs 91,750 742,482
Accrued Fluxome consideration (note 5) 818,711 -
Accrued vacation 775,242 751,441
Accrued salaries and social security 210,518 252,988
other accruals 247,428 474,849
Total 2,143,648 2,221,762
76
Notes to the Consolidated Financial Statements
30. Finance lease
the Company has entered into rental contracts for office and laboratory space in Switzerland and for laboratory equipment in Denmark.
Some elements of these contracts qualify as a finance lease. At signing of the contracts, the rental period was 15 respectively 14 years unless
terminated earlier or extended.
the elements not qualifying for finance lease are disclosed in note 32 “Commitments and contingencies”.
In case evolva terminates the rental contract in Reinach, Switzerland, an amount of CHF 3,212,170 will become payable for leasehold
improvements. this amount gradually declines to CHF 0 by 30 november 2026.
31. Compensation to management and Board and related party transactions
the total remuneration for evolva’s Group Management team and Board of Directors during 2012 and 2011 was as follows:
Total compensation of Board of Directors and Group Management Team
Finance lease commitments 2012 2012 2011 2011
CHF
Future minimum lease payments
Present value of future minimum lease payments
Future minimum lease payments
Present value of future minimum lease payments
Within one year 483,629 431,692 593,066 524,722
Between one and five years 1,787,540 1,370,455 2,355,006 1,783,153
More than five years 3,596,873 2,038,499 2,676,711 1,794,699
Total minimum lease payments 5,868,041 3,840,646 5,624,783 4,102,574
less amounts representing financing charges (2,027,395) (1,522,209)
Total at 31 December 3,840,646 4,102,574
CHF 2012 2011
Short-term benefits: wages and salaries / Board compensation1 1,802,447 2,030,997
post-employment benefits (pension fund) 346,010 400,194
other long-term benefits - -
termination benefits - -
Share-based payments (fair value according to IFRS 2)2 1,960,583 4,815,649
Total compensation 4,109,040 7,246,840
1 Short-term employee benefits comprise salaries and bonus payments (none in 2012). In July 2012, Board and management members accepted to replace some of their cash compensation for 2012 and 2013 with stock options of evolva.
2 Based on the grant-date fair value of stock options granted in 2012 (resp. 2011) using a binominal assessment model.
77
Notes to the Consolidated Financial Statements
Group Management Team compensation3
Board of Directors compensation
3 evolva’s Group Management team includes the Management team of evolva Holding SA plus the Ceos of evolva nutrition, Inc. and evolva Biotech private limited (India).4 Due to the acquisition of evolva nutrition, Inc. in July 2011, the 2011 numbers do not include the remuneration to the Ceo of evolva nutrition, Inc. for the first half-year 2011.5 Shows number of stock options granted in reporting period. options might vest over different periods, depending on the vesting scheme (refer to note 26).
32. Commitments and contingencies
Operating lease commitments
the future minimum lease payments under non-cancellable operating leases that are not accounted were as of year-end:
CHF 2012 2011
Short-term employee benefits4 1,576,197 1,740,997
post-employment benefits (pension fund) 327,797 382,069
Total compensation 1,903,994 2,123,066
Stock options (numbers)5 3,298,005 -
CHF 2012 2011
Short-term employee benefits 226,250 290,000
post-employment benefits (pension fund) 18,213 18,125
Total compensation 244,463 308,125
Stock options (numbers)5 1,973,250 560,000
CHF 2012 2011
Within one year 784,143 920,638
later than one year and not later than five years 2,771,709 3,221,757
later than five years 5,360,004 3,138,763
Total 8,915,856 7,281,157
78
Notes to the Consolidated Financial Statements
Contingent liabilities
As part of its R&D operations, evolva has entered into agreements with other firms that either a) give evolva access to the partners’ intellec-
tual property rights, or b) provide for these firms to conduct discovery or development work at their risk. under these agreements, evolva will
be due to make certain milestone payments to the firms depending on whether evolva decides to progress the relevant products to defined
development and/or marketing milestones. evolva does not expect any significant payments before 2016. In the event that some of the
products reach market, evolva will have to pay 1.5-4% royalty on product revenues or up to 20% royalty on evolva licensing revenues.
In addition, the former owners of Abunda nutrition, Inc. are entitled to a share earn-out which will be determined based on the change in the
Company’s market cap related to announcements regarding the former Abunda assets. the earn-out consideration expires as at 7 February
2013. evolva does not expect any payments resulting from this agreement in 2013.
Other commitments
the Company has entered into various purchase commitments for services and materials as part of its ordinary business. these commitments
are not in excess of current market prices and reflect normal business operations.
33. Events subsequent to the reporting date
on 17 January 2013, evolva signed a 3½ year collaboration agreement with Ajinomoto Co., Inc., Japan, for the joint development of novel
fermentation production routes for a natural functional ingredient for application in personal care. the total fees and milestone payments to
evolva during the collaboration will amount to more than CHF 10 million. In case of commercialisation, evolva will receive a royalty as a
percentage on products sold.
As at 7 February 2013, the earn-out period related to the acquisition of Abunda Inc. expired. In 2012, 339,621 shares were transferred as
stock earn-out payment in connection with a public announcement related to assets acquired from Abunda Inc. (note 6). As no further public
announcements were made in this connection between the reporting date and the date of approval of these financial statements, the
remaining stock earn-out and cash earn-out payments expired.
As at 6 March 2013, the Company signed a collaboration agreement with Cargill, Inc. to jointly develop and commercialise fermentation-
derived steviol glycosides. Cargill will be responsible for commercialization and has agreed to make a CHF 4.5 million equity investment in
evolva. Additionally, evolva is entitled to receive up to uSD 7.5 million in milestone payments and has the right to a 45% participation in the
final business.
As at 27 March, 2013 the Company successfully closed a financing round of CHF 31.3 million, which includes CHF 4.5 million from Cargill as
mentioned above. the total new shares subscribed amount to 52,214,472.
As at 25 March 2013, the Company has issued 14 million treasury shares (from authorised capital) at nominal value, which will be held for use
under the Company’s agreements with SeDA and Ventureast respectively.
Between the reporting date and the authorisation of these consolidated financial statements by the Board of Directors as at 5 April 2013,
evolva has issued 1.6 million shares for SeDA advances, which contributed to a CHF 0.6 million cash inflow.
79
Report of the Statutory Auditor on the Consolidated Financial Statements
To the General Meeting of Evolva Holding Sa, Reinach
As statutory auditor, we have audited the consolidated financial statements of evolva Holding SA, Reinach, which comprise the consolidated
statement of financial position, consolidated statement of financial performance, consolidated statement of comprehensive income, consoli-
dated statement of cash flow and the consolidated statement of equity and notes to consolidated financial statement (pages 43 to 78) for the
year ended 31 December 2012.
Board of Directors’ responsibility
the Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) and the requirements of Swiss law. this responsibility includes designing, implementing and
maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error. the Board of Directors is further responsible for selecting and applying appropriate
accounting policies and making accounting estimates that are reasonable in the circumstances.
auditor’s responsibility
our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accord-
ance with Swiss law and Swiss Auditing Standards and International Standards on Auditing. those standards require that we plan and perform
the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
the procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consoli-
dated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system.
An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the financial position,
the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor oversight Act (AoA) and independence (article 728 Code
of obligations [Co] and article 11 AoA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 Co and Swiss Auditing Standard 890, we confirm that an internal control system exists,
which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
ernst & Young ltd
Jürg Zürcher David Haldimannlicensed audit expert licensed audit expert(Auditor in charge)
Basel, 5 April 2013
80
Notes to the Consolidated Financial Statements
81
Statutory Financial Statements of Evolva Holding SA
Statutory Financial Statements 2012 of Evolva Holding SA
Statement of financial position as of
CHF 31 December 2012 31 December 2011
Assets
Current assets
Cash and cash equivalents 104,815 4,263,969
other receivables 171,665 51,412
prepaid expenses - 101,931
Total current assets 276,480 4,417,311
Non-current assets
Investments in subsidiaries 43,481,666 48,481,666
long-term receivables - subsidiaries 6,799,254 3,739,200
equipment 304,000 342,000
Intangible assets 80,000 100,000
Rent deposit1 2,150,000 2,150,000
Total non-current assets 52,814,920 54,812,866
Total assets 53,091,400 59,230,177
liabilities and shareholders' equity
Current liabilities
trade accounts payables 53,700 -
other payables third parties 57,362 394,507
other payables related parties - 4,120
Accrued expenses and other current liabilities 574,873 597,867
Total current liabilities 685,936 996,494
Non-current liabilities
non-current financial liabilities related parties - 2,854,468
Total non-current liabilities - 2,854,468
Total liabilities 685,936 3,850,961
Shareholders' equity
Share capital 34,668,656 34,581,002
legal reserves
- Capital contribution reserves 27,390,345 26,444,025
- Reserve for treasury shares 313,623 1,247,119
- Accumulated deficit (6,892,933) (5,567,968)
- loss for the period (3,074,227) (1,324,965)
Total shareholders' equity 52,405,464 55,379,215
Total liabilities and shareholders' equity 53,091,400 59,230,177
1 See note 7.
82
Statutory Financial Statements of Evolva Holding SA
1 See note 7.
Statements of financial performance Period from 1 January to 31 December
CHF 2012 2011
Revenue
Management fee income - 3,488,593
Total revenues - 3,488,593
Staff costs (2,043,146) (2,418,002)
Rent and maintenance expenses1 - (1,349,940)
Administrative expenses (1,029,792) (1,451,193)
Depreciation tangible and intangible assets (58,000) (38,000)
Total operating expenses (3,130,939) (5,257,135)
extraordinary income 20,938 474,677
Financial income 57,283 77,806
Financial expenses (21,509) (108,906)
Net loss (3,074,227) (1,324,965)
83
Notes to the Statutory Financial Statements of Evolva Holding SA
Notes to the Statutory Financial Statements of Evolva Holding SA
evolva Holding SA (“the Company”) is the continuing company resulting from the combination on 11 December 2009 of Arpida AG, Reinach,
Baselland, and evolva SA, Allschwil, Baselland.
the Company is subject to the provisions of the Articles of Association and to article 620 et seq. of the Swiss Code of obligations, which de-
scribes the legal requirements for limited companies (“Aktiengesellschaft”).
the legal domicile of the company is:
evolva Holding SA
Duggingerstrasse 23
4153 Reinach, Switzerland
1. Fire insurance value of plant and equipment
2. Conditional and authorised capital
Conditional shares Authorised shares
Number of shares CHF Number of shares CHF
1 January 2011 43,386,144 8,677,229 31,906,510 6,381,302
Approved by AGM 2011 17,073,629 3,414,726 37,500,000 7,500,000
Issued2 (344,885) (68,977) (33,000,000) (6,600,000)
expired - - - -
31 December 2011 60,114,888 12,022,978 36,406,510 7,281,302
Approved by AGM 20121 23,000,000 4,600,000 50,000,000 10,000,000
Issued2 (438,269) (87,654) - -
expired - - (9,406,510) (1,881,302)
31 December 2012 82,676,619 16,535,324 77,000,000 15,400,000
1 the Annual General Meeting of 9 May 2012 approved the increase of conditional capital for financing purposes by CHF 4,600,000 (equal to 23,000,000 registered shares) and the increase of authorised capital for financing purposes by CHF 10,000,000 (equal to 50,000,000 registered shares) pursuant to article 3a and article 3abis of the Articles of Association and extension.
2 In 2012, CHF 19,730 (98,648 shares) of conditional capital was used for shares issued under evolva’s incentive option plans. In addition, CHF 67,924.20 (339,621 shares) were issued with regard to an earn-out payment to former Abunda shareholders.
CHF 2012 2011
Fire insurance value equipment 1,000,000 3,375,000
84
Notes to the Statutory Financial Statements of Evolva Holding SA
3. Treasury shares
In 2011, evolva Holding SA created eight million treasury shares from authorised capital to be used for the initial and future share issues under
the SeDA agreement and for other financing purposes. these treasury shares are kept in evolva SA’s books at nominal value. As at 31 Decem-
ber 2012, evolva SA holds 1,568,116 treasury shares at nominal value of CHF 0.20/share in its books (CHF 313,623). A reserve for treasury shares
has been recorded in evolva Holding in accordance with SCo.
4. Subsidiaries
In 2012, evolva Holding has transferred its participation in evolva nutrition, Inc. to evolva SA and dissolved its subsidiary tlt Medical ltd. in liq.
5. Major shareholders
the following table shows the shareholders with holdings of more than 3% as reported as at 31 December 2012:
6. Recoverability of subordination of loans
evolva Holding SA has subordinated intercompany loans of CHF 6,799,254 in favour of its subsidiary evolva SA as at 31 December 2012.
Research and development activities are primarily run by evolva SA and its operating subsidiaries whereas evolva Holding SA is the listed
company and has no research and development activities. In order to fund evolva’s research and development activities, evolva Holding grants
loans to its subsidiaries. the recoverability of these loans is ensured by the fair value of evolva Holding SA’s subsidiary whose accounts are kept
on a going concern basis. the fair value of evolva SA and the long-term recoverability of these loans depend on the future ability to close new
partnership contracts and the market success of evolva’s products in development. even though evolva is making promising progress, some
uncertainties remain as to whether success can be achieved.
Shareholder Holding in % of total outstanding shares
Abunda SR, llC 14.49%
Sunstone 9.75%
Wellington partners 6.66 %
Aravis Venture 5.45%
Renaissance 4.97%
entrepreneurs Funds 4.34%
Source: SIX reporting of significant shareholders
Name location Nominal capital Holding Purpose
evolva SA Switzerland CHF 6,369,540 100 % R&D
Arpida uK ltd. (inactive) united Kingdom GBp 1,000 100 % trade
85
Notes to the Statutory Financial Statements of Evolva Holding SA
7. Rent facilities and lease commitments not recorded in the statement of financial position
During the reporting period the Company has transferred the main rent agreement to one of its subsidiaries. As a consequence, no rent and
maintenance expenses have incurred during the reporting period and fire insurance values have been reduced to CHF 1 million. nevertheless,
the rent deposit remains with the Company. Due to this transfer, there are no unrecorded lease commitments to be disclosed in the reporting
year (2011: CHF 3,849,902).
8. Risk management
the Company regularly evaluates its identified financial and operating risks in regard to their probability and potential impact. With the con-
sent of the Board of Directors, appropriate measures are taken to eliminate or to mitigate the risks identified. the remaining risks for the
Company are monitored appropriately. the Board of Directors reviews the Company’s risk management on a regular basis.
9. Compensation and equity positions
In 2012, the Board of Directors and the the Group Management team agreed voluntarily to exchange part of their cash compensation into
share options. this option plan was launched in July 2012 and aims to save salary costs (cash) through a 12-month period. options were
purchased as at 1 July 2012 and vest over a period of six to twelve months. the total charge of this option plan amounts to CHF 480,102
(calculated with a binominal assessment model) and is included in the share option compensation tables for the financial year 2012 below.
9.1 Compensation and equity position of the Board of Directors
the total compensation paid to the members of the Board of Directors in 2012 is as follows:
Amounts in CHF base compensation Variable compensationOther
compensation4 Total
Cash1 Share options3 Cash Share options3
Sir tom McKillop, Chairman 22,500 121,339 - - 1,811 145,650
Claus Braestrup 35,000 58,567 - - 2,818 96,385
erich Schlick5 - 55,713 - - - 55,713
Ganesh Kishore 30,000 52,860 - - 2,415 85,275
Jean-philippe tripet 25,000 30,034 - - 2,013 57,047
Martin Gertsch 12,500 28,533 - - 1,006 42,039
Michel pettigrew 25,000 30,034 - - 2,013 57,047
nicole Dubois 32,500 54,287 - - 2,616 89,403
Stuart Strathdee 33,750 55,713 - - 2,717 92,180
thomas Videbaek 10,000 22,826 - - 805 33,631
neil Goldsmith2 - - - - - -
Total 226,250 509,906 - - 18,213 754,369
1 As of 1 July 2012, cash compensation for directors was reduced by 50% or more in exchange for share options with the same theoretical value. 2 neil Goldsmith is being remunerated as Ceo of evolva and receives no compensation for his Board activities.3 Based on the grant-date fair value of stock options granted in 2012 using a binominal assessment model.4 Includes employers’ contributions to pension plans, social security, life insurances, etc.5 erich Schlick represents one of evolva’s core shareholders (Wellington partners). Based on Wellington’s general policy, erich Schlick waived his right to receive a cash compensa-
tion for his Board activities.
86
Notes to the Statutory Financial Statements of Evolva Holding SA
the total compensation paid to the members of the Board of Directors in 2011 was as follows:
1 erich Schlick represents one of evolva’s core shareholders (Wellington partners). Based on Wellington’s general policy, erich Schlick waived his right in 2011 to receive a cash compensation for his Board activities.
2 neil Goldsmith is remunerated as Ceo of evolva and receives no compensation for his Board activities.3 Based on the grant-date fair value of stock options granted in 2011 using a binominal assessment model.4 Includes employers’ contributions to pension plans, social security, life insurances, etc.
note that in prior years remuneration received for the attendance of meetings was disclosed as variable compensation. For the reporting year
this remuneration has been combined with the base compensation.
9.2 Compensation and equity position of the Group Management Team
the total compensation paid to the Group Management team and the highest total compensation in 2012 by evolva Holding SA are as follows:
1 In 2012, management members accepted to replace some of their cash compensation for 2012 and 2013 in share options of evolva with the same theoretical value.2 Based on the grant-date fair value of stock options granted in 2012 using a binominal assessment model.3 Includes employers’ contributions to pension plans, social security, life insurances, etc.
Amounts in CHF base compensation Variable compensationOther
compensation4
Total
Cash Share options3 Cash Share options3
erich Schlick, Chairman1 - 60,413 - - - 60,413
Jean-philippe tripet 50,000 60,413 - - 3,125 113,538
Ingelise Saunders 20,000 60,413 - - 1,250 81,663
Sir tom McKillop 42,500 60,413 - - 2,656 105,569
Claus Braestrup 45,000 60,413 - - 2,813 108,226
nicole Dubois 42,500 60,413 - - 2,656 105,569
Michel pettigrew 47,500 60,413 - - 2,969 110,882
Stuart Strathdee 22,500 - - - 1,406 23,906
Ganesh Kishore 20,000 - - - 1,250 21,250
neil Goldsmith2 - - - - - -
Total 290,000 422,890 - - 18,125 731,015
Amounts in CHF base compensation Variable compensationOther
compensation3 Total
Cash1 Share options2 Cash Share options2
neil Goldsmith, Ceo 283,642 54,170 - 165,218 51,546 554,576
Senior executive officers 1,292,555 156,296 - 385,508 276,251 2,110,610
Total Group Management Team 1,576,197 210,466 - 550,726 327,797 2,665,186
87
Notes to the Statutory Financial Statements of Evolva Holding SA
the total compensation paid to the Group Management team and the highest total compensation in 2011 by evolva Holding SA were as
follows:
1 Includes employers’ contributions to pension plans, social security, life insurances, etc.
In the year under review, the Company did not issue or assume any guarantees for any shareholder or member of the Board of Directors or the
management. no shareholder and no member of the Board of Directors or the management has received any loans from the Company.
the number of evolva Holding shares and options held by members of the Board of Directors and the Group Management team at the end of
2012 was as follows:
1 Includes shares owned by family members.2 numbers included under Group Management team.3 Ganesh Kishore and Stuart Strathdee have an indirect shareholding in evolva, through their participation in Abunda SR.4 prior to the acquisition of Abunda, Stuart Strathdee, Ganesh Kishore and Simon Waddington (former Ceo of Abunda nutrition Inc.) owned stock options in Abunda nutrition Inc.
As at the acquisition date, these stock options were converted into evolva Holding SA options.5 Vested options include options issued in lieu of cash remuneration. total options granted under this plan for the Board of Directors are expected to be 1,181,250. Approximately
50% of these options have effectively been granted as at 31 December 2012. the second part will be granted in mid-2013. As for accounting disclosure requirements and to be consistent with disclosures in the published annual report of evolva Group and this report, the full amount of 1,181,250 has been allocated to the Board members in the table above. As for management, the total number of options granted under this plan amounts to 1,134,005 and is included in the table above as fully vested options.
Amounts in CHF base compensation Variable compensationOther
compensation1 Total
Cash Share options Cash Share options
neil Goldsmith, Ceo 343,428 - - - 61,677 405,105
Senior executive officers 1,367,569 - 30,000 - 320,392 1,717,961
Total Group Management Team 1,710,997 - 30,000 - 382,069 2,123,066
No. of Shares1 No. of Share options
board of Directors Vested5 unvested Total
Sir tom McKillop (Chairman) - 439,800 139,200 579,000
Claus Braestrup (Vice-Chairman) - 164,800 139,200 304,000
nicole Dubois - 146,050 139,200 285,250
Martin Gertsch - 125,000 - 125,000
Ganesh Kishore 1,346,6003 342,5704 79,200 421,770
erich Schlick - 152,300 139,200 291,500
Stuart Strathdee 3,3713 345,3244 79,200 424,524
thomas Videbaek - 100,000 - 100,000
neil Goldsmith2 - - - -
Total board of Directors 1,349,971 1,815,844 715,200 2,531,044
Group Management team
neil Goldsmith 1,117,662 2,975,082 1,776,990 4,752,072
other team members 580,038 5,332,5694 2,456,150 7,788,719
Total Group Management Team 1,697,700 8,307,651 4,233,140 12,540,791
88
Notes to the Statutory Financial Statements of Evolva Holding SA
10. Events subsequent to the reporting date
� on 17 January 2013, evolva signed a 3½ year collaboration agreement with Ajinomoto Co., Inc., Japan, for the joint development of
novel fermentation production routes for a natural functional ingredient for application in personal care. the total fees and milestone
payments to evolva during the collaboration will amount to more than CHF 10 million. In case of commercialisation, evolva will receive a
royalty as a percentage on product sold.
� As at 6 March 2013, the Company signed a collaboration agreement with Cargill, Inc. to jointly develop and commercialise fermentation-
derived steviol glycosides. Cargill will be responsible for commercialisation and has agreed to make a CHF 4.5 million equity investment in
evolva. Additionally, evolva stands to receive up to uSD 7.5 million in milestone payments and has the right to a 45% participation in the
final business.
� As at 27 March 2013, the Company successfully closed a financing round of CHF 31.3 million, which includes CHF 4.5 million from Cargill
mentioned above. the total new shares subscribed amount to 52,214,472.
� As at 25 March 2013, the Company has issued 14 million treasury shares (from authorised capital) at nominal value to be held by evolva
SA under the agreement with SeDA and Ventureast purposes.
� Between the reporting date and the authorisation of these financial statements by the Board of Directors as at 5 April 2013, evolva has
issued 1.6 million shares for SeDA advances, which contributed to a CHF 0.6 million cash inflow.
89
Report of the Statutory Auditor on the Financial Statements
To the General Meeting of Evolva Holding Sa, Reinach
As statutory auditor, we have audited the accompanying financial statements of evolva Holding SA, Reinach, which comprise the statement
of financial position, statement of financial performance and notes (pages 81 to 88), for the year ended 31 December 2012.
Board of Directors’ responsibility
the Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the
company’s articles of incorporation. this responsibility includes designing, implementing and maintaining an internal control system relevant
to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. the Board of Directors is
further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the
circumstances.
auditor’s responsibility
our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss
law and Swiss Auditing Standards. those standards require that we plan and perform the audit to obtain reasonable assurance whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. the proce-
dures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s
preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of
the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the
financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended 31 December 2012 comply with Swiss law and the company’s articles of incorporation.
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor oversight Act (AoA) and independence (article 728 Co
(and article 11 AoA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 Co and Swiss Auditing Standard 890, we confirm that an internal control system exists,
which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
We recommend that the financial statements submitted to you be approved.
ernst & Young ltd
Jürg Zürcher David Haldimannlicensed audit expert licensed audit expert(Auditor in charge)
Basel, 5. April 2013
90
Evolva Holding SaDuggingerstrasse 23CH-4153 ReinachSwitzerlandtel. +41 61 485 2000Fax +41 61 485 [email protected]
Evolva SaDuggingerstrasse 23CH-4153 ReinachSwitzerlandtel. +41 61 485 2000Fax +41 61 485 2001
Evolva a/Slersø parkallé 42-44DK-2100 Copenhagen oeDenmarktel. +45 35 200 230Fax +45 35 200 231
Evolva Nutrition, Inc.101 larkspur landing Circle, Suite 222larkspurCA 94939, uSA
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