2017 Annual Report - kuros.ch

1 2017 Annual Report Our ambition is to become a leader in bone repair and regeneration. Kuros Biosciences 2017 Annual Report 1 Table of content Highlights of the last 16 months .. 2 Letter to Shareholders .. 5 Our Ambition and Products .. 7 Corporate Governance Report .. 11 Compensation Report .. 36 Financial Report .. 48 Legal Disclaimer/Forward-Looking Statements .. 118 Kuros Biosciences 2017 Annual Report 2 Highlights of the last 16 months March 12 European patent covering osteoinductive materials obtained: Kuros announced that its Dutch subsidiary, Kuros Biosciences BV, has been granted the European patent, EP3021878, entitled Method for producing an osteoinductive calcium phosphate and products thus obtained by the European Patent Office.

2 January 8, 2018 License agreement with Checkmate expanded: Kuros amended its exclusive license agreement, which was originally signed in 2015, that grants Checkmate Pharmaceuticals Inc., Cambridge, MA, USA access to Kuros clinically validated product candidate CYT003 as well as its VLP platform and to technology related to oligonucleotide synthesis. December 14, Announcement of management succession: Kuros announced the appointment of Michael Grau as Chief Financial Officer effective February 1, 2018. Michael Grau succeeds Harry Welten, who stepped down as CFO on February 1, 2018 to focus on his board roles and part-time CFO functions in privately held companies.

3 November 28 Chief Medical Officer to retire: Dr. Virginia Jamieson, Chief Medical Officer, has reached retirement age and will retire from full-time employment with effect as of May 31, 2018. November 22 Option to secure equity financing of up to CHF 30 million: Kuros entered into a Standby Equity Distribution Agreement with a fund managed by Yorkville Advisors Global, LLC. Under the terms of the agreement, Yorkville has committed to provide up to CHF 30 million in equity financing over a 36-month period in individual tranches of up to CHF 1,000,000 each.

4 In exchange for the funds to be provided, Yorkville will receive Kuros shares at a price, which will be determined anew each time a SEDA tranche is called. The shares will be placed at a 5% discount to the market price which is in line with Swiss market practice for private placements. November 16 Announcement of management changes: Kuros announced the promotion of Dr. Joost de Bruijn to Chief Executive Officer, effective December 4, 2017. Dr. de Bruijn is co-founder and current managing director of Kuros Biosciences BV (formerly known as Xpand Biotechnology BV), a wholly owned subsidiary of Kuros.

5 Dr. Ivan Cohen-Tanugi has decided to step down as CEO and member of the Board of Directors. Further, Kuros founding CEO and current President, Didier Cowling, will retire from the Executive Management team to serve as a senior advisor to the CEO and continue to serve as a Director on the company s Board. September 26 Financial results for first half-year of 2017: For the first six months of 2017, Kuros reported significantly lower net operating costs of CHF million and a substantial reduction of net loss of CHF million (first half-year 2016: CHF million) mainly due to the absence of non-recurring, non-cash charges.

6 Cash reserves by mid-year 2017 amounted to CHF million. Summary of progress since the beginning of the year: All-share strategic acquisition of Xpand accelerates Kuros transition to commercial stage and provides an EU hub for future distribution, pre-clinical and manufacturing operations. Newly appointed CEO Dr. Ivan Cohen-Tanugi prepares Kuros for late-stage clinical development of Fibrin-PTH candidates and for product launches and commercialization in the United States of America and the European Economic Area.

7 MagnetOsTM received clearance for commercialization in the Unites States as well as in Europe, while Neuroseal received clearance in Europe. Portfolio extension into new formulations and indications is well underway with MagnetOsTM Putty receiving market clearance in the United States and filing the product for CE marking in Europe. Successful placement of new shares strengthens Kuros equity base to fund future commercial activities and Fibrin-PTH development programs. Kuros Biosciences 2017 Annual Report 3 August 24 Regulatory clearance for MagnetOsTM Putty commercialization in the United States and filing for CE marking in Europe: Kuros has received 510(k) clearance from the US Food and Drug Administration for MagnetOsTM Putty indicated for use as an autograft extender in posterolateral spine.

8 This market clearance allows commercialization of MagnetOsTM Putty in the United States and complements the existing clearance for MagnetOsTM Granules, which was granted by the FDA in February 2017. In addition, Kuros has filed MagnetOsTM Putty for CE mark certification in Europe. MagnetOsTM is a novel synthetic bone graft substitute designed to regenerate bone in the implanted site in the body. Numerous studies have shown that MagnetOsTM leads to progressive bone formation and implant resorption comparable to current gold standard autograft.

9 July 31 Kuros announces full exercise of over-allotment option: Kuros announced that the over-allotment option granted to Z rcher Kantonalbank in connection with the capital increase has been exercised in full on July 28, 2017. Including the 200,000 shares placed in connection with the over-allotment option, Kuros has sold a total of 1,351,606 registered shares in the rights and share offering. June 29 Strengthening of equity base with placement of new shares: Kuros sold 1,151,606 new shares (excluding an over-allotment option of up to 200,000 shares) to existing and new investors at a price of CHF per share.

10 In total, Kuros raised gross proceeds of CHF million (or CHF million if the over-allotment option will be exercised in full). The new funds will fund Kuros commercial activities, in particular the market launch of novel products MagnetOsTM and Neuroseal as well as certain important activities for the ongoing Fibrin-PTH development programs. June 21 Kuros receives CE certification for Neuroseal, a novel dural sealant: Kuros has received CE certification for its novel dural sealant, Neuroseal. The CE certification allows for the commercialization of the product anywhere in the European Economic Area.