Cellectis Activity Report 2011

ACTIVITY REPORT

2011

DisclaimerThis publication and the information contained herein do not constitute an offer to sell or subscribe, or a solicitation of an offer to buy or subscribe for shares in Cellectis in any country. This publication contains forward-looking statements that relate to the Company’s objectives based on the current expectations and assumptions of the Company’s management only and involve unforeseeable risk and uncertainties that could cause the Company to fail to achieve the objectives expressed by the forward-looking statements hereafter.

CONTENTS

Note from the Chairman and CEO

2011 HIGHLIGHTS

Our story

Rapid growth

Our technology

FINANCIAL ITEMS FOR 2011 AND COMMENTS

GOVERNANCE

5

6

10

14

18

22

28

l Cellectis l Activity Report 2011 l4

CELLECTIS GROUP IN BRIEF

Worldwide pioneer in genome engineering

Established in 1999, listed on the NYSE-Euronext Alternext market in Paris since 2007

Total operating revenue in 2011: e15,993 million

Staff: 214 including 74 PhDs (as of December 31, 2011)

Applications: research and biomanufacturing, agricultural biotechnology, human health

Main technologies: genome and high-specificity nuclease engineering, such as meganucleases and TALENs™

Industrial Property: 83 patents granted and more than 300 patent applications pending

Locations: France, Sweden, USA

Legal form: Public limited company with a board of directors

Chairman and CEO: André Choulika

Chief Financial Officer: Marc Le Bozec

TRADING DATA

Exchange listing: NYSE-Euronext Alternext market in Paris

ISIN code – Ticker code: FR0010425595 – ALCLS

Introduced: February 6, 2007

Trading indexes: Alternext Allshare, Next Biotech, Oseo Innovation

Shares at December 31, 2011: 14,128,446

Share capital as of December 31, 2011: e706,422,30

Market capitalization at December 31, 2011: e89,433,063

Reuters: ALCLS.PA

Bloomberg: ALCLS: FP

CONTACT INFORMATION

Cellectis – Shareholder relations8 rue de la Croix Jarry – 75013 Paris – FranceTel: +33 (0)1 81 69 16 00e-mails: [email protected] - [email protected] Securities ServicesSociété Générale Securities Services (affiliate: 042)

l Cellectis l Activity Report 2011 l 5

It was in view of the many proven and potential fields of application for our technology that we decided back in 2008 to expand our company by creating dedicated subsidiaries. Without compromising this strategic vision we have decided to increase the focus of our human and financial resources on therapeutics. This is the reason behind structuring a large-scale therapeutic cluster at the Group’s core. In this aim we acquired Cellartis AB, the world leader in stem cells, the Caisse des Dépôts has contributed to Ectycell’s capital, Dr. Andrew Scharenberg has been recruited as the Chief Scientific Officer of the subsidiary Cellectis therapeutics, and we have launched collaborative projects.

Our Group gets re-organized and acquires the means to fulfill its ambitions. The financial boost from the e50 million investment by the Fonds Stratégique d'Investissement and Mr. Pierre Bastid marks 2011 as a turning point for our company.

Changes in the governance and improvements made, both in terms of Group management and organization, represent key steps in Cellectis’s history. We have a new Chairman of the Board of Directors, three new directors have been appointed, ad hoc committees have been added to the board, we have recruited top managers and a CEO for our subsidiaries and a General Secretary position has been added. All this serves to prepare the groundwork for our Group's future.

The tremendous efforts made, both in strategic reasoning and structural organization, have provided us with the fundamentals we need to achieve our medium- and long- term objectives: to generate a regular turnover that is enough to ensure Cellectis’s continuing profitability. Indeed, the Group’s worth is set to reach the billion Euro mark by the end of the decade.

We can be legitimately proud of our collective success. In twelve years, Cellectis has furthered science, generated and commercialized numerous innovative products, created several hundred jobs and been profitable for shareholders. Several projects and important commercial negotiations are currently in the works.

Our success has placed us at the frontline of immense scientific and commercial potential, whose economic and financial predictions have already helped fuel the interest of a growing number of people around the world. Soon, we will have to face increasingly intense competition. A new era is upon us, more competitive, more dynamic. This is a challenge that plays right into our business model.

In 2011, Cellectis sought to prepare itself for battle. Now we are ready to rise to the challenges that await us.

NOTE FROM THE CHAIRMAN AND CEO

Cellectis’s battle plan

Dr. André Choulika Chairman and Chief Executive Officer


2011 HIGHLIGHTS

Cellectis therapeutics (CTx) starts off the year by publishing proof of concept data to show that meganucleases can prevent viral infection in the journal Molecular Therapy. The publication highlights CTx, the French National Center for Medical Research (CNRS) and the Institut de la Vision successfully protecting cultured human cells from a herpes viral infection using meganucleases, Cellectis’s flagship technology.Cellectis supplements its portfolio of genome modification tools by signing an exclusive license agreement with the University of Minnesota for revolutionary genome customization technology using TAL effectors. Cellectis obtains rights to use these highly promising molecular tools in all areas of application.

Cellectis bioresearch (CBR) puts its exclusive license on TAL technology within the financial grasp of research laboratories by launching its first service offering for custom TAL (TALEN™) nucleases. These new tools allow for specific gene modification in any cell type. The nucleases, which can be produced quickly and easily, have "huge" potential and "could revolutionize the genome customization sector", states Marc Le Bozec, CEO of CBR. Alongside meganucleases, the new products expand its signature range of molecular tools for genome customization.

Stem cells take the stage as Cellectis and the Établissement Français du Sang (French Blood Agency) announce the start of their ambitious StemRed program. This program, also involving the Université Pierre et Marie Curie, Bertin Technologies and the Centre d’Étude des Cellules Souches, will be launched over a seven-year period. Faced with the reality that 80% of the world’s population has no access to blood transfusion, the program aims to balance this deficit with the industrial production of red blood cells using induced pluripotent stem cells. In addition, Cellectis continues growth with the official inauguration of Cellectis bioresearch, Inc., the Group’s new American subsidiary based in Cambridge, Massachusetts (USA).

Febr

uary

Janu

ary

Mar

ch

Marc Le Bozec, Cellectis’s Chief Financial Officer and Cellectis bioresearch’s Chief Executive Officer


This spring, stem cells are still the hot topic at Cellectis.This comes as a result of an agreement signed by Ectycell and the Caisse des Dépôts on the industrial development of induced pluripotent stem cells (iPS). The goal of this agreement is to establish the world’s first iPS cell bank and to make Ectycell a major player in this area. The agreement stipulates a capital increase made in two installments amounting to a total of €12 million reserved equally for Cellectis and the Caisse des Dépôts.In addition, Ectycell strengthens its man-agement teams with three new senior managers: Edward Balbirnie, PhD, as Chief Operations Officer, Stephan Reynier, engineer, as Head of Programs, and Wu Ma, PhD, as Head of the induced Pluripotent Stem (iPS) Cell platform.

TALENs™ take center stage when Cellectis bioresearch chooses Wako Pure Chemical Industries to be its exclusive distributor in Japan for its genome customization solutions, including the new TALEN Access™ service. Japan is a major player in life science research and Wako is one of the country's leading distributors of products for research. This agreement allows Cellectis bioresearch to promote its portfolio of over 200 product and service references using genome customization as well as "effectively enter this important market", as Luc Selig, VP Sales and Marketing at CBR, explains.

In June, therapeutic research and the development of new vaccines are a main focus for Cellectis. Cellectis and VitamFero announce the signing of an agreement for the design and development of new generation attenuated vaccines against parasite infections. This gives VitamFero access to meganucleases - Cellectis's proprietary technology - which, as Pascal Breton, CEO of VitamFero, explains, "represents a very important step forward for [our] company".Another important event in June is the appointment of André Choulika, Cellectis founder and CEO, as Chairman of the board of directors. Predecessor Christian Policard, declares: "during my six years as Chairman, Cellectis has reinforced its leadership position and I wish the company every success", and expresses his delight at "the appointment of André Choulika".

Apr

il

May

June

Wu Ma, Head of iPS Cell Platform

Edward Balbirnie, Chief Operating Officer

Stephan Reynier, Head of Programs

Christian Policard

8

In July, Cellectis bioresearch basks in the limelight when its TALEN Access™ offering is awarded "Most Innovative New Service 2011" at the Life Science Awards. Luc Selig, VP Sales and Marketing says on the subject: "We are very honored to receive this award. It makes our team’s hard work in coming up with such a high quality offer, at an affordable price, only a few months after having acquired the technology, worthwhile".The subsidiary follows up this victory by reaching a significant milestone in the use of meganucleases as part of a project to develop a new bio-engineered cell line in collaboration with Lonza. The subsidiary Cellectis therapeutics also announces, in July, the appointment of Dr. Andrew Scharenberg, as Chief Scientific Officer. As a doctor specializing in immunology and a professor at the University of Wisconsin, he also runs an academic research laboratory (in Seattle) that is known internationally for its work using genome engineering technology for the development of innovative therapeutic applications.

This month, Cellectis rolls out its technology in a new area of application, animal genetics, by making its meganucleases available for agrifood (accelerated breeding programs) as well as biomedical applications. A development and license agreement for the creation of large transgenic livestock is signed between Cellectis bioresearch and Recombinetics, an American specialist in biogenetics. This agreement gives Recombinetics access to Cellectis proprietary technology for the production of transgenic animals with improved genetic features.

The major event in September (subject to the projected capital increase) is the contract signed for the acquisition of Swedish company Cellartis AB, European leader in in vitro R&D tools derived from stem cells.In addition, Cellectis announces tremendous growth in nuclease production capabilities in 2011. In 2008, Cellectis was producing 20 nucleases a year. In 2011, production rose to 7,200. By industrializing nuclease production Cellectis bioresearch is able to share its technology with nearly 300,000 public and private research laboratories around the world - technology which was previously only available to large industrial companies and heavily funded laboratories. Cellectis's goal to engineer entire, high-throughput genomes becomes a tangible reality.

Aug

ust

July

Sept

embe

r

l Cellectis l Activity Report 2011 l


The Group’s structure is strengthened with the appointment of Philippe Valachs as General Secretary and member of the Group’s Executive Committee. Cellectis also makes the move to Paris's 13th arrondissement with new and less expensive premises at the Biopark, an industrial hub dedicated to companies working in biotechnology.At the end of October, stem cells gain new significance for Cellectis with shareholders approving the acquisition of Cellartis AB. This acquisition enables Cellectis to become the world’s leading supplier of in vitro models derived from stem cells and of related technologies which are revolutionizing research and development for therapeutic treatments, such as the one for diabetes (agreement with Novo Nordisk). To make this possible, Cellectis has solicited a capital increase of €50 million financed by the Fonds Stratégique d’Investissement and Mr. Pierre Bastid.

After confirming the acquisition of Cellartis AB and beginning the process of integrating Cellartis AB and Ectycell to form a single Business Unit, "Cellectis stem cells", Cellectis and the Établissement Français du Sang inaugurate their collaborative project, StemRed. This large-scale program is divided into two parts. The first part aims to construct an induced pluripotent stem cell bank with donations from "universal" donors that will serve as a resource for cell therapies, the goal being to cover the needs of a vast majority of the population while relying on only a handful of donors. The second part aims to support research on cultured red blood cells with a view to industrialize their production in order to supplement blood transfusions that are currently only possible through traditional blood donations.

The year ends just as it started, in a bustle of activity. Cellectis bioresearch finalizes its partnership with Syngene (the number one Indian biotechnology company in terms of turnover) for the development of new genetically customized cell lines. These recombinant lines, developed using Cellectis’s technology and Syngene’s platform, will be used for cancer research as well as for pharmacological research based on ADME-Tox (Absorption, Distribution, Metabolism, Excretion and Toxicity) properties.Cellectis’s intellectual property continues to excite and interest large and small companies. More proof comes this month with the signing of a new license agreement with Novartis. Chairman and CEO, André Choulika, highlights this when he says: "This agreement is a new declaration of the quality and importance of Cellectis's intellectual property in the area of homologous recombination."

Oct

ober

Nov

embe

r

Dec

embe

r

Cellectis’s Board of Directors, Marc Le Bozec, Chief Financial Officer and Philippe Valachs, General Secretary

From left to right : David Sourdive (Cellectis), Gérard Tobelem (EFS), André Choulika (Cellectis) and Johan Hyllner (Cellectis stem cells)


OUR STORY

2000: A new millennium bringing new prospects for France’s biotechnology industry. Three young PhDs from the Institut Pasteur decide to launch the start-up company Cellectis. The promising new company specializes in rewriting the genomes of any living organism, a technology with a multitude of potential applications in areas such as human health, agrifood and biofuels.At its inception, the Institut Pasteur holds a 25% stake in Cellectis and gives the start-up company access to its business incubator and facilities. Cellectis’s technology is also covered by a portfolio of 9 patent families. These conditions are soon shown to have a positive impact on Cellectis. In autumn 2000, Cellectis is awarded the 2nd special prize at the Concours National d’Aide à la création d'Entreprises de Technologies Innovantes (a competition giving financial aid to start-up businesses in innovative technologies) in the "Creation and Development" category (French Ministry of Research in partnership with OSEO). Soon after its inception, a two-step €e3.8 million fundraising operation is completed and Kaminvest Holding becomes a shareholder.

Cellectis rapidly gains a strong position in the sector and in 2001 signs its first license agreements, for instance with the German biotechnology company Zentaris. This agreement gives Cellectis a foothold in the health and therapeutic-focused research sectors.This license agreement concerns cancer treatment and authorizes Zentaris to use Cellectis technology to improve existing gene therapy processes applied to cancer treatment. This involves destroying tumor cells without affecting healthy tissue. The license granted by Cellectis covers six specific genes involved in different types of cancers.

Two years on from its inception, Cellectis organizes its structure and sets up its scientific advisory board. Chaired by Professor François Jacob, 1965 Nobel Prize in Medicine, the board includes 8 active members appointed for one year and is tasked with outlining the broad scientific goals of Cellectis, submitting methods for implementing the adopted strategy and assessing the company's research and findings.

The Institut Pasteur

Patents acquired by Cellectis SA

Stylized meganuclease

The French Ministry of Research and OSEO awarded a trophy to Cellectis in 2000


At the same time, Cellectis succeeds in convincing investors and manages to raise €16 million at a second roundtable attended by Danish BankInvest Biomedical Venture and French companies AGF Private Equity, Edmond de Rothschild Investment Partners and Odyssée Venture.

2003: Cellectis confirms its talent with laboratory achievements and the signing of new agreements with players in the pharmaceutical and agrifood sectors.Cellectis’s team effectively succeeds in engineering the first synthetic hybrid meganucleases. In the spring the findings are published in Nucleic Acids Research and highlight the spectacular breakthroughs made by Cellectis.Cellectis also signs license agreements with Regeneron Pharmaceuticals in the field of animal models and with BASF Plant Science and with Limagrain for meganucleases applied to plants for food purposes.

2004: Cellectis grants Lexicon Genetics a non-exclusive international license concerning the specific modification of a gene for use in animal models. Lexicon Genetics uses the license to create and use engineered mice in its research in order to develop therapeutic and diagnostic products for humans. This agreement underlines the strength and relevance of Cellectis’s patents.During this time, Cellectis leaves the Institut Pasteur's business incubator and relocates its headquarters, laboratories and support services to Biocitech in Romainville (Greater Paris).

2005 celebrates a major scientific breakthrough: Cellectis engineers the first custom meganuclease. Over the same period, André Choulika is named “2005 Researcher of the Year” in the “People of the Year” series by Le Nouvel Econo-miste.

The focus of the company’s business model shifts from the marketing of sub-licenses to the actual products derived from its own proprietary technology, and Cellectis continues its quest for partners, signing a major agreement in biotechnological agriculture with Bayer Biosciences.

Biocitech in Romainville (93)


This highlights the industrial potential of meganuclease technology for agriculture.Cellectis is also continuing to make headway internally. Its researchers succeed in demonstrating the efficacy of meganucleases in vivo and publish the first article on the subject in The Journal of Gene Medicine. The strong potential of Cellectis’s gene therapy technology is now certain.The company’s achievements are rewarded with the 2006 Entrepreneur of the Year Award in the “2006 Company of the Future” category, by Ernst & Young and L’Entreprise.

2007 marks a turning point for Cellectis as it succeeds in entering the stock exchange on Euronext's Alternext market in Paris, with demand from investors outstripping supply by about six times. This amounts to the company raising funds to the tune of €21.2 million.

Cellectis also expands its intellectual property portfolio thanks to the Institut Pasteur. In addition to new American and Japanese patents, the Institut Pasteur, of which Cellectis is the sole licensee, is granted a general European license for the use of homologous eukaryotic recombination processes. Cellectis thus consolidates its already strong position on the various global markets.

The year's achievements come in addition to these new patents. Cellectis confirms its place in the therapeutic field by providing the teams of Pr. Alain Fischer (Necker hospital) and Pr. Luigi Notarangelo (Children’s Hospital Boston) with specific meganucleases targeting two genes involved in two types of severe immunodeficiency.The company workforce stands at 45, including 17 PhDs.

In 2008, two subsidiaries are set up. These are Cellectis bioresearch and Cellectis therapeutics. The mission of Cellectis bioresearch is the development and marketing of research kits that make genome engineering accessible to all biology researchers the world over. Cellectis therapeutics is entirely dedicated to the development of innovative therapeutic approaches using meganucleases. A few agreements for several million euros in the health sector are signed during the year. The first agreement is with Regeneron Pharmaceuticals for the development of new therapeutic products (rights extension), and another agreement links Cellectis to the French Association against Muscular Dystrophies for a genome surgery program treating certain genetic diseases. The ACTIVE program is also launched. Its purpose is to treat persistent viral infections including those caused by HIV and herpes using meganucleases as antiviral agents.

Cellectis's IPO advertisement


A third subsidiary, Ectycell, is founded in 2009. The company is dedicated to the research and marketing of stem cells and opens up a new range of applications for Cellectis’s technology. The aim is to revolutionize research and medical care by offering high-tech cell models for any type of genetic disease and, ultimately, develop new solutions in regenerative medicine.A number of agreements are signed, in both the agricultural and therapeutic fields. Cellectis is awarded the National Trophy for Innovation 2009 by the National Industrial Property Institute.

In 2010, the Group keeps growing, settles a new subsidiary in the United States and confirms its involvement in the agriculture sector. Its 4th subsidiary, Cellectis plant sciences, dedicated to genome engineering applications in agricultural biology is set up In St Paul, Minnesota. Pr. Daniel Voytas, an internationally renowned scientist and established expert in plant genome engineering, is appointed as Chief Scientific Officer of the new entity. The founding of a subsidiary of Cellectis bioresearch in the United States (Cambridge, Massachusetts), in charge of promoting the company’s products and services in America, is announced: Cellectis forges ahead with its internal expansion policy.

The Group also pursues an external growth strategy and acquires various assets of CytoPulse Sciences, specialized in electroporation systems that enable the efficient incorporation of molecules (e.g. meganucleases) into cells.The Group now has a workforce of 130, including 54 PhDs.

In 2011, the University of Minnesota grants Cellectis the right to use inventions related to DNA recognition and cleavage by TAL effectors, revolutionary new molecular tools that are sold in Cellectis’s product line, on an international scale. Cellectis bioresearch launches its first TALEN™ offering during the year and is awarded the “Most Innovative Service Award for 2011” at the Life Science Awards.Cellectis makes a new breakthrough in the field of stem cells. It signs an agreement with the Caisse des Dépôts for the establishment of a world-leading iPS cell bank for industrial usage, forms a partnership with the Établissement Français du Sang (French Blood Agency) to provide deprived populations with access to blood transfusions, and acquires the Swedish biotechnology company Cellartis AB, the European stem cell leader. On this occasion, Cellectis raises e50 million with the Fond Stratégique d’Investissement and

Mr. Pierre Bastid becoming shareholders. Cellectis thus sets up the "Cellectis stem cells" business unit by combining its two subsidiaries Ectycell and Cellartis AB with the declared aim of becoming a global leader in this market. At the end of 2011, the Group’s workforce is 214, including 74 PhDs.

Stem cells have the potential to differentiate into any of the body's cells (for example : cardiac cells, red blood cells, neurons)


RAPID GROWTH

From a macroscopic perspective, biotechnologies are characterized by two factors: their incredibly fast assimilation of scientific and industrial practices and their huge potential for applications. When considered from a microeconomic perspective, biotechnologies no doubt offer a formidable opportunity for growth, as well as job and value creation worldwide.

In the early 2000s, a bare 50 years after the double helix structure of deoxyribonucleic acid (DNA) was first discovered by Watson and Crick, the first human genome sequencing was completed. In the space of 50 years, restriction enzymes have been discovered, and their role in DNA repair and mutation processes has been studied and their use well-established. In 1980, Cohen and Boyer thus patented their recombinant DNA technique. This was one of the first biopatents to be granted. The discovery marked the advent of modern biotechnology and the development of genetic engineering, paving the way for genomic recombination techniques for therapeutic, phytosanitary and industrial purposes.

"Biotechnology emerges as a modern-day

« new frontier » that will have an impact on the entire

human species".

l Cellectis l Activity Report 2011 l 15 15

"The production of adaptable meganucleases will certainly meet major therapeutic needs".

In the course of a short generation, our perception of the living world radically changed. But more fundamentally still, this new knowledge immediately took root in our lives, changing the very structure of medical practices and, in the short term, also affecting many facets of our relationship with the world.Because industry has embraced biotechnology, it emerges as a modern-day “new frontier” that will have an impact on the entire human species.Today, 50% of all drugs launched on the market are the fruit of biotechnological research. And in 5 years’ time it will be two-thirds. Before the close of this decade, progress in stem cell culture technology will in all likelihood rid patients of their dependence on blood donations, guaranteeing them access to synthetic blood products in conditions of total safety.

Biotechnologies will also make a strong impact in the energy sector. Used to produce new, more advanced biofuels, they will make us less dependent on fossil fuels.The story of Cellectis is precisely part of this process and wave of growth.In the 90s, within François Jacob’s and Bernard Dujon’s laboratories, researchers from the Institut Pasteur focused on deciphering the activity of specific enzymes: meganucleases. From analyzing their capacity to cut the phosphodiester bonds between two nucleic acid strand nucleotides arose the vision that if it was possible to control this “cut and paste” quality, the production of adaptable meganucleases would certainly meet major therapeutic needs and benefit numerous industrial applications. At the end of 1999, the Institut Pasteur granted one of his researchers an exclusive license agreement covering a portfolio of patents, several of which that scientist co-authored. And so Cellectis came into being.


For the last 12 years the ambition of Cellectis has been to win recognition as a leading global player in the biotech sector before the decade is out, based on the dual belief that biotechnologies will be to the 21st century world economy what chemistry was to the 20th century’s, and that the sector's development will be rooted in synthetic biology.

After an initial phase of business mainly devoted to proof of concept trials, scientific demonstration of technical feasibility, and consolidation of the production platform’s robustness –an essential prerequisite for reducing the unit costs of meganuclease production– from 2007 onwards Cellectis accelerated the pace of its expansion.

Prior to the implementation of this forward-looking growth strategy, Cellectis changed its financing model and, in 2007, succeeded in entering the stock exchange with a listing on the Alternext market. Thus freed of its almost full dependence on private equity financing, the company launched two capital increase operations, first in 2009, and then in 2011, which allowed Cellectis to raise more than e70 million and to bring in long-term investors, primarily the Fonds Stratégique d’Investissement and Mr. Pierre Bastid.

In parallel with its equity consolidation, Cellectis changed its business model and also adapted its organizational and operational structures to the rapid pace of its expansion.

From a model based on revenues from intellectual property licenses, the company moved to a model based on turnover generated from “products”.In a little more than a decade, Cellectis has built a portfolio of patents that fully protects its scientific advances. At the end of 2011, Cellectis held 83 patents and had filed over 300 patent applications.During its first years, Cellectis got most of its income from selling the use of intellectual property to different pharmaceutical and agronomic companies.

"In little over a decade Cellectis has built up a patent portfolio

that broadly protects its scientific interests".


From 2007 onwards, Cellectis implemented a sales policy designed to generate recurring revenues based on the sale of its products. In 2008, the Group launched research kits for use by the scientific community working on genome engineering applications in both public and private laboratories. In 2011, with the development of a new business unit dedicated to stem cells (roll-out of Ectycell and acquisition of Cellartis AB), the prospects for increasing sales improved considerably. In fiscal 2012, the Group anticipates a contribution of e3.3 million from the “Cellectis stem cells” Business Unit to its overall turnover.

Similarly, the company’s organizational structure was adapted in view of the huge scope and diversity of its technology's application potential.As early as 2007, Cellectis had thus planned to build a group organized around its parent company and constituted by subsidiaries dedicated to the scientific, technical and sales development of its

various applications. It is in this vein that Cellectis bioresearch and Cellectis therapeutics were founded in 2008, followed by Ectycell in 2009, Cellectis plant sciences in 2010 and Cellartis AB which was acquired in 2011. The parent company defines the Group’s strategy, holds the reins of the nuclease research, development and production businesses, designs its intellectual property strategy and gathers all the Group’s support services.

The characterization of each type of application meets both scientific and economic needs. The individual company strategy ensures optimal technical and economic cycle management and enables independence in terms of the overall Group’s development and ensuing constraints and specific financial commitments.Faced with a multitude of scientific, financial and business challenges, Cellectis constantly works to ensure access to relevant financial tools that are in line with its strategic development plan, and to

strengthen its organization. The company also strives to win the support of the most prominent academic laboratories, to recruit staff with the highest credentials, and to develop and adapt its marketing and sales services to demand and to competition.

At the end of 2011, Cellectis Group had a workforce of over 210 spread over 5 subsidiaries in 7 different geographical locations around the globe.

17


Cellectis SA Cellectis SA offers all upstream research activities relating to genome engineering, bioinformatics media and a custom nuclease production platform (meganucleases and TALENs™). New approaches in computational and structural biology reduce manufacturing times for meganucleases but above all improve performance. The scientific teams have suc-ceeded in manufacturing these molecules in three months, whereas just two years ago, up to nine months were needed. These achievements enable Cellectis to handle more projects in a shorter timeframe and to provide superior quality enzymes.2011 saw the unveiling of a production platform for TALENs™, a new class of nucleases which are much faster to produce, which has opened up new possibilities not available with meganucleases. Synthesis of TALENsTM mainly requires robotized molecular biology techniques, thus making it possible to produce a custom enzyme in just a few weeks. However, the biology of these proteins is less well-known than that of meganucleases. Cellectis’s researchers are constantly working to measure their characteristics and determine their potential in various biological systems with the support of the Group’s subsidiaries.Thanks to these two families of nucleases, it is possible to modify the genome of any organism. This includes gene insertion, sequence modification and fragment excision using natural homologous recombination processes, or else locus mutagenesis through a simple cut and ligate procedure.

Cellectis bioresearch Cellectis bioresearch develops and markets targeted integration kits designed for discovering and testing new drugs, functional genomics and production of recombinant proteins. These kits use specific endonucleases (meganucleases and TALENs™). The genome customization kits contain reagents and protocols that enable precise and targeted modification of DNA sequences in the genome of interest, whether a cell line or an entire organism. Targeted integration involves a “cut and paste” procedure that is performed by a nuclease, an integration matrix, and DNA recombination processes.

Due to its constant research activity, Cellectis has become a leading player in the biotech industry. The company offers tools dedicated to genome engineering such as meganucleases and TALENs™, as well as pre-engineered products for the pharmaceutical industry, cell therapies, seed companies and laboratory researchers.Subsidiaries have been set up to roll out its technologies, developing techniques specifically oriented to their field of application and tailored to demand.

OUR TECHNOLOGY


The cGPS® kit is based on the establishment of a cell line in which a fragment of exogenous DNA (or transgene), designed for precise characteristics, has been introduced. This transfection technique can be used to specifically cut the appropriate site and to stimulate the natural DNA repair mechanism. The user can thus develop as many variants as required and these variants will all be identical with the exception of the sequences introduced into the cell. The user therefore has a reliable means of comparison.The second type of kit is called custom cGPS®. It is based on the use of meganucleases with modified specificity but can target an endogenous locus. The major difference is that it is no longer necessary to modify the host cell. The user can therefore use this technology on “their” cell of interest. Targeted integration is carried out with a meganuclease expression vector and an integration matrix.With CBR developing TALENs™ technology, it will be possible to produce new targeted integration kits for cells of human or various non-human organisms. Cell line models with applications in cancer therapy, in vitro ADMET (absorption, distribution, metabolism, and excretion – toxicity) and imaging are also produced by CBR’s laboratories.

"Thanks to these two families of nucleases, it is now possible to modify the genome of any organism".


Cellectis therapeutics The mission of Cellectis therapeutics is to treat genetic diseases, cancer and viral infections that are resistant to conventional methods of treatment in order to fulfill unmet medical needs. This subsidiary uses specific endonucleases that directly target relevant genome sequences in order to create precise modifications or to destroy undesirable genes or genomes. This technology can be used in a number of applications that include correction of a genetic defect in a patient’s genome, elimination of viral genomes or inactivation of specific genes. Cellectis therapeutics is also conducting projects on monogenic diseases (including muscular dystrophy, hemoglobin diseases and hemophilia) in partnership with world-renowned laboratories, as well as an antiviral program for the prevention of recurrent infections by the herpes virus (HSV-1) during corneal transplantation surgery.Cellectis therapeutics launched an engineering program relating to T lymphocytes (that play a central role in the immune system), providing its technology and expertise for the use of adoptive immunotherapy. Adoptive immunotherapy involves the transfer of modified T cells generated ex vivo to the patient. This is a highly promising strategy for treating cancer. The technology is used to generate cells resistant to chemotherapy, as well as “ready-to-use” T lymphocytes that may be used to treat patients through an allogeneic, immunotherapeutic approach.The recent acquisition of the Cytopulse large-scale electroporation technology has enabled Cellectis to develop reliable methods for non-viral vectorization of nucleases in hematopoietic cells (blood cells). These methods enable efficient modification of endogenous genome sequences of primary T lymphocytes, and are thus preparing the ground for the cancer- targeting adoptive immunotherapy program.

Cellectis plant sciencesCellectis plant sciences is dedicated to the application of nucleases to plants in order to develop new species expressing traits of high added value. The subsidiary develops products and solutions for the agriculture market and human health.In 2011, leading scientists, Pr. Daniel Voytas and Dr. Feng Zhang, joined Cellectis plant sciences. These inventors and pioneers of plant modification technologies showed the relevance of Cellectis’s tools in various plant systems. One feature of this subsidiary's technologies is the ability to induce targeted plant cell modifications without adding foreign DNA to the end product. From this viewpoint, the acquisition of technologies such as biolistics or electroporation enables Cellectis plant sciences to bypass the conventional plant cell modification systems.This year a network of industrial and strategic partners was developed around the subsidiary, furthering its growth and resulting in a portfolio of products developed both alone and in partnership. These partnerships cover the seed and plant biotechnology sectors (Bayer CropScience agreement), or production of therapeutic agents.

"Adoptive immunotherapy involves the transfer of modified

T cells generated ex vivo to the patient. This is a highly

promising strategy for treating cancer".


Cellectis stem cellsThe acquisition of Cellartis AB highlighted 2011. The synergy created through the merger of its business lines with Ectycell gave rise to the “Cellectis stem cells” Business Unit whose mission is focused on using pluripotent cells to develop new products for drug research as well as regenerative medicine. Pluripotent cells can be divided into two categories depending on their biological origin: human embryonic stem cells (hESC) are derived from the cells, found within the embryo, which have a natural potential to differentiate into any of the body's cells; and induced pluripotent (iPS) cells come from “normal” adult cells that are modified in the laboratory to regain the characteristics of embryonic cells enabling them to differentiate into any cell type.Genome modification techniques applied to these cells can produce high-quality liver cells from iPS cells of different genetic origin, for example. This variety is used to test or check the potential of drugs on a virtual population. The time saved, as well as early and fast comparison of the results obtained enable the pharmaceutical industry to quickly sort the most promising molecules prior to entering the clinical phase, and to develop a personalized medicine approach as well. This subsidiary already markets numerous products such as cardiomyocytes and hepatocytes from human ESCs. It is also the owner of the largest biobank of research-dedicated hESCs in the world.At the same time, the use of nucleases with modified specificity was also launched in these cells: meganucleases and TALENs™ were tested and the results for targeted insertion in iPS cells and primary cell lines are already promising.The development of regenerative medicine products was also launched. The project with Novo Nordisk and Lund University aims to generate beta pancreatic cells from hESCs (to produce insulin and treat diabetes-related diseases). Another project with the Établissement Français du Sang (French Blood Agency), I-Stem and Bertin Technologies aims to establish a clinical biobank of typed iPS cells (Haplobank project) as well as a bank of red blood cells from human fibroblasts via iPS cells (StemRed project, for blood product substitution).

21

How to make an iPS cell

4 genes

all types of cells such as...

... neurons ... red blood cells ... cardiac cells

pluripotent stemcells

an adult cell


ÉTATS FINANCIERS

ASSETS (in 000' €) 31/12/2011 31/12/2010

Intangible assets 35 202 3 976

Tangible assets 6 619 3 913

Financial assets 960 231

Deffered tax assets 4 483 7 853

Non-current Assets 47 265 15 973

Inventories 626 153

Trade receivables 4 003 2 491

Research tax credit and grants 4 472 6 588

Other current assets 3 008 2 486

Cash & cash equivalent 42 384 24 048

Current Assets 54 492 35 766

TOTAL ASSETS 101 757 51 739

Balance sheet (assets)

The accounts outlined in this document are summary extracts of the Group’s full consolidated accounts that were prepared in accordance with International Financial Reporting Standards (IFRS). The 2010 accounts were certified without reservation. The items presented for 2011 were still with the auditors at the time the Annual Report was being published.There was no change in the accounting method between 2010 and 2011, but two major events had a significant impact on the 2011 accounts. These were the acquisition of Cellartis AB and the issue of Mandatory Convertible Bonds (MCBs or "ORA"s) in November 2011. To provide a clearer understanding of the changes that occurred within the Group between 2010 and 2011, pro forma profit and loss accounts were prepared, based on the following assumptions: the acquisition of Cellartis AB and the MCB issue occurred on January 1, 2010 (2010 pro forma P&L) and on January 1, 2011 (2011 pro forma P&L).

• The increase in “Intangible assets” is mainly due to the acquisition of Swedish company Cellartis AB, which generated goodwill of €26.6 M, after recognition of two identified intangible assets (“Technology” for €1.8 M, and “Deferred Tax Assets” for €2.8 M). “Tangible assets” mainly consist of laboratory equipment and materials.

• “Research tax credit” drop in 2011 is due to the collection of substantial grants and refundable advances during the year. Thanks to the funds raised in early November, the cash position improved significantly over the year to reach €42.4 M.


Balance sheet (liabilities)

LIABILITIES (in 000' €) 31/12/2011 31/12/2010

Common stock and paid-in capital 80 397 66 018

Accumulated deficit (27 996) (20 236)

Net income (23 838) (8 302)

Stockholders' Equity 28 564 37 480

Long-term debt 52 088 1 397

Provision for retirement plans 239 120

Noncurrent provisions 66 50

Deferred tax liability - -

Non-current Liabilities 52 393 1 567

Short-term debt 1 213 817

Trade payables 19 587 11 875

Other current liabilities - -

Current Liabilities 20 800 12 692

TOTAL LIABILITIES AND EQUITY 101 757 51 739

• The increase in "Common stock and paid-in capital" is linked to the acquisition of Cellartis AB, half of which was financed in cash (€16.4 M) and the other half through an exchange of shares, which led to the issue of 1.9 million new Cellectis shares with a par value of 5 euro cents per share and an issue premium of 8.95 euro cents.

• The high increase in "Long-term debt" is due to MCBs issued to the FSI and Mr. Pierre Bastid in early November for an amount of €50 M. These bonds – considered as non-current liabilities in IFRS terms – bore interest (at 3.4%) until February 3, 2012, the date on which they were redeemed shares. Their initial amount (€50 M) and the interest due over the period (€0.4 M) have been converted to capital, which brought the amount of capital and issue premiums to €130.8 M.

• The rise in "Trade payables" can be mainly explained by the fact that Cellartis AB entered the scope of consolidation and the receipt of deferred revenue.


Profit and loss account

(In 000' €) 2011 2010

Sales 9 928 8 166

Other revenues 6 065 7 505

Total Revenues 15 993 15 671

Cost of sales (2 515) (1 445)

Gross Margin 13 478 14 225

R&D cost (12 306) (12 311)

Sales, General & Administrative cost (20 589) (13 457)

Other operating income 381 -

Other operating expenses (491) (27)

Operating Income (19 526) (11 569)

Interest income 613 485

Interest expense (488) (153)

Other financial income (expense) 8 34

Financial Income 133 366

Income Tax (4 445) 2 902

PROFIT (LOSS) FOR THE PERIOD (23 838) (8 302)

• The increase in administrative and sales expenses is mainly due to the non-recurring charges from the operations involved in the acquisition of Cellartis AB, the fund raising (MCB) and the issue of equity warrants carried out in November (for €3.9 M) on one hand, and expenses related to the move from Romainville to Paris, on the other hand (€0.6 M).

• “Income tax” is the main factor explaining the lower net income between 2010 and 2011. Up until 2010, all deferred taxes related to losses were capitalized. In 2011, given the tax change in the method used to recover losses being carried forward and the usual IFRS practices as regards the loss recovery period (5 years), the Group decided to no longer capitalize Cellectis SA: deferred taxes and even consider a non-recurring impairment loss. This is therefore a purely accounting entry of all tax losses acquired at the end of 2011, with no impact on recovery in the future.

• Sales rose by 22% in 2011. Revenues from products and services developed by the Group (which include income from licenses in overall sales) rose from 25 to 36%. Other revenues, R&D tax credits and grants are down due to the “mechanical” fall of the R&D tax credit linked, in 2011, to the collection of higher grants and refundable advances than in 2010.

• The cost of sales consists of all annual costs of licenses bought by the Group to enable it to conduct its various business operations.

• R&D cost remains stable but they do include some development costs, capitalized, representing €€1.9 M in 2011 compared to €1.6 M in 2010.


Pro forma profit and loss account

(In 000' €) 2011 2010

Sales 12 313 11 088

Other revenues 7 029 8 170

Total Revenues 19 342 19 258

Cost of sales (2 570) (1 455)

Gross Margin 16 771 17 803

R&D cost (17 809) (17 064)

Sales, General & Administrative cost (21 830) (19 160)

Other operating income 381 29

Other operating expenses (491) (67)

Operating Income (22 977) (18 459)

Interest income 1 157 1 277

Interest expense (658) (497)

Other financial income (expense) (4) (1)

Financial Income 495 778

Income Tax (4 413) 3 153

PROFIT (LOSS) FOR THE PERIOD (26 896) (14 528)

• These pro forma accounts can be used to analyze changes in the Group’s business in its new scope (Cellartis AB included within the scope of the Group) over a full year period and not just over the 10 months of the historical scope and 2 months of the expanded scope, and excluding any impact of non-recurring costs related to the acquisition and issue of MCBs.

• Sales are is 11% higher (the increase would have been 17% at constant historical scope).

• In this presentation, the administrative and sales expenses for 2011 remain affected by the non- recurring charges linked to the move from Romainville to Paris of three of the Group’s companies (including the holding company) and the move of a 4th company from Romainville to Evry (€0.6 M). But most of the increase is due to consolidation of the marketing and sales teams in line with the strategy announced by the Group. The increase in operational expenses (excluding removal expenses) stands at 11%.

To provide a clearer understanding of the changes that occurred within the Group between 2010 and 2011, pro forma profit and loss accounts were prepared, based on the following assumptions: the acquisition of Cellartis AB and the MCBs ("ORA"s) issue occurred on January 1, 2010 (2010 pro forma) and on January 1, 2011 (2011 pro forma).


• In the cash flow statement, only the costs of MCB issue are explicitly included (and not those linked to the acquisition). They show as a positive amount in the “Items without impact on cash flow” item and as a negative amount in the “Cost of MCB issue” item.

• All these flows combined resulted in a significant improvement in the Group’s cash position (€42.4 M at the end of 2011) providing it with substantial means for development for the next two years.

• Cash burn was particularly kept well under control in 2011, notably due to an improvement in working capital requirements: despite a 30% rise in operating expenses, cash flow for business operations showed a marked improvement over 2010.

• The gross total of capitalized development expenses (for Cellectis bioresearch and Cellectis plant sciences businesses) amount-ed to €2.8 M as against €2.0 M in 2010.

• The cash impact of the acquisition of Cellartis AB was €16.3 M. This was the price paid for 50% of Cellartis AB shares, the remaining 50% being paid in Cellectis shares (1.9 million new shares).

• The €1.7 M capital increase corresponds to the exercise of share purchase warrants and founders' warrants, mainly by the two managers (co-founders).

• The “Borrowings and refundable advances” item mainly consists of the issue of MCBs in November 2011, for €50 M.

Summary cash flow statement

(In 000' €) 2011 2010

Net Income (loss) for the period (23 838) (8 302)

Non cash elements 9 121 (1 557)

(Increase) decrease in Working Capital Requirements 3 984 (6 428)

Interest received 555 420

NET CASH FLOw FROM OPERATING ACTIvITIES (10 178) (15 866)

Acquisition of development costs (2 763) (1 951)

Acquisition of other intangible assets (332) (1 577)

Acquisition of property, plant and equipment (2 945) (1 477)

Acquisition of other noncurrent assets (383) -

Impact of changes in scope of consolidation (16 271) -

NET CASH USED IN INvESTING ACTIvITIES (22 694) (5 005)

Share capital increase 1 717 93

Proceeds from lease-back operations 520 729

Borrowings and refundable advances 51 097 (987)

Sale and purchase of treasury shares (15) 3

Transaction costs (MCB) (2 099) -

NET CASH FROM (USED IN) FINANCING ACTIvITIES 51 221 (161)

Effect of exchange rate changes (54) -

NET INCREASE (DECREASE) IN CASH AND CASH EQUIvALENTS 18 295 (21 033)

Cash and cash equivalents at beginning of the period 24 048 45 080

Effect of exchange rate changes on cash 41 -

Cash and cash equivalents at end of the period 42 384 24 048


• In a still-difficult and volatile market, the share price fluctuated, from December 31, 2010 to December 30, 2011, between €7.40 and €6.33, with the highest price on March 9 at €9.37 and the lowest price on September 13 at €5.35. The average daily number of securities traded was 15,611 (a rise of over 50% compared with 2010), with an average closing market price of €7.11.

• The company's capital was significantly restructured at the end of the year. As part of the acquisition of Cellartis AB, half of which was financed through an exchange of shares, Cellartis AB’s long-standing investment funds became Cellectis shareholders. In addition, in order to finance the other half of the acquisition, as well as the Group's upcoming developments, two major benchmark shareholders decided to enter Cellectis’s capital. These were the Fonds Stratégique d’Investissement (FSI) and Mr. Pierre Bastid, who still held MCBs at December 31, 2011, but who became shareholders on redemption of their bonds, on February 3, 2012.

Trading price and capital structure

Shareholders breakdown as of December 31, 2011

1 Founders: 13,9 %2 Historical fincancial investors: 9,9 %3 Corporate partners: 6,8 %4 Former Cellartis shareholders: 13,7 %5 Free float: 55,7 %

Shareholders breakdown as of February 10, 2012 - after redemption of M. Bastid's and the FSI's bonds

1 Founders: 9,6 %2 Historical financial investors: 6,9 %3 Corporate partners: 4,7 %4 Former Cellartis shareholders: 9,5 %5 FSI: 15,4 %6 Pierre Bastid: 15,4 %7 Free float: 38,5 %

Alternext Allshare NYSE-Euronext ACLS

Cellectis

9

8

7

6

5

400 K

300 K

200 K

100 K16/102010

31/102010

15/112010

30/112010

15/122010

30/122010

15/012011

2012

2011 Apr Jul Oct

Share price

Share price in e Share volume in thousands of shares

5

4

4

2

3

1

7

2

3

1

56


GOVERNANCE

Executive CommitteeCellectis's Executive Committee, responsible for Group strategy, is made up of five members in charge of heading strategic projects, setting company objectives and determining company priorities.

André Choulika, Chairman and CEO André Choulika, PhD, Chairman, CEO and nd founder of the company. He is one of the pioneers in the analysis and use of meganucleases to modify complex genomes. He earned his doctorate in molecular virology at the University of Pierre et Marie Curie, Paris VI, before undertaking post-doctoral studies in the Genetics Department of Harvard Medical School. He developed the first approaches for the application of meganucleases in human therapies while working in the Molecular Medicine department at Boston Children’s Hospital. He also studied at the HEC School of Management (Challenge + program).

David Sourdive, Executive Vice-President of Corporate Development David Sourdive, PhD, EVP of Corporate Development and co-founder of the company. After a doctorate in molecular virology at the Institut Pasteur, he joined one of the top immunology and anti-viral laboratories at the University of Emory, Atlanta, USA, where his work focused on immunological memory. Before founding the company, he was head of the biotechnology laboratory at the Centre d’Etudes du Bouchet (French Ministry of Defence), between 1998 and 1999. He studied at the École Polytechnique, and also at the HEC School of Management (Challenge + program).

Marc Le Bozec, Chief Financial OfficerMarc Le Bozec, Chief Financial Officer, was Operations Director at Alfact Innovation (Paris,

France) until September 2006. He has over ten years of experience as consultant in the biotech sector (Arthur D. Little, Paris office), and then as founder, Chairman and CEO of BioProtein Technologies (France), a company dedicated to the production of recombinant proteins in the milk of transgenic animals. He is also a graduate of the HEC School of Management.

Jean-Charles Epinat, Chief Technology Officer Jean-Charles Epinat received his PhD in molecular and cellular genetics from the University of Paris VI following his work at the Institut Pasteur on the regulation of transcription factor and did his post-doctoral work at Boston University (Massachusetts, USA). Jean-Charles Epinat has been at Cellectis since 2000 and headed the platform for high throughput screening and nuclease production from 2005. His achievements include the development of selection and screening methods for meganuclease activity in yeast that are still used today. Philippe Valachs, General Secretary Philippe Valachs, Cellectis’s General Secretary, worked previously as a managing partner in the lobbying firm Archimede Consultants (2003) and as an associate director for the French think tank Cercle des Economistes (2004-2008). As a trained economist, he began his career in consulting and worked internationally before becoming a cabinet member for the French Ministry for Industry and Foreign Trade (1991-1993). He then moved to Compagnie Générale des Eaux (now Vivendi), where he was appointed the Chairman’s chief of Staff (1996). In 1999 he embarked on an entrepreneurial project, participating in the creation of Europe’s first webTV, Canalweb.

Executive committee, from left to right : Jean-Charles Epinat, Marc Le Bozec, David Sourdive, André Choulika, Philippe Valachs


Cellectis’s board of directors, from left to right : Annick Schwebig, André Choulika, Pierre Bastid, Roger J. Hajjar, David Sourdive, Pascale Augé, Laurent Arthaud, Alain Godard

Board of DirectorsThe Board of Directors determines the Group’s strategic focuses and keeps itself informed of the Group’s activities.

As at December 31, 2011: André Choulika, chairman of the board of directors, Chief Executive Officer

David Sourdive, Director, Executive Vice-President of Corporate Development Alain Godard, Independent Director

Kaminvest, Director,Represented by Roger J. Hajjar

Pierre Bastid, Director

Laurent Arthaud, Director

Annick Schwebig, Director

Institut Pasteur, Advisor,Represented by Pascale Augé

Scientific Advisory BoardThe Scientific Advisory Board, set up in 2002, is made up of ten active members appointed for one year and is tasked with outlining Cellectis’s broad scientific goals. The board submits methods and strategies to Cellectis’s management team for meeting the company’s technical objectives, and assesses work that is done and results that are achieved.

Professor François Jacob, Honorary Chairman, MD, PhD, Collège de France, Paris, France

Professor Rodney J. Rothstein, Chairman of the Scientific Advisory Board, PhD, Columbia University, New York City, New York, USA

Professor Frederick W. Alt, PhD, Howard Hughes Medical Institute, Chavey Chase, états-Unis ; Harvard Medical School, Boston, états-Unis

Professor Bernard Dujon, PhD, UPMC, Institut Pasteur, Paris, France

Professor Alain Fischer, MD, PhD, Necker Children's Hospital, Paris, France

Professor James E. Haber, PhD, Brandeis University, Waltham, Massachusetts, USA

Doctor Frédéric Pâques, PhD, Ecole Normale Supérieur, Paris, Former Chief Scientific Officer of Cellectis

Professor Denis Pompon, PhD, Center for Molecular Genetics, CNRS, Gif-sur-Yvette, France

Professor José Alain Sahel, MD, PhD, Quinze-Vingts Hospital, Paris, France

Professor Luis Serrano, PhD, Center for Genomic Regulation (C.R.G.), Barcelona, Spain

®Cellectis

Cellectis – Shareholder relations8 rue de la Croix Jarry75013 Paris – FranceTel : +33 (0)1 81 69 16 00e-mails: [email protected] [email protected]

Photos :Franck Beloncle Aurélia Blanc CellectisDR Ramon MartinezÉric Merle Tim Rummelhoff

Graphic design:Agence CoonileValentina Hermann

IPrinting:GraphiCentre

Printed on FSC certified recycled paper using vegetable based inks.

MADE BY CELLECTIS

Documents

Cellectis Activity Report 2011