ANNUALREPORT 2013 - Kuros€¦ · Full 12-month results are expected for Q1 2015. Cytos is preparing an additional Phase 2b clinical ... CYT003 development program and its product

ANNUAL REPORT 2013

Index4 At a Glance

6 Major Developments in 2013

10 Letter to Shareholders and Bondholders

13 CYT003 – For Allergic Asthma14 • About CYT003

14 • CYT003 in allergic asthma - novel mechanism of action

15 • Clinical experience with CYT003

15 • CYT003 clinical trial

16 • Allergic asthma

16 • Asthma medical need

17 Platform – Targeted Immunotherapy18 • About the VLP platform

19 • Collaborations

21 Corporate Governance

53 Financial Statements 201354 • Financial performance and results of operations (IFRS)

56 • Consolidated financial statements and notes (IFRS)

107 • Statutory financial statements and notes

120 Glossary

122 Legal Disclaimer

4

Cytos Biotechnology Ltd – At a Glance

Cytos Annual Report 2013

5Cytos Annual Report 2013

Cytos Biotechnology Ltd is a Swiss public biopharmaceutical company focused on

the development of targeted immunotherapies. The Company is listed according

to the Main Standard on the SIX Swiss Exchange under the symbol CYTN.

Cytos’ lead product candidate CYT003 is a novel, first-in-class, immune

modulator in clinical development as a potential new treatment for asthma.

We believe CYT003 has the potential to improve the quality of life for patients,

provide a novel treatment alternative for physicians and reduce the use of

healthcare resources by improving asthma control in patients insufficiently

controlled on the current standard treatments.

Contact addresses

Cytos Biotechnology LtdWagistrasse 25

8952 Schlieren (Zurich)Switzerland

Phone +41 44 733 47 47Fax +41 44 733 47 40

Email: [email protected]

Media relationsChristian Itin, PhD

Chairman & Chief Executive OfficerPhone +41 44 733 47 70

Fax +41 44 733 47 07Email: [email protected]

Investor relationsHarry Welten, MBA

Chief Financial OfficerPhone +41 44 733 46 46


Cytos on the internetwww.cytos.com

Annual and quarterlyreports on the website

www.cytos.com – Investor RelationsReports & Presentations

Stock exchange information

ListingSIX Swiss Exchange

Registered sharesSIX:CYTN; Swiss Security

No.: 1 102 521

Convertible Bond due in 2015SIX:CYT07; Swiss Security

No.: 2 906 073

Share registerAktienregister

Cytos Biotechnology Ltdc/o Nimbus AG

Postfach8866 Ziegelbrücke

SwitzerlandPhone +41 55 617 37 20


Major Developments in 2013

6



Cytos is in the process of conducting a substantial Phase 2 clinical development program in patients withallergic asthma treated with CYT003. A Phase 2a proof of concept trial was successfully completed inpatients with persistent allergic asthma receiving standard inhaled corticosteroid (ICS) treatment. In thisplacebo-controlled study, lung function and asthma control in patients treated with CYT003 were main-tained as ICS treatment was withdrawn, while patients receiving the placebo deteriorated over the courseof the 12-week study period and experienced a substantial loss of asthma control and lung function.

CYT003 is currently being evaluated in a global, randomized and placebo-controlled Phase 2b clinical trialas an add-on therapy in 365 patients with moderate to severe allergic asthma not sufficiently controlledon standard controller therapy. The study began enrolling patients in May 2013 and was fully enrolled byOctober 2013. Top-line results will be measured after three months of treatment and are expected inApril 2014. Full 12-month results are expected for Q1 2015.

Cytos is preparing an additional Phase 2b clinical trial with CYT003. The study is designed to evaluate themaintenance treatment effect of CYT003. The study is expected to start mid-2014. In addition, a Phase1b study is planned for the second half of 2014 to further evaluate its mechanism of action.

Finally, the company is evaluating the feasibility of a dual listing of the company on the NASDAQ in addi-tion to its listing on the SIX Swiss Exchange and is planning to develop options for potential collaborationson the development and commercialization of CYT003. Execution of any such plans will depend on thePhase 2b data related to CYT003, market conditions and additional business considerations to supportvalue creation for our shareholders.

Other Major Developments in 2013

Additional monies raisedAfter completion of patient enrolment in the on-going Phase 2b clinical trial, Cytos called the secondtranche of the convertible loan notes in the amount of CHF 6.625 million from Abingworth, venBio,Amgen and Aisling.

Furthermore, Cytos announced on November 18, 2013 the completion of a financing transaction thatraised a total of CHF 24.3 million by selling 8.1 million shares at a price of CHF 3.00 per share. The rightsoffering was oversubscribed and share allocations included the use of authorized capital. Internationalinstitutional investors and other shareholders have invested CHF 10.2 million. The group of institutionaland strategic shareholders, Abingworth, Amgen, venBio and Aisling, initially committed to investCHF 9 million. Amgen further increased its participation by CHF 5.1 million, leading to a total investmentby this group of CHF 14.1 million.


8 Cytos Annual Report 2013

Major Developments in 2013Major Developments

Board of Directors and management team further strengthenedOn December 30, 2013 the shareholders elected Dr. Yamo Deniz as an independent member ofthe Board of Directors. Dr. Deniz was appointed Global Head of Rare Diseases at Genzyme (Sanofi)in 2014, prior to which he was Chief Medical Officer, Global Head of Medical & Pharmacovigilanceat GE Healthcare Lifesciences. Before joining GEHC in 2010, Dr. Deniz held numerous senior clinicaland leadership positions of increasing responsibilities in respiratory and inflammation groups atGenentech and Roche, respectively, where he played a key role in the filing and approval ofomalizumab (Xolair®) for the treatment of asthma.

Throughout 2013, Cytos announced the appointment of several members of senior management,thereby underscoring its ambition to widen and deepen the pool of knowledge to support theCYT003 development program and its product and corporate development capabilities.

In March 2013, Matthias Alder joined as Executive Vice President Corporate Developmentand Legal Affairs. He has more than 20 years of business, transactional and legal experiencein the pharmaceutical and biotechnology industries, most recently as Senior Vice PresidentAdministration, General Counsel and Secretary of Micromet, Inc., a former NASDAQ-listedbiopharmaceutical company located in Rockville, MD, USA and Munich, Germany, that wasacquired by Amgen in 2012 for US$1.2 billion in cash.

Also in March 2013, Cheryl Lassen, MD, joined as Vice President Clinical Development, bringinga wealth of clinical development experience, with particular expertise in respiratory diseases.Dr. Lassen was previously at Novartis where she was Program Leader for the global clinicaldevelopment of the indacaterol program, a product since approved by the US FDA, EMA, Japanand many countries worldwide. In her 20-year career, she has worked on a multitude of clinicaldevelopment programs and in medical affairs in the UK and South Africa for companies includingBristol Myers Squibb, Abbott Laboratories and Pharmacia.

In May 2013, the development team for CYT003 was further strengthened with the hire ofDr. Dorothee Krumwieh, who joined as Vice President and Program Leader for CYT003. Previously,Dr. Krumwieh was in charge of neurological development programs at Merck Serono.

In recognition of his outstanding contributions and his increased responsibilities, Cytos appointedDr. Philippe Saudan to Vice President and Chief Scientific Officer effective as of March 1, 2014. Dr.Saudan has been with Cytos in various roles of increasing responsibility since 2000, most recentlyserving as Vice President Research & Preclinical Development.

Cytos’ VLP platform is basis for Phase 1 clinical trial with anti-lgE vaccineOn February 4, 2013, Cytos was informed by Pfizer Inc. that the first patient had been dosedin a Phase 1 clinical trial with an anti-IgE vaccine, which is being developed under a licenseagreement between both parties. Pfizer’s anti-IgE vaccine is based on Cytos’ VLP vaccineplatform.

Progress of programs on the VLP vaccine platformA*STAR and Cytos bring Singapore’s first influenza vaccine to clinical testingOn May 17, 2013, Cytos announced that A*STAR and Cytos had brought Singapore’s first influenzavaccine to clinical testing. Healthy individuals were dosed in a Phase 1 clinical trial with the H1N1influenza vaccine candidate based on Cytos’ proprietary bacteriophage Qbeta virus-like particle(VLP) technology. The clinical trial has been completed and results will be published in 2014.



Sufficient funds available to support operations until the beginning of 2015

In CHF million Results 2013 Results 2012Revenue 1.0 1.1Net operating costs (24.3) (14.6)Operating loss (23.3) (13.5)Net loss (30.8) (9.3)Net loss per share (in CHF) (1.32) (0.57)

In CHF million December 31, 2013 December 31, 2012Cash, cash equivalents, financial assets & tradeand other receivables 40.0 28.7

Full-time equivalents 28.7 21.0

Financial summary (consolidated)

• Cash, cash equivalents, financial assets and trade and otherreceivables were at CHF 40.00 million at year end 2013.

• Effective as of November 18, 2013, a share capital increase ofCHF 0.81 million (8,113,845 shares with a nominal value ofCHF 0.10 each) was registered with the Commercial Register inthe Canton of Zurich and the new shares were subsequentlyissued as follows at a price of CHF 3.00 each:

•A total of 4,686,413 shares issued to the following investors:

– venBio Global Strategic Fund L.P., Grand Cayman (CaymanIslands)

– Amgen Investments Ltd., Hamilton (Bermuda)

– Abingworth Bioventures V L.P., London (UK)

– Abingworth Bioequities Master Fund Limited, Grand Cayman

(Cayman Islands)

– Aisling Capital III L.P., New York, NY (USA)

and

•3,427,432 shares issued in connection with subscriptionrights to existing shareholders and new shareholders.

• A cash inflow of CHF 24.3 million has been accounted for (agio:CHF 23.5 million).

• This financing transaction consisted of a rights offering of6’303’215 shares to existing shareholders whereby those rightsnot taken up were allocated by the Board of Directors to othershareholders or new investors. In addition, further 1’810’630shares were placed out of the authorized share capital.

• In addition 26,588 treasury shares have been used tosatisfy existing shareholders in connection with subscriptionrights. From the sale of these t

Treasury shares at a price of CHF 3.00 each, a cash inflow ofTCHF 79.8 has been accounted for (agio: TCHF 77.1).

• In 2013, 52,887 options were exercised with an exercise priceof CHF 3.41 and 1,500 options were exercised with an exer-cise price of CHF 2.57. The shares needed for this exercisewere taken from treasury shares. From the exercise of theseoptions, a cash inflow of THCF 184.20 has been accounted for(agio: TCHF 178.76).

• On completion of enrollment in the ongoing Phase 2b clinicaltrial with CYT003 in allergic asthma, the Company has calledthe second tranche of CHF 6.625 million onOctober 21, 2013 from Abingworth, venBio, Amgen and Ais-ling. The second tranche of the convertible loan notes of CHF6.625 million was paid in four installments between October29, 2013 and December 10, 2013. The convertible loan notescarry an interest rate of 9% p.a. and are due for repayment at150% of the nominal value on February 10, 2015.

• Convertible bonds with a nominal value of CHF 13.17 millionare issued and outstanding, i.e. not held by the Company.These convertible bonds are due for repayment at 150% ofpar in February 2015 unless they are converted into equity.Cytos did not buy back any convertible bonds on the marketduring 2013. Furthermore, convertible loan notes with anominal value of CHF 13.25 million are issued andoutstanding. They become due for repayment in February2015 unless they are converted into equity.

• Revenues of CHF 1.0 million in 2013, net loss of CHF 30.8 mil-lion.

• Gross cash used in operating activities was CHF 1.7 millionaverage per month in 2013.


Letter to Shareholdersand Bondholders


Dear Shareholder and Bondholder,

Cytos achieved significant milestones during the course of 2013. Last October, patient

enrollment was completed in a global, placebo-controlled and randomized Phase 2b

clinical trial to evaluate the activity of our lead product candidate CYT003 in patients with

moderate to severe asthma not sufficiently controlled on current standard controller

therapy. This trial recruited more than 365 adult patients and is being conducted at more

than 90 centers in North America and Europe. Top-line data is expected in April 2014 and

the full data set in Q1 2015. A positive outcome of the clinical trial is critical to the future

success of the company.

We expect to broaden the Phase 2 development program in 2014 in preparation for phase

3 clinical trials. Throughout 2013, Cytos was able to further attract key talents both to

the Board of Directors and on a senior management level. With these added resources,

we are looking forward to progressing the development of CYT003 towards late stage

development and commercialization.

A successful financing completed in November 2013 provides funding for the further

development of CYT003. In addition, after completion of the enrollment of the Phase 2b

study, Cytos called the second of two tranches of convertible loan notes, bringing the

total of additional funding raised in 2013 to more than CHF 30 million. We are pleased

by the continued support of our shareholders.

We believe that CYT003 has significant potential to create substantial value not only for

our shareholders and bondholders, but for all our stakeholders, including patients with

allergic asthma, treating physicians, and the healthcare systems and insurers that bear

the costs of this disease.

We would like to thank all our shareholders and bondholders for their continued sup-

port and look forward to a productive year ahead.

Sincerely,

Harry Welten, MBAChief Financial Officer

Christian Itin, PhDChairman & Chief Executive Officer

CYT003 – For Allergic Asthma

13

14

CYT003 in allergic asthma – novel mechanism of action

CYT003 offers a differentiated approach for the treatment of asthmathat acts upstream of most therapeutic agents currently in develop-ment.

It is a targeted therapy based on a novel biologic that comprises thevirus-like particle Qb filled with an activating ligand (agonist) of Toll-likereceptor 9 (TLR9), a key mediator of innate immunity and inflammation.TLR9 belongs to an ancient class of receptors that detect the presenceof microbial DNA and induces the immune system’s first line of defenseagainst bacterial infection. The activating ligand is an immune-stimulatory synthetically produced G10 DNA oligonucleotide containingnon-methylated CpG motifs as found in bacterial DNA.

TLR9 is predominantly expressed in plasmacytoid dendritic cells (pDCs)and B-cells in humans. CYT003 is actively taken up by pDCs, activatesTLR9, and induces the production of type 1 helper T cell (Th1) cytokineIFN-alpha and the co-stimulatory molecule ICOS-Ligand. CYT003-activated pDCs are then postulated to inhibit type 2 helper T (Th2) cells,which are critically involved in the development of allergic asthma.

Toll-like receptors are expressed in a subset of immune cells calledantigen-presenting cells (APCs; e.g. dendritic cells, macrophages,B-cells). APCs are typically found in tissue in contact with the externalenvironment (skin, lining of the nose, lungs, stomach and intestines) andserve as an important element of the immune defense. APCs, and inparticular dendritic cells, communicate with T-cells to orchestrate theimmune response when challenged by bacteria or viruses.



About CYT003

Cytos’ lead candidate CYT003 is a first-in-class biologic inclinical development with the potential to become the firstcausally acting and disease modifying therapy in asthma.

CYT003 is currently being evaluated in a global, randomizedand placebo-controlled Phase 2b clinical trial as an add-ontherapy in 365 patients with moderate to severe allergicasthma not sufficiently controlled on standard controllertherapy. The study was fully enrolled in Q4 2013 and top-line results are expected in April 2014.

Cytos has completed a Phase 2a study that demonstratesthat CYT003 maintains asthma control and lung function,despite standard inhaled corticosteroid withdrawal. Itsattractive safety profile is further supported by a databaseof more than 450 patients treated with CYT003 in previousstudies.

CYT003 acts via a novel, allergen-independent mechanismof action to selectively suppress the body’s immuneresponse to allergens, which is considered a predominantrisk factor for asthma.



Clinical experience with CYT003

CYT003 has been shown to be safe and generally welltolerated in more than 450 individuals receiving theactive agent. In 2010, Cytos successfully completed arandomized, double-blind, placebo-controlled Phase 2a trialin patients with persistent allergic asthma requiring long-termtreatment with inhaled corticosteroids (ICS)1. This study tookplace at five centers in Germany and recruited 63 patients whoreceived seven weekly to bi-weekly subcutaneous injectionswith efficacy assessment over 12 weeks. ICS treatment waswithdrawn in two steps from 100% to 50% to 0%.

Ref. (1) Beeh, KM et al, J. Allergy. Clin. Immunol., 2013 Mar; 131 (3) 866-74.

Clinical endpoints

• Asthma control determined by validated questionnaire(ACQ)

• Lung function objectively assessed by spirometry (FEV1)• Day and night-time asthma symptoms and use of relief

medication• Inflammatory markers – exhaled NO and eosinophils in

peripheral blood – were also measured.

Ongoing Global Phase 2b clinical trial with CYT003

A global, randomized, placebo-controlled clinical trial evaluates three doses of CYT003 versus placebo in addition to standardof care. The patient enrollment was completed in Q4 2013. This trial involves 365 patients with moderate to severe allergicasthma not sufficiently controlled on standard controller therapy, and is conducted at more than 90 centers in North Americaand Europe. This study investigates the effectiveness, safety and tolerability of CYT003.

Top-line results are expected in April 2014. Further details of the trial can be found at clinicaltrials.govunder the identifier code NCT01673672.

CYT003 – Maintains Lung Func�on (FEV1)Despite inhaled cor�costeroid withdrawal

FEV1 = ��ec��e Lung Func�on(Mean ± SEM)

ICS 100%

50%0%

CYT003

repeated measures weeks2-‐12 p=0.009

weeks

0.024 0.002 0.016 0.025 0.012 0.010p value:

CYT003 – Maintains Asthma Control (ACQ)Despite inhaled cor�costeroid withdrawal

ICS 100%

50%0%

CYT003CYT003

0.045 0.012 0.004 0.011 0.003 0.003p value: 0.005

ACQ = Asthma Control Ques�onnaire1(Mean ± SEM)

Δ = 0.5 points: “A medically important difference”

“Well controlledasthma”

“Loss of asthmacontrol”

weeks

Results

The study met all clinical endpoints. In patients treated withCYT003, their asthma control improved despite ICS withdrawal.Treatment with CYT003 was safe and generally well tolerated.At week 12, two thirds of the CYT003-treated patients hadtheir asthma “well controlled” (asthma control questionnairescore < 0.75) compared with one third under placebo. FEV1 had worsened to a clinically significant extent in patientson placebo while it remained stable in CYT003 patients.

Treatment with CYT003 was safe and generally well tolerated.

Allergic asthma

Asthma is one of the most common chronic diseases, with an estimated 300 million individuals affected worldwide.Its prevalence is increasing, especially among children, with an expected 400 million patients by 2025. Allergic asthmais the most common type of asthma with 75%-85% patients testing positive for allergies2.

Asthma is a chronic inflammatory disorder of the airways. Chronically inflamed airways are hyper-responsive; theybecome obstructed and airflow is limited (by bronchoconstriction, mucus plugs, and increased inflammation) whenairways are exposed to various risk factors.

Common triggers include exposure to allergens (e.g. house dust mites, animal fur, pollens and molds), smoke,chemical fumes, respiratory (viral) infections, exercise, strong emotional expression, chemical irritants, and drugs(such as aspirin and beta blockers).

Symptoms include recurring episodes of wheezing, breathlessness, chest tightness, and coughing, particularly atnight or in the early morning.

Ref: (2) WHO Fact Sheet No. 307, May 2008.

Asthma: an unmet medical need

Asthma represents a large unmet medical need. The asthma prescription market3 was $21.6 billion in 2011, butdespite the many therapies available, the economic cost of treating asthma still remains significant: asthma-relatedmedical expenses in the US in 2007 amounted to $50 billion4.

Current standard of care (SoC) aims to achieve and maintain asthma control, and includes inhaled corticosteroids(ICS) and long-acting beta-2 agonists (LABAs), alone or in combination. However, more than 50% of patients do notachieve control of their asthma with SoC. Healthcare costs are mainly driven through patients with uncontrolledasthma needing unscheduled doctor/hospital visits. Oral steroids and anti-IgE therapies may also be used to treatsevere or difficult-to-treat asthma.

According to the World Health Organization, asthma is under-diagnosed and under-treated, creating a substantialburden to individuals and families and possibly restricting individuals’ activities for a lifetime. The need for a bettertargeted, long-acting treatment that acts independently of allergens to control asthma therefore is highly desirable.

Refs: (3) AstraZeneca annual report 2011; (4) CDC, Vital Signs, May 2011; (5) BMC Pulmonary Medicine 2006, 6:13 / doi:10.1186/1471-2466-6-13.

16 Annual Report 2013


Platform – Targeted Immunotherapy

17


About the VLP platform

CYT003 has been developed using a versatile, defined and robust vaccineplatform based on bacteriophage Q beta-derived virus-like particles(Qb VLPs), which act as immune-stimulatory carriers for disease-associatedantigens.

The VLP platform builds on the repetitive and highly ordered protein arrayformed by the Qb VLP. GMP grade Qb VLPs are produced efficiently atlarge scale in E.coli. Desired antigens are produced separately and can,using chemical linkers, be directionally conjugated to the VLP surface andpresented in a highly ordered fashion to B-cells. As a result, B-cellreceptors are efficiently cross-linked, a key feature in induction of a potentimmune response. In addition, Qb coat proteins contain strong T helper-cell epitopes providing efficient T-help to B-cells.

Cytos and its partners have tested a wide array of antigens ranging fromchemical entities, to peptides, to large multimeric proteins. Vaccine can-didates based on Cytos’ Qb VLP platform have been tested in various pre-clinical and clinical studies and were found to be safe, generally welltolerated and highly immunogenic. The vaccine platform is modular,robust and scalable.

Qb VLP Antigen

chemical linker

Antigen-VLPconjugate




NovartisCytos has a collaboration with Novartis for CAD106, an active immunotherapyin development for the treatment of patients with Alzheimer’s disease. In2010, Novartis initiated a randomized, placebo-controlled, multi-center Phase2 clinical trial to investigate the safety, tolerability and immunogenicity ofCAD106.

In January 2013, Novartis announced it was discontinuing the NIC002 project,a therapeutic vaccine candidate for the treatment of nicotine addiction, andreturned all rights to Cytos.

PfizerPfizer is evaluating a novel anti-IgE vaccine, based on Cytos’ Qb VLP platform.Under the collaboration, additional undisclosed targets are being evaluated.A Phase 1 trial began in February 2013.

Singapore GovernmentIn July 2010, Cytos and Singapore’s Agency for Science, Technology andResearch (A*STAR) established a Collaborative Research, Development andCommercialization Agreement for the research, development and commer-cialization of an influenza vaccine. In May 2013, the first healthy volunteer wasdosed in a Phase 1 clinical trial with the H1N1 influenza vaccine candidate basedon Cytos’ proprietary bacteriophage Qbeta virus-like particle (VLP) technology.In this first Phase 1 clinical trial, the safety and immunogenicity of this novelvaccine candidate and its potential to protect against H1N1 influenza infectionwill be evaluated.

Collaborations

Cytos has established several collaborations with pharmaceutical partners.

Product Indication Preclinical P1 P2 P3 Collaborator Licensed territory

CYT003Allergic asthma

Allergic rhinitis

CAD106 Alzheimer’s Novartis Exclusive/global

PF-06444753/752 Allergic rhinitis Pfizer Exclusive/global

CYT021 (gH1Qb) Influenza Govt of Singapore Non-excl/ASEAN

CYT012 (FelQb) Cat allergy

Malaria antigen- Qb Malaria WRAIR (CRADA)

Corporate Governance

21


Cytos Biotechnology Ltd Corporate Governance

Group structure and shareholders (DCG 1)

Group structure (DCG 1.1)With regard to its activities in biotechnology, the board of directors (“Board of Directors”) and theexecutive board (“Executive Board”) review the financial performance on an aggregate basis andmanage the operations of Cytos Biotechnology Ltd (the “Company”) as a single operating entity.Accordingly, the Company operates in one segment, which is the business of development andcommercialization of products for human health care.

Cytos Biotechnology Ltd, Schlieren, Switzerland, is listed according to the Main Standard on the SIXSwiss Exchange, Zurich, Switzerland.

Security number 1 102 521ISIN CH0011025217Ticker symbol CYTNMarket capitalization on December 31, 2013 CHF 93.1 million

The Company is a corporation established under Swiss law with its registered office inSchlieren, Switzerland. As at December 31, 2013 the group consists of the parent companyCytos Biotechnology Ltd and two non-listed companies:

Share capital ShareholdingName (in thousands)

Proteome Therapeutics GmbH, Singen, Germany EUR 25 100%BioSupport AG, Schlieren, Switzerland* CHF 100 33%

*BioSupport AG will be liquidated in 2014 since its services are no longer required by Cytos.

The Articles of Association (the “Articles”) of Cytos Biotechnology Ltd can beviewed at www.cytos.com under “Investor Relations – Corporate Governance”.Link: http://www.cytos.com/corporate-governance/

The information published below conforms to the Corporate Governance Directive(“DCG”) of the SIX Swiss Exchange (“SIX”). The numbering of the subsections wasmade on the basis of the DCG.



Significant shareholders (DCG 1.2)According to disclosure notifications filed with the Company to the SIX Swiss Exchange, eachof the following shareholders held more than 3% of the share capital of the Company as ofDecember 31, 2013:

A group consisting of:venBio Global Strategic Fund L.P., Grand Cayman, Cayman Islands

ultimately jointly controlled by:

• Corey Goodman, Marshall, CA, USA

• Kurt von Emster, Belmont, CA, USA

• Paul Brooke, New York, NY, USA

• Robert Adelman, Hillsborough, CA, USA(Kurt von Emster and Paul Brooke also hold certain stock options on shares of CytosBiotechnology Ltd)

Amgen Investments Ltd., Hamilton, Bermudaultimately controlled by:

• Amgen Inc., Wilmington, Delaware, USA (a publicly listed company and theultimate parent company of the Amgen group of companies)

Abingworth Bioventures V L.P., London, UKvoting rights are exercised by Abingworth Bioventures V L.P.’s investment manager:

• Abingworth LLP, London, UK (certain stock options on shares in theCompany are held for the account of Abingworth LLP as the investmentmanager of Abingworth Bioventures V L.P., by Joseph Anderson, Surrey, UK)

Abingworth Bioequities Master Fund Limited, Ugland House, Grand Cayman,Cayman Islands ultimately controlled by:

• Abingworth LLP, London, UK (together with Abingworth Bioventures V L.P.,the “Abingworth Funds”)

Aisling Capital III, LP, New York, NY, USAultimately controlled by:

• Aisling Capital Partners III, LLC, New York, NY, USA

• holds 17,372,106 voting shares (registered shares) with a current proportionof voting rights of 56.91%

• holds 67.29% proportion of voting rights* based on financial instruments.

Brennus Fund Ltd., Grand Cayman, Cayman Islands c/o Brennus Asset Management LLP,London, UK (Brennus Asset Management LLP is the “Investment manager” delegated byBrennus Investment Advisors Limited (Manager), who is employed by Brennus Fund Limited):

• holds 1,317,973 voting shares (registered shares) with a currentproportion of voting rights of 4.32%

• holds 0.14% proportion of voting rights* based on financial instruments.

*The proportion of voting rights based on financial instruments is calculated pursuant to Art. 12 para. 2 of the Ordinance ofthe Swiss Financial Market Supervisory Authority on Stock Exchanges and Securities Trading [Verordnung der EidgenössischenFinanzmarktaufsicht über die Börsen und den Effektenhandel (BEHV-FINMA)] on the basis of the entry in the commercial register.



Information on disclosure notifications during the year under review, concerning the significantshareholders and the financial instruments in particular may be found on the SIX Exchange platformon the following page:http://www.six-exchange-regulation.com/publications/published_notifications/major_shareholders_en.html

The Company has not entered into any agreement with any shareholder regarding the voting orholding of shares in the Company.

To the knowledge of the Company, no shareholders are linked by any shareholder agreement.

Cross-shareholdings (DCG 1.3)There are no cross-shareholdings.

Capital structure as of December 31, 2013 (DCG 2)Excerpt from the Articles of Association of Cytos Biotechnology Ltd as of December 30, 2013

Capital (DCG 2.1)The share capital of Cytos Biotechnology Ltd is CHF 3,052,527.60, fully paid up and divided into30,525,276 registered shares with a nominal value of CHF 0.10 each, according to the CommercialRegister of the Canton of Zurich.

Conditional capital (DCG 2.2)Article 4b:The share capital may be increased by the maximum amount of CHF 1,120,571.50 by issuing upto 11,205,715 fully paid-up registered shares with a nominal value of CHF 0.10 each. The issue ofregistered shares by exercising conversion and/or option rights and any other transfer of shares issubject to the transfer restrictions pursuant to Article 5 of the Articles of Association.

Upon exercising the option rights granted to them, employees of the Company and its subsidiaries,as well as members of the Board of Directors or the Scientific Advisory Board will receive a maxi-mum of 273,273 of these registered shares. The issue price and the conditions for the allocationand exercise of the employee options was, or for new employee options will be, specified by theBoard of Directors in separate Rules. The Company’s shareholders are not entitled to subscribe tosuch employee options, unless they fulfill the conditions of the Rules in their function as employees,members of the Board of Directors or the Scientific Advisory Board.

Additional registered shares will be issued on exercise of the 350,000 option rights that were givento an investor pursuant to the Option Agreement dated March 20, 2012 as compensation for itsexpenses in connection with the placement of the majority of the shares issued as part of thecapital increase resolved for at the General Meeting dated April 20, 2012. The options have anexercise term of five years following entry of this provision of the Articles of Association in thecommercial register and an exercise price (subject to any adjustments within the scope of anti-dilution protection pursuant to the Option Agreement) of CHF 2.244* (hereinafter referred to as the“2012 OPTIONS”).* Adjusted to CHF 2.13 following the application of the anti-dilution clause in connection with the 2013 financing.



All other registered shares in Article 4b not used or reserved for the option rights of employeespursuant to paragraph 2 or for the option rights of an investor under paragraph 3 will be issuedupon exercise of: a) conversion rights granted to the bond creditors of the outstanding convertiblebond (Swiss Security Number 2.906.073) (hereinafter referred to as the ”CONVERTIBLE BONDS”);as well as b) conversion rights that were granted to investors as part of the 9% convertible loannotes with a total amount of CHF 13,250,000 and with a maturity date of February 10, 2015 pursu-ant to the Convertible Loan Note Agreement dated March 20, 2012, and which provide for, amongother things, a conversion during the conversion term, which starts upon entry of this provision ofthe Articles of Association in the commercial register and ends on January 30, 2015, at a conver-sion price (subject to any adjustments within the scope of anti-dilution protection pursuant to theConvertible Loan Note Agreement) of CHF 2.244* (hereinafter referred to as the “CONVERTIBLELOAN NOTES”).* Adjusted to CHF 2.13 following the application of the anti-dilution clause in connection with the 2013 financing.

In addition, all other registered shares in Article 4b not issued for the option rights of employeespursuant to paragraph 2, the option rights of an investor under paragraph 3, the CONVERTIBLEBONDS or the CONVERTIBLE LOAN NOTES under paragraph 4 may be used in conjunction with theexercise of the “2012 WARRANTS”. The 2012 WARRANTS are warrants that are issued pursuant tothe Warrant Agreement dated March 20, 2012 and that entitle each warrant holder to subscribeto a new registered share of the Company. These warrants may be exercised during an exerciseterm of four years following entry of this provision of the Articles of Association in the commercialregister, and the exercise price (subject to any adjustments within the scope of anti-dilution protec-tion pursuant to the Warrant Agreement) is CHF 2.244* per warrant.* Adjusted to CHF 2.13 following the application of the anti-dilution clause in connection with the 2013 financing.

The Board of Directors shall determine the issue conditions for the CONVERTIBLE BONDS,CONVERTIBLE LOAN NOTES, 2012 WARRANTS and 2012 OPTIONS (provided that issued conditionsare not already stipulated in paragraphs 3 to 5 of the present Article 4b). The subscription rightsof shareholders with regard to the shares that are issued in connection (i) with the exercise of therights associated with the CONVERTIBLE BONDS or the CONVERTIBLE LOAN NOTES, or (ii) with theexercise of the 2012 OPTIONS or the 2012 WARRANTS, are excluded. The shareholders neitherhave a right to subscribe to the 2012 OPTIONS nor the 2012 WARRANTS. Furthermore, the prefer-ential subscription right of existing shareholders is excluded for the CONVERTIBLE BONDS and theCONVERTIBLE LOAN NOTES.

Article 4h:The Company’s share capital shall be increased by an amount not exceeding CHF 153,563.70through the issue of a maximum of 1,535,637 registered shares, to be fully paid in, with a nominalvalue of CHF 0.10 per share, through (i) the voluntary or compulsory exercise of conversion rightsand/or warrants granted or to be granted in connection with bonds or other financial market instru-ments or loans of the Company, or any of its group companies, that allow for conversion into sharesof the Company (equity-related financial instruments) or (ii) the exercise of options granted to allshareholders (shareholder options).

For equity related instruments the shareholders’ pre-emptive rights are excluded. Holders of suchequity-related financial instruments are entitled to subscribe to the new shares. The Board of Direc-tors fixes the conversion/warrant conditions. Shareholder options must be allocated to all share-holders pro rata to their shareholding. The Board of Directors fixes the exercise conditions.



The acquisition of shares through the exercise of conversion rights and/or warrants and/or share-holder options and any subsequent transfer of the shares are subject to the restrictions set outunder Art. 5 of these Articles of Association.

The Board of Directors is authorized to exclude shareholders’ preferential subscription rights inrelation to equity-related financial instruments when such equity-related financial instruments areissued provided these instruments are being issued to finance or refinance the acquisition of com-panies, parts of companies, participations or new investment projects, and/or if the instruments areissued on the national or international capital markets (including private placements).

If shareholders’ preferential subscription rights are restricted or excluded for such equity-relatedfinancial instruments: (i) these equity-related financial instruments must be issued at prevailingmarket conditions, (ii) the issue price of the new shares must be set at market conditions takingdue account of the stock market price of the shares and/or comparable instruments priced by themarket, and (iii) the conversion rights may be exercised for a maximum of 12 years and the warrantsmay be exercised for a maximum of seven years from the relevant issue date.”

Article 4i:The share capital of the Company may be increased in the nominal value of up to CHF 252,128.60by issuance of up to 2,521,286 fully paid-in registered shares with a nominal value of CHF 0.10 pershare, subject to the exercise of options granted by the Company to employees of the Company orits subsidiaries, persons of a comparable position and Board members.

The pre-emptive rights of the shareholders shall be excluded. The conditions of the grant of theoptions, as the amount of the issue of the shares, the time of the entitlement for dividends as wellas the kind of contribution, shall be determined by the Board of Directors in the form of specialrules (Stock Option Plans).

The further transfer of the registered shares acquired by the exercise of the conversion or optionsrights under this article shall be subject to the restrictions of Article 5 of the Articles of Association.

Authorized capital (DCG 2.2)Article 4c:The Board of Directors is authorized to increase the share capital at any time until June 27, 2015by an amount not exceeding CHF 1,120,571.50 by issuing up to 11,205,715 fully paid-up registeredshares with a nominal value of CHF 0.10 each. Increases by way of an underwriting offering by abank, a bank consortium or a third party, subject to an exclusion of the pre-emptive rights or anypreferential subscription rights according to paragraph 3 of Article 4c of the Articles of Association,a subsequent offer to the shareholders and increases in partial amounts, are allowed. In each case,the issue price, the date of entitlement to dividends and the type of contribution shall be deter-mined by the Board of Directors, provided that nothing to the contrary is stipulated in Article 4cof the Articles of Association. The newly issued registered shares shall be subject to the transferrestrictions foreseen in article 5 of the Articles of Association.



The Board of Directors is authorized to issue shares according to paragraph 1 of Article 4c of theArticles of Association as (i) base values of 12,700,532, 2012 WARRANTS (as defined in Article4b of the Articles of Association, paragraph 5), whereby the Board of Directors determines theissue conditions of the 2012 WARRANTS (provided that they are not already stipulated in Article4b of the Articles of Association, paragraph 5), or (ii) to use said shares in a maximum amount ofCHF 60,000 for employees, members of the Board of Directors and consultants of the Company andits subsidiaries who have exercised the option rights granted to them, whereby the issue amountand the conditions for allocating and exercising the employee options by the Board of Directors arestipulated in separate rules.

The subscription rights of shareholders with regard to the shares that are issued in connectionwith the exercise of the rights associated with the 2012 WARRANTS or the employee options areexcluded. The shareholders do not have a right to subscribe to the 2012 WARRANTS.

Article 4g:The Board of Directors is authorized, at any time until December 30, 2015, to increase the sharecapital by a maximum of CHF 405,692.30 through the issuance of a maximum of 4,056,923 registeredshares, to be fully paid up, with a nominal value of CHF 0.10 per share. Increases by underwritingas well as partial increases are permissible. The issue price, the time of dividend entitlement, andthe type of contribution will be determined by the Board of Directors. Upon acquisition, the newshares will be subject to the transfer restrictions pursuant to Art. 5 of the Articles of Association.

The Board of Directors is authorized to exclude shareholders’ pre-emptive rights if the new registeredshares are used for (a) the allocation of shares to existing shareholders in case the subscription ofshares in a rights offering exceed the number of shares available; (b) the acquisition of companies,segments of companies or participations through an exchange of shares; (c) for financing/refinan-cing the acquisition of companies, segments of companies or participations, or (d) investment plansand/or instruments that are issued on the national or international capital markets or for raisingcapital in a fast and flexible manner (including private placements) and that could probably not beachieved without the exclusion of the legal pre-emptive rights of shareholders.

If commitments to service convertible bonds or loans or bonds with warrants are assumed inconnection with company take-overs or investment plans, the Board of Directors is authorized, forthe purpose of fulfilling delivery commitments under such bonds, to issue new shares excluding thepre-emptive rights of shareholders.

Registered shares for which pre-emptive rights have been granted but not exercised, are to be usedin the best interests of the Company or sold on the market at market conditions.

The full text of the Articles of Association is available on the Company’s website under the followinglink: http://www.cytos.com/corporate-governance/

Changes in capital (DCG 2.3)For further information on the changes in the capital structure in 2013, please see note 17 ofthe detailed consolidated financial statements. You can find this report on the website at:http://www.cytos.com.



Description of changes in capital that have taken place within the last three financial years:

Consolidated Statement of Changein Shareholders’ Equity1 Number Share Additionalin TCHF (except for share information) of shares capital paid-in capital Other2 Total

December 31, 2010 5,270,056 527 211,073 (205,005) 6,595

Total comprehensive loss – – – (18,783) (18,783)Partial repurchase of convertible bonds – – – (357) (357)Share-based compensation – – 865 – 865December 31, 2011 5,270,056 527 211,938 (224,145) (11,680)January 1, 2012, as published 5,270,056 527 211,938 (224,145) (11,680)Adjustment “IAS 19, revised”3 – – – (554)3 (554)January 1, 2012, restated 5,270,056 527 211,938 (224,699) (12,234)

Total comprehensive loss – – – (9,044) (9,044)Convertible Bond/-loan notes:equity component – – – 4,260 4,260Partial repurchase of convertible bonds – – – (127) (127)Convertible Bond/-loan notes:deferred tax – – – (932) (932)Convertible Bond/-loan notes: costs – – – (127) (127)Issuance of share capital 14,900,232 1,490 26,682 – 28,172Share capital issuance costs – – (1,190) – (1,190)Treasury shares 2,241,143 224 – (224) –Share-based compensation – – 869 – 869December 31, 2012 restated 22,411,431 2,241 238,299 (230,893) 9,647

Total comprehensive loss – – – (30,943) (30,943)Convertible Bond/-loan notes:equity component – – – 711 711Issuance of share capital 8,113,845 812 23,530 – 24,342Issuance of share capitalfrom Treasury shares 80,975 8 256 – 264Use of Treasury shares (80,975) (8) – 8 –Share capital issuance costs – – (1,100) – (1,100)Share-based compensation – – 1,309 – 1,309Reclassification – – 134 (134) –December 31, 2013 30,525,276 3,053 262,428 (261,251) 4,230

1) For further details see “Consolidated Statements of Change in Shareholders‘ Equity” and Note 17, “Shareholders’ equity”, to the consolidated financial statements.2) Including: legal reserves, Treasury shares, accumulated deficit, cumulative translation adjustment, equity component of the convertible bonds outstanding and

cumulative pension adjustments.

3) For further details see note 24, “Adjustments of prior year information due to adaption of IAS19 (revised)”.



Shares and participation certificates (DCG 2.4)The Company has only one class of shares, i.e. registered shares with a nominal value of CHF 0.10each. Each share is fully paid up and carries one vote and equal dividend rights with no privileges.The Company has no outstanding participation certificates.

The Company’s shares are not certified. Shareholders are not entitled to request printing anddelivery of share certificates; however, any shareholder may at any time request the Company toissue a confirmation of its shareholding.

Profit-sharing certificates (DCG 2.5)The Company has not issued any profit-sharing certificates.

Limitations on transferability and nominee registrations (DCG 2.6)If buyers of registered shares explicitly declare in the request for registration that they have boughtthe registered shares in their own name and for their own account, they shall be registered in theshare register as shareholders with voting rights. Article 5 of the Articles furthermore providesthat shareholders may register their shares in the name of a nominee (“Nominee”) and may exer-cise their voting rights by giving instructions to the Nominee to vote on their behalf. However, aNominee holding more than 3% of the Company’s share capital may be registered as a Nominee forshareholders with voting rights only if the Nominee discloses the identity of those ultimate benefi-cial owners of shares claiming 0.5% or more of the Company’s share capital.

To remove or amend the above mentioned limitations on transferability and nominee registrations,the approval of (i) at least two-thirds of the votes represented and (ii) the majority of the repre-sented share capital at the respective shareholders’ meeting would be required.

Convertible bonds and options (DCG 2.7)In February 2007, the Company issued 2.875% p.a. convertible bonds (“Convertible Bond”) witha nominal value of CHF 70 million. The Convertible Bond was initially due for repayment onFebruary 20, 2012. However, following a resolution of the bondholders on November 10, 2011,which became legally binding on March 13, 2012, half of the then outstanding nominal value wasrepaid at par. The repayment for the remaining half as well as the payment of any interest sinceFebruary 21, 2011 has been deferred to February 20, 2015. The repayment will be at 150% ofpar. Also, the coupon has been increased from 2.875% p.a. to 5.75% p.a. Furthermore, the con-version price has been reduced to CHF 7.71. In connection with the rights offering in November2013, the conversion price has been further reduced to CHF 7.32 per share due to the anti-dilutionclause, representing a conversion ratio of 341.5301 registered shares of the Company per Conver-tible Bond of CHF 2,500. Every bondholder can request conversion at any time. CHF 179,883.88representing 1,798,838 shares of the Company’s conditional and authorized capital can serve asunderlying shares for the extended outstanding convertible bonds during the extended maturity.Under certain circumstances, and subject to a period of 30 days’ notice, the Company may redeemthe Convertible Bond early at no less than 150% of its nominal value. The Convertible Bond is listedon the SIX Swiss Exchange under the symbol CYT07 (see Note 14 “Convertible Bond and Convertibleloan notes”, to the consolidated financial statements).



Overview of outstanding options1 on December 31, 2013, options granted to the Board of Directors(BoD) are marked accordingly (each option entitles the option holder to purchase one share):

Year of grant Number of options outstanding Exercise price (CHF) Exercise period (years)

2009 91,5092 33.42 52009 3,4432 BoD 33.42 52009 67,420 12.38 52010 77,120 14.05 52010 8,2892 BoD 14.05 52010 12,000 12.30 52011 73,152 12.53 52011 207,1132 3.41 21⁄22011 20,0002 BoD 3.41 21⁄22012 565,1802 2.57 62012 100,000 BoD 2.57 62012 960,0002 2.54 62012 350,0004 2.24 52013 522,300 3.63 62013 70,000 BoD 3.63 62013 200,000 3.84 62013 380,000 3.85 62013 240,000 4.09 62013 60,000 4.04 620133 1,464,1502 3.49 620133 20,000 BoD 3.05 6Total 5,491,676

1) For further details please see Note 25, “Share options”, to the consolidated financial statements.2) Options allocated to employees: options of individuals acting simultaneously as members of the Board of Directors and of the

Executive Board are subsumed under “options allocated to employees”.

3) The option plan “SOP 2014” was approved and granted by the Board of Directors in 2013.4) Options were granted to venBio Global Strategic Fund L.P. as part of the financing.

The total 5,491,676 outstanding options represent CHF 549,167.60 nominal capital.



Nomination &Name Corporate

Year of First Elected Compensation Governance AuditPosition, nationality birth elected until Committee Committee Committee

Christian Itin, PhD 1964 2012 2016Chairman & CEO, SwitzerlandJohn Berriman, MBA 1948 2012 2015Vice Chairman, UKArthur M. Krieg, MD 1957 2012 2015Vice Chairman, USAJoseph Anderson, PhD 1959 2012 2014Member, UKPaul Brooke 1945 2012 2014Member, USAYamo Deniz, MD 1964 2013 2014Member, Sweden, USAKurt von Emster, CFA 1967 2012 2016Member, USA

Board of Directors (DCG 3)

Members of the Board of Directors (DCG 3.1)

ChairmanMember

Christian ItinChristian Itin, PhD, serves as of November 2012 as Cytos’ Chief Executive Officer and Chairmanof the Board of Directors. Before joining Cytos, Dr. Itin was President and Chief Executive Officerof Micromet Inc., a former NASDAQ-listed biopharmaceutical company, with its headquartersin Rockville, MD, USA, and an R&D center in Munich, Germany, which was acquired in March2012 by Amgen, Inc. for USD 1.16 billion. He spent 13 years with Micromet in a number of seniormanagement roles, becoming CEO in 2004. Before joining Micromet in 1999, Dr. Itin co-foundedZyomyx, Inc., a protein chip company based in Hayward, CA, USA. He received a Diploma in bio-logy and a PhD in cell biology from Basel University, Switzerland. In addition, he also performedpost-doctoral research at the Biocenter of Basel University and at Stanford University School ofMedicine, CA, USA. Dr. Itin serves as a non-executive director of Kymab Ltd (Cambridge, UK) andZyngenia Inc. (Gaithersburg, MD, USA). Christian Itin is a Swiss citizen and resident of Germany.



John BerrimanJohn Berriman, MBA, has been a member of the Board of Directors since May 2012 and was electedas its Vice Chairman in May 2012. He is the Deputy Chairman (previously Chairman) of Oslo-listedAlgeta ASA, Chairman of Heptares Therapeutics Ltd, Autifony Therapeutics Ltd and a member ofthe board of AIM-listed ReNeuron Group plc. Until March 2012, he was a member of the Board ofDirectors of NASDAQ-listed Micromet Inc. Previously he was a Director of Abingworth ManagementLtd, an international investment group dedicated exclusively to the life sciences and healthcaresectors, where he was involved in founding, financing and serving as a director of several biotechno-logy companies in Europe and the USA, many of which obtained listings on public stock exchanges.Before that, Mr. Berriman spent 14 years with Celltech Group plc and was a member of its Execu-tive Board when it listed on the London Stock Exchange in 1994. He has a degree in chemicalengineering from the University of Cambridge, UK, and a MBA from the London Business School.He is a British citizen and resident of the UK.

Arthur M. KriegArthur M. Krieg, MD, has been a member of the Board of Directors since May 2012 and was electedas its Vice Chairman in May 2012. He currently serves as Senior Vice President and Chief ScientificOfficer at Serepta Therapeutics. Prior to that, he served as CEO and director of RaNA TherapeuticsInc., which he co-founded in 2011. Prior to RaNA, Dr. Krieg was Chief Scientific Officer of Pfizer’sOligonucleotide Therapeutics Unit from 2008 to 2011, and before this he was CSO of Coley Phar-maceutical Group, which was acquired by Pfizer in 2008. He co-founded Coley in 1997, serving onits Board and as CSO and Executive Vice President of R&D. Before joining Coley, he was a Professorof Medicine at the University of Iowa in the Division of Rheumatology, where he was responsiblefor patient care, medical student teaching, and basic research in immunology. Dr. Krieg received aBS in Biology from Haverford College, an MD from Washington University, completed an internshipand residency in Internal Medicine at the University of Minnesota, and a Fellowship in Rheumato-logy at the National Institutes of Health. He is certified by the US Board of Internal Medicine and isa Fellow of the American College of Rheumatology. Dr. Krieg is a US citizen and resident of the USA.

Joseph AndersonJoseph Anderson, PhD, has been a member of the Board of Directors since May 2012. He is aPartner at Abingworth LLP, an international investment group dedicated to the life sciencesand healthcare sectors. He leads private investments in public companies in the US and Europe.Dr. Anderson has more than 20 years’ experience as a portfolio manager and analyst in the pharma-ceutical and bioscience sectors and he has founded and managed two healthcare funds, has beena Special Adviser to the UK Government and published more than 50 papers on research manage-ment. Before joining Abingworth in 2004, Dr. Anderson was Head of Global Healthcare Equities atFirst State Investments in London, part of the Commonwealth Bank of Australia. Prior to this, he wasa pharmaceuticals analyst at Dresdner Kleinwort Benson, an investment bank. From 1990 to 1998,Dr. Anderson established and was Head of the Strategy Unit at The Wellcome Trust, one of theworld’s largest medical foundations. Before that he was a Non-executive Director of Algeta ASA(Oslo bourse) and Amarin Corp. (NASDAQ). He is also a Director of Abingworth BioEquities MasterFund Limited, an offshore investment fund. Dr. Anderson has a PhD in Biochemistry. He is a Britishcitizen and resident of the UK.

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Paul BrookePaul Brooke has been a member of the Board of Directors since May 2012. He has more than30 years of experience in life science analysis, investing and management. He is a co-founder andManaging Director of venBio, a biotechnology-focused private equity firm with offices in New Yorkand San Francisco. Prior to venBio, Mr. Brooke was the Global Head of Health Care Research andStrategy at Morgan Stanley and headed up Morgan Stanley Research, Strategy, and Economics inthe Pacific Basin, including Japan. He also was a Managing Director for Tiger Management, wherehe was responsible for health care investing. Mr. Brooke is a Director of ViroPharma, Incyte, CheyneCapital International and Manning & Napier, and has served on numerous other boards includingWebMD, Transform and Novirio. Previously, he was an advisor to MPM Capital and a member ofthe Board of Directors of the MPM BioEquities Fund. Mr. Brooke is a managing member of PMSVHoldings (an investment firm). Mr Brooke has a BA from Columbia College, New York, and an MAfrom Columbia University, New York. He is a US citizen and resident of the USA.

Yamo DenizYamo Deniz, MD, has been a member of the Board of Directors since December 2013. He wasappointed Global Head of Rare Diseases at Genzyme (Sanofi) in 2014, prior to which he was ChiefMedical Officer, Global Head of Medical & Pharmacovigilance at GE Healthcare Lifesciences.Previously to joining GEHC in 2010, Dr. Deniz held numerous senior clinical and leadership posi-tions of increasing responsibilities in respiratory as well as inflammation groups at Genentech andRoche, respectively. Dr. Deniz played a key role in the filing and approval of multiple drugs and in-vivo diagnostics agents in several therapeutic areas of unmet need, including omalizumab (Xolair®)for the treatment of asthma in the US and the EU. He also oversaw the lifecycle managementplans of marketed products for other indications. In addition, he led Genentech’s Peanut Allergyprogram. Dr. Deniz graduated with a BA in Chemistry from the College of the Holy Cross. Afterfinishing his medical studies at the University of Massachusetts, Dr. Deniz completed a pediatricresidency in New York and a sub-specialty training in Pediatric Allergy & Immunology at Duke Uni-versity Medical Center in North Carolina. Before joining Genentech in 2001, Dr. Deniz worked at theKarolinska Institutet Pediatric Hospital and remains actively involved in the respiratory, allergy andimmunology fields. He currently also serves as a member of the corporate scientific advisory boardof DBV Technologies. He is citizen of Sweden and USA and resident of USA.

Kurt von EmsterKurt von Emster, CFA has been a member of the Board of Directors since May 2012. He has beenan institutional biotechnology and health care analyst and portfolio manager for over 20 years.Currently he serves as a Managing Partner of venBio. Mr. von Emster’s investment career startedin 1989 at Franklin Templeton where he founded and managed several health and biotechnologyfunds in the 1990s, each achieving a 5-star Morningstar ranking. In 2001, Mr. von Emster becamea General Partner at MPM Capital, a leading biotechnology private equity firm, and launched theMPM BioEquities Fund, a cross over public and private biotechnology hedge fund. He was the port-folio manager of this fund from inception in 2001 until his departure in 2009. He is a member ofthe Board of Directors of CymaBay Therapeutics, Inc., a former member of the Board of SomaxonPharmaceuticals Inc. and Facet Biotech Corporation and a former Board observer of AcceleronPharma. Mr. von Emster holds a BA from the University of California, Santa Barbara, and is a certi-fied financial analyst. He is a US citizen and resident of the USA.

Christian Itin is as CEO Member of the Executive Board. No other Board member is or has beenmember of the executive management or has a material business relationship with the Company.



Other activities and vested interests (DCG 3.2)Other than as described above, none of the members of the Board of Directors has any position ingoverning or supervisory bodies of any major organization, institution or foundation under privateor public law, permanent management or consultancy function for major interest groups, officialfunction or political mandate.

Elections and terms of office (DCG 3.3)The Articles of Association provide that the Board of Directors must consist of three to nine boardmembers. On December 31, 2013, it consisted of seven members.

As of January 1, 2014, each member of the Board of Directors is elected individually for a maximumterm of one year and maybe re-elected for successive terms at the shareholders’ meeting. The termof office of a member of the Board of Directors is determined by Swiss law.

Internal organizational structure (DCG 3.4)The functions of the Chairman of the Board of Directors include the following:• Preparing, calling, and chairing the meeting of the Board of Directors and the shareholders’

meetings

• Supervision of the implementation of resolutions passed by the Board of Directors or the share-holders’ meeting

• Representation of the Board of Directors to the public, public authorities and the shareholders.

Since November 20, 2012 the Chief Executive Officer holds the additional office of the Chairman ofthe Board and thus presides over the Executive Board and the Board of Directors.

The Board of Directors constitutes itself and appoints its chairman, vice-chairman and secretary.

The Board of Directors has established three permanent committees to carry out specific duties:the Compensation Committee, the Nomination and Corporate Governance Committee as well asthe Audit Committee, each in general consisting of two or more members of the Board of Directors(currently two committees are consisting of only two members each). The members of the commit-tees are appointed by the Board of Directors. Members of the committees were all non-executivedirectors in 2013.

The Board of Directors convened in person or by phone 16 times in 2013. In addition, there iscontact between meetings as required. Members of senior management regularly attend boardmeetings in order to report on areas of the business within their responsibility and to respond toquestions from board members. One part of the meetings always takes place with the members ofthe Board of Directors only. No consultants, with the exception of the Company’s lawyer, partici-pated in board meetings in 2013.



Compensation Committee (CC)

The CC meets as often as business requires, but at least twice per year and has the following duties(excerpt from the CC Charter of Cytos Biotechnology Ltd approved by the Board of Directors onNovember 18, 2013):

“4. DutiesThe Committee has the following duties, and such other duties as may be assigned to theCommittee by the Board from time to time:

4.1 Compensation PoliciesThe Committee shall:

• prepare and recommend to the Board for approval a compensation policy for the Board (the“Director Compensation Policy”) and for the executive board, and thereafter annually review suchpolicies and recommend changes, if any, for approval by the Board; such compensation policiesshall provide for near-term and long-term compensation, including variable compensation for theexecutive board, which (1) is designed to attract, motivate and retain persons with the necessaryskills and character, (2) is consistent with market conditions, and in the case of variable compensa-tion, consistent with the Company’s and the individual’s performance, and (3) aligns the interestsof the members of the Board and the executive board with the interests of the Company;

• periodically review the Company’s compensation policies for its employees who are not membersof the executive board.

4.2 Board CompensationThe Committee shall review and recommend to the Board for approval any compensation andother payments to present and former non-employee directors of the Company to the extent notalready provided for in the Director Compensation Policy.

Nomination andCompensation Corporate Governance Audit

Name Board of Directors* Committee Committee Committee

Christian Itin, PhD 16 – – –John Berriman, MBA 10 4 – –Arthur Krieg, MD 14 – 4 –Joseph Anderson, PhD 15 – 4 –Paul Brooke 16 4 – 4Kurt von Emster, CFA 15 – 4 4*Including telephone conferences

Attendance at the Board of Directors and committee meetings in 2013:



4.3 Executive Board Compensation and ContractsThe Committee shall:

• evaluate annually the performance of the CEO, and submit such evaluation for review and discus-sion by the Board, in each case in executive session without the presence of the CEO;

• review and discuss the annual performance evaluation of the members of the executive boardpresented by the CEO to the Committee;

• review and recommend for approval by the Board the annual base salary, incentive compensationand equity compensation of the CEO, and in consultation with the CEO, of the other members ofthe executive board, and the overall compensation of the CEO and executive board;

• review and approve any employment contracts, severance contracts, or other agreements thatthe Company proposes to enter into with any present, future or former members of the executiveboard; provided that the key terms of such contracts shall be submitted for approval by the Board.

4.4 Incentive, Equity Compensation and Perquisite Benefits PlansThe Committee shall:

• establish an incentive compensation plan providing for variable compensation of the membersof the executive board based on the achievement of the Company’s corporate goals and theindividuals’ performance, and approve any changes to such plan as may be proposed by the CEOfrom time to time;

• approve any incentive compensation plans providing for variable compensation of employees ofthe Company (other than the members of the executive board) and any changes thereto, as maybe proposed by the CEO from time to time;

• develop and periodically review equity compensation plans, and submit such plans and anychanges to such plans to the Board for approval;

• review and approve any perquisite benefits plans proposed by the CEO for the members of theexecutive board.

4.5 Corporate GoalsThe Committee shall:

• review the annual corporate goals proposed by the CEO, and recommend such goals as approvedby the Committee for approval by the Board;

• determine the level of achievement of the corporate goals as approved by the Board upon com-pletion of each calendar year, and apply such achievement level to the determination of thevariable compensation of the members of the executive board in accordance with the applicableincentive compensation plan.

4.6 Compensation DisclosuresThe Committee shall review and approve the compensation statements to be included and pub-lished in the Company’s annual report, and any other required public disclosure statements oncompensation and benefits.

4.7 Annual Committee Performance ReviewThe Committee shall evaluate its own performance on an annual basis as part of the Board perfor-mance assessment process established by the Nomination and Corporate Governance Committee.



4.8 Committee CharterThe Committee shall review this Charter annually and submit any recommended changes to theBoard for approval.”

The chairperson of the Committee shall report to the chairperson of the Board after each meetingand shall inform the Board at its next meeting on the activities as well as decisions taken by theCommittee and the considerations that led to such decisions. Urgent matters shall be communi-cated to the chairperson of the Board without delay. The CC met four times in 2013.

The full text of the “Compensation Committee Charter” may be read on the Company’s website at:http://www.cytos.com/corporate-governance/

Nomination and Corporate Governance Committee (NCGC)

The NCGC meets as often as business requires, but at least twice per year and has the followingduties (excerpt from the NCGC Charter of Cytos Biotechnology Ltd approved by the Board of Direc-tors on November 18, 2013):

“4. DutiesThe Committee has the following duties, and such other duties as may be assigned to the Commit-tee by the Board from time to time:

4.1 Director Qualifications and NominationThe Committee shall:

• establish and periodically review the qualification criteria for Board candidates, with the goal ofachieving a composition of the Board that collectively has the skills and experience needed todetermine the strategy of the Company and oversee the management in executing the Company’sstrategy and achieving its objectives;

• conduct the search for Board candidates based on the qualification criteria established by theCommittee and any other criteria that the Committee may consider appropriate, and recommendsuitable candidates to the Board to be nominated for election by the shareholders.

4.2 Board and Committee Governance and CompositionThe Committee shall:

• periodically review the policies and principles for corporate governance of the Company, includingthe Internal Regulations, and recommend changes, if any, to the Board for approval;

• make recommendations to the Board on Board and committee compositions, including the Boardand committee chairpersons and the size of the Board and the committees, taking into accountthe independence standards established by applicable laws, regulations, the committee chartersand corporate governance principles.

4.3 CEO and Executive Board Nominations• The Committee shall be responsible for conducting the search for candidates for the position of

CEO of the Company, and shall recommend suitable candidates for evaluation and appointmentby the Board;

• The CEO shall be responsible for conducting the search for candidates for executive board posi-tions, and shall recommend candidates for evaluation by the Committee. The Committee shallevaluate such candidates, and shall recommend suitable candidates for evaluation and appoint-ment by the Board.



4.4 Board Performance ReviewThe Committee shall:

• establish a process for, and conduct an annual review of the performance of the Board, its com-mittees, and individual Board members in their role as members of the Board or a committee ofthe Board;

• consider the results of the annual performance review when determining whether or not torecommend the nomination of a director for an additional term on the Board or a committee,and for developing proposals for improving corporate governance policies and effectiveness ofthe Board and its committees.

4.5 Succession PlanThe Committee shall prepare and review annually a succession plan for the directors of the Board,the CEO, and the members of the executive board.

4.6 Corporate Governance DisclosuresThe Committee shall review and approve the corporate governance report of the Company forinclusion in the annual report as well as any other written public disclosures on corporate gover-nance matters.

4.7 Annual Committee Performance ReviewThe Committee shall evaluate its own performance on an annual basis as part of the Board perfor-mance assessment process established by the Committee.

4.8 Committee CharterThe Committee shall review this Charter annually and submit any recommended changes to theBoard for approval.”

The chairperson of the Committee shall report to the chairperson of the Board after each meetingand shall inform the Board at its next meeting on the activities as well as decisions taken by theCommittee and the considerations that led to such decisions. Urgent matters shall be communi-cated to the chairperson of the Board without delay. The NCGC met four times in 2013.

The full text of the “Nomination and Corporate Governance Committee Charter” may be read onthe Company’s website at: http://www.cytos.com/corporate-governance/

Audit Committee (AC)

The Committee meets (by person or by telephone) as often as business requires and has the fol-lowing duties (excerpt from the AC Charter of Cytos Biotechnology Ltd approved by the Board ofDirectors on September 3, 2013):

“4. DutiesThe Committee has the following duties, and such other duties as may be assigned to the Commit-tee by the Board from time to time:

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4.1 Financial StatementsThe Committee shall:

• review and discuss with management and the Auditor the annual and quarterly financial state-ments and reports intended for publication as well as any other financial statements intendedfor publication;

• approve the quarterly reports for publication;

• inform the Board of its assessment of the financial statements and decide whether to recommendthe statutory and consolidated financial statements to the Board for approval and presentationto the general shareholders’ meeting;

• review in cooperation with the Auditor and the management whether the accounting principlesapplied by the Company and its subsidiaries are appropriate in view of the size and complexityof the Company.

4.2 Interaction with the Company’s External Auditor (the “Auditor”)The Committee shall:

• review and assess the qualifications, independence, performance and effectiveness of the Audi-tor, and recommend to the Board the nomination of the Auditor for election by the generalassembly of shareholders;

• review the scope of the prospective audit by the Auditor, the estimated fees, and any other mat-ters pertaining to such audit as the Committee may deem appropriate;

• approve any audit and non-audit services proposed to be provided by the Auditor to the Com-pany to ensure Auditor independence; provided that the chairperson of the Committee may pre-approve such services between scheduled Committee meetings subject to the ratification of suchapprovals by the Committee at a subsequent meeting;

• review and assess the Auditor’s report, management letters and take notice of all comments ofthe Auditor on accounting procedures and systems of control;

• review with the Auditors and management the Auditor’s reports to the Committee/Board on criti-cal accounting policies and practices used (and any changes therein), on alternative treatments offinancial information discussed with management and on other material written communicationbetween the Auditor and management;

• review with the Auditor any audit problems or difficulties and management’s response, includingany restrictions on the scope of the Auditor’s activities or on access to requested information, andany significant disagreements with management.

4.3 Internal Control Over Financial Reporting, Risk Management, Compliance and Contingent LiabilitiesThe Committee shall:

• at least annually monitor, review and discuss with the Auditor and with management the adequacyand effectiveness of the Company’s policies and procedures regarding internal controls over financialreporting and risk assessment, and the Company’s compliance therewith;

• periodically review the Company’s policies and procedures for risk management and assess the effec-tiveness thereof;

• periodically review the Company’s policies and procedures designed to ensure compliance with laws,regulations and internal rules and policies;

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• discuss with management and, if appropriate, the Company’s external advisors any legal matters(including the status of pending or threatened litigation) that may have a material impact on the Com-pany’s financial statements, and any material reports or inquiries from regulatory or governmentalagencies that could materially impact the Company’s contingent liabilities and risks.

4.4 Annual Committee Performance ReviewThe Committee shall evaluate its own performance on an annual basis as part of the Board perfor-mance assessment process established by the Nomination and Corporate Governance Committee.

4.5 Committee CharterThe Committee shall review this Charter annually and submit any recommended changes to theBoard for approval.

The chairperson of the Committee shall report to the chairperson of the Board after each meetingand shall inform the Board at its next meeting on the activities as well as decisions taken by theCommittee and the considerations that led to such decisions, including, without limitation anydiscussions or decisions relating to the quality or integrity of the financial statements, compliancewith legal or regulatory requirements, and performance and independence of Auditor. Urgent mat-ters shall be communicated to the chairperson of the Board without delay. The AC met four timesin 2013.

The full text of the “Audit Committee Charter” may be read on the Company’s website at:http://www.cytos.com/corporate-governance/

Definitions of areas of responsibility (DCG 3.5)All executive functions within the Company not reserved for the Board of Directors or the Chair-man as stated in the Articles or the internal regulations (“Internal Regulations”) are delegated tothe Chairman (CEO) and the Executive Board. The Chairman (CEO) chairs the Executive Board andis responsible for its organization.

In accordance with article 716a of the Swiss Code of Obligations (CO), Article 23 of the Articles ofAssociation and Article 2 of the Internal Regulations, the Board of Directors has the following non-assignable and non-withdrawable duties:

“3.2. Duties of the Board3.2.1. GeneralThe Board has the power to make decisions on all matters not vested in the General Meeting ordelegated to any other corporate body or person by statute, the Articles or the Regulations.

3.2.2. Ultimate Leadership and SupervisionThe Board has the ultimate responsibility for the success of the Company, and has the authority andobligation to resolve on the following matters:




(a) the ultimate direction of the business of the Company and the issuance of the necessary direc-tives, including, by way of example:

(i) determination of the business strategy taking into account the information, proposals andalternatives presented by the Chairman & CEO;

(ii) setting of annual operational and financial goals and approval of the annual business planand budget (and any material deviations therefrom), based on proposals presented by theChairman & CEO;

(iii) reviewing the Company’s risk assessment and risk management processes, andmonitoring the risks that may affect the Company’s success and long-term growth;

(iv) entry into new areas of activity and withdrawal from existing areas of the business;

(v) approving all matters and business decisions where such decisions exceed theauthority delegated by the Board to the committees or the Chairman & CEO.

(b) the determination of its organization and ultimate supervision of the organization and thepersons entrusted with the management of the Company, including, by way of example:

(i) appointment and dismissal of the Chairman & CEO and the other members of theExecutive Board, and development of a plan for their succession;

(ii) establishment of a reporting and compliance framework for the Company to ensure com-pliance with the law, the Articles, the Regulations, and the directives of the Board; and

(iii) approval of the compensation policy of the Company, conduct of an annual review of theperformance of the CEO and the members of the Executive Board, and approval of theircompensation and severance packages;

(iv) adoption from time to time of further regulations and instructions regarding the organiza-tion of the business and the duties and responsibilities of the executive bodies.

(c) the organization of the accounting, financial and risk control and financial planning systemsas required for management of the Company, including:

(i) approval of accounting principles and changes thereto;

(ii) review and approval of the framework for the Company’s internal control systems; and

(iii) establishment of the Company’s finance and investment policy;

(iv) review and approval of the annual financial statements and the annual report of theCompany prior to its submission to the General Meeting.

3.2.3. Additional DutiesThe Board has additional duties assigned to it by statute and in the Articles, including:

(a) convening of the General Meetings, approval of proposals to be made to the GeneralMeeting, and implementation of any lawful resolutions of the General Meeting;

(b) notification of the court in the event that the Company is over indebted;




(c) adoption of any resolutions and reports concerning an increase or decrease of the sharecapital to the extent that such power is vested in the Board, including resolutions concer-ning confirmation of capital increases or decreases and related amendments to the Articles(in particular but not limited to decisions and acts to be taken in accordance with Articles651a, 652e, 652g, 653g, 653i or also 634a of the Swiss Code of Obligations).

3.2.4. Resolution on Certain Business Matters and TransactionsThe Board has reserved the right to resolve on the following business matters and transactions:(a) execution of loan or lease agreements with a principal amount borrowed by the Company

in excess of CHF 1 million;

(b) granting of a loan or taking on contingent liabilities in respect of independent third partieswith an exposure of more than CHF 250,000;

(c) opening and closing of offices or other sites from which the Company operates its business;

(d) merger and acquisitions of any kind, divestments of companies, participations in companiesor businesses, or incorporations or liquidations of companies or businesses as well as anyreorganization;

(e) initiation and settlement of legal proceedings of material significance in terms of financialexposure of the Company or impact on the Company’s business;

(f) all transactions between the Company and Board members or members of the ExecutiveBoard;

(g) contracts with third parties outside the ordinary course of business of the Company;

(h) any other matters for which the Chairman & CEO requests a resolution of the Board.”

The full text of the “Internal Regulations” is available on the Company’s website at:http://www.cytos.com/corporate-governance/

Information and control instruments versus the Executive Board (DCG 3.6)The members of the Board of Directors receive comprehensive management reports from time totime designed to provide them with an update about business activities in general and develop-ments in clinical trials, finance and any other matters of importance. These reports are discussedduring board meetings together with the members of the Executive Board. In addition, strategic dis-cussions are held. Condensed financial statements, drafted on the same financial principles (IFRS)as the annual report, are distributed to the members of the Board of Directors on a quarterly basis.

Insider Trading Policy

In order to prevent insider trading an Insider Trading Policy was created, which is periodicallyreviewed and updated by the Board. The goal of the policy is to regulate any inappropriate trad-ing by insiders based on confidential information. Specifically, any insider who has knowledge ofinsider information shall not trade in securities of the company to which such information per-tains, disclose such information to third parties, or encourage any other person to trade in such

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securities. A violation of this policy may result in disciplinary action, up to and including termina-tion of employment without notice. In addition, a violation may result in criminal prosecution ofthe insider based on Art. 40 of the Swiss Stock Exchange Act, which prohibits trading on or passingon insider information.

Code of Conduct

The Company also has a Code of Conduct. Cytos is committed to, and expect its employees, officersand directors (“Associates”) to observe the highest standards of ethical business conduct and tocomply with the letter and spirit of all laws and regulations applicable in the countries or regionswhere we engage in business. All Associates are responsible and accountable for complying withthe provisions of this Code as well as with all applicable law and regulations.

The full Code of Conduct may be read on the Company’s website at: http://www.cytos.com/cor-porate-governance/

Due to the size of the Company, it does not have an internal audit function.

In 2013, none of the members of the Board of Directors, except the Chairman who is also CEO,participated in any meeting of the Executive Board.

In 2013, the CFO of the Company was present at all Audit Committee meetings. If deemed appro-priate by any member of the Audit Committee, part of the committee meetings takes place withoutthe presence of members of management.




Executive Board (DCG 4)

Members of the Executive Board (DCG 4.1)

Name Year of birth Nationality Position

Christian Itin, PhD 1964 Swiss Chairman and Chief Executive Officer (CEO)Matthias Alder 1965 Swiss EVP Corporate Development & Legal AffairsFrank Hennecke, PhD 1963 Swiss/German EVP Product DevelopmentHarry Welten, MBA 1965 Swiss EVP and Chief Financial Officer (CFO)

Christian ItinChristian Itin, PhD, serves as of November 2012 as Cytos’ Chairman of the Board of Directors andChief Executive Officer. Before joining Cytos, Dr. Itin was President and Chief Executive Officerof Micromet Inc., a former NASADAQ-listed biopharmaceutical company, with its headquartersin Rockville, MD, USA, and an R&D center in Munich, Germany, which was acquired in March2012 by Amgen, Inc. for USD 1.16 billion. He spent 13 years with Micromet in a number of seniormanagement roles, becoming CEO in 2004. Before joining Micromet in 1999, Dr. Itin co-foundedZyomyx, Inc., a protein chip company based in Hayward, CA, USA. He received a Diploma in biologyand a PhD in cell biology from Basel University, Switzerland. In addition, he also performed post-doctoral research at the Biocenter of Basel University and at Stanford University School of Medicine,CA, USA. Dr. Itin serves as a non-executive director of Kymab Ltd (Cambridge, UK) and Zyngenia Inc.(Gaithersburg, MD, USA). Christian Itin is a Swiss citizen and resident of Germany.

Matthias AlderMatthias Alder joined Cytos as Executive Vice President Corporate Development and Legal Affairsin March 2013. He has more than 20 years of business, transactional and legal experience in thepharmaceutical and biotechnology industries. Most recently, he served as Senior Vice PresidentAdministration, General Counsel and Secretary of Micromet, Inc., a former NASDAQ-listedbiopharmaceutical company located in Rockville, MD, USA and Munich, Germany, that was acquiredby Amgen, Inc. in 2012 for USD 1.2 billion. Prior to joining Micromet, he was a partner in the LifeSciences Transactions Practice at Cooley LLP, a renowned technology and life sciences-focused USlaw firm, where he specialized in representing biotech companies in strategic transactions withpharmaceutical companies. Earlier in his career, Mr. Alder was in-house counsel at Ciba-Geigy andNovartis. He holds law degrees from the University of Basel and the University of Miami (Florida),and is qualified to practice law in Switzerland and the USA.

Former Members of the Executive Board

Name Year of birth Nationality PositionPhilippe Müller, MD 1953 Swiss EVP Clinical Development

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Frank HenneckeFrank Hennecke, PhD, serves as Executive Vice President Product Development of Cytos since April2001. Dr. Hennecke is responsible for process sciences and pioneered the manufacturing process forQbeta-derived virus-like particles, the foundation of Cytos class of product candidates. He trainedin biology and received a PhD in molecular biology from the University of Göttingen, Germany,in 1996. Dr. Hennecke joined Cytos in 1998 after a postdoctoral fellowship with Prof. AndreasPlückthun at the University of Zurich.

Harry WeltenHarry Welten, MBA, serves as Executive Vice President and Chief Financial Officer of Cytos sinceAugust 2010. He has 20 years of international executive experience, more than 12 of which as aCFO in the biotech industry. Prior to joining Cytos, Mr. Welten was CFO at Nitec Pharma AG inReinach, Switzerland, which merged with US-based Horizon Pharma Inc. and was listed on NASDAQin 2011. From 2001 to 2009, he was CFO at Arpida AG, Basel, Switzerland, taking the companypublic in 2005 to the SIX Swiss Exchange and raising more than CHF 250 million in private andpublic offerings. Prior to joining Arpida, he held various senior management positions at UBS groupincluding Director at UBS Warburg in New York. Before joining UBS, Mr. Welten was with ABB andDaimlerChrysler. He is a member of the Board of Directors of BiognoSYS AG, Horizon Pharma AG andBioSupport AG, and a member of the foundation council of HBM Foundation. He holds a degree inbanking and finance, a degree in economics and business administration, and an MBA (Hons) fromColumbia University, NY, USA.

Other activities and vested interests (DCG 4.2)Other than as described above, none of the members of the Executive Board has any position ingoverning or supervisory bodies of any major organization, institution or foundation under privateor public law, permanent management or consultancy function for major interest groups, officialfunction or political mandate.

Management contracts (DCG 4.3)There are no management contracts.




Other members of the Company’s management teamIn addition to the members of the Executive Board, the following members of the Company’sextended management team provide senior leadership to key functions:

Dorothee KrumwiehDorothee Krumwieh, PhD serves as Vice President, Program Leader since May 2013. Before joiningCytos, Dr. Krumwieh was most recently in charge of the neurological development programs atMerck Serono. Previously Dr. Krumwieh held various positions in research and regulatory affairsand lead cross-functional development programs in oncology and dermatology at Merck Serono,Serono and Behringwerke AG. Dr. Krumwieh received a PhD in immunology from the University ofFreiburg im Breisgau, Germany.

Cheryl LassenCheryl Lassen, MD, joined Cytos as Vice President Clinical Development in March 2013 bringinga wealth of clinical development experience, with particular expertise in respiratory diseases.Dr. Lassen joined from Novartis where she was Program Leader for the global clinical developmentof the indacaterol program, a product since approved by the US FDA, EMA, Japan and manycountries worldwide. In her 20-year career, she has worked on a multitude of clinical developmentprograms and in medical affairs in the UK and in South Africa for companies including Bristol MyersSquibb, Abbott Laboratories and Pharmacia. Dr. Lassen received her Medical Degree from theUniversity of the Witwatersrand in South Africa and holds a Science degree in microbiology andphysiology from the University of South Africa. She leads the clinical development activities at Cytos.

Philippe SaudanPhilippe Saudan, PhD, serves as Vice President and Chief Scientific Officer of Cytos fromMarch 2014 (before that, he served as Vice President Research & Preclinical Development).He has been leading key research and development programs at Cytos and has been managingcollaborations with corporate partners. Dr. Saudan joined Cytos’ Research Department in 2000.Dr. Saudan graduated in biology at the University of Zurich and conducted research in Virologyat the Swiss Institute for Experimental Cancer Research, receiving his PhD in Virology from theUniversity of Lausanne, Switzerland.

Martin SperrleMartin Sperrle, PhD, serves as Vice President Intellectual Property since January 2008. Dr. Sperrleis a registered Swiss and European Patent Attorney and has been responsible for Cytos’ globalintellectual property strategy since 2001. Before joining Cytos in 2001, Dr. Sperrle worked forseveral years as a patent attorney in a private patent law firm in Zurich. He studied chemistry at theUniversities of Tübingen (Germany), Pisa (Italy) and Toulouse (France), received his PhD from theSwiss Federal Institute of Technology in Zurich, and performed post-doctoral research at StanfordUniversity, CA, USA.



Compensation, shareholdings and loans (DCG 5)

Content and method of determining compensation and the share-ownership programs (DCG 5.1)Compensation of the Board of Directors and the Executive Board is defined, reviewed and approvedby the Board of Directors on recommendation of the Compensation Committee with the involve-ment of external consultants on benchmarking as deemed appropriate.

In accordance with the Compensation Committee Charter, the Compensation Committee annuallyreviews the compensation policy for the Board of Directors and the Executive Board and recom-mends changes, if any, for approval by the Board of Directors. Such compensation policy providesfor near- and long-term compensation, including variable compensation for the Executive Board,that (1) is designed to attract, motivate and retain persons with the necessary skills and character,(2) is consistent with market conditions, and in the case of variable compensation, consistent withthe Company’s and the individual’s performance, and (3) aligns the interests of the members of theBoard and the Executive Board with the interests of the Company, and its shareholders.

Based on resolutions adopted by the Board of Directors on August 22, 2012 and incorporated in theCompany’s Director Compensation Policy, non-executive members of the Board of Directors receivean annual fixed (not performance-related) compensation of CHF 30,000 plus an attendance fee ofCHF 4,000 for each board meeting attended in person. In the event of attendance by telephone,the fee is reduced to CHF 2,000. The attendance fee for a committee meeting is CHF 2,000 (chair-man: CHF 4,000); in the event of attendance by telephone, the fee is reduced to CHF 1,000 (chair-man: CHF 2,000). As the Chairman of the Board is also the CEO of the Company, he is not entitledto compensation under the Director Compensation Policy and has not received any compensationrelating to his service as a member or Chairman of the Board.

The overall compensation for the Executive Board (including the Chairman of the Board of Directorswho is also the Chief Executive Officer) is composed of (1) a fixed cash base salary, (2) a perfor-mance-related cash bonus depending on the achievement of Company and personal goals, and (3)non-cash incentive awards in the form of employee stock options, based on the Company’s equitycompensation plan as may be in effect from time to time.

The variable compensation for the Executive Board (including the Chairman of the Board of Direc-tors who is also the Chief Executive Officer) is governed by the Incentive Compensation Plan, whichis designed to offer cash and non-cash incentive compensation to officers and employees of Cytosby rewarding the achievement of corporate goals, and specifically measures personal goals that areconsistent with and support the achievement of corporate goals. The target bonus is determinedby applying a “target award multiplier” to the annual cash base salary of the Chief Executive Officerand the other members of the Executive Board. The final performance-related cash bonus is thencomputed by taking into consideration the achievement of corporate goals and personal goals. Therespective percentages are as shown below:

Position Target award multiplier Weighting of Weighting ofcorporate goals personal goals

CEO 55% 100% 0%Executive Vice President 35% 75% 25%



For 2013 (1 January 2013 through 31 December 2013), the corporate goals consisted of (i) extendthe cash runway to Q1 2015 (30% weight), (ii) complete patient enrollment in the on-going phase2b clinical trial with CYT003-QbG10 in with moderate to severe asthma (40% weight), (iii) completethe manufacturing technology transfer for CYT002-QbG10 (10% weight) (iv) initiate another phase2b clinical trial with CYT003-QbG10 in patients suffering from mild to moderate asthma (10% weight)and (v) initiate a phase 1b mechanism of action study with CYT003-QbG10 (10% weight). The timelyachievement of a goal is weighted with 100% while an earlier or a better achievement can improvethe weight to maximally 150% whereas a late or under-achievement can decrease the weight to80% or zero.

During its meetings on November 18, 2013, the Board of Directors, based on a proposal of theCompensation Committee, determined that the 2013 corporate goals had been achieved at a levelof 84%. Personal goals were set by the CEO and approved by the Board for Executive Vice Presidentswith a weight of 25%. These personal goals mainly related to the field of activity of each ExecutiveVice Presidents. These personals goals were achieved by an average of 90.30% (range: 84%-95%). Thecorporate goals have a weight of 75%.

The following information is published in Note 11, “Compensation and participations”, to the statutoryfinancial statements of Cytos Biotechnology Ltd.: (i) total compensation of the members of the Boardof Directors and parties closely linked to such people, (ii) total compensation for the members of theExecutive Board (including the relationship of base salary and performance based salary expressed asa percentage of the base salary) with the highest remuneration paid to whom and total compensationof the Executive Board and parties closely linked to such people, (iii) participations, conversion rightsand option rights in the Company by the individual members of the Board of Directors and the Execu-tive Board and parties closely linked such people.

In addition to the cash remuneration specified above, all members of the Board of Directors, theExecutive Board and all other employees are eligible to receive stock options. The allocation of theseoptions is discretionary and decided from time to time by the Board of Directors upon recommen-dation of the Compensation Committee.

On the start of his employment, one member of the Executive Board received restricted stock unitsfor 85,000 shares of the Company that are subject to certain restrictions and to risk of forfeiture (the“Restricted Stock Units”) subject to reverse vesting conditions as published in Note 11, “Compensationand participations”. The Restricted Stock Units vest in case of a change of control of the Companyprovided that the Company is valued in such transaction at a price that is higher than the marketcapitalization of the Company on the start date of employment. No other shares were allotted tomembers of the Board of Directors or the Executive Board or any parties closely linked to them in2013. The grant of option rights to the members of the Board of Directors or the Executive Board ispublished in Note 11, “Compensation and participations”.

The Board of Directors approved the extension of the maturity of 140,000 options (“SOP 2011, Sep-tember)” granted to some members of the Executive Board by one year. The grants took place onSeptember 1, 2011 and will expire on February 28, 2015 instead of February 28, 2014.

No compensation was paid to former members of Board of Directors or of the Executive Board, otherthan a consulting fee of TCHF 158 in 2013 for services rendered by a former member of the ExecutiveBoard.



No fees or remuneration were paid to members of the Board of Directors or the Executive Board orparties closely linked to such persons for additional services performed during 2013. With the excep-tion of a consulting fee of TCHF 105 in 2013 for services rendered before the start of employment ofa current member of the Executive Board.

No severance payments were paid to members of the Board of Directors or the Executive Board.

No loans were granted to any governing body or closely linked party, neither in 2013 nor in previousyears.

The notice period of the members of the Executive Board is 12 months.

Transparency of compensation, shareholdings and loans to issuers domiciled abroad (DCG 5.2)Not applicable, as the Company is domiciled in Switzerland.

Shareholders’ participation (DCG 6)

Voting rights and representation restrictions (DCG 6.1)All shares have the same voting rights and voting rights may be exercised only after the Boardof Directors has approved a shareholder to be recorded in the Company’s share register (Aktien-register) as a shareholder with voting rights. Without such registration, the transferee may notvote at or participate in the shareholders’ meetings, but will still be entitled to dividends and otherrights with a financial value.

At shareholders’ meetings, shareholders can be represented only by way of written proxy. The onlyvoting restriction is the restriction to 3% of the share capital in accordance with article 5 of theArticles applicable for Nominees as described under “Limitations on transferability and nomineeregistrations” in this Corporate Governance section.

Statutory quorums (DCG 6.2)With the exception of provision 18c of the Articles, which requires at least two-thirds of the votesand the absolute majority of the represented nominal share capital for the removal of transferrestrictions, there are no provisions in the Articles requiring qualified majorities that differ fromthe mandatory provisions of Swiss corporate law.

Convocation of shareholders’ meeting (DCG 6.3)There are no provisions in the Articles regarding the convocation of the shareholders’ meeting thatdeviate from the rules of the Swiss Code of Obligations.

Agenda (DCG 6.4)According to the Articles, shareholders representing at least 10% of the share capital may requestthat an item be included on the agenda of a shareholders’ meeting. Such inclusion must berequested in writing at least 45 days prior to the meeting and must specify the agenda items andproposals of the respective shareholder(s).



Entry into the share register (DCG 6.5)Those shareholders eligible to vote and entered in the share register as of June 6, 2013, automaticallyreceived the invitation to the 2013 Annual Shareholders’ Meeting. Shareholders who were notregistered on June 6, 2013, but who purchased shares at a later date received the invitation to theshareholders’ meeting later, provided the request for registration as shareholder was received atthe share register no later than June 19, 2013. At the Annual Shareholders’ Meeting held on June28, 2013, shareholders registered with voting rights in the share register on June 19, 2013, wereentitled to vote their shares.

Those shareholders eligible to vote and entered in the share register as of October 14, 2013, auto-matically received the invitation to the 2013 Extraordinary Shareholders’ Meeting. Shareholderswho were not registered on October 14, 2013, but who purchased shares at a later date receivedthe invitation to the Extraordinary Shareholders’ Meeting later, provided the request for regis-tration as shareholder was received at the share register no later than October 29, 2013. At theExtraordinary Shareholders’ Meeting held on November 4, 2013, shareholders registered withvoting rights in the share register on October 29, 2013, were entitled to vote their shares.

Those shareholders eligible to vote and entered in the share register as of December 6, 2013, auto-matically received the invitation to the 2013 Extraordinary Shareholders’ Meeting. Shareholderswho were not registered on December 6, 2013, but who purchased shares at a later date receivedthe invitation to the Extraordinary Shareholders’ Meeting later, provided the request for registra-tion as shareholder was received at the share register no later than December 20, 2013. At theExtraordinary Shareholders’ Meeting held on December 30, 2013, shareholders registered withvoting rights in the share register on December 20, 2013, were entitled to vote their shares.

Changes of control and defense measures (DCG 7)

Duty to make an offer (DCG 7.1)The Company has neither an opting-out nor an opting-up provision in its Articles. As a consequence,the mandatory bid obligation of the Stock Exchange Act applies.

Clauses on changes of control (DCG 7.2)Until January 16, 2014, the employment contracts of two members of the Executive Board providedthat upon a change of control, the periods of notice applicable to these two members of the Execu-tive Board would become twelve months in the event of termination by the Company within ninemonths after the change of control.

Effective as of January 16, 2014, the following change of control clauses apply to all members ofthe Executive Board:Upon the effectiveness of a change of control, all unvested stock awards become fully vested andexercisable, and the annual target bonus becomes payable. If a member of the Executive Boardreceives a notice of termination without cause from the Company or provides a notice of termina-tion with good cause to the Company during a period starting 6 months prior to a change of controland ending 2 years after a change of control, the member of the Executive Board will a bonus equalto 50% of the base salary and will be entitled to garden leave, except that the member will berequired to perform transition activities for the remainder of the 12 month notice period as neces-sary to ensure a transfer of job responsibilities to his or her successor.



The Company’s option plans have different vesting periods. For further details see Note 25, “Shareoptions”. In the case of a change of control, all stock options vest immediately as mentioned aboveand costs of CHF 3.036 million would occur per January 16, 2014. Prior to January 16, 2014, onlyhalf of the options would have vested immediately and the costs that would have occurred wouldhave been CHF 1.518 million.

Auditors (DCG 8)

Duration of the mandate and term of office of the auditor in charge (DCG 8.1)PricewaterhouseCoopers AG (PwC) was appointed as group and statutory auditors and asindependent auditors for the first time at the shareholders’ meeting in June 2002. The appointmentis made on an annual basis. Stefan Räbsamen became the auditor in charge of the mandate in the2008 financial year. The rotation of the auditor in charge is due after seven years of duty.

Auditing fees (DCG 8.2)In 2013, PwC earned in total of TCHF 76 for reviewing the half-year statements, auditing statutoryand consolidated financial statements and reviewing the internal control system.

Additional fees (DCG 8.3)In 2013, PwC earned additional fees from the group in the amount of TCHF 7.5 for services renderedin relation to an employment contract and an internal project.

Information tools pertaining to the external audit (DCG 8.4)There were four meetings of the Audit Committee. The auditors participated in two meetings anddelivered and commented on a report on the significant results in the half-year review and on the2013 audit plan. Furthermore, the audit scope, audit and review procedures, independence ofauditors, and audit fees were discussed. The Board of Directors assesses the performance of theauditors by its adherences to deadlines and agreed budgets as well as quality of reporting to theBoard of Directors and Executive Board. The Company strives to safeguard and support the inde-pendence of the auditor by avoiding conflicts of interest, and carefully examines conflict of interestconsiderations before engaging its auditor for other consulting services in order not to endangerthe independence of its auditor.

Information policy (DCG 9)

Upon request of shareholders entered in the share register, the Company will provide them withregular information such as Annual Reports, Quarterly Reports and press announcements.

Cytos Biotechnology’s website http:www.cytos.com provides additional information such as anoverview of the Company’s organization, science and technology, product pipeline, archived andlatest press releases, publication dates of financial reports and the date of the annual shareholders’meeting. Quarterly and Annual Reports as well as the Articles are also available on the website.

Ad-hoc press releases are available on the website at: http://www.cytos.com/press-releases/

Existing and potential investors are welcome to visit the Company’s site; members of the ExecutiveBoard hold regular meetings with existing and potential investors and other interested parties.Contact details are displayed on page 5 of this Annual Report.


Financial Statements 2013

53


Cytos Biotechnology Ltd and its subsidiary Financial StatementsFinancial performance and results of operations

Financial performance and results of operations (IFRS)

Balance sheetFunds available for financing the Company’s operations amount to CHF 40.00 million as per Decem-ber 31, 2013, and include cash and cash equivalents, financial assets and trade and otherreceivables. This is CHF 11.35 million higher than on December 31, 2012 (CHF 28.65 million). Thisnet change is composed of a cash increase of CHF 31.23 million due to funds raised in the form ofequity CHF 24.60 million and debt CHF 6.63 million as well as a payment of CHF 1.00 million from acollaboration partner and other payments of CHF 0.20 million. Cash decreased by CHF 1.10 milliondue to share capital issuance costs as well as funds CHF 19.98 million mainly spent on ongoingoperating activities – in particular, the global clinical Phase 2b trial with CYT003 in allergic asthma.

As of December 31, 2013, convertible bonds with a nominal value of CHF 13.17 million are issuedand outstanding, i.e. not held by the Company (see note 6 to the statutory financial statements).These convertible bonds are due for repayment at 150% of par in February 2015 unless they areconverted into equity. In 2013 the conversion price was reduced from CHF 7.71 to CHF 7.32 pershare due to the anti-dilution clause. The current conversion price is subject to further reductionon certain conditions. Furthermore, convertible loan notes with a nominal value ofCHF 13.25 million are issued and outstanding per December 13, 2013 (see note 6 to the statutoryfinancial statements). They become due for repayment in February 2015 unless they are convertedinto equity. In 2013 the conversion price was reduced from CHF 2.244 to CHF 2.13 per share due tothe anti-dilution clause. The current conversion price is subject to further reduction on certainconditions. For further details see as well note 14 “Convertible Bond and Convertible loan notes”.

RevenuesRevenues decreased from CHF 1.10 million in 2012 to CHF 1.00 million in 2013. In 2012 the revenuestemmed from license fees from Novartis of CHF 1.00 million and revenue from a technology trans-fer of CHF 0.10 million. In 2013 the revenue derived solely from license fees from Novartis.

Net operating costsNet operating costs in 2013 amounted to CHF 24.27 million compared to CHF 14.64 million in theprevious year. The main reason for this increase of CHF 9.63 million is based on extended activitiesin particular in clinical development. Compared to last year, research and development costs in-creased in 2013 by CHF 9.56 million from CHF 10.89 million in 2012 to CHF 20.45 million in 2013,mainly due to increased spending for the on-going global clinical Phase 2b study of Cytos’ leadcandidate CYT003 in allergic asthma. In addition the entire balance of CHF 0.79 million of the activesubstance “Qbeta” on stock was written off in 2013 as this substance is unlikely to be used for anyfurther production of clinical trial material. In future, any new CYT003 clinical trial material will beproduced by a new supplier. General and administrative costs and sales and marketing expensescombined amounted to CHF 5.88 million, CHF 0.53 million higher in 2013 compared to 2012, mainlydue to higher personnel costs and increased travel expenses. Other income in 2013 was CHF 2.06million, CHF 0.46 million higher than in 2012 (CHF 1.60 million) due to rental payments from addi-tional subtenants and further charged-through costs to the same parties.


Cytos Biotechnology Ltd and its subsidiary Financial StatementsFinancial performance and results of operations

Operating lossThe operating loss increased from CHF 13.54 million in 2012 by CHF 9.73 million to CHF 23.27 mil-lion in 2013 as a result of the effects mentioned above.

Financial income/expenseFinancial income decreased by CHF 6.90 million in 2013, from CHF 7.16 million in 2012 toCHF 0.26 million in 2013. As of March 31, 2012, the restructured Convertible Bond had to be valuedat fair value. As a result, it was valued at CHF 9.04 million using the market rate as per February 20,2012. This adaptation to fair value resulted in a one-time, non-recurring financial income ofCHF 7.10 million in 2012. This effect is, as mentioned, due to the restructuring of the ConvertibleBond. Hence, it will not occur again unless there is another restructuring of the Convertible Bondleading to the same or an opposite effect. In 2013, there was no such adjustment to be made.

Financial expenses were CHF 7.83 million in 2013 and CHF 3.82 million in 2012. Key reasons for thisincrease of CHF 4.01 million were (i) doubling of the coupon (5.75% instead of formerly 2.875%) onthe restructured Convertible Bond, (ii) accruals for the repayment of the restructured ConvertibleBond at 150% of par, (iii) accruals of interest on the convertible loan notes from May 15, 2012 on-wards (first tranche of convertible loan notes), (iv) accruals of interest on the convertible loan notes(second tranche of convertible loan notes) which were called on October 21, 2013 and (v) accrualsfor the repayment of the convertible loan notes at 150% of par. The accruedinterest from February 21, 2011 to February 20, 2012, of the restructured Convertible Bond wasdeferred to February 20, 2015. This accrued interest has been discounted from CHF 1.03 million toCHF 0.26 million. The difference of CHF 0.77 million was accounted for in 2012 as financial costreduction. This, in addition, also explains the lower financial expenses of CHF 3.82 million in 2012.

Net lossNet loss was CHF 30.83 million in 2013, compared to a net loss of CHF 9.26 million in the previous year,mainly due to increased development activities in the clinical Phase 2b study of Cytos’ lead candidateCYT003, lower financial income in 2013 as specified above, higher financial expenses related to theConvertible Bond and convertible loan notes and the write-off of inventory.

Cash burnThe gross cash burn for operating activities, as calculated on the cashflow statement, increasedfrom CHF 1.10 million in 2012 to CHF 1.68 million in 2013 on average per month.

56 Cytos Annual Report 2013565656 Cytos Annual Report 2013

57Cytos Annual Report 2013 575757Cytos Annual Report 2013


Cytos Biotechnology Ltd and its subsidiary Financial StatementsConsolidated financial statements and notes

Consolidated Balance Sheets as ofin TCHF Note Dec 31, 2013 Dec 31, 2012 Jan 1, 2012

restated* restated*Non-current assets:Property and equipment, net 12 93 86 137Investment in associates 13 72 67 61Total non-current assets 165 153 198

Current assets:Prepayments and other assets 11 336 1,584 1,755Trade and other receivables 10 154 68 273Financial assets 9 – – 4,000Cash and cash equivalents 8 39,847 28,585 24,542Total current assets 40,337 30,237 30,570

Total assets 40,502 30,390 30,768

Shareholders’ equity:Share capital 17 3,053 2,241 527Legal reserves 17 2 136 136Additional paid-in capital 17 262,428 238,299 211,938Convertible Bond/-loan notes: equity component 9,830 9,119 6,045Treasury shares 17 (216) (224) –Accumulated deficit (270,867) (239,924) (230,880)Total shareholders’ equity 4,230 9,647 (12,234)

Non-current liabilities:Accrued expenses 15 – 645 690Convertible Bond/-loan notes: liability component 14 25,168 12,998 –Convertible Bond/-loan notes: accrued interest 14/15 2,299 920 –Pension liabilities 23/24 545 381 509Provisions 16 2,450 2,309 2,243Total non-current liabilities 30,462 17,253 3,442

Current liabilities:Trade accounts payable 1,492 362 328Other current liabilities 177 57 39Accrued expenses 15 3,417 2,352 2,673Convertible Bond: liability component 14 – – 35,715Deferred income 676 682 696Provisions 16 48 37 109Total current liabilities 5,810 3,490 39,560

Total shareholders’ equity and liabilities 40,502 30,390 30,768

See accompanying notes, which are an integral part of these consolidated financial statements.

*For further details, see note: ”24. Adjustments of prior year information due to adaption of IAS19 (revised)”.



Consolidated Income Statements Twelve months ended Twelve months ended

in TCHF Note December 31, 2013 December 31, 2012restated*

Revenue 5/6 1,000 1,100Revenue 1,000 1,100

Research and development (20,449) (10,888)Sales and marketing (473) (330)General and administrative (5,402) (5,017)Other income 2,058 1,600Net operating costs 18 (24,266) (14,635)

Operating loss (23,266) (13,535)

Financial income 260 7,160Financial expense (7,825) (3,819)Share of gain of associates 13 5 6Loss before tax (30,826) (10,188)

Tax income – 932Net loss (30,826) (9,256)

Consolidated Statements of Comprehensive Income Twelve months ended Twelve months ended

in TCHF (except for share information) Note December 31, 2013 December 31, 2012restated*

Net loss (30,826) (9,256)

Items that will not be reclassified to profit or loss:Remeasurement of pension liabilities due to adaption of IAS19R 24 (117) 212Other comprehensive (loss)/income (117) 212

Total comprehensive loss (30,943) (9,044)

Basic and diluted net loss per share 24/26 (1.32) (0.57)

See accompanying notes which are an integral part of these consolidated financial statements.




Consolidated Statements of Cash Flows Twelve months ended Twelve months ended

in TCHF Note December 31, 2013 December 31, 2012restated*

Cash flow from operating activities:Net loss (30,826) (9,256)Adjustments to reconcile net loss tonet cash used in operating activities:Depreciation 12 85 75Impairment of assets 11 793 –Change of provisions 16 152 (6)Financial income (260) (7,160)Financial expense 7,825 3,819Gain on associates 13 (5) (6)Share-based compensation 25 1,309 869

Changes in assets and liabilities:Trade and other receivables 10 (86) 205Pension liabilities 23/24 164 (127)Prepayments and other assets 11 455 171Trade accounts payable 1,130 34Other current liabilities and accrued expenses 94 (408)Net cash used in operating activities (19,170) (11,790)

Cash flow from investing activities:Sale of financial assets 9 – 4,000Purchase of property and equipment 12 (92) (24)Sale of property and equipment 12 195 253Interest received 22 41Net cash provided by investing activities 125 4,270

Cash flow from financing activities:Proceeds from Convertible loan notes 14 6,625 6,625Partial repurchase of convertible bonds – (20,465)Proceeds from issuance of share capital 17 24,342 27,171Use of treasury shares 17 264 (224)Share issuance-/Convertible Bond/loan notes costs (1,100) (1,537)Net cash provided by financing activities 30,131 11,570

Net effect of currency translation on cash 176 (7)Net increase in cash and cash equivalents 11,086 4,050Cash and cash equivalents, beginning of period 8 28,585 24,542Cash and cash equivalents, end of period 8 39,847 28,585

See accompanying notes which are an integral part of these consolidated financial statements.




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Cytos Biotechnology Ltd and its subsidiary



1. General information

Cytos is a public biopharmaceutical company focused on the development of targeted immuno-therapies.The Company’s lead product candidate CYT003 is a first-in-class immune modulator in clinical develop-ment as a potential new treatment for allergic asthma. CYT003 is currently being evaluated in a global,randomized and placebo-controlled Phase 2b clinical trial as an add-on therapy in 365 patients withmoderate to severe allergic asthma not sufficiently controlled on standard controller therapy. The studywas initiated in the fourth quarter of 2012 and top-line results are expected in April 2014.

Cytos was founded in 1995 as a spinoff from the Swiss Federal Institute of Technology (ETH) in Zurich.It is located in Schlieren (Zurich), Switzerland. The Company is listed according to the Main Standardon the SIX Swiss Exchange Ltd under the symbol CYTN.

The consolidated financial statements for the year ended 2013 have been approved for issuance by theBoard of Directors on February 6, 2014.

2. Summary of significant accounting policies

Basis of preparationThe consolidated financial statements have been prepared in accordance with the International Finan-cial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and effectivefor 2013. The accounting policies set forth below have been consistently applied to all years presented.

The consolidated financial statements have been prepared under the historical cost convention, asmodified by financial assets and liabilities (including derivative instruments) at fair value through profitor loss. The preparation of financial statements in conformity with IFRS requires the use of certaincritical accounting estimates. It also requires management to exercise its judgment in the process ofapplying the Company’s accounting policies. The areas involving a higher degree of judgment orcomplexity, or areas where assumptions and estimates are significant to the consolidated financialstatements are disclosed in note 4, “Critical accounting estimates and judgments”.

For better readability the amounts in the Group’s financial statements and notes are presented inthousand Swiss francs (TCHF) unless stated otherwise.

Uncertainties and ability to continue operationsThe Company is subject to various risks and uncertainties, including, but not limited to the time ofachieving sustainable profitability and the uncertainty of the discovery, development, and commercia-lization of product candidates, which includes uncertainty of the outcome of clinical trials and signifi-cant regulatory approval requirements. The Company has several product candidates in its portfolio.However, most of these products are licensed to third parties and it is not likely at this point in time,that these products will contribute in a significant manner to the financial situation of the Companywithin the next year or two. The lead product candidate, CYT003, is the only drug candidate currentlyin advanced development at Cytos. Therefore, it represents, for the time being, the only relevant valuedriver for Cytos for 2014 and 2015.

The company will require access to additional capital to support the key activities related to CYT003.The activities are focused on enabling the start of clinical Phase 3 studies in the second half of 2015and to sustain operations going forward. The key activities related to CYT003 for the financial year2014 include the completion of study 12, the conduct of another Phase 2b study (study 13) and a smallmechanism of action study (study 14). In addition the manufacturing process for CYT003 has to bedeveloped to commercial scale for the manufacturing of Phase 3 clinical trial material at two contractmanufacturing organizations. Finally, a non-clinical toxicology study to evaluate chronic treatment withCYT003 has to be conducted in 2014.



The top line data read-out of the currently on-going Phase 2b of study 12 (CYT003) is expectedfor April 2014 and full data is expected to be available in Q1 2015. Positive results are critical forthe Company’s ability to continue as a going concern, but will not yet generate revenue to sustainpositive cash flows. This situation is considered typical to this industry and nature of business.However, these conditions indicate the existence of material uncertainties, which may castsignificant doubt about the Company’s ability to continue as a going concern.

Positive results from the Phase 2b clinical trial (study 12) would be a good indicator that CYT003has an increased probability to reach the market. Such a de-risking of the key asset is expected toincrease the value of the Company and may be reflected in its share price.

With all these activities, especially the initial read of study 12 in April 2014, the management andthe Board of Directors believe the Company will have substantial additional data that demonstratesthe increase in value of CYT003 and its potential. Considering the Company’s current cash positionand the level of spending according to management’s plans and budgets, management anticipatesthe Company to continue as a going concern until at least the beginning of 2015.

Assuming that the core data from study 12 (CYT003) will be positive, the Board of Directors andmanagement remain confident in their ability to access additional capital to maintain the Company’sliquidity at satisfactory levels. For this reason, the Board of Directors and the management believethat it is appropriate to prepare these financial statements on a going concern basis.

If the results of the CYT003 study will not be positive, we may need to curtail or shut down opera-tions and we may not be able to raise additional financing to support our operations.

New accounting standards and IFRIC interpretationsNew standards and interpretations and amendments to standards and interpretations mandatoryfor the first time for the financial year beginning January 1, 2013 and adopted by the group in 2013.• IAS 1, (Amendment), Financial statement presentation; Requirement for entities to group items

presented in “other comprehensive income” on the basis of whether they are potentially reclas-sifiable to profit or loss subsequently (effective on January 1, 2013). The Group applies this stan-dard since January 1, 2013, but it does not have any impact on the Group’s accounts.

• IAS 19, (Revised), Employee benefits; These amendments basically eliminate the corridor andspreading approach and calculate finance costs on a net funding basis for post-employmentdefined benefit plans (effective on January 1, 2013). In addition the Group early adopted theamendments to IAS 19 Defined benefit plans: Employee contributions issued in November 2013.For further details see note: “24. Adjustments of prior year information due to adaption of IAS 19(revised)”.

• IAS 27, (Revised 2011), Separate financial statements; Includes the provisions on separate finan-cial statements that are left after the control provisions of IAS 27 have been included in the newIFRS 10 (effective on January 1, 2013). The Group applies this standard since January 1, 2013, butit does not have any impact on the Group’s accounts.



• IAS 28, (Revised 2011), Associates and joint ventures; Includes the requirements for joint ven-tures, as well as associates, to be equity accounted following the issue of IFRS 11 (effective onJanuary 1, 2013). The Group applies this standard since January 1, 2013, but it does not have anyimpact on the Group’s accounts.

• IFRS 1, (Amendment), First-time adoption of International Financial Reporting Standards; Govern-ment loans (effective on January 1, 2013). The Group applies this standard since January 1, 2013,but it does not have any impact on the Group’s accounts.

• IFRS 7, (Amendment), Financial instruments; Disclosures – Offsetting financial assets and financialliabilities (effective on January 1, 2013). The Group applies this standard since January 1, 2013,but it does not have any impact on the Group’s accounts.

• IFRS 10, Consolidated financial statement; To establish principles for preparation and controls, ifan entity controls one or more other entities (effective on January 1, 2013). The Group appliesthis standard since January 1, 2013, but it does not have any impact on the Group’s accounts.

• IFRS 11, Joint arrangements; Is a more realistic reflection of joint arrangements (effective onJanuary 1, 2013). The Group applies this standard since January 1, 2013, but it does not have anyimpact on the Group’s accounts.

• IFRS 12, Disclosure of interests in other entities; Includes the disclosure requirements for all formsof interests in other entities, including joint arrangements, associates, special purpose vehiclesand other off balance sheet vehicles (effective on January 1, 2013). The Group applies this stan-dard since January 1, 2013, but it does not have any impact on the Group’s accounts.

• IFRS 13, Fair value measurement; Aims to improve consistency and reduce complexity by provi-ding a precise definition of fair value and a single source of fair value measurement and disclosurerequirements for use across IFRS (effective on January 1, 2013). The Group applies this standardsince January 1, 2013, but it does not have any impact on the Group’s accounts.

New standards, amendments and interpretations issued but not effective for the financial yearbeginning January 1, 2013 and not adopted early

• IAS 32 (Amendment), Financial instruments: Presentation – Offsetting financial assets and finan-cial liabilities (effective on January 1, 2014). The Group will apply this standard from January 1,2014. It is not expected to have an impact on the Group’s accounts.

• IAS 36 (Amendment), “Impairment of assets” on recoverable amount disclosures; This amend-ment addresses the disclosure of information about the recoverable amount of impaired assetsif that amount is based on fair value less costs of disposal (effective on January 1, 2014). TheGroup will apply this standard from January 1, 2014. It is not expected to have an impact on theGroup’s accounts.

• IAS 39 (Amendment), Financial Instruments: Recognition and measurement: This amendmentprovides relief from discontinuing hedge accounting when novation at a hedging instrument to acentral counter party meets specified criteria (effective on January 1, 2014). The Group will applythis standard from January 1, 2014. It is not expected to have an impact on the Group’s accounts.

• IFRS 9, Financial Instruments; Is the first standard issued as part of a wider project to replace IAS39. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary mea-surement categories for financial assets: Amortised cost and fair value. The basis of classificationdepends on the entity’s business model and the contractual cash flow characteristics of the finan-cial asset (no longer effective from January 1, 2015, but rather be left open pending the finalisa-tion of the impairment and classification measurement requirements).

• IFRS 10/12/IAS 27 (Amendment); These amendments mean that many funds and similar entitieswill be exempt from consolidating most of their subsidiaries. Instead, they will measure them at

65



fair value through profit or loss. The amendments give an exception to entities that meet an“investment entity” definition and which display particular characteristics. Changes have alsobeen made IFRS 12 to introduce disclosures that an investment entity needs to make (effectiveon January 1, 2014). The Group will apply this standards from January 1, 2014. It is not expectedto have an impact on the Group’s accounts.

• IFRIC 21, “Levies”: This is an interpretation of IAS 37, “Provisions, contingent liabilities and con-tingent assets”. IAS 37 sets out criteria for the recognition of a liability, one of which is therequirement for the entity to have a present obligation as a result of a past event (known as anobligating event). The interpretation clarifies that the obligating event that gives rise to a liabilityto pay a levy is the activity described in the relevant legislation that triggers the payment of thelevy (effective on January 1, 2014). The Group will apply this standard from January 1, 2014. It isnot expected to have an impact on the Group’s accounts.

ConsolidationSubsidiaries are all entities (including structured entities) over which the group has control. Thegroup controls an entity when the group is exposed to, or has rights to, variable returns from itsinvolvement with the entity and has the ability to affect those returns through its power over theentity. Subsidiaries are fully consolidated from the date on which control is transferred to thegroup. They are deconsolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of a subsidiary by theGroup. The cost of an acquisition is measured as the fair value of the assets given, equity instru-ments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributableto acquisitions are directly expensed. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are measured initially at their fair values at the acqui-sition date, irrespective of the extent of any non-controlling interest. The excess of the cost ofacquisition over the fair value of the Group’s share of the identifiable net assets acquired isrecorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of thesubsidiary acquired, the difference is recognized in the income statement.

The Group applies the equity method of accounting for investments in companies that areconsidered associated companies and for which it has the ability to exercise significant influence,but not control. This generally exists when it owns between 20% and 50% of the voting rights of anassociated company. The Group’s share of its associates’ post-acquisition profits or losses is recog-nized in the income statement, and its share of post-acquisition movements in reserves is recog-nized in reserves. The cumulative post-acquisition movements are adjusted against the carryingamount of the investment.If the ownership interest in an associate is reduced but significant influence is retained, only a pro-portionate share of the amounts previously recognized in other comprehensive income is reclassi-fied to profit or loss where appropriate.

All inter-company balances, transactions and unrealized gains on transactions have been eliminatedin consolidation. Unrealized losses are also eliminated unless the transaction provides evidence ofan impairment of the asset transferred.

The consolidated financial statements include the accounts of Cytos Biotechnology Ltd, Schlieren,Switzerland, and its wholly-owned subsidiary Proteome Therapeutics GmbH, Singen, Germany, non-operative, (partner’s capital: EUR 25,000).




Segment reportingThe Group operates in one segment, focusing on the development and prospective commercializa-tion of a new class of biopharmaceutical products that are intended for use in the treatment andprevention of chronic diseases. The segment is reported in a manner consistent with the internalreporting provided to the CEO who is the chief operating decision-maker.

Foreign currency translation and transactionsItems included in the financial statements of each of the Group’s entities are measured using thecurrency of the primary economic environment in which the entity operates (“the functional cur-rency”). The consolidated financial statements are presented in Swiss Francs (“CHF”), which is theCompany’s functional and presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year-end exchange rates of monetaryassets and liabilities denominated in foreign currencies are recognized in the income statement.

Translation differences on non-monetary financial assets and liabilities such as equities held at fairvalue through profit or loss are recognized in profit or loss as part of the fair value gain or loss.Translation differences on non-monetary financial assets, such as equities classified as available forsale, are included in other comprehensive income.

Assets and liabilities of companies whose functional currency is other than CHF are included in theconsolidation by translating the assets and liabilities into the presentation currency at the exchangerates applicable at the end of the reporting period. Income and expenses for each income state-ment are translated at average exchange rates (unless this average is not a reasonable approxima-tion of the cumulative effect of the rates prevailing on the transaction dates, in which case incomeand expenses are translated at the dates of the transaction). All resulting exchange differences arerecognized as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreignentities and from borrowings are brought into shareholders’ equity. When a foreign operation issold, such exchange differences are recognized in the income statement as part of the gain or losson sale.

Impairment of assetsNon-financial assets that are subject to amortization are reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying amount exceeds its recoverable amount.An impairment loss is recognized for this difference. The recoverable amount is the higher ofan asset’s fair value less costs of disposal and value in use. For the purpose of assessing impairment,assets are grouped at the lowest levels for which there are separately identifiable cash flows(cash-generating units).

Cash and cash equivalentsThe Group considers all short-term, highly liquid investments convertible into known amounts ofcash with original maturities of three months or less at the date of the purchase to be cash equiva-lents. The cash flow statement is based on cash and cash equivalents.

Trade and other receivablesTrade and other receivables are initially recognized at fair value and subsequently measured at



amortized cost using the effective interest rate method (unless considered immaterial). A provisionfor impairment of trade receivables is established when there is objective evidence that the Groupwill not be able to collect all amounts due according to the original terms of the invoice. The amountof the provision is the difference between the carrying amount and the recoverable amount and isrecognized in the income statement.

InvestmentsThe Group classifies its investments in the following categories: financial assets at fair value throughprofit or loss, loans and receivables, held-to-maturity investments and available-for-sale financialassets. The classification depends on the purpose for which the investments were acquired.Management determines the classification of its investments at initial recognition and re-evaluatesthis designation at every reporting date.

Financial assets at fair value through profit or lossThis category has two sub-categories: financial assets held for trading and those designated at fairvalue through profit or loss at inception. A financial asset is classified in this category if acquiredprincipally for the purpose of selling in the short-term or if so designated by management. Deriva-tives are also categorized as held for trading unless they are designated as hedges. Financial assetsat fair value through profit or loss are measured at their fair value plus initial transaction costs. Fairvalue changes on financial assets at fair value through profit or loss are included in financial incomeor expense for the period in which they arise. Assets in this category are classified as current assetsif they are either held for trading or are expected to be realized within 12 months of the balancesheet date. As per year end the Group held no investments in this category.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. They arise when the Group provides money, goods or servicesdirectly to a debtor with no intention of trading the receivable. They are included in current assets,except for maturities longer than 12 months after the balance sheet date. These are classified asnon-current assets. Loans and receivables are shown separately in the balance sheet. Loans andreceivables are measured at amortized cost. Amortized cost is the amount at which the financialasset is measured at initial recognition minus principal repayments, plus or minus the cumulativeamortization using the effective interest method of any difference between that initial amount andthe maturity amount.

Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable pay-ments and fixed maturities that the Group’s management has the intention and ability to hold tomaturity. They are included in non-current assets, except for those with maturities less than12 months from the balance sheet date, which are classified as current assets. Assets under thiscategory that have a fixed maturity are valued at amortized cost using the effective interest ratemethod. As per year end the Group held no investments in this category.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are designated in thiscategory or not classified in any of the other categories. They are included in non-current assetsunless management intends to dispose of the investment within 12 months of the balance sheetdate. Available-for-sale financial assets are measured at their fair value. Fair value movements arerecorded in OCI (other comprehensive income). Gains or losses are included in net profit or loss forthe period in which the asset has been sold. As per year end the Group held no investments in thiscategory.



68

Purchases and sales of all above mentioned categories of investments are recognized on trade-date,the date on which the Group commits to purchase or sell the asset. Investments are derecognizedwhen the rights to receive cash flows from the investments have expired or have been transferredand the Group has transferred substantially all risks and rewards of ownership.

The fair values of listed investments are based on current market prices. If the market for a financialasset is not active and for unlisted securities, the Group establishes fair value by using valuationtechniques. These include the use of recent arm’s length transactions, reference to other instru-ments that are substantially the same, discounted cash flow analysis, and option pricing modelsrefined to reflect the Company’s specific circumstances.

The Group assesses at the end of each period whether there is objective evidence that a financialasset or a group of financial assets has to be impaired. In the case of equity securities classified asavailable for sale, a significant or prolonged decline in the fair value of the security below its costis considered in determining whether the securities are impaired. If any such evidence exists foravailable-for-sale financial assets, the cumulative loss – measured as the difference between theacquisition cost and the current fair value, less any impairment loss on the financial asset previouslyrecognized in profit or loss – is removed from OCI (other comprehensive income) and recognizedin the income statement. Impairment losses on equity instruments recognized in the income state-ment are not reversed through the income statement.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into andare subsequently remeasured at their fair value. Gains or losses from remeasured derivatives arerecognized immediately in the income statement if the derivatives are not designated as hedginginstruments. The Group did not designate any derivative as a hedging instrument and did not holdany derivatives at the end of the reporting period.

Property and equipmentProperty and equipment is stated at historical costs less accumulated depreciation and any impair-ment. Historical costs include expenditures that are directly attributable to the acquisition of theitems. Depreciation is calculated on a straight-line basis over the expected useful lives of theindividual assets or asset categories.

The applicable estimated useful lives are as follows:

Machinery and equipment 5–10 yearsOffice equipment, furniture and fixtures 3–10 yearsAutomobiles 5 years

Leasehold improvements are depreciated over the shorter of the estimated useful life or the leaseterm. Subsequent costs are included in the asset’s carrying amount or recognized as a separateasset, as appropriate, only when it is probable that future economic benefits associated with theitem will flow to the Group and the cost of the item can be measured reliably. The carrying amountof the replaced part is derecognized. All other repairs and maintenance are charged to the incomestatement during the financial period in which they are incurred.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at eachbalance sheet date. An asset’s carrying amount is written down immediately to its recoverableamount, if the asset’s carrying amount is greater than its estimated recoverable amount.

6868



Cost and accumulated depreciation related to assets retired or otherwise disposed are removedfrom the accounts at the time of retirement or disposal and any resulting gain or loss is included inthe income statement in the period of disposition.

Compound financial instruments - Convertible bonds and loan notesConvertible bonds and loan notes are classified as non-current liabilities unless they are due within12 months after the balance sheet date.

Compound financial instruments issued by the group comprise convertible bonds and loan notesthat can be converted to share capital at the option of the holder at the fixed conversion ratio.

The liability component of a compound financial instrument is recognized initially at the fair valueof a similar liability that does not have an equity conversion option. The equity component is recog-nized initially at the difference between the fair value of the compound financial instrument as awhole and the fair value of the liability component. Any directly attributable transaction costs areallocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument ismeasured at amortized cost using the effective interest method. The equity component of a com-pound financial instrument is not re-measured subsequent to initial recognition except on conver-sion or expiry.

Borrowings are classified as current liabilities unless the group has an unconditional right to defersettlement of the liability for at least 12 months after the end of the reporting period.

Deferred taxesDeferred income tax is provided in full, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the consolidated finan-cial statements. However, if the deferred income tax arises from initial recognition of an asset orliability in a transaction other than a business combination that at the time of the transactionaffects neither accounting nor taxable profit nor loss, it is not accounted for.Deferred income tax is determined using tax rates and laws that have been enacted or substantivelyenacted by the balance sheet date and are expected to apply when the related deferred income taxasset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized to the extent that it is probable that future taxable profitwill be available against which the temporary differences can be utilized. The Group has onlyrecognized a deferred tax asset arising from unused tax losses or tax credits to the extent that theGroup has sufficient taxable temporary differences.

Deferred income tax is provided on temporary differences arising on investments in the Company’ssubsidiary and associates, except where the timing of the reversal of the temporary difference iscontrolled by the Group and it is probable that the temporary difference will not reverse in theforeseeable future.

Pension planThe Group provides retirement benefits to its employees. The net defined asset/liability of the per-formance-oriented pension plans as recognized in the balance sheet comply with the present value ofthe defined pension obligation less the fair value of plan assets at the date of balance.In respect of defined benefit plans, liabilities and service costs are determined by management basedon actuarial valuation techniques, using the projected unit credit method annually and relatedassumptions as further detailed in note 23 of our consolidated financial statements.


The pension obligation is the actuarially computed present value of the estimated future net cashoutflow, using interest rate assumptions in line with high quality corporate bonds. Regarding the pen-sion costs, they correspond with the sum of current service costs inclusive net interest expenses onthe defined benefit liabilities at the beginning of the period. In case of events leading to a settlement,the related gains and losses are added to the yearly pension costs when the settlement occurs. Incase of events leading to a past service cost, the related costs are immediately added to the yearlypension costs. The actuarial gains and remeasurements, the differences between the return on planassets, and interest income on plan assets are recognized in other comprehensive income. The sameapplies to the pension obligation side.

Share-based compensationThe share-based compensation plans qualify as equity settled plans. The fair value of the employeeservices received in exchange for the grant of the options is recognized as an expense. The totalamount to be expensed over the vesting period is determined by reference to the fair value of theoptions granted. For equity-settled plans, the fair value is determined at the grant date. At eachreporting date, the Group revises its estimates of the number of options that are expected tobecome exercisable. It recognizes the impact of the revision of original estimates, if any, in theincome statement and a corresponding adjustment to equity.

In the year the options are exercised the proceeds received net of any directly attributable trans-action costs are credited to share capital (nominal value) and additional paid-in capital.

Bonus plansThe Group recognizes an accrual where contractually obliged. The expense for bonuses is based ona formula that takes into consideration the company goals reached.

ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as a resultof a past event, where it is more likely than not that an outflow of resources will be required tosettle the obligation, and where a reliable estimate can be made of the amount of the obligation.Provisions are not recognized for future operating losses. Provisions are measured at the presentvalue of the expenditures expected to be required to settle the obligation using a pre-tax rate thatreflects current market assessments of the time value of money and the risks specific to the obliga-tion. The increase in the provision due to the passage of time is recognized as other operatingexpense.

Shareholders’ equityAll shares of the Company are registered shares and classified as part of shareholders’ equity.

Incremental costs directly attributable to the issue of new shares, other than on a business combi-nation, are shown as a deduction, net of tax, in equity from the proceeds.

Where the Group purchases the Company’s equity share capital (treasury shares), the considerationpaid, including any directly attributable incremental costs (net of income tax), is deducted fromtotal shareholders’ equity as treasury shares until the shares are cancelled, reissued or disposed of.Where such shares are subsequently sold or reissued, any consideration received, net of anydirectly attributable incremental transaction costs and the related tax effects, is included in share-holders’ equity.

The Company has not paid any dividends since its inception and does not anticipate paying divi-dends in the foreseeable future.




Revenue recognitionRevenues under collaborative long-term research and development agreements are recognized whenearned based upon the performance requirements of the respective agreements. For revenuearrangements with separately identifiable components the revenue recognition criteria are appliedseparately. The consideration received is allocated among the separate components based on theirrespective fair values and the applicable revenue recognition criteria are applied to each of the sepa-rate components. Payments received in excess of amounts earned are recorded as deferred revenue.Revenues under these long-term collaborative agreements typically consist of the following:

• Revenues from royalties and licenses: revenues related to royalties and licenses are recognizedwhen earned on an accrual basis in accordance with the substance of the relevant agreements.

• Revenues from technology transfer fees are recognized on the basis of the progress of the projectin accordance with the percentage of completion method (PoC).

• Other revenues include small licensing fees of collaboration agreements, success and milestonepayments for example.

Research and development expensesResearch and development expenses consist primarily of compensation and other expenses relatedto research and development personnel; costs associated with pre-clinical testing and clinical trialsof the Group’s product candidates, including the costs of manufacturing the product candidates;expenses for research and services under collaboration agreements; outsourced research anddevelopment at research institutions, and relevant facility expenses.

Research and development expenses are fully charged to the income statement as incurred. CytosBiotechnology considers that regulatory and other uncertainties inherent in the development of itskey new products preclude it from capitalizing development costs under IFRS. Development costsare capitalized when the following criteria are met: (a) the technical feasibility of completing theintangible asset so that it will be available for use or sale (b) its intention to complete the intangibleasset and use or sell it (c) its ability to use or sell the intangible asset (d) how the intangible assetwill generate probable future economic benefits. Among other things, the entity can demonstratethe existence of a market for the output of the intangible asset or the intangible asset itself or, if itis to be used internally, the usefulness of the intangible asset (e) the availability of adequate tech-nical, financial and other resources to complete the development and to use or sell the intangibleasset (f) its ability to measure reliably the expenditure attributable to the intangible asset duringits development. That means that projects which have achieved technical feasibility, usually signi-fied by US Food and Drug Administration or comparable regulatory body approval, would be capita-lized because it is probable that the costs will give rise to future economic benefits.

LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by the les-sor are classified as operating leases. Payments made under operating leases (net of any incentivesreceived from the lessor) are charged to the income statement on a straight-line basis over theperiod of the lease.

Rent expense for leases of real estate include the land and building component together when it isclearly a single operating lease and the components cannot reliably be separated.



3. Financial risk management

Financial risk factorsThe Group is subject to risks common to companies in the biotechnology industry, including, butnot limited to, uncertainties regarding the effectiveness and safety of new drugs, new and unproventechnologies, the development process and outcome of clinical trials, rigorous governmental regu-lation and uncertainty regarding regulatory approvals, long product development cycles, continuingcapital requirements to fund research and development, history of operating losses and uncertaintyof future profitability, uncertainty regarding commercial success and acceptance, third party reim-bursements, uncertainties regarding patents and legally protected products or technologies, uncer-tainty regarding third party intellectual property rights, dependence on third parties, dependenceon publicly available scientific findings and research data, dependence on third party manufacturersand service providers, competition, concentration of operations, product liability, dependence onimportant employees, the environment, health, data protection and safety, lack of experience inmarketing and sales, litigation, currency fluctuation risks and other financial risks, volatility ofmaket value, as well as limited liquidity and shares eligible for future sale.

The Group is focusing on the development of its lead product candidate CYT003 in allergic asthma,which is currently not generating a constant revenue stream, resulting in a negative cash flow fromoperating activities. At present the lack of positive operating cash flow may expose the Group tofinancing risks in the medium-term; see note 4, “Critical accounting estimates and judgments”.

Risk management is carried out centrally under policies approved by the Board of Directors. Fur-thermore, management controls financial risks, specifically the liquidity risk (refer also to “capitalrisk management” disclosure).

The Group is marginally exposed to market risks such as currency risk and interest rate risk. Theyare insignificant for the Group as it has loans (convertible Bond and Convertible loan notes) with afixed interest rate and asset and liabilities in small amounts in foreign currencies. The Group is notexposed to market price development as it has no saleable products.



Liquidity risk

The Group manages its liquidity by planning and closely monitoring cash burn and investments infixed-term time deposits on an ongoing basis to ensure sufficient liquidity and appropriate interestincome. The Company‘s financial status at December 31, 2013, provides funds for operations into2015, not taking into account further revenue streams or material variations to the present financialplan.

The table below shows the maturities of the liquidity relevant financial liabilities as ofDecember 31, 2013:

*This position includes the first and second tranche of the Convertible loan notes. For furtherdetails, see note 14, “Convertible Bond and Convertible loan notes”.

The table below shows the maturities of the liquidity relevant financial liabilities as ofDecember 31, 2012:

Foreign exchange risk

The Group has an investment in a foreign entity and is exposed to exchange risks which arediscussed in the accounting policies section “Foreign currency translation and transactions”. TheGroup is currently not subject to significant foreign currency transactions.

Maturity table Less than Between Between Overin TCHF (undiscounted amounts) 3 months 3 months and 1 year 1 year and 5 years 5 years

Convertible Bond 5.75% (2.875%) – interest – – 3,029 –Convertible Bond 2/20/2015 – principal – – 19,751 –Convertible loan notes 9.00% – interest* – – 2,344 –Convertible loan notes 2/10/2015 – principal* – – 19,876 –Trade accounts payables 1,492 – – –Other liabilities and accrued expenses 3,594 – – –Rent and leasing 262 787 363 –

Maturity table Less than Between Between Overin TCHF (undiscounted amounts) 3 months 3 months and 1 year 1 year and 5 years 5 years

Convertible Bond 5.75% (2.875%) – Interest – – 3,029 –Convertible Bond 2/20/2015 – principal – – 19,751 –Convertible loan notes 9.00% – interest – – 1,634 –Convertible loan notes 2/10/2015 – principal – – 9,938 –Trade accounts payables 362 – – –Other liabilities and accrued expenses 2,409 – 645 –Rent and leasing 254 761 349 –



As of December 31, 2013, if the Swiss Franc had weakened/strengthened by 5% against theEuro with all other variables held constant, the net loss for the period would have been TCHF 34(2012: TCHF 66) lower/higher, mainly as a result of foreign exchange gains/losses on translation ofEuro denominated assets and liabilities. The impact is the same on equity.

Credit risk

Out-licensing agreements for Immunodrugs™ have only been entered into with industryleading companies, which limits the credit risk relating to trade receivables. Trade and otherreceivables are not past due and not impaired and contain only existing customers with nodefaults in the past. Cash and cash equivalents and the financial assets are held, with oneexception, with financial institutions with at least an “A” rating (Standard & Poor’s) equivalent orbetter. The exception is related to a private bank without any rating, which holds 2% of the cash and cashequivalents and financial assets. As per December 31, 2013 the outstanding trade receivables areinsignificant.

Investment risk

Fixed-term time deposits and money market investments are made only with highly rated coun-terparties. The Group is not exposed to equity securities price risks and to commodity price risks.

Interest rate risk

The Group issued a Convertible Bond and convertible loan notes with a fixed interest rate. As suchthe Group’s income and operating cash flows are substantially independent of changes in marketinterest rates.

As of December 31, 2013, if interest rates on time deposits had been 50 basis points higher/lower with all other variables held constant, the net loss for the period would have been TCHF 0(2012: TCHF 0) lower/higher, as a result of higher/lower interest income. Due to the current lowinterest rate of fixed deposits, Cytos Biotechnology Ltd. has not made any investments in financialassets in 2013.

Capital risk managementThe Group is not regulated and not subject to specific capital requirements. It aims to maintainthe specific needs of the Code of Obligations (Swiss law). To ensure that statutory capital require-ments remain intact, the Group monitors capital periodically on an interim and annual basis. Fromtime to time the Group may take appropriate measures or propose capital increases to the AnnualShareholders’ Meeting or an Extraordinary Shareholders’ Meeting to ensure the necessary capitalremains intact.

Fair value estimationThe Group does not hold any financial assets except fixed-term time deposits and the carryingamounts of the financial assets including trade and other receivables correspond to the fair valueas they are short-term in nature.

The Convertible Bond and the convertible loan notes are carried at amortized cost and are accoun-ted for using the effective interest rate method. At initial recognition the fair value of the Convert-ible loan notes and Convertible bond have been determined as outlined in note 14: “ConvertibleBond and convertible loan notes”.



4. Critical accounting estimates and judgements

The Group’s accounts are prepared on a going concern basis. The Group makes estimates andassumptions concerning the future. The resulting accounting estimates will, by definition, seldomequal the related actual results. The estimates and assumptions that have a significant risk of cau-sing a material adjustment to the carrying amounts of assets and liabilities identified by the Grouprelate to provisions, going concern and revenue and are discussed below:

• Going concern: Based on the belief that the core data for study 12 (CYT003) will be positive, con-sidering cash and financial assets (including trade receivables from partners) and the Group’scurrent plans and budgets, the Group can continue as a going concern (refer also to “Uncertain-ties and ability to continue operations” in note 2).

• Provisions for legal cases: Estimates and judgments are performed by the Group with support ofits legal advisers in order to determine the likelihood, timing and amount involved with probablerequired outflow of resources. Details are discussed in note 16, “Provisions”.

• Revenue: Fluctuation in revenues is not uncommon to biotech companies as the revenues areoften linked to up-front fees, milestones or license payments as well as income for delivery ofdrug substance, which occur sporadically.

5. Segment information

The Group operates in one segment, focusing on the discovery, development and prospective com-mercialization of a new class of biopharmaceutical products that are intended for use in the treat-ment and prevention of chronic diseases. The CEO reviews the profit or loss of the Group on anaggregated basis. The operations of the Group are managed as a single operating segment. TheGroup derives its research and collaboration revenues from research and development collabora-tions with third parties.

All research and collaboration revenues as well as all operating costs including research and deve-lopment, sales and marketing, general and administrative, other operating income and expense aregenerated in Switzerland.



The Group’s segment information is as follows:

Other information: December 31, 2013 December 31, 2012Total non-current assets* 165 153Total liabilities 36,272 20,743

Twelve months ended Twelve months ended

December 31, 2013 December 31, 2012Capital expenditure for property and equipment 92 24Depreciation and amortization 85 75*No adjustments to non-current assets required as in line with definition of IFRS 8.

Analysis of revenue by category: Twelve months ended Twelve months ended

in TCHF December 31, 2013 December 31, 2012

Revenue from technology transfer – 100Revenue from royalties and licenses 1,000 1,000Total 1,000 1,100

Analysis of revenue by customer: Twelve months ended Twelve months ended

in TCHF December 31, 2013 December 31, 2012

Novartis 1,000 1,000Other customers – 100Total 1,000 1,100

As noted above our revenue is sourced from a few customers, however as business is in R&D phase, this does not represent asignificant risk in terms of exposure of revenue fluctuation.



6. Licensing, research and development collaborations

Events over the last three years (for previous years please refer to prior financial reports):

In October 2011, after the restructuring of Cytos Biotechnology Ltd, the agreement with Agency forScience, Technology and Research (A*STAR) was amended such that Cytos Biotechnology wasrelieved of its obligation to develop, manufacture and supply A*STAR with a Good ManufacturingPractice (GMP)-grade investigational vaccine candidate for a human proof-of-concept study in Sin-gapore.

In the year 2011 a second payment of CHF 0.35 million was received for related to the agreementwith Agency for Science, Technology and Research (A*STAR) and a second and third payment oftotal CHF 0.17 million was received for related to the contract with Science Applications Interna-tional Corporation (SAIC). For 2012 no further payments were expected.

As a further result of the restructuring event in September 2011 Cytos ceased preclinical develop-ment work on malaria vaccines under the subcontract awarded in October 2010 by SAIC and NIH.

Cytos Biotechnology Ltd announced on January 23, 2013, that Novartis terminated the licenseagreement under which it had been developing NIC002, a therapeutic vaccine candidate for thetreatment of nicotine addiction and returned the licensed rights to Cytos pursuant to the provisionsof the license agreement. In this context, it was decided that the non-current accrued expensesof TCHF 645 and the current accrued expenses of TCHF 101 as per December 31, 2012, were con-sidered unnecessary and therefore have been reversed in the first quarter 2013 to the incomestatement.

In February 2013 Cytos Biotechnology Ltd has been informed by Pfizer Inc. that the first patienthas been dosed in a Phase 1 clinical trial with an anti-IgE vaccine, which is being developed under alicense agreement between both parties. Pfizer’s anti-IgE vaccine is based on Cytos’ VLP (“virus-like-particle”) vaccine platform. Pfizer acquired world-wide exclusive rights to develop, manufactureand commercialize certain specified vaccines based on Cytos’ VLP platform in 2009.

In May 2013 Singapore’s Agency for Science, Technology and Research (A*STAR) and Switzerland’sCytos Biotechnology AG announced that the first healthy volunteer has been dosed in a Phase 1clinical trial with their H1N1 influenza vaccine candidate based on Cytos’ proprietary bacteriophageQbeta virus-like particle (VLP) technology. In this first Phase 1 clinical trial, the safety and immuno-genicity of this novel vaccine candidate and its potential to protect against H1N1 influenza infec-tion will be evaluated. A*STAR is developing the vaccine candidate under a collaborative research,development and commercialization agreement entered into with Cytos in 2010, with the goal ofproviding the government of Singapore an effective means of combatting influenza epidemics andpandemics. Under the agreement, Cytos retains the worldwide right to develop and commercializethe vaccine candidate globally, while A*STAR subsidiaries will have the right to develop and com-mercialize the vaccine for Singapore and other ASEAN countries and can earn royalties on world-wide net sales. The clinical results will be published in 2014.



1) The above-mentioned amounts are held, with one exception in 2012 and 2013, with financial institutions with at least an “A” rating (Standard & Poor’s),equivalent or better. The exception in 2012 and 2013 is related to a private bank without any rating, which held 3% of the amounts mentioned above in 2012 and 2%of the amounts mentioned above in 2013.2) The above-mentioned amounts were neither past due nor impaired and contain only existing customers with no defaults in the past.

December 31, 2013 Assets at fairLoans and value through Held-to-maturity

in TCHF receivables profit or loss investments Available-for-sale

Cash and cash equivalents 39,8471 – – –Trade and other receivables 1542 – – –Total 40,001 – – –

December 31, 2012 Assets at fairLoans and value through Held-to-maturity

in TCHF receivables profit or loss investments Available-for-sale

Cash and cash equivalents 28,5851 – – –Financial assets – – – –Trade and other receivables 682 – – –Total 28,653 – – –

7. Financial instruments by category

December 31, 2013 Liabilities at fairvalue through Other financial

in TCHF profit or loss liabilities

Trade accounts payable – 1,492Other current liabilities – 177Convertible Bond – liability component – 13,045Convertible loan notes - liability component – 12,123Total – 26,837

December 31, 2012 Liabilities at fairvalue through Other financial

in TCHF profit or loss liabilities

Trade accounts payable – 362Other current liabilities – 57Convertible Bond – liability component – 9,108Convertible loan notes – liability component – 3,890Total – 13,417



8. Cash and cash equivalents

in TCHF 2013 2012

Cash at bank and on hand 39,847 28,585Balance as per December 31 39,847 28,585

In 2013, the Company recorded TCHF 34 interest income (2012: TCHF 55).

9. Financial assets

Due to the current low interest rate of fixed deposits, Cytos has not made any investments in financial assets in 2012 and 2013.

10. Trade and other receivables

in TCHF 2013 2012

Trade receivables 79 39Value added taxes (VAT) 55 –Withholding tax 12 23Other 8 6Balance as per December 31 154 68thereof non-current – –

11. Prepayments and other assets

in TCHF 2013 2012

Research material* – 793Social insurances 195 638Other 141 153Balance as per December 31 336 1,584

The fair values of trade and other receivables do not differ from the carrying amounts. Trade and other receivables are denominated in CHF and are not consideredimpaired as they are fully performing and not past due. The maximum exposure to credit risk at the reporting date is the carrying amount of trade and otherreceivables mentioned above. The Group does not hold any collateral as security. The credit quality of the Company‘s debtors is high, since they are composedof tax authorities and leading pharmaceutical companies.

*The entire balance of TCHF 793 of the active substance “Qbeta” on stock was written off in 2013 as this substance is unlikely to be used for any further productionof clinical trial material. Going forward, any new CYT003 clinical trial material will be produced by a new supplier using an improved production method. Therefore,there is no necessity to have Qbeta on stock anymore.



12. Property and equipment, netOffice

equipment,Leasehold Machinery furniture

in TCHF improvements and equipment and other Total

Gross value as per January 1, 2012 13,456 10,780 2,163 26,399Additions – – 24 24Disposals (383) (2,404) (956) (3,743)Gross value as per December 31, 2012 13,073 8,376 1,231 22,680

Accumulated depreciation as per January 1, 2012 (13,456) (10,779) (2,027) (26,262)Depreciation charge – (1) (74) (75)Disposals 383 2,404 956 3,743Closing net book amount as per December 31, 2012 (13,073) (8,376) (1,145) (22,594)

Net book amount as per December 31, 2012 – – 86 86

Gross value as per January 1, 2013 13,073 8,376 1,231 22,680Additions – 12 80 92Disposals (14) (3,458) (38) (3,510)Gross value as per December 31, 2013 13,059 4,930 1,273 19,262

Accumulated depreciation as per January 1, 2013 (13,073) (8,376) (1,145) (22,594)Depreciation charge – – (85) (85)Disposals 14 3,458 38 3,510Closing net book amount as per December 31, 2013 (13,059) (4,918) (1,192) (19,169)

Net book amount as per December 31, 2013 – 12 81 93

Sales of impaired property and equipment were fully accounted for as income in the income state-ment and amounted to TCHF 195 for 2013 (2012: TCHF 253).

In 2013 and 2012, the Group invested TCHF 92 and TCHF 24 respectively. As in 2012 the Groupinvested in 2013 mostly in IT equipment. In addition the Group invested in 2013 TCHF 12 inmachinery and equipment.



Depreciation expense has been charged to:

in TCHF 2013 2012

Research and development 66 50Sales and marketing 2 2General and administrative 17 23Total year ended December 31 85 75

13. Investment in associates

in TCHF 2013 2012

Balance at January 1 67 61Share of gain 5 6Balance as per December 31 72 67

The Company owns 33% of BioSupport AG shares. As the Company has significant influence,it accounts for BioSupport AG under the equity based method of accounting.

BioSupport AG

in TCHF 20132 20123

Interest held 33% 33%Assets1 324 448Liabilities1 107 245Revenues1 734 926Profit/(loss)1 15 19

1) = 100%2) = From October 2012 - December 2013 (15 months), Financial close as per December 31, 2013 not yet audited3) = From October 2011 - September 2012 (12 months)


14. Convertible Bond and Convertible loan notes

“Original” Convertible Bond (see on next page “Restructured Convertible Bond”)

In February 2007, the Company issued 2.875% p.a. convertible bonds (“Convertible Bond”) witha nominal value of CHF 70.00 million which are listed on the SIX Swiss Exchange under the sym-bol CYT07 (security number 2 906 073). The Convertible Bond was initially due for repaymenton February 20, 2012, and was convertible into the Company’s shares at a conversion price ofCHF 175. The Convertible Bond was restructured and the restructuring became legally binding onMarch 13, 2012 and is mentioned separately on the next page. The table below shows the statusof the “original” Convertible Bond, including all closing entries as per the original maturity dateFebruary 20, 2012.

The values of the liability component and the equity conversion component were determined uponissuing the Convertible Bond.

The fair value of the liability component, included in “non-current liabilities”, was calculated usinga market interest rate for an equivalent non-convertible bond. The residual amount, representingthe value of the equity conversion option, is included in shareholders’ equity.

Transaction costs associated with the issuance have been allocated proportionately to the liabilityand equity components.

Due to the restructuring of the Convertible Bond, the accrued interest as per February 20, 2012 ofTCHF 1,033 will be due on February 20, 2015 (2011: TCHF 1,182; paid on February 21, 2011). Thislower interest is due to the lower nominal value of the convertible bonds not held by the Company.

The “original” Convertible Bond recognized in the balance sheetis calculated as follows:Nominal value of Convertible Bond issued in February 2007Equity componentTransaction costs allocated to liability componentLiability component on initial recognitionInterest expensePartial repurchase of convertible bondsGain on partial repurchase of liability component of convertible bondsPartial repurchase of equity componentInterest paidLiability component as per February 20, 2012thereof interest as per February 20, 2012 due on February 20, 2015

TCHF

70,000(11,788)

(1,811)56,40119,111

(38,601)(15,425)

2,385(6,703)17,168

1,033




Restructured Convertible Bond

The Convertible Bond which was issued in 2007 was due for repayment on February 20, 2012.However, because Cytos did not have enough financial means to fully repay the Convertible Bondat maturity, it proposed a bond restructuring to the bondholders on November 10, 2011. In sum-mary, Cytos proposed to repay half of the outstanding nominal value at par and to postpone therepayment for the remaining half as well as to defer the payment of any interest to February 20,2015. The repayment will be at 150% of par value. In addition, the coupon has been increased from2.875% p.a. to 5.75% p.a. Furthermore the conversion price has been reduced to CHF 7.71. In themeantime, the conversion price has been further reduced to CHF 7.32 per share due to theanti-dilution clause. This restructuring became legally binding on March 13, 2012.

The value of the liability component of the restructured Convertible Bond was determined basedon a discount rate of 47.86%. The remaining value has been allocated to the equity component.

The Convertible Bond constitutes direct, subordinated (nachrangige) unsecured and unconditionalobligations of the Issuer.

*The adjustment to fair value has been recorded as financial income in 2012.

The nominal value of convertible bonds not held by the company amounts to CHF 13.168 million asper December 31, 2013, (2012: CHF 13.168 million).

The fair value of the Convertible Bond at December 31, 2013 amounted to CHF 15.801 million(2012: CHF 11.061 million).

The total interest expense amounted to CHF 4.79 million and has been recognized for 2013 as“financial expense” (same period in 2012: CHF 3.27 million).

In 2013, Cytos did not buy back any convertible bonds on the market. In 2012, Cytos bought backrestructured convertible bonds on the market with a nominal value of CHF 2.95 million at an aver-age purchase price of 63.26% of the nominal value.

The restructured Convertible Bond recognized in the balance sheet 2013 2012

is calculated as follows: TCHF TCHF

Nominal value of the restructured Convertible Bond 16,135 16,135Adjustment to fair value as per February 20, 2012* (7,100) (7,100)Equity component (688) (688)Transaction costs allocated to liability component (115) (115)Liability component on initial recognition as per February 20, 2012 8,232 8,232Interest expense 6,326 2,389Partial repurchase of convertible bonds (1,880) (1,880)Loss on partial repurchase of liability component of convertible bonds 240 240Partial repurchase of equity component 127 127Liability component as per December 31, 13,045 9,108Accrued interest as per December 31, (deferred until February 20, 2015) 1,551 700



First tranche of the convertible loan notes

Four investors granted Cytos Biotechnology Ltd convertible loan notes, payable in two equaltranches with a total amount of CHF 13.25 million. The convertible loan notes (capital and interest)can be converted into shares of the Company, whereby the conversion price is CHF 2.13 for the capi-tal. The first tranche of TCHF 6.625 was due for payment upon completion of the capital increaseand was paid on May 15, 2012. For the second tranche of the convertible loan notes of TCHF 6.625we refer to the next page, “second tranche of the convertible loan notes”. The convertible loannotes carry an interest rate of 9% p.a. and are due for repayment at 150% of the nominal value onFebruary 10, 2015. In case of a change in controlling interest, the investors can demand the repay-ment of the convertible loan notes at 190% of the original amount of the convertible loan notes.

The value of the liability component of the first tranche of the convertible loan notes was deter-mined based on a discount rate of 61.19%. The remaining value has been allocated to the equitycomponent.

The fair value of the convertible loan notes at December 31, 2013 amounted to CHF 10.495 million.(2012: CHF 8.355 million).

The total interest expense amounted to CHF 2.562 million and has been recognized for 2013 as“Financial expense”. For the period from May 15, 2012 until December 31, 2012 an interest expenseof CHF 1.159 million was recognized as “Financial expense”.

The convertible loan notes recognized in the balance sheet are 2013 2012

calculated as follows: TCHF

Nominal value of the convertible loan notes issued in May 2012* 6,625Equity component (3,572)Transaction costs allocated to liability component (102)Liability component on initial recognition as per May 15, 2012 2,951Interest expense 3,016Liability component as per December 31, 5,967Accrued interest as per December 31, (deferred until February 10, 2015) 705

*Granted by:- venBio Global Strategic Fund L.P., Grand Cayman (Cayman Islands)- Amgen Investments Ltd., Hamilton (Bermuda)- Abingworth Bioventures V L.P., London (UK)- Aisling Capital III L.P., New York, NY (USA)

TCHF

6,625(3,572)

(102)2,951

9393,890

220



Second tranche of the convertible loan notes

Upon completion of enrollment in the ongoing Phase 2b clinical trial with CYT003in allergic asthma, the Company called the second tranche of CHF 6.625 million onOctober 21, 2013. The second tranche of the convertible loan notes of CHF 6.625 million was paidin four different installments between October 29, 2013 and December 10, 2013. The convertibleloan notes carry an interest rate of 9% p.a. and are due for repayment at 150% of the nominalvalue on February 10, 2015. In case of a change in controlling interest, the investors can demandthe repayment of the convertible loan notes at 190% of the original amount of the convertible loannotes.

The value of the liability component of the second tranche of the convertible loan notes was deter-mined based on a discount rate of 61.19%. The remaining value has been allocated to the equitycomponent.

The fair value of the convertible loan notes on December 31, 2013 amounted to CHF 9.550 million.

The total interest expense amounted to CHF 0.285 million and has been recognized for 2013 as“Financial expense”.

The convertible loan notes recognized in the balance sheet are 2013 2012calculated as follows: TCHF TCHF

Nominal value of the convertible loan notes issued in Octoberand December 2013* 6,625 –Equity component (711) –Liability component on initial recognition in October and December 2013 5,914 –Interest expense 242 –Liability component as per December 31, 6,156 –Accrued interest as per December 31, (deferred until February 10, 2015) 43 –

*Granted by:- venBio Global Strategic Fund L.P., Grand Cayman (Cayman Islands)- Amgen Investments Ltd., Hamilton (Bermuda)- Abingworth Bioventures V L.P., London (UK)- Aisling Capital III L.P., New York, NY (USA)



in TCHF 2013 2012

Accrued project costs 1,674* 1,794*Accrued payroll and bonuses 1.340 908Accrued interest Convertible Bond/-loan notes 2,299 920Other 403 295Balance as per December 31 5,716 3,917thereof non-current 2,299* 1,565*

*NIC002 Project

Cytos Biotechnology Ltd announced on January 23, 2013, that Novartis terminated the license agreement under which it hadbeen developing NIC002, a therapeutic vaccine candidate for the treatment of nicotine addiction and returned the licensedrights to Cytos pursuant to the provisions of the license agreement.

In this context, it was decided that the non-current accrued expenses of TCHF 645 and the current accrued expenses ofTCHF 101 as per December 31, 2012, are considered unnecessary and therefore have been reversed in the first quarter 2013to the income statement.

15. Accrued expenses



16. Provisions

*In relation to the restructuring in 2011 and belongs to non-cancelable lease obligations of business premises which Cytos Bio-technology Ltd no longer needs. In 2012 all provisions in relation to the restructuring were dissolved.

As a consequence of the merger of Cytos Biotechnology AG (“Cytos”) with Asklia Holding AG(“Asklia”), which occurred in 2002, Cytos assumed a number of provisions for legal claims as wellas costs for lawyers, accounting and liquidation of companies. Since the acquisition of and mergerwith Asklia, most of the provisions have been utilized or reversed to the income statement.

Asklia was involved in (i) various claims and lawsuits arising in the ordinary course of its businessand (ii) claims regarding representations, warranties and covenants given by Asklia when divestingits business. Some of these Asklia claims and lawsuits (including claims regarding representations,warranties and covenants given by Asklia when divesting its business) were settled. Other casesof legal disputes, involving subsidiaries of Asklia that were divested prior to the acquisition weretransferred as part of the divested business.

With regard to two such lawsuits, whereby the plaintiffs claimed CHF 1.3 million and CHF 0.6 mil-lion each, Asklia agreed to indemnify the acquirer of the divested business for all costs the divestedcompany or the acquirer will incur in connection with these proceedings.

As a consequence of the acquisition of Asklia these liabilities and lawsuits as well as the otherpending and threatened lawsuits and claims of Asklia were taken over by the Group. The Groupbelieves that adequate provisions were made to cover the risks associated with these various claimsand lawsuits pending or threatened. Management estimates the lawsuits will not be resolved inthe short-term.

Legalin TCHF Other)) claims Total

Balance as per December 31, 2011 109 2,243 2,352Additions – 66 66Utilization (72)* – (72)*Balance as per December 31, 2012 37 2,309 2,346

Additions 50 141 191Utilization (39) – (39)Balance as per December 31, 2013 48 2,450 2,498

Thereof as per December 31, 2013:current 48 – 48non-current – 2,450 2,450



17. Shareholders’ equity

Share TreasuryShares capital shares

(number) (TCHF) (TCHF)

December 31, 2011 5,270,056 527 –

New Shares issued 17,141,375 1,714 (224)December 31, 2012 22,411,431 2,241 (224)

New shares issued 8,113,845 812 –Treasury shares sold (80,975) (8) 8Shares and employee option shares* 80,975 8 –December 31, 2013 30,525,276 3,053 (216)

*issued from Treasury shares

Issued and fully Treasury TotalNumber of shares at paid shares shares shares

December 31, 2012 20,170,288 2,241,143 22,411,431December 31, 2013 28,363,608 2,161,668 30,525,276

Summary of authorized and conditional capital (see articles 4b, 4c, 4h, 4g, and 4i of the articles of association of theCompany)

in TCHF (except share data) 2013 2012

Authorized capital as per December 31 1,526 1,121Conditional capital as per December 31 1,526 1,121Weighted average number of shares usedin computing basic and diluted net loss per share 23,350,223 16,225,111

Under the Swiss Code of Obligations (CO), new share capital can be created by way of ordinary,authorized or conditional capital increase, which is defined as follow:

Ordinary capital (art. 650 CO):Shareholders resolve on terms of capital increase and instruct board to increase capital within threemonths from shareholders’ resolution.

Authorized capital (art. 651 CO):Shareholders amend the articles of association to include authorized capital (up to 50% of existingshare capital) to authorize board to issue a maximum amount of shares. Authorized capital is validfor two years from shareholders’ resolution.

Conditional capital (art. 653 CO):Shareholders create unissued share capital for equity-linked debt, bonds with warrants, oremployee stock options by amending the articles of association. New share capital will be createdby operation of law upon conversion / exercise of options.



In 2012, two capital increases took place

First increase with total new equity of CHF 1.23 millionEffective as of March 21, 2012, a share capital increase of TCHF 49 (490,000 shares with a nominalvalue of CHF 0.10 each) was registered with the Commercial Register in the Canton of Zurich andthe new shares were subsequently issued to a new shareholder. In this regard, paid-in capital ofCHF 1.18 million was accounted for. The new shares have been issued from the conditional capitalwhich was approved by the shareholders at the Annual Shareholders’ Meeting on May 4, 2011.

Second capital increase with total new equity of CHF 27.18 millionEffective as of May 14, 2012, a share capital increase of CHF 1.67 million (16,651,375 shares with anominal value of CHF 0.10 each) was registered with the Commercial Register in the Canton of Zurichand the new shares were subsequently issued to the following shareholders:

• A total of 12,700,532 shares issued to the following investors:

– venBio Global Strategic Fund L.P., Grand Cayman (Cayman Islands)



– Abingworth Bioequities Master Fund Limited, Grand Cayman (Cayman Islands)


• 1,709,700 shares issued in connection with subscription rights to existing shareholders and

• 2,241,143 shares issued and held as treasury shares

Paid-in capital of CHF 25.51 million was accounted for.

The share capital increase was approved at the General Meeting of Shareholders on April 20,2012.

WarrantsIn connection with the second capital increase, the shareholders named above received one war-rant for each new registered share subscribed. One warrant allows an investor to purchase oneregistered share in the Company for CHF 2.244* during a period of four years.

In the course of 2012 or 2013, no warrants have been exercised.

OptionsAs part of the financing, venBio Global Strategic Fund L.P. received 350,000 options. Each optioncarries the right to subscribe to one share in the Company at an issue price of CHF 2.244* duringa period of five years. The fair value of the options was determined at the grant date applying theBlack Scholes Model (key assumptions: risk-free interest rate 0.3805%, volatility 80%). The expensefor the share-based compensation for these options amounted to TCHF 500 and was accounted forin the second quarter of 2012.

In the course of 2012, no options have been exercised.

* Adjusted to CHF 2.13 following the application of the anti-dilution clause in connection with the 2013 financing.


In 2013, one capital increase took place

Capital increase with new Shares issued of CHF 24.34 millionEffective as of November 18, 2013, a share capital increase of CHF 0.81 million (8,113,845 shareswith a nominal value of CHF 0.10 each) was registered with the Commercial Register in the Cantonof Zurich and the new shares were subsequently issued to the following shareholders at a price ofCHF 3.00 each:

• A total of 4,686,413 shares issued to the following investors:

– venBio Global Strategic Fund L.P., Grand Cayman (Cayman Islands)



– Abingworth Bioequities Master Fund Limited, Grand Cayman (Cayman Islands)


• 3,427,432 shares issued in connection with subscription rights to existing shareholders and newshareholders.

A cash inflow of CHF 24.34 million has been accounted for (agio: CHF 23.53 million).

Capital increase with Treasury Shares issued of TCHF 79.76In addition 26,588 Treasury Shares have been used to satisfy existing shareholders in connectionwith subscription rights. From the sale of these Treasury Shares at a price of CHF 3.00 each a cashinflow of TCHF 79.76 has been accounted for (agio: TCHF 77.11).

A share capital increase of 6,303,215 shares was approved at an Extraordinary Shareholders’Meeting on November 4, 2013. In addition, further 1,810,630 shares were placed out of theauthorized share capital.

OptionsIn 2013, 52,887 options have been exercised with an exercise price of CHF 3.41 and 1,500 optionshave been exercised with an exercise price of CHF 2.57. The Shares needed for this exercise weretaken from the Treasury Shares. From the exercise of these options a cash inflow of TCHF 184.2 hasbeen accounted for (agio: TCHF 178.76).

Legal reservesThe legal reserves are built in line with Swiss Law and can only be used for compensating lossescarried forward. The legal reserves cannot be used for distribution to shareholders.

Additional paid-in capitalThe additional paid-in capital resulted from several capital increases.

Treasury sharesThe treasury shares held by the Company as per December 31, 2013 at nominal value werecreated as part of the ordinary capital increase in 2012 and should allow the Company to use thesetreasury shares as underlying for exercised conversion and option rights, which are not completelycovered by conditional or authorized share capital.




18. Costs by nature

*The entire balance of TCHF 793 of the active substance “Qbeta” on stock was written off in 2013 as this substance is unlikely tobe used for any further production of clinical trial material. Going forward, any new CYT003 clinical trial material will be producedwith Qbeta from a new supplier using an improved production method. Therefore, there is no necessity to have Qbeta on stockanymore.

In 2013 and 2012, the amounts of “Other income” are primarily related to rental payments and passthrough costs recovered from subtenants. In 2013 and 2012, proceeds from the sale of impairedproperty and equipment were fully accounted for as income and amounted to TCHF 195 and TCHF253 respectively.

19. Employee benefits

in TCHF 2013 2012restated

Salaries (5,943) (5,144)Social security costs (371) (396)Pension costs, defined benefit plan (note 23) (368) (372)Share-based compensation (1,309) (869)*Other costs related to employees (297) (397)Total year ended December 31 (8,288) (7,178)


Depreciation and impairment of assets* (878) (75)Employee benefits (8,288) (7,178)Materials, consumables, services (12,949) (5,617)Rental expenses (1,405) (1,255)Other expenses (2,804) (2,110)Other income 2,058 1,600Total year ended December 31 (24,266) (14,635)

*Balance includes 350,000 options (TCHF 501) granted for venBio Global Strategic Fund L.P., (see note 17 “Shareholders‘ equity”).



Year ending December 31

in TCHF 2013 2012

2013 – (1,015)2014 (1,050) (349)2015 (362) –Total year ended December 31 (1,412) (1,364)

20. Operating leases

The Group has several operating leases principally for its offices and development facilities, whichcan be cancelled the earliest by March 2014 with effect as of March 2015 (i.e. 12 months noticeperiod), except for certain rooms (1519 m2) with contracts that expire by August 31, 2014. As thefair value of land and building components at inception of the lease has not been determined andlease is defined as operating rent, expenses for the components are combined. Lease expensesincurred for the year ended December 31, 2013 were CHF 1.1 million and CHF 1.0 million forthe year 2012. The future minimum lease payments under non-cancelable operating leases atDecember 31, 2013 are as follows:

21. Related party transactions

BioSupport AG, a related party, is providing research related services to the Group and to its othershareholders. During 2013 and 2012, the Group paid TCHF 101 and TCHF 196, respectively, for theservices rendered.

Key management (including the Board of Directors and the Executive Board) personnel compensa-tion of the Company is:

in TCHF 2013 2012

Short-term employee benefits 2,194 2,700Share-based compensation* 795 240Post-employment benefits 198 246Total 3,187 3,186

*Stock-based compensation for key management was presented on a total basis in prior year. Presentation has been updated toshow current year expense. 2012 information was made consistent.

No further compensation has been paid to the key management in the year 2013 and 2012.



22. Income taxes

As of December 31, 2013, the Group had total gross operating loss carry forwards amounting toCHF 164.5 million of which CHF 159.9 million related to the Company, CHF 4.1 million related toProteome Therapeutics GmbH which has an expected income tax rate of 28% for the year 2013(2012: 28%), and CHF 0.5 million related to the merger of the Company’s subsidiary Cytos Biothera-peutics Ltd in 2010 (2012: CHF 147.8 million, of which CHF 143.2 million is related to the Company,CHF 4.1 million is related to Proteome Therapeutics GmbH, and CHF 0.5 million is related to themerger of the Company’s subsidiary Cytos Biotherapeutics Ltd in 2010).

The gross operating loss carry forwards of the Group expire as follows:• CHF 32.5 million expiring on December 31, 2013

• CHF 9.5 million expiring on December 31, 2014





•CHF 44.5 million expiring on December 31, 2020 and

• CHF 4.1 million can be set off against future profit indefinitely;

It is management’s best estimate that this loss carry-forward will not be used in the foreseeablefuture.

As of December 31, 2013, the Group had deductible temporary differences (including investments,accrued expenses, the Convertible Bond as well as the convertible loan notes and pension) of nega-tive CHF (11.5) million (2012: positive CHF 2.8 million).

Deferred income tax assets and liabilities are offset when there is a legally enforceable right tooffset current tax assets against current tax liabilities and when the deferred income taxes relate tothe same fiscal authority. The Group did not recognize deferred tax assets relating to tax loss carry-forwards and deductible temporary differences since the criteria for recognition were not met.

The unrecognized tax loss carry-forwards and deductible temporary differences would have givenrise to deferred tax assets of CHF 27.1 million in 2013 and deferred tax assets of CHF 33.1 millionin 2012.


The Group has neither recorded any provisions for income taxes payable nor for current or deferredincome taxes for the years ended December 31, 2013 and 2012 due to taxable losses.

The Company’s income tax expense differed from the amount computed by applying the statutorySwiss income tax rate as summarized in the following table:

Capital tax expenses amounted to TCHF 51 and TCHF 35 for the years ended December 31, 2013and 2012 respectively, and are included in the net operating costs.

in TCHF 2013 2012

Loss before tax (30,826) (10,188)Expected income tax rate (%) 22 22Expected income tax 6,782 2,241

Expenses not deductible for tax purposes (874) (296)Effect of changes in unrecognized deferred taxes (5,909) (1,014)Other 1 1Income tax – 932

The Group calculates its taxes at 22% for the year 2013 (2012: 22%).


9494



23. Benefit plans

The Company maintains a retirement plan (the “Plan”) covering all its employees, including somemembers of the Executive Board. In addition to retirement benefits, the Plan provides death orlong-term disability benefit to its employees. Benefits under the Plan are principally based on con-tributions, computed as a percentage of salary, adjusted for the age of the employee. Under theagreement, both the Group and the employee share the costs, including contributions, 50/50. Tominimize the risk associated with a pension obligation, the Group has entered into a term agree-ment with a third-party insurance company. In fact, Cytos is affiliated with the Swiss Life CollectiveBVG Foundation, based in Zurich for the provision of occupational benefits.

All benefits in accordance with the regulations are reinsured in their entirety with Swiss Life Ltdwithin the framework of the corresponding contract. This pension solution fully reinsures the risksof disability, death and longevity with Swiss Life. Swiss Life invests the vested pension capital andprovides a 100% capital and interest guarantee. In 2013 the guaranteed interest was 1.5% for man-datory retirement savings and 1.25% for supplementary retirement savings. The pension plan isentitled to an annual bonus from Swiss Life comprising the effective savings, risk and cost results.

The technical administration and management of the savings account are guaranteed by Swiss Lifeon behalf of the collective foundation. Insurance benefits due are paid directly to the entitled per-sons by Swiss Life in the name of and for the account of the collective foundation. Cytos has com-mitted itself to pay the annual contributions and costs due under the pension fund regulations.

The contract of affiliation between Cytos and the collective foundation can be terminated by eitherside. In the event of a termination, recipients of retirement and survivors’ benefits would remainwith the collective foundation. Cytos hereby commits itself to transfer its active insured membersand recipients of disability benefits to the new employee benefits institution, thus releasing thecollective foundation from all obligations.

The treatment of so-called “fully insured” BVG plans under IAS 19 has been thoroughly analyzed bythe Swiss Auditing Chamber’s Auditing Practice Committee. As a result of these consultations, theSwiss Auditing Chamber and its Accounting Practice Subcommittee have concluded that for IAS 19purposes “fully insured” BVG plans shall be considered as defined benefit plans. The reasons are asfollows:

• In the event of contract cancellation, there is no guarantee that the employeebenefits can be continued under the same conditions;

• The risk and cost premiums are charged at different levels.

The valuation of employee benefits obligations in accordance with international accounting stan-dards is carried out regardless of the legal configuration of the pension plans and employee benefitsinstitutions. The standards influence solely the financial result of the company and not that of theemployee benefits institution. These results are not relevant for an actuarial assessment in accor-dance with Article 52e, BVG.



Change in benefit obligation


Benefit obligation at beginning of year 9,218 11,711*Service cost 362 361Ordinary contributions paid by employees 322 288Interest cost 161 263Remeasurements 180 (47)Benefits paid (2,427) (3,523)Transfer of prior pension of new employees 798 165Benefit obligation as per December 31 8,614 9,218


Actuarial (gains)/losses arising from changes indemographic assumption – 101Actuarial (gains)/losses arising from changes infinancial assumptions (274) 379Experience adjustments (gains)/losses 454 (527)Total 180 (47)

Change in plan assets


Fair value at beginning of year 8,836 11,201Interest income on plan assets 155 252Return on plan assets excl. interest income 63 165Employer contributions 322 288Plan participant contributions 322 288Benefits paid (2,427) (3,523)Benefit obligation entitlement of new employees 798 165Pension assets as per December 31 8,069 8,836

* Employee contributions reducing the cost to the employer are attributed to the years of service on a straight-line basis. Previously

employee contributions were recognized as a reduction in the service cost in the period in which the related service was rendered. This

resulted in a decrease of the defined benefit obligation of TCHF 284 as at January 1, 2012.



The pension expense for 2013 is included in the income statement in research and development atTCHF 286 (2012: TCHF 250), in sales and marketing at TCHF 7 (2012: TCHF 7) and in general andadministrative at TCHF 75 (2012: TCHF 115).

Defined benefit costs


Service cost 362 361Interest cost, net 6 11Defined benefit cost for the yearrecognized in profit and loss statement 368 372

Assets as per September 30, 2013 comprised 79% fixed term deposits and cash, 7% mortgages andreceivables, 12% real estate properties and 2% other.

Funded status


Unfunded status (545) (382)Net amount recognized in the balance sheet (545) (382)

Asset breakdown

IAS19 requires a breakdown of the assets into categories that distinguish the risk and liquiditycharacteristics and whether or not they have a quoted market price in an active market. Accordingly, asat December 31, 2013 it follows:

In TCHF Quoted market Not quotedprice market price

Insurance contract – 8,036Cash 33 –Total value of assets 33 8,036



Net defined benefit (liability )/asset


Pension assets December 31 8,069 8,836Benefit obligation December 31 8,614 9,218Net defined benefit (liability)recognized in balance sheet (545) (382)

The following table provides the weighted average assumptions used to develop net periodicbenefit cost and the actuarial present value of projected benefit obligations:

Sensitivity analysis

The sensitivity analysis was performed by recalculating the DBO and the Service Cost with the samemethod used as when calculating the pension liability recognized within the statement of financial posi-tion and changing the following assumptions while holding other assumptions constant:

2013 2013DBO Service Cost

Discount rate and + 0.5% -5.7% -5.3%Discount rate and - 0.5% +6.1% +5.9%

Salary increase + 0.5% +0.4% +2.3%Salary increase - 0.5% -0.6% -2.2%

Life expectancy + 1 year +1.4% +1.2%Life expectancy - 1 year -1.6% -1.2%

The above sensitivity analyses are based on a change in an assumption and in the correlated ones,while holding all other assumptions constant. The same method (present value of the definedbenefit obligation calculated with the projected unit credit method at the end of the reportingperiod) has been applied as when calculating the pension liability recognized within the statementof financial position.

The methods and types of assumptions used in preparing the sensitivity analysis did not changecompared to the previous period.

Assumptions 2013 2012 2011

Price inflation 1.00% 1.00% 1.00%Discount rate 2.00% 1.75% 2.25%Interest rate on the savings accounts 2.00% 1.75% 2.25%Salary increase 1.00% 1.00% 2.00%Social security increase 1.00% 1.00% 1.00%Pension increase 0.00% 0.00% 0.00%



Mortality rate 2013 2012

Average life expectancy in years of a pensionerretiring at age 65 male and 64 female is as follows:Male 21.29 21.18Female 24.74 24.64

Asset Liability Strategy

Cytos outsources the asset liability management strategy and asset allocation to Swiss Life Ltd. Therisks of disability, death and longevity are reinsured in their entirety with Swiss Life Ltd.

The weighted average duration of the defined obligation is 12.2 years.

Future ContributionsIn 2013, the Group expects to contribute approximately CHF 0.4 million to the plan.



24. Adjustments of prior year information due to adaption of IAS19 (revised)

The Group adopted IAS19 Employee Benefits (revised June 2011) and early adopted the amendmentsto IAS 19 Defined benefit plans: Employee contributions issued in November 2013 as at January 1, 2013.Comparative periods were restated. The main impacts from the changes to IAS19 Employee Benefits wereas follows:

- Actuarial gains and losses are no longer deferred but immediately recognized in other comprehensiveincome.

- Interest on the net recognized defined benefit asset or liability must be recognized in profit or loss, inplace of the previously separate recognition of interest cost on the benefit obligation and of an expectedreturn on plan asset.

- Past service cost arising from plan amendments must be recognized in full in profit or loss in the periodin which the plan amendment occurs, in place of the previous requirement to recognize such costs overthe vesting period for the amended benefits.

- Employee contributions reducing the cost to the employer are attributed to the years of service on astraight-line basis. Previously employee contributions were recognized as a reduction in the service costin the period in which the related service was rendered. This resulted in a decrease of the definedbenefit obligation of TCHF 284 as at January 1, 2012.

The changes to IAS19 Employee Benefits have been applied retrospectively in accordance with IAS 8. Theeffect on the comparative information presented for each financial statement line item is set out in thefollowing tables.

Impact on the Balance Sheet

Opening balance as of 01.01.2012 restatement 01.01.2012

restated

Equity:

Accumulated deficit (230,326) (554) (230,880)

Total equity (11,680) (554) (12,234)

Non-current assets/(liabilities):

Pension assets/(liabilities) 45 (554) (509)

Impact on the Balance Sheet

Ending balance as of 31.12.2012 restatement 31.12.2012

as published restated

Equity:

Remeasurement of pension

liabilities due to adoption of IAS19R 0 212 212

Net loss (9,216) (40) (9,256)

Total equity 10,029 (382) 9,647

Non-current assets/(liabilities):

Pension assets/(liabilities) 1 (382) (381)



Impact on the income statement and comprehensive loss

2012 restatement 2012

as published restatedGeneral and administrative (4,977) (40) (5,017)Net loss for the year (9,216) (40) (9,256)Other comprehensive loss 0 212 212Total comprehensive loss (9,216) 172 (9,044)

Earnings per share2013 2012 2012

as published restatedWeighted average number of sharesused in computing basic

and diluted net loss per share 23,350,223 16,225,111 16,225,111Basic and diluted net loss per share (1.32) (0.57) (0.57)


25. Share options

The Group regularly grants share options to the members of the Board of Directors, the membersof the Executive Board and the employees and consultants of the Company. All share options areequity-settled. The fair value of the options is determined at the grant date based on the marketprice using the Black-Scholes model. The vesting period can be seen in the footnote*. The Companyapplies IFRS 2 for recognizing the share option expense.

The table below shows the range of conditions as well as the range of assumptions applied to theshare-based payment arrangements for 2013. All the granted options in 2013 are as per Decem-ber 31, 2013 existing. In December 2013, the Board of Directors approved a share option plan(“SOP2014”), according to which a total of 1,464,150 options were granted in December 2013. Thefollowing table includes this option plan (“SOP2014”):

Share options, conditions and assumptions

Nature of arrangement Grant of share optionsGrant date March 4, 2013 - December 20, 2013Number of options granted 2,964,750Exercise price (CHF) 3.05 - 4.09Share price at date of grant (CHF) 3.05 - 4.09Contractual life (years) 6.0Vesting period (years) 1.0 - 4.0*Settlement SharesExpected volatility (%) 54.5 - 80.5Expected option life at grant date (years) 3.5 - 4.39Risk-free interest rate p.a. (%) 0.2208 - 0.5105Expected dividend zeroEstimated fair value of option at grant date (CHF) 1.30 - 2.33Expiry date March 5, 2019 - December 21, 2019Valuation model Black-Scholes

*Options granted in 2013:- 2,894,750 options, 1/4 vesting after one year cliff, followed by quarterly vesting over the following three years.- 70,000 options can be exercised completely after a cliff vesting period of one year.

The exercise price of the granted options is equal to the market price of the Company’s shares onthe grant date. The volatility is based on the Company’s historical volatility where available. The riskfree interest rate is based on the CHF swap rate for the expected life of the options.




The table below shows the range of conditions as well as the range of assumptions applied to theshare-based payment arrangements for 2012:

Share options, conditions and assumptions

Nature of arrangement Grant of share optionsGrant date May 14, 2012 - October 8, 2012Number of options granted 2,014,980Exercise price (CHF) 2.244 - 2.57Share price at date of grant (CHF) 2.26 - 2.57Contractual life (years) 5.0 - 6.0Vesting period (years) 0.0 - 4.0*Settlement SharesExpected volatility (%) 72.0 - 80.0Expected option life at grant date (years) 4.33 - 5.0Risk-free interest rate p.a. (%) 0.099 - 0.3805Expected dividend zeroEstimated fair value of option at grant date (CHF) 1.41 - 1.43Expiry date May 15, 2017 - October 31, 2018Valuation model Black-Scholes

*Options granted in 2012:- 160,000 options, 1/3 vesting after one year cliff, followed by quarterly vesting over the following two years.- 1,489,980 options, 1/4 vesting after one year cliff, followed by quarterly vesting over the following three years.- 15,000 options vesting in quarterly installments over four years.

- 350,000 options: no vesting period.

The exercise price of the granted options is equal to the market price of the Company’s shares onthe grant date or equal to the average of the prices several days before the grant. The volatility isbased on the Company’s historical volatility where available. The risk-free interest rate is based onthe CHF swap rate for the expected life of the options.



The movements in the number of all valid share options are as follows:

**Weighted average share price at time of exercise was CHF 3.98

The following table applies to all valid share options outstanding on December 31, 2013:

Weighted averageOptions exercise price

Share option movements (number) (CHF)

Balance outstanding December 31, 2011 834,487 29.19

Granted 2,014,980 2.50Exercised – –Forfeited (54,956) 17.77Lapsed (101,524) 96.88Balance outstanding December 31, 2012 2,692,987* 6.90

Granted 2,956,450 3.64Exercised** (54,387) 3.39Forfeited (7,140) 12.53Lapsed (96,234) 65.79Balance outstanding December 31, 2013 5,491,676* 4.14

Exercise price Options Remaining life Exercisable options(CHF) (number) (years) (number)

2.24 350,000 3.5 350,0002.54 960,000 4.8 240,0002.57 650,180 4.7 216,2022.57 15,000 4.7 4,6873.05 20,000 6 03.41 227,113 0.2 227,1133.49 1,464,150 5.9 03.63 522,300 5.2 03.63 70,000 5.2 03.84 200,000 5.2 03.85 380,000 5.2 04.04 60,000 5.4 04.09 240,000 5.4 012.30 12,000 1.5 12,00012.38 67,420 0.3 67,42012.53 73,152 2.0 73,15214.05 85,409 1.1 85,40933.42 94,952 0.0 94,952Total 5,491,676* 1,370,935

*Balance includes 350,000 options granted for venBio Global Strategic Fund L.P., (see note 17 “Shareholders‘ equity”).



The following table applies to all valid share options outstanding on December 31, 2012:

Exercise price Options Remaining life Exercisable options(CHF) (number) (years) (number)

2.24 350,000 4.5 350,0002.54 960,000 5.8 02.57 654,980 5.7 02.57 15,000 5.7 9373.41 280,000 1.2 280,00012.30 12,000 2.5 12,00012.38 68,980 1.3 68,98012.53 73,512 3.0 014.05 85,769 2.1 85,76933.42 96,512 1.0 96,51242.46 35,361 0.4 35,36179.35 60,873 0.0 60,873Total 2,692,987 990,432

* Balance includes 350,000 options granted for venBio Global Strategic Fund L.P. As part of the financing, venBio Global StrategicFund L.P. received 350,000 options in May 2012. Each option carries the right to subscribe to one share in the Company at an issueprice of CHF 2.244 during a period of five years. The fair value of the options was determined at the grant date applying the BlackScholes Model (key assumptions: risk-free interest rate 0.3805%, volatility 80%). The expense for the share-based compensationfor these options amounted to TCHF 500 and was accounted for in the second quarter of 2012 as these options were fully vestedas at grant date.

The expense for the share-based payments recognized in the income statement according toIFRS 2 can be summarized as follows:

in TCHF 2013 2012

Research and development 1,017 584Sales and marketing 23 18General and administrative 269 267Total year ended December 31 1,309 869

With the approval of the Board of Directors the tenor of 140,000 options of the option plan “SOP 2011”September have been extended for one year. The grants were made on September 1, 2011 and willexpire now on February 28, 2015. The expense for the re-evaluation for these options amounted toTCHF 26 and are included in the table above.

*



26. Net loss per share

Basic and diluted net loss per share have been computed based upon the weighted average numberof common shares outstanding. Basic net loss per share excludes any dilutive effects of options,shares subject to repurchase, warrants, and convertible securities. Neither outstanding optionsto purchase shares of common stock nor shares resulting from the conversion right of the bondholders were included in the computation of the dilutive net loss per share, as the effect wouldhave been anti-dilutive.

27. Contingencies

The operations and earnings of the Group continue, from time to time and in varying degrees, tobe affected by political, legislative, fiscal and regulatory developments as well as various otherrisks. The nature and frequency of these developments and events, not all of which are covered byinsurance, as well as their effect on future operations and earnings are not predictable.

28. Events after balance sheet date

There were no subsequent events requiring disclosure after December 31, 2013.




Cytos Biotechnology Ltd Financial StatementsStatutory financial statements and notes

Balance Sheet as of:

in TCHF Note December 31, 2013 December 31, 2012

Current assets:Cash and cash equivalents 39,818 28,552Treasury shares 216 224Trade and other receivables – third parties 153 67Prepaid expenses and accrued revenue 336 1,584Total current assets 40,523 30,427

Non-current assets:Convertible Bond 6 2,501 4,696Convertible loan notes first tranche 6 1,344 2,551Convertible loan notes second tranche 6 3,094 –Property and equipment, net 93 86Investments 4 73 73Intangible assets – capitalized costs 9 – 16,765Total non-current assets 7,105 24,171

Total assets 47,628 54,598

Current liabilities:Trade accounts payable – third parties 1,619 344Other accounts payable – third parties 49 77Accrued expenses 3,449 2,288Provisions 48 137Total current liabilities 5,165 2,846

Non-current liabilities:Convertible Bond (subordinated) 6 19,751 19,751Convertible loan notes first tranche 6 9,938 9,938Convertible loan notes second tranche 6 9,938 –Convertible Bond: accrued interest (subordinated) 6 2,166 1,408Convertible loan notes: accrued interest 6 1,020 376Provisions 2,449 2,954Total non-current liabilities 45,262 34,427

Shareholders’ equity:Share capital 3,053 2,241Free reserves – 205,271Legal reserves:– General reserves 2 136– Additional paid-in capital – 26,810– Capital contribution reserve* 255,753 –– Reserves for treasury shares out of capital contribution reserves* 216 224Retained loss:– Brought forward (217,356) (201,704)– Net loss for the year (44,467) (15,653)Total shareholders’ equity (2,799) 17,325

Total liabilities and shareholders’ equity 47,628 54,598

* TCHF 36,249 of the total capital contribution reserves amounting to TCHF 255,969 disclosed in the shareholders´ equity as per December 31, 2013 have not been confirmed by the Federal

Tax Administration yet.



Income StatementTwelve months ended Twelve months ended

in TCHF Note December 31, 2013 December 31, 2012

Revenue 1,000 1,100

Research expense (12,949) (5,618)Employee benefits (6,932) (6,224)Depreciation of property and equipment (85) (75)Amortization and impairments of tangible and intangible assets 9 (17,558) (4,040)Other operating expenses (5,420) (4,873)Income from disposal of fixed assets 195 253Total operating expenses (42,749) (20,577)

Operating loss (41,749) (19,477)

Other income 9 1,979 6,474

Financial income 515 1,148Financial expense (5,212) (3,798)Net loss (44,467) (15,653)



Notes to the Financial StatementsDecember 31, 2013 December 31, 2012

in TCHF in TCHF

1. Fire insurance value of propertyand equipment 20,000 20,000

2. Authorized and conditional capital

Authorized capital with a nominal value of 1,526 1,121Conditional capital with a nominal value of 1,526 1,121

3. Treasury shares number of shares purchase price in TCHF

Balance as of January 1, 2012 – – –Purchase 2,241,143 0.10 224Sale – – –Balance as of December 31, 2012 2,241,143 0.10 224Balance as of January 1, 2013 2,241,143 0.10 224Purchase – – –Sale 80,975 3.26* 8Balance as of December 31, 2013 2,160,168 0.10 216

*average sale price

4. Important investments December 31, 2013 December 31, 2012

Proteome Therapeutics GmbH,Singen, GermanyNon-operative since May 2002Paid-in capital (TEUR) 25 25Shareholding (%) 100 100

BioSupport AG, Schlieren, SwitzerlandPurpose: Provider of research servicesShare capital (TCHF) 100 100Shareholding (%) 33 33

5. Lease commitments notrecorded in the balance sheet December 31, 2013 December 31, 2012

Rent and leasing (TCHF) 1,412 1,364

The minimum lease commitments comprise all amounts due in future periods.



6. Convertible Bond and Convertible loans notes

Convertible Bond

In February 2007, the Company issued 2.875% p.a. convertible bonds (“Convertible Bond”) with anominal value of CHF 70 million. The Convertible Bond was initially due for repayment on Febru-ary 20, 2012, and was convertible into the Company’s shares at a conversion price of CHF 175.However, because Cytos did not have the financial means to fully repay the Convertible Bond atmaturity, it proposed a bond restructuring to the bondholders on November 10, 2011. In summary,Cytos proposed to repay half of the outstanding nominal value at par and to postpone the repay-ment for the remaining half and to defer the payment of any interest to February 20, 2015. Therepayment will be at 150% of par. Also, the coupon was increased from 2.875% p.a. to 5.75% p.a.Furthermore, the conversion price was reduced to CHF 7.71. In the meantime, the conversion pricehas been further reduced to CHF 7.32 per share due to the anti-dilution clause. This restructuringbecame legally binding on March 13, 2012.

In the course of the second, third and fourth quarter of 2012, Cytos Biotechnology Ltd bought backconvertible bonds on the market with a nominal value of CHF 2.97 million. Cytos Biotechnology Ltddid not buy any convertible bonds on the market in 2013. The nominal value of the outstandingConvertible Bond as per December 31, 2013 amounted to CHF 13.17 million (the same in prior year).

The convertible bonds with extended maturity are subordinated.

Convertible loan notes

Four investors granted Cytos Biotechnology Ltd convertible loan notes, payable in two equal tranchesat a total amount of CHF 13.25 million. The convertible loan notes (capital and interest) can beconverted into shares of the Company, whereby the conversion price CHF 2.244 was. In the mean-time, the conversion price has been further reduced to CHF 2.13 per share due to the anti-dilutionclause. The first tranche of TCHF 6,625 was due for payment upon completion of the capital increaseand was paid on May 15, 2012. Upon completion of enrollment in the ongoing Phase 2 b clinicaltrial with CYT003 in allergic asthma, the Company called the second tranche of CHF 6.625 millionon October 21, 2013. The second tranche of the convertible loan notes of CHF 6.625 million waspaid in four installments between October 29, and December 10, 2013. As security for the conver-tible loan notes, the Company agreed to pledge certain patents and associated know-how (primarypatents and know-how concerning CYT003) and to conclude a license agreement, which allows theuse of the pledged intellectual property rights in case the Company does not meet its obligationsas per the convertible loan note agreement. The convertible loan notes carry an interest rate of 9%p.a. and are due for repayment at 150% of the nominal value on February 10, 2015. In the event of achange in controlling interest, the investors can demand the repayment of the convertible loan notesat 190% of the original amount of the convertible loan notes.

7. Risk management in accordance with CO 663b.12

On August 30, 2007, the Board of Directors of Cytos Biotechnology Ltd approved the guidelines ofthe internal control system (“ICS”) as part of the risk management system (“RMS”) and delegatedthe introduction of the ICS to the CFO. On the same date, the Board of Directors asked the ExecutiveBoard to revise the risk management handbook. By means of the risk management handbook andthe ICS, the Board of Directors and the Executive Board intend to recognize risks which mightendanger the goals of the Company or compliance with regulations and to define risk minimizingmeasures where appropriate.



December 31, 2013 December 31, 2012

A group consisting of: 17,372,106 shares, 56.91% 12,700,532 shares, 56.67%

- venBio Global Strategic Fund L.P.,Grand Cayman, Cayman Islands

- Amgen Investments Ltd.,Hamilton, Bermuda

- Abingworth Bioventures V L.P., London, UK- Abingworth Bioequities Master Fund Limited

Ugland House, Grand Cayman- Aisling Capital III, LP,

New York, NY, USA

For detailed information see the 2012 and 2013 Annual Report Corporate Governance, section“Significant Shareholder (DCG 1.2)”.

8. Main shareholders

As far as can be ascertained from the information available, the following shareholders owned 5%or more of the Company‘s share capital this year or last year:

9. Other disclosures

Capitalization of costs

Up until 2012, research and development costs were capitalized to the extent that research anddevelopment projects were considered to represent sustained and valuable prospective commer-cial opportunities and the financing of the finalization of the projects can be expected. The capita-lized research and development costs were amortized over the shorter of the patents’ useful lifeor a period of 10 years. The capitalization of research and development costs resulted in “otherincome” of CHF 4.9 million for the year 2012.

The assessment in the past indicated the existence of a material uncertainty regarding the valuationof the capitalized research and development costs, because it was uncertain whether the projectscan be successfully finalized and therefore these capitalized research and development costs couldbe realized through future revenues. In order to (i) apply a more conservative accounting principle,(ii) align statutory accounting with IFRS and (iii) account for more increased regulatory scrutiny theCompany decided to amend past practice and to (i) write-off capitalized research and developmentcosts accrued up until December 31, 2012 and (ii) no longer capitalize research and developmentcosts. As a result, an impairment of CHF 16.8 million was accounted for in 2013 to write-off allcapitalized costs up as per December 31, 2012.

On November 29, 2007, the Board of Directors approved the risk management handbook and thecomprehensive assessment of the risks which were systematically captured and analyzed with re-gard to a potential impact on the Company, whereby measures to prevent or minimize risks werepresented in a risk/probability matrix.

Every year the Executive Board deals with the RM (risk management) in several meetings and pro-poses a RM/ICS report to the Board of Directors.

The Board of Directors approved the report for the year 2013 on January 16, 2014.



Impairment of other current assets

The entire balance of CHF 0.8 million of the active substance “Qbeta” on stock was written off in2013 as this substance is unlikely to be used for any further production of clinical trial material.Going forward, any new CYT003 clinical trial material will be produced with Qbeta from a newsupplier using an improved production method. Therefore, there is no necessity to have Qbeta onstock anymore.

10. Uncertainties and ability to continue operations

The Company is subject to various risks and uncertainties, including but not limited to the timeof achieving sustainable profitability and the uncertainty of the discovery, development, andcommercialization of product candidates, which includes uncertainty of the outcome of clinical trialsand significant regulatory approval requirements. The Company has several product candidates inits portfolio. However, most of these products are licensed to third parties and it is not likely at thispoint in time, that these products will contribute in a significant manner to the financial situationof the Company within the next year or two. The lead product candidate, CYT003, is the only drugcandidate currently in advanced development at Cytos. Therefore, it represents, for the time being,the only relevant value driver for Cytos for 2014 and 2015.

The company will require access to additional capital to support the key activities related to CYT003.The activities are focused on enabling the start of clinical phase 3 studies in the second half of 2015and to sustain operations going forward. The key activities related to CYT003 for the financial year2014 include the completion of study 12, the conduct of another phase 2b study (study 13) and asmall mechanism of action study (study 14). In addition the manufacturing process for CYT003 hasto be developed to commercial scale for the manufacturing of phase 3 clinical trial material at twocontract manufacturing organizations. Finally, a non-clinical toxicology study to evaluate chronictreatment with CYT003 has to be conducted in 2014.

The top line data read-out of the currently on-going phase 2b of study 12 (CYT003) is expectedfor April 2014 and full data is expected to be available in Q1 2015. Positive results are critical forthe Company’s ability to continue as a going concern, but will not yet generate revenue to sustainpositive cash flows. This situation is considered typical to this industry and nature of business.However, these conditions indicate the existence of material uncertainties, which may castsignificant doubt about the Company’s ability to continue as a going concern.

Positive results from the Phase 2b clinical trial (study 12) would be a good indicator that CYT003has an increased probability to reach the market. Such a de-risking of the key asset is expected toincrease the value of the Company and may be reflected in its share price.

With all these activities, especially the initial read of study 12 in April 2014, Management and theBoard of Directors believe the Company will have substantial additional data that demonstrates theincrease value of CYT003 and its potential. Considering the Company’s current cash position andthe level of spending according to management’s plans and budgets, management anticipates theCompany to continue as a going concern until at least the beginning of 2015.

Assuming that the core data from study 12 (CYT003) will be positive, the Board of Directors andmanagement remain confident in their ability to access additional capital to maintain the Company’sliquidity at satisfactory levels. For this reason, the Board of Directors and the management believethat it is appropriate to prepare these financial statements on a going concern basis.

If the results of the CYT003 Study are not positive, we may need to curtail or shutdown operationsand we may not be able to raise additional financing to support our operations.



11. Compensation and participations

Compensation for Board of Directors for the year 2013

Variable CarCash Options bonus leasing Pension Total Options

Name TCHF TCHF TCHF TCHF TCHF TCHF number

Christian Itin 480.0 376.8 221.7 – 78.0 1,156.5 240,000Chairman of the Board and CEOJohn Berriman 68.0 40.0 – – 2.9 110.9 20,000Vice Chairman of the BoardArthur Krieg 64.0 40.0 – – 3.3 107.3 20,000Vice Chairman of the BoardJoseph Anderson 72.0 20.0 – – 3.7 95.7 10,000Member of the BoardPaul Brooke 75.0 20.0 – – 3.0 98.0 10,000Member of the BoardYamo Deniz – 26.0 – – – 26.0 20,000Member of the BoardKurt von Emster 72.0 20.0 – – 3.7 95.7 10,000Member of the BoardTotal Board of Directors 831.0 542.8 221.7 0.0 94.6 1,690.1 330,000

Compensation for Executive Board for the year 2013

Variablecash options bonus Pension Total Options

Name TCHF TCHF TCHF TCHF TCHF number

Matthias Alder, EVP Corporate Developmentand Legal Affairs (highest compensatedmember of EB) 293.1 1,014.0 83.6 – 1,390.7 510,000Total Executive Board 881.9 1,835.0 259.3 103.4 3,079.6 980,000

Explanations:– Individuals acting simultaneously as member of the Board of Directors and of the Executive Board are reported under Board of Directors.– Since 2012 the bonus year is equal to the calendar year. Therefore the bonus amount is composed of the annual bonus of 2013 which is accrued.– The group regularly grants share options to the members of the Board of Directors, the members of the Executive Board and the employees of the Company. Eight

option plans were allocated in 2013, the fair values were calculated using Black-Scholes method. Each option entitles the holder to buy one share of the Companywith an exercise price mentioned below:1.Option plan*: granted on March 4, 2013. Expiry date on March 5, 2019, the fair value at grant date amounted to CHF 2.01 and the exercise price is CHF 3.63.Number of options granted 530,600.2. Option plan***: granted on March 4, 2013. Expiry date on March 5, 2019, the fair value at grant date amounted to CHF 2.00 and the exercise price is CHF 3.63Number of options granted 70,000.3.Option plan*: granted on March 7, 2013. Expiry date on March 8, 2019, the fair value at grant date amounted to CHF 2.12 and the exercise price is CHF 3.84Number of options granted 200,000.4. Option plan*: granted on March 11, 2013. Expiry date on March 12, 2019, the fair value at grant date amounted to CHF 2.13 and the exercise price is CHF 3.85Number of options granted 380,000.5.Option plan*: granted on May 2, 2013. Expiry date on May 3, 2019, the fair value at grant date amounted to CHF 2.33 and the exercise price is CHF 4.09.Number of options granted 240,000.6.Option plan*: granted on May 6, 2013. Expiry date on May 7, 2019, the fair value at grant date amounted to CHF 2.30 and the exercise price is CHF 4.04Number of options granted 60,000.7.Option plan*: granted on November 18, 2013. Expiry date on November 19, 2019, the fair value at grant date amounted to CHF 1.57 and the exercise price isCHF 3.49. Number of options granted 1,464,150.8.Option plan**: granted on December 20, 2013. Expiry date on December 21, 2019, the fair value at grant date amounted to CHF 1.30 and the exercise price isCHF 3.05. Number of options granted 20,000.



Participations as of December 31, 2013

The following numbers of participations were held by members of BoD or EB (including parties closely related to thesemembers):

Options expiring:Name Shares Options 2014 2015 2016 or later

Christian Itin – 1,220,000 – – 1,220,000Chairman of the Board and CEOJohn Berriman – 40,000 – – 40,000Vice-ChairmanArthur M. Krieg 9,830 40,000 – – 40,000Vice ChairmanJoseph Anderson – 30,000 – – 30,000Member of the BoardPaul Brooke – 30,000 – – 30,000Member of the BoardYamo Deniz – 20,000 – – 20,000Member of the BoardKurt von Emster – 30,000 – – 30,000Member of the BoardMatthias Alder – 510,000 – – 510,000Member of the Executive BoardFrank Hennecke 7,509 418,000 6,000 46,000 366,000Member of the Executive BoardHarry Welten 9,392 500, 000 – 78,000 422,000Member of the Executive Board

*The vesting period is as follow: Four years from the grant date. This means a quarter of the options vest on the first anniversary of the grant date. The balanceof the option vests over the remainder of the vesting period in equal installments at the end of each consecutive tree month period following the first anniversaryof the grant date.

**The vesting period is as follow: Three years from the grant date. This means a third of the option vest on the first anniversary of the grant date. The balance ofthe option vests over the remainder of the vesting period in equal installments at the end of each consecutive three month period following the first anniversary ofthe grant date.

***The options can be exercised completely after a cliff vesting period of one year.

– No loans or credits were granted to members of BoD or EB.– No severance payments were made to former members of BoD or EB.

116



Compensation for Board of Directors for the year 2012

Variable CarCash Options bonus leasing Pension Total Options

Name TCHF TCHF TCHF TCHF TCHF TCHF number

Christian Itin 74.7 1,420.2 – – 12.5 1,507.4 980,000Chairman of the Board and CEOThomas Hecht 349.6 49.4 231.5 – 26.4 656.9 35,000Former Executive Chairman 2

John Berriman 44.0 28.2 – – 2.3 74.5 20,000Vice Chairman of the BoardArthur Krieg 37.0 28.2 – – 1.9 67.1 20,000Vice Chairman of the BoardThorlef Spickschen 15.0 – – – – 15.0 –Former Vice Chairman of the Board 2

Wolfgang A. Renner 67.4 – – 1.0 9.6 78.0 –Former delegate of the Board, CEO 1

Joseph Anderson 40.0 28.2 – – 2.0 70.2 20,000Member of the BoardPaul Brooke 43.0 28.2 – – 1.6 72.8 20,000Member of the BoardKurt von Emster 38.0 28.2 – – 1.9 68.1 20,000Member of the BoardJakob Schlapbach 60.5 28.2 – – 3.1 91.8 20,000Former Member of the Board 2

Total Board of Directors 769.2 1,638.8 231.5 1.0 61.3 2,701.8 1,135,000

1) Resigned as CEO and member of the Board of Directors in 2011. 2) Resigned as member of the Board of Directors in 2012.

Compensation for Executive Board for the year 2012Variable

cash options bonus Pension Total OptionsName TCHF TCHF TCHF TCHF TCHF number

Harry Welten, CFO(highest compensatedmember of EB) 304.4 211.5 257.5 58.9 832.3 150,000Total Executive Board 972.4 423.0 726.3 184.5 2,306.2 300,000

Explanations:– Individuals acting simultaneously as member of the Board of Directors and of the Executive Board are reported under Board of Directors.– Since 2012 the bonus year is equal to the calendar year. Therefore the bonus amount is composed of the remaining 1/4 bonus for 2011

which was compensated in 2012 (cash) and the annual bonus of 2012 which is accrued.– The Group regularly grants share options to the members of the Board of Directors, the members of the Executive Board and the employees and consultants of the

Company. Two option plans were allocated in 2012, the fair values were calculated using Black-Scholes method. Each option entitles the holder to buy one share ofthe Company with an exercise price mentioned below:

1. Option plan: granted on September 28, 2012. Expiry date on September 29, 2018, the fair value at grant date amounted to CHF 1.41 and the exercise price isCHF 2.57. Number of options granted 704,980. The vesting period of 160,000 options is as following: Three years from the grant date. This means a third of theoption vest on the first anniversary of the grant date. The balance of the option vests over the remainder of the vesting period in equal installments at the end ofeach consecutive three month period following the first anniversary of the grant date. The vesting period of 529,980 is as following: Four years from the grantdate. This means a quarter of the options vest on the first anniversary of the grant date. The balance of the option vests over the remainder of the vesting periodin equal installments at the end of each consecutive tree month period following the first anniversary of the grant date. The vesting period of 15,000 is asfollowing: no initial cliff vesting period but vest in quarterly installments over four years.

2. Option plan: granted on October 8, 2012. Expiry date on October 31, 2018, the fair value at grant date amounted to CHF 1.45 and the exercise price isCHF 2.54. Number of options granted 960,000. The vesting period is as follow: Four years from the grant date. This means a quarter of the options vest on thefirst anniversary of the grant date. The balance of the option vests over the remainder of the vesting period in equal installments at the end of each consecutivetree month period following the first anniversary of the grant date.

– No loans or credits were granted to members of BoD or EB.– No severance payments were made to former members of BoD or EB.



Appropriation of the accumulated loss

At the Annual Shareholders’ Meeting on June 28, 2013, the shareholders approvedto carry forward the net loss of the year 2012 in the amount of TCHF 15,653 andto transfer TCHF 25,826 of paid-in capital (surplus funds) to the free reserves. Fur-ther, the shareholders approved to offset the loss carry-forward in the amount ofTCHF 217,356 against such free reserves. As a result, there remained a balance offree reserves in the amount of TCHF 13,740.

At the Extraordinary Shareholders’ Meeting on December 30, 2013, the shareholdersapproved the amendment to the resolution of the Annual General Meeting share-holders held on June 28, 2013 (compensation of Loss). The outcome of this is that theshareholders approved to carry forward the net loss of the year 2012 in the amountof TCHF 15,653 and to transfer the free reserves existing on December 31, 2012 inthe amount of TCHF 205,271 as well as the share premium of TCHF 25,826 (total ofTCHF 231,096) to the legal reserve from capital contribution.

The Board of Directors proposes to carry forward the net loss of the year 2013 in theamount of TCHF 44,467.

Participations as of December 31, 2012

The following numbers of participations were held by members of BoD or EB (including parties closely related to thesemembers):

Options expiring:Name Shares Options 2013 2014 2015 or

later

Christian Itin – 980,000 – – 980,000Chairman of the Board and CEOJohn Berriman – 20,000 – – 20,000Vice ChairmanArthur M. Krieg 9,830 20,000 – – 20,000Vice ChairmanJoseph Anderson – 20,000 – – 20,000Member of the BoardPaul Brooke – 20,000 – – 20,000Member of the BoardKurt von Emster – 20,000 – – 20,000Member of the BoardFrank Hennecke 5,862 208,000 – 46,000 162,000Member of the Executive BoardPhilipp Müller 150 58,000 – 46,000 12,000Member of the Executive BoardHarry Welten 7,331 240,000 – 60,000 180,000Member of the Executive Board


Glossary of selected terms



Cytos Biotechnology Glossary of selected terms

ACQ: Asthma control questionnaire

Allergen: A normally harmless substancethat elicits a misdirected immuneresponse.

Alzheimer’s disease: A progressivedegenerative disease that alters the brain,causing impaired memory, thinking andbehavior.

Antigen: A molecule capable of stimulatingthe immune system.

Asthma: A chronic inflammatory disorderof the airways.

Bacteria: Single-celled microorganismswhich can exist as independent (free-living) organisms.

Bacteriophage: Viruses that infect andreproduce within bacteria.

Biologic: Protein- or peptide-basedtherapeutic (e.g. vaccines, monoclonalantibodies).

Biotechnology: Biotechnology is theuse of living systems and organisms todevelop or make useful products, or“any technological application that usesbiological systems, living organisms orderivatives thereof, to make or modifyproducts or processes for specific use”Depending on the tools and applications,it often overlaps with the (related)fields of bioengineering and biomedicalengineering.

Biopharmaceutical: A drug created bymeans of biotechnology, especially geneticengineering.

Cell: An autonomous self-replicating unit.All living organisms are composed of oneor more cells. In multi-cellular organisms,cells may be more or less specialized(differentiated) for particular functions.

Chronic diseases: Illnesses that areprolonged, do not resolve spontaneously,and are rarely cured completely.

Clinical: Relating to a clinic or conductedin a clinic and depending on directobservation of patients or healthyvolunteers.

Cytokine: Regulatory protein releasedby cells of the immune system. Acts asintercellular mediator.

Dendritic cell: A subtype of antigenpresenting cells.

DNA: Deoxyribonucleic acid. The geneticinformation of an organism.

Double-blind: Set-up often used in clinicaltrials where neither the doctor nor thepatient knows if placebo or the active drugsubstance is used.

Efficacy: Power or capacity of a drug toproduce a desired therapeutic effect.

Endpoint: An outcome measure in aclinical trial.

FEV 1: Fast expiratory pressure in onesecond, lung function measure

GMP: Good Manufacturing Practice.Guidelines for the manufacture ofmedicinal products issued by theregulatory authorities worldwide.

Immune system: Complex and integratedbody system of organs, tissues, cells,and cell products such as antibodiesthat differentiates self from non-self andprotects the organism from potentiallypathogenic organisms or substances.

Immunogenicity/Immunogenic: Ability ofa substance to evoke an immune response.

Immunotherapy/Immunotherapeutic:Therapy / product aimed at activation ofthe immune system to modulate a certaindisease process.

Inflammation: A basic way in which thebody reacts to infection, irritation or otherinjury, the key feature being redness,warmth, swelling and pain.

Ligand: Molecule capable of binding to areceptor – may function as an agonist oran antagonist.

Macrophages: A large cell that acts as ascavenger, helping the immune system todestroy foreign agents.

Microbial: Relating to microorganisms(microbes).

Persistent: Relates to defined classificationof asthma. Without treatment patientswith persistent asthma suffer daily fromthe severity of asthma symptoms.

Phase 2 trials: Clinical trial that examinesa new drug candidate’s dose, safetyand exploratory efficacy in patients andmay involve between 20 (2a) and 500(2b) patients. Phase 2b trails are oftenconducted at several centers.

Placebo: Dummy medical treatment.

Preclinical: Phase of activities where a newdrug candidate is tested in animal models.

Prevalence: The percentage of individualswithin a population having a disease.

Protein: Complex, high-molecular-weightorganic compound. Proteins are essentialto the structure and function of all livingcells and viruses.

Qb: Virus-like protein (VLP) carrier derivedfrom the bacteriophage Qb.

Randomize: Selecting (by chance) arandom sample of a population (importantin statistical sampling), allocatingexperimental units via random assignmentto a treatment or control condition

Receptor: Group of molecules on thesurface or within a cell that deliver a signalto the cell upon stimulation.

Subcutaneous: Located / placed justbeneath the skin.

T cell: Immune cell that plays a centralrole in cell-mediated immunity. There area number of different subgroups, such ascytotoxic T cells and T helper cells.

Virus-like particle (VLP): Geneticallyengineered spherical protein envelopederived from a virus; does not contain viralgenetic material and cannot replicate butelicits a potent immune response.

Published:Cytos Biotechnology Ltd, Schlieren (Zurich), Switzerland

Design/Layout:Conscience Creative LLP, United Kingdom

Print:Effingerhof AG, Brugg AG, Switzerland

Legal Disclaimer:

This Annual Report contains statements that constitute “forward-lookingstatements”, including but not limited to, statements relating to research and

development plans, planned regulatory approvals, research collaborations andestimates and projections of future trends, as well as the anticipated futuredevelopment and economic performance of the Company and/or its subsidiaries(together “the Group”). Such forward-looking statements involve known and unknownrisks, uncertainties and other factors that could cause the actual future results,performance or achievement of the Group, or industry results, to differ materiallyfrom any future results, performance or achievement implied by such forward-lookingstatements. The forward-looking statements are based on the information availableto the Group on the date of this Annual Report and on the Group’s current beliefs,forecasts and assumptions regarding a large number of factors affecting its business.Such beliefs and assumptions are inherently subject to significant uncertainties andcontingencies, many of which are beyond the control of the Group. There can beno assurance that: (i) the Group has correctly measured or identified all the factorsaffecting its business or the extent of their likely impact, (ii) the publicly availableinformation with respect to these factors on which the Group’s analysis is based iscomplete or accurate, (iii) the Group’s analysis is correct or (iv) the Group’s strategy,which is based in part on this analysis, will be successful. Factors that affect theGroup’s business include, but are not limited to, (i) general market, governmentaland regulatory trends, (ii) competitive pressures, (iii) technological developments,(iv) effectiveness and safety of the Group’s technology and therapeutics,(v) uncertainty regarding outcome of clinical trials and regulatory approvalprocesses, (vi) management changes, (vii) changes in the market in which theGroup operates and (viii) changes in the financial position or credit-worthiness

of the Group’s customers and partners. The Group assumes no liability toupdate forward-looking statements or to conform them to future events or

developments.

Cytos Biotechnology AG Wagistrasse 25 CH-8952 Schlieren SwitzerlandTel: +41 44 733 47 47 Fax: +41 44 733 47 40 [email protected] www.cytos.com

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