AnnuAl RepoRt 2012 - Evolva · folio in terms of both production method ... consumer health and pharmaceutical sec- ... than is the case for novel chemical entity

AnnuAl RepoRt 2012

2

title | 2011

CONTENTS

letter to our Shareholders 5

Mission & Strategy 7

Financial Review 8

Stock Review 10

products 13

legacy products 18

partnerships 20

technology 23

Corporate Governance 27

Consolidated Financial Statements 43

Statutory Financial Statements of evolva Holding SA 81

this annual report contains certain forward-looking statements. these forward-looking statements may be identified by words such as “believes”, “expects”, “anticipates”, “projects”, “should”, “seeks”, “estimates”, “future” or similar expres-sions or by discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ materially from those reflected in the forward-looking statements contained in this annual report. this annual report is available in english only. A German summary is available on request.

5

Letter to Our Shareholders

letter to our Shareholders

Dear Evolva shareholder,

In 2012, and even more so in early 2013, the strategic shift that we embarked upon some three years ago delivered tangible results.

particularly notable were:

� new deals with IFF and Roquette

� Milestones for BASF and Roquette

� A major collaboration with Cargill on our stevia product

� A collaboration with Ajinomoto – applying our technology to new applications in personal care

� the entry of our vanillin product into pre-production in collaboration with IFF

� A lower cash outflow than in previous years

In late 2012 we also acquired our first marketed product – resveratrol – which perfectly complements the rest of our product port-

folio in terms of both production method (fermentation in yeast) and market focus (ingredients for health, wellness and nutrition).

Another key event completed in March 2013 was the raising of CHF 31.3 million in funds from existing and new shareholders. We

thank our existing shareholders for their confidence in the company as evidenced by their high level of participation and are pleased to

welcome several high quality new investors including Cargill and some well-respected Swiss and uS institutions.

the capital increase was significantly oversubscribed and the funds provide a solid basis to carry our company towards profitability

over the next few years. the proceeds will primarily be invested in the development and commercialisation of our products, as well as our

technology platform.

of course not everything went quite so well during 2012. Although we obtained good efficacy results from our phase IIa study on

eV-077, we were disappointed to also observe transient liver enzyme elevations in some individuals. We do see this sort of result, which

is of course very common in drug development, as validating our shift in strategy towards innovative, high value ingredients for health,

wellness and nutrition.

the last 12 months has seen a number of management team changes. Alexandra Santana Sorensen, one of the founders of the

company, left in March 2012, after eight years helping build the company. norbert Bender will leave as Chief Medical officer at the end

of May 2013, and recently Jutta Heim, our Chief Scientific officer, decided to step down. We would like to thank all of them for their

contribution to evolva’s development. We are very pleased that Jutta will remain as an advisor, as well as being willing to join the Board

of Directors. Jutta will be replaced as CSo by Jørgen Hansen, who has run evolva’s Danish research team for the last eight years, during

which time he has been in particular responsible for our vanillin and stevia projects.

In early 2013 the approval of the “Minder initiative” paved the way to changes in Swiss corporate governance over the next few years.

overall evolva is ready to implement the key elements of the initiative that we believe will strengthen the links between companies and

their shareholders. Accordingly at our AGM this May we will start to pro-actively implement some of the envisaged changes.

We are proud of the progress that our company has achieved during the first eight years of its existence but recognise that we are

now entering a crucial period. over the next three years, we will be working hard to launch and drive the sales of several products – some

with a partner, some, like resveratrol, ourselves. As our products enter commercialisation we will face many new challenges, but ones that

we are privileged to have.

once again, we thank our employees for their immense contribution and you, our shareholders, for your support for evolva and hope

you will continue to accompany us on our journey.

With best regards,

Sir Tom McKillop Neil GoldsmithChairman of the Board of Directors Ceo and Managing Director

Reinach, Switzerland, 9 April 2013

7

Mission & Strategy

Mission & Strategy

evolva follows a business-to-business

model, providing ingredients (and technolo-

gies for making ingredients) to other compa-

nies, in particular in the food and beverage,

consumer health and pharmaceutical sec-

tors. We aim to be excellent at the discovery

and implementation of new ingredient pro-

duction routes, as well as the discovery of

novel functional ingredients

our internal focus is on high-value in-

gredients with relatively low production vol-

umes – tonnes or hundreds of tonnes per

year, rather than hundreds of thousands of

tonnes. We see this focus as best fitting our

competitive strengths as a small, highly in-

novative company. In line with this we do

not ourselves pursue low-margin, low-price

sectors such as biofuels or bulk chemicals –

though we are happy to help companies who

do have such a focus, in return for a share of

the value we bring.

our strategy has been developed with

reference to three key factors, namely:

1. Evolva’s competitive strengths

our key competitive strengths lie in our

innovative technologies, as well as an entre-

preneurial mindset. At the same time our

background in highly regulated, science-

driven, sectors means we are comfortable

with the regulation of products that are

consumed by people – whether as foods,

personal care products or pharmaceuticals.

2. Favourable global macrotrends

the number of “medium-affluent” con-

sumers across the world is increasing sharp-

ly. Such individuals typically desire better

health and better quality food at an afford-

able price. this coincides with generally in-

creased consumer awareness of health and

nutrition, and the fact that we are all (not

only as individuals, but as populations) get-

ting older – again increasing our focus on

health. Similar trends are, to a lesser extent,

driving demand for products that are envir-

onmentally sustainable. Yet at the same time

consumers want such benefits without com-

promising on the intrinsic appeal (taste,

smell, look) of a product, or its cost, or indeed

its ease of use. Finally pressures in the de-

veloped world for governments to reduce

expenditure are creating demand (from both

governments and consumers) for products

that can provide health benefits without the

high costs of novel pharmaceuticals.

3. Risk-adjusted returns

the discovery and provision of ingredi-

ents for nutrition and consumer products

have much lower development costs and

risks, and much shorter timelines to market

than is the case for novel chemical entity

pharmaceuticals. At the same time margins

can still be very attractive. Further there are

often major synergies in the discovery and

development of apparently different ingredi-

ents. thus the work we have put into vanillin

also can be used to create capsaicinoids (the

active ingredients of chilli peppers) with ap-

plications ranging from analgesia to weight

loss. Combined, these factors mean a focus

on ingredients that has, we believe, the po-

tential for a better risk-adjusted return than

the conventional biotech emphasis on novel

pharmaceuticals.

Evolva discovers and provides innovative, high-value, sustainable ingredients – in particular for

health, wellness and nutrition.

8

Financial Review

Financial Review | 2012

Overview

Despite a drop in total revenues (as fore-

cast in August 2012), evolva posted a signifi-

cantly lower net loss in 2012 than in the

previous year as it managed to significantly

reduce total costs. As a consequence, the

Company had a relatively solid cash position

at the end of 2012 as it was actively prepar-

ing for the financing round.

total revenues in 2012 reached CHF 7.0

million compared with CHF 11.1 million in

2011. the decrease is primarily due to the ex-

piry (as per contract) in 2011 and early 2012 of

two biodefence projects performed for the uS

Department of Defense. In contrast, revenues

from corporate partnerships increased from

CHF 4.1 million to CHF 6.4 million.

operating expenses decreased by 27% to

CHF 27.1 million. the net loss decreased from

CHF 22.9 million to CHF 16.7 million, below

the estimated loss in november 2012.

At the end of 2012, the total cash

position amounted to CHF 9.1 million

(2011: CHF 22.7 million).

Income statement

During 2012, the Company completed

the shift of its revenue base from projects for

the uS Department of Defense (2% of total

revenues in 2012 versus 51% in 2011 and

80% in 2010) to revenues from corporate cli-

ents such as IFF, Roquette and Roche which

accounted for 90% of total revenues in 2012.

About 10% of the revenues in 2012 origin-

ated from research grants from national and

eu institutions.

total operating expenses declined from

CHF 37.0 million to CHF 27.1 million, a drop

of CHF 9.9 million of which CHF 1.8 million

represented lower charges for the Compa-

ny‘s option programme.

technology and discovery costs (excl.

option charges) declined from CHF 17.7 mil-

lion to CHF 15.0 million primarily due to the

expiry (as per contract) of a biodefence pro-

ject in early 2012, which led to the closure of

the Company’s subsidiary in palo Alto,

California, in March 2012.

Costs for development (excl. option

charges) dropped from CHF 8.2 million in

2011 to CHF 3.5 million. this reflected partly

the expiry in 2011 of a major biodefence pro-

ject, partly that costs for the clinical develop-

ment of eV-077 were not recurring, and fi-

nally a reduction in development staff costs

in 2012.

the Company incurred non-cash ex-

penses of CHF 3.3 million in 2012 for its in-

centive option plans, compared with CHF 5.0

million in 2011.

Both financial income and financial ex-

penses declined during 2012 mainly because

of significantly lower currency fluctuations

during the reporting period compared to

2011.

Key financials1

CHF million 2008 2009 2010 2011 2012

Revenues 11.9 18.9 18.6 11.1 7.0

R&D costs -16.2 -21.2 -30.9 -27.5 -19.5

G&A costs -3.8 -6.6 -10.8 -9.5 -7.5

Net result -8.7 -9.6 -23.3 -22.9 -16.7

equity financing 4.0 45.6 3.6 0.9 1.9

Cash (year-end) 6.2 52.9 37.7 22.7 9.12

Net cash flow -1.1 +46.7 -15.2 -15.0 -12.62

Net equity (year-end) 3.3 67.9 53.0 73.2 61.2

earnings per share (CHF) -0.39 -0.15 -0.17 -0.14 -0.09

1 the financials for 2008 - 2009 (prior to the combination with Arpida) only include evolva SA and its subsidiaries.2 Cash at year-end 2012 and net cash-flow of 2012 do not include CHF 1 million in restricted cash.

9

Financial Review | 2012

the Company posted a gain of CHF 2.6

million in 2012 because of the expiry of the

earn-out commitment to the former Abunda

shareholders.

total general & administrative costs

(excl. option charges) declined from CHF 7.1

million to CHF 5.7 million. this drop reflects

partly the transaction costs in 2011 in con-

nection with the Abunda acquisition and the

SeDA agreement, partly a general reduction

in facility and administration costs across

the evolva Group.

Balance sheet and cash flow

evolva’s cash balance decreased from

CHF 22.7 million at the end of 2011 to CHF

9.1 million at the end of 2012. Including the

CHF 1 million in restricted cash at year-end

2012, the total net cash burn in 2012

amounted to CHF 12.6 million, which was

CHF 2.4 million or 16% lower than in 2011.

the cash outflow from operating activ-

ities was reduced from CHF 17.4 million to

CHF 13.4 million, reflecting lower expenditure

in all major expense categories. Cash inflow

from financing declined from CHF 3.5 million

in 2011 (when proceeds from the Abunda

acquisition represented the major part) to

CHF 1.5 million (before allocation to restricted

cash). proceeds from SeDA financing amount-

ed to CHF 1.9 million compared to CHF 0.8

million in 2011.

total assets declined from CHF 106.5

million to CHF 90.4 million largely reflecting

the decline in the cash position and depreci-

ation of intangible assets.

non-current liabilities declined because

one of the mortgage loans has been trans-

ferred to current liabilities. Deferred income

increased due to the signing of contracts

with Roquette and IFF and deferred income

related to these contracts.

equity decreased from CHF 73.2 million

to CHF 61.3 million at the end of 2012 main-

ly as a result of the net loss in 2012.

Outlook 2013

the Company expects revenues in 2013

to increase to CHF 10-13 million (2012:

CHF 7 million) as a result of new R&D part-

nerships, incl. the agreement with Ajinomoto

(signed in January 2013). existing R&D part-

nerships are expected to continue through-

out the year.

operating costs are expected to increase

as a consequence of new R&D partnerships,

additional investment in internal projects

(incl. the stevia project partnered with Cargill)

as well as financing costs. the net cash out-

flow from operating and investing activities is

expected to be approx. CHF 12-15 million.

the Company conducted an equity

financing in March 2013 which provided

net proceeds of approx. CHF 28.3 million.

taking into account the cash available

before the financing and the projected

operating cash flow, the Company expects

the cash position at the end of 2013 to be at

least CHF 25 million.

10

Stock Review | 2012

10

Key data (as at 31 December 2012)

Stock exchange SIX Swiss exchange

total number of shares 173,343,279

nominal value per share CHF 0.20

ISIn CH0021218067

Symbol eVe

number of registered shareholders 4,939

Stock Review

the evolva stock price ended the year

2012 at CHF 0.36, compared with CHF 0.54 at

the end of 2011. this performance was in line

with the negative trend among other biosyn-

thetic companies. on average, some 202,000

evolva shares were traded per day in 2012

(2011: 98,000).

0

0.10

0.20

0.30

0.40

0.50

0.60

Jan Feb Mar April May June July Aug Sept Oct Nov Dec0

100,000

200,000

300,000

400,000

500,000

600,000

CHF

Num

ber o

f sha

res

Share price (end of month, LH scale) Average daily volume (RH scale)

Development of the Evolva stock in 2012

Source: SIX

11

Stock Review | 2012

The table below gives an overview of the shareholdings before and after the rights issue.

Million shares Year-end 2012

Changes Q1 2013

Share issue March 2013

End-March 2013

End-March 2013 as %

Investors >3%

Abunda 25.3 - 1.8 27.1 11.3%

Sunstone 16.8 3.0 2.5 22.3 9.3%

Wellington 11.0 - - 11.0 4.6%

Aravis 9.4 -3.0 1.6 8.0 3.3%

entrepreneurs Fund 7.4 - 2.2 9.6 4.0%

Cargill - - 7.5 7.5 3.1%

Total >3% 69.9 0.0 15.5 85.4 35.6%

treasury shares 0.2 0.0 14.0 14.2 5.9%

Smaller and unregistered investors 103.2 0.0 36.7 139.9 58.4%

Total 173.3 0.0 66.2 239.6 100.0%

During 2012, the total number of shares

outstanding rose from 172.9 million to 173.3

million. A detailed overview of the changes

during 2012 is available on page 29 of this

report. As per year-end 2012, the stock mar-

ket capitalisation was CHF 62.4 million on an

undiluted basis.

evolva Holding has only registered com-

mon shares outstanding. A total of 4,939

shareholders, including nominees, were

entered in the share register as per year-end

2012, representing 73% of the total out-

standing capital.

Capital increase March 2013

In March 2013, evolva successfully

raised additional funds through a rights is-

sue to existing investors. Due to the high

level of demand from international institu-

tional investors, evolva increased the size of

the financing from the level indicated in Au-

gust 2012 (CHF 10-20 million) to CHF 31.3

million. As part of the collaboration on ste-

viol glycosides with evolva, Cargill, Inc. in-

vested CHF 4.5 million in the financing.

Based on the 3-for-10 subscription

ratio, the maximum number of shares to be

issued was 52.2 million. At a subscription

price of CHF 0.60 per share, the maximum

proceeds were CHF 31.3 million.

the subscription period ran from 12

March until 19 March. the rights were not

tradable.

existing shareholders took up 24.2 million

shares, or 46.3% of the total of 52.2 million

shares, available in the rights offering. After

allowing for the subscription of existing

shareholders, 28.0 million new shares were

placed with Cargill, Inc. and institutional

investors. As reported on 6 March 2013,

Cargill, institutional investors as well as evolva

Board and management had pre-committed

to purchase up to 47.4 million shares

(CHF 28.5 million), so that not all pre-commit-

ments by new investors could be satisfied.

the capital increase also included the

issuance of 14 million treasury shares to

evolva. these will be used to satisfy part of

evolva’s obligations towards ApIDC/Ventur-

east (conversion agreement as explained in

the 2012 annual report, page 27) and the

SeDA arrangement with YA Global (see press

release 11 August 2011).

Source: evolva share register and SIX reporting of significant shareholders

13

Products

Products

Evolva has a proprietary, fermentation-based platform that allows radically different approaches

to the production of ingredients for the food, beverage and consumer health sectors.

Although evolva historically has derived

its revenues from its R&D partnerships and

expects these R&D partnerships to contribute

the majority of its revenues for at least the

next two to three years, it is a key part of evol-

va’s strategy to gradually build an additional

and, ultimately, primary revenue base through

the commercialisation of its own products,

either with or without partners. evolva’s prod-

ucts at the most advanced stages of develop-

ment and/or commercialisation include fer-

mentation-derived resveratrol, vanillin, stevia

and saffron, which it considers to be its “core

products”.

Resveratrol

Resveratrol is a compound produced in

grapes and other plants. It occurs in red wine,

albeit at low concentrations. Scientific re-

search indicates that resveratrol may have

protective benefits against age-related health

conditions. In particular, several animal stud-

ies have shown positive effects of resveratrol

on diabetes, inflammation and cardiovascular

conditions. Currently, several clinical studies

are being conducted in order to demonstrate

the potential effects of resveratrol on

humans. A recent study by professor David

Sinclair, Harvard Medical School professor of

genetics, demonstrates where and how

resveratrol works. these findings are

published in the 8 March 2013 issue of the

journal Science.

Most resveratrol products on the market

today are sourced from grapes or from the

Japanese knotweed plant, but there is also a

synthetic version. evolva’s resveratrol is pro-

duced by yeast fermentation.

Market opportunity

A 2012 report by market research firm

Frost & Sullivan, estimated total resveratrol

sales at approximately uSD 50 million in 2011,

with north America representing approxi-

mately 88% of global revenues. In the same

report, Frost & Sullivan estimated that sales in

Asia-pacific and europe will grow by more

than 20% p.a. in the 2013-2018 period. Res-

veratrol is currently consumed primarily as a

nutritional supplement, however, evolva be-

lieves that resveratrol can also be commercial-

ised as an ingredient in beverages and other

consumer goods. Based on the research by

Frost & Sullivan as well as its own estimates

regarding potential market expansion, evolva

estimates that the total addressable market

for its resveratrol product (i.e. the size of the

total market in which evolva’s resveratrol

product will compete) will amount to approxi-

mately uSD 400 million in the year 2020.

As compared to agriculturally derived res-

veratrol, evolva’s fermentation-derived res-

veratrol production has the benefits of a

traceable supply chain and potentially lower

production costs and is expected to result in a

high-quality product. In contrast to synthetic

resveratrol, evolva believes that fermentation-

derived resveratrol addresses an increasing

consumer demand for products that are con-

sidered ‘‘natural’’.

Status and plans

evolva acquired its resveratrol product

from Fluxome Sciences A/S (Denmark) (‘‘Flux-

ome’’) in november 2012. the Fluxome prod-

uct has been on the uS market since 2010, but

primarily due to Fluxome’s high production

costs has not generated significant sales. It

has Self-Affirmed GRAS (“Generally Recog-

nised As Safe”) status in the united States and

obtained novel Foods authorisation from the

european Commission in January 2012

through the notification procedure.

evolva expects to leverage the technology

platform to reduce production costs, and

thereby further strengthen the competitive

position of its resveratrol product. the product

will be toll-manufactured by specialised third-

party manufacturers. evolva expects to be

able to bring down the cost of goods of its

resveratrol product to an economically viable

level, so that it may generate a positive cash

flow by 2014. evolva does not intend to build

a significant sales and marketing organisation

for resveratrol but will instead work with dis-

tributors and major consumer goods compa-

nies to drive sales of the product once the cost

of goods reaches an economically viable level.

Resveratrol

14

Products

Stevia (steviol glycosides)

Stevia (Stevia rebaudiana) is a leafy green

plant that is widely grown around the world

and used in a variety of forms as a natural,

zero-calorie, high-intensity sweetener, espe-

cially in beverages. Stevia leaves contain a

number of individual molecules (steviol glyco-

sides) that give the leaves of the plant their

sweet taste. purified stevia extract can contain

one steviol glycoside, such as Rebaudioside A

(“Reb A”), or a combination of several. Reb A is

a popular steviol glycoside due to its sweet-

ness and abundance in the stevia leaf. Accord-

ing to the International Stevia Council, the

sweetness intensity of Reb A is approximately

200 times that of sugar.

Steviol glycosides are used as a sweetener

either alone or in combination with other in-

gredients such as sugar. Steviol glycosides are

used in a wide variety of food and beverages,

as well as tabletop sweeteners. Stevia has gar-

nered attention because of the strong rise in

consumer demand for natural, low-calorie al-

ternatives to sugar. Hundreds of products

sweetened with steviol glycosides have been

launched in recent years. Steviol glycosides do

not raise blood glucose, which makes it par-

ticularly suitable for diabetic or obese indi-

viduals who have to strictly adhere to a carbo-

hydrate-reduced diet.

A growing number of health and nutrition

authorities, including the American Academy

of nutrition and Dietetics, International Food

Information Council, european Food Informa-

tion Council, and the Calorie Control Council,

support the use of stevia-based and other non-

nutritive sweeteners as tools for calorie reduc-

tion for weight loss management. Steviol gly-

cosides have been approved as sweetening

ingredients for use in foods and beverages by

major governing bodies, including the europe-

an Commission and the uS DA.

the only commercially available steviol

glycosides available today are derived from ste-

via plants grown and harvested in an agricul-

tural setting. evolva believes it is the first com-

pany to successfully adapt fermentation

technology to produce a range of commercially

relevant steviol glycosides, using sustainable,

low-cost, carbohydrate feedstocks, which can

be sourced virtually anywhere on the planet.

Market opportunity

evolva aims to develop and commercial-

ise a range of high-purity steviol glycosides

produced through yeast fermentation.

evolva has already succeeded in making

some of the key steviol glycosides using low-

cost, natural carbohydrate feedstocks.

Fermentation-derived steviol glycosides

will benefit food and beverage manufacturers

in a number of ways: � First, it will allow better tasting steviol-

glycoside-based products (the best-tast-

ing stevia leaf molecules, known as mi-

nor steviol glycosides, are not currently

commercially available due to their very

low concentrations in the plant).

� Second, it will allow steviol glycosides to

become a more economic product for

companies and consumers alike.

� Finally, it will allow steviol glycosides to

be produced using a simplified and scal-

able supply chain.

Fermentation allows the large-scale pro-

duction of minor steviol glycosides, opening

up the possibility of new formulations for

the food and beverage industry that were

previously not possible due to limitations as-

sociated with taste and cost. Based on these

advantages, evolva believes that fermenta-

tion-derived steviol glycosides have the po-

tential to accelerate the adoption of steviol

glycosides and significantly expand the mar-

ket for such sweeteners.

Based on sales volume data published in

2011 by the industry research group lMC Inter-

national and data published by other sources,

evolva estimates that total sales of all sweet-

eners amount to approximately uSD 60 billion

p.a., with sugar representing an estimated

85% of total sales. Stevia-based sweeteners

are believed to be the fastest-growing seg-

ment because of increasing consumer de-

mand for products that are low-carbohydrate

and low-sugar. Steviol glycosides can already

be found in hundreds of food and beverage

products, including carbonated soft drinks,

teas, juices, flavoured milks, yogurts, baked

goods, cereals, salad dressings, confectionery,

and as a tabletop sweetener.

STEvIa

15

Products

According to one analyst report (Mira-

baud Securities llp, october 2012), the value

of retail sales in the uS of stevia-sweetened

food and beverage products increased by 45%

from the second quarter of 2011 to the second

quarter of 2012. the same report estimates

that more than 56 million uS households pur-

chased products made with stevia-based

sweeteners in the twelve months to August

2012.

A landmark development in September

2012 was the launch of a stevia- and sugar-

sweetened, 30%-reduced-calorie version of

pepsi next in Australia. According to Beverage

Daily, the launch is significant because it

marks the first time that stevia components

have been used in a front-line cola brand. Also

noteworthy were the launches in the uK and

France of Sprite reformulated with steviol gly-

cosides.

Based on data published in 2012 by Mira-

baud Securities llp and in 2011 by industry

research group lMC International, as well as

other third-party sources and its own market

forecasts, evolva estimates that the total ad-

dressable market for its steviol glycoside

product (i.e. the size of the total market in

which its steviol glycoside product will com-

pete) will amount to approximately uSD 4 bil-

lion in the year 2020.

Status and plans

In 2009, evolva entered a R&D partner-

ship with Abunda nutrition, Inc. (“Abunda”)

for the discovery and development of certain

food ingredients, with a particular focus on

producing the key steviol glycosides by fer-

mentation. In July 2011, evolva acquired

Abunda and gained full ownership of Abun-

da’s steviol glycoside programme, which at

that time was in an early research phase.

evolva’s steviol glycoside R&D is primarily

conducted at its Copenhagen site, with com-

mercial business development activities in the

united States.

on 5 March 2013, evolva entered into a

product partnership with Cargill to jointly de-

velop and commercialise fermentation-de-

rived steviol glycosides. Cargill will be respon-

sible for commercialisation and has agreed to

make a CHF 4.5 million (approximately uSD

4.8 million) equity investment in evolva. Add-

itionally, evolva stands to receive up to uSD

7.5 million in milestone payments and has the

right to a 45% participation in the final busi-

ness. If evolva decides not to exercise this op-

tion it will receive royalty payments from

global sales of the co-developed steviol glyco-

side products; these royalties will scale from

mid-single digit to low double-digit percent-

ages as a function of sales volume and other

parameters. pursuant to the terms of the

partnership, Cargill has the exclusive right to

commercialise any fermentation-derived

steviol glycosides developed as a result of the

partnership.

the steviol glycoside product is expected

to progress into pilot scale in 2014. Based on

current plans and expectations, the first fer-

mentation-derived steviol glycoside product

is expected to be available for commercial

launch in 2015/2016.

vanillin

Vanilla is a complex blend of flavour and

fragrance compounds extracted from the

seed pods of the vanilla orchid. Commercially,

the most widely used compound in the blend

is vanillin, and because of the cost and supply

chain variability of natural vanilla, most prod-

ucts that contain “vanilla” in fact just contain

synthetic vanillin made from petrochemical or

other feedstocks.

Both natural vanilla extract and synthetic

vanillin are used as flavouring agents, primar-

ily in foods and beverages, including, for ex-

ample, in confectionery and dairy products.

Vanillin is also used in the fragrance industry

(for example in perfumes and cleaning prod-

ucts) and to mask unpleasant tastes in medi-

cines or livestock fodder as well as an inter-

mediate in the manufacture of certain

pharmaceuticals. evolva’s vanillin product is

fermentation-derived.

Market opportunity

Vanilla and vanillin are among the most

widely used flavouring products in the world,

with current total annual sales and produc-

tion volumes estimated by evolva to be ap-

proximately uSD 650 million and 16,000 met-

ric tons, respectively. natural vanilla represents

less than 1% of total sales by volume. Sales

prices range from about uSD 1,500 per kg for

natural vanilla extract to uSD 10-20 per kg for

synthetic vanillin.

evolva sees a market opportunity in pro-

viding a competitively priced product with

taste and fragrance superior to, and an inher-

ently greater naturalness than, synthetic

16

Products

vanillin. evolva believes such properties will al-

low fermentation-derived vanillin to be used in

a wide variety of food and other products and

evolva’s product to penetrate a meaningful

part of the total vanillin market. evolva does

not believe that its product will significantly

replace vanilla obtained from the orchid.

Based on the above estimated sales vol-

umes, evolva expects that the total addressa-

ble market for its vanillin product (i.e. the size

of the total market in which its vanillin prod-

uct will compete) will amount to approxi-

mately uSD 600 million in the year 2020.

Status and plans

In January 2011, evolva entered into a

product partnership with IFF with the purpose

of collaborating on the implementation of a

commercial viable biosynthetic route for the

production of vanillin. pursuant to the terms

of the partnership, IFF has the exclusive right

to commercialise any fermentation-derived

vanillin product developed as a result of the

partnership in certain market segments.

evolva has successfully constructed the

production route to vanillin and has filed a

number of patent applications (some already

granted) for this production approach. As of

February 2013, evolva has achieved the pro-

duction yield, titre (i.e. concentration) and

productivity that will allow the commercial

launch of its vanillin product. evolva is con-

tinuing to research ways to further improve

the production process with the aim of

lowering the cost of goods over time.

on 5 February 2013, evolva and IFF an-

nounced that they have entered into the pre-

production phase to develop and scale up,

via a third-party, fermentation-derived van-

illin for commercial application through a

cost-effective, natural and sustainable route.

the two companies are working to confirm

scalability and yield targets through a yeast-

based fermentation route during the pre-

manufacturing phase.

Based on current plans and expectations,

evolva expects its fermentation-derived van-

illin product to be available for commercial

launch in 2014.

vanillin pathway products

Based on the production route for vanil-

lin, evolva believes that it will be able to de-

velop and commercialise other products that

are derived from the same pathway as vanil-

lin. the aim is to launch the first such prod-

ucts by 2016.

Saffron

Saffron is one of the world’s most ex-

pensive spices by weight, as well as one of

the oldest. It comes from the stigma of the

saffron crocus and is used for colouring

and flavouring (e.g. in soups, bread and rice

dishes) as well as for its aroma properties

(such as in soaps and candles).

the characteristic flavour, colour and

odour of saffron come from several com-

ponents, of which the most important are

picrocrocin, crocin and safranal. evolva aims

to develop and commercialise saffron pro-

duced by yeast fermentation.

Market opportunity

Saffron is grown by mostly small farm-

ers in a few regions of the world, with an

estimated 90% or more of the world’s pro-

duction (estimated at about 300 tonnes a

year in 2012) in Iran. the Company estimates

current total annual saffron sales to be ap-

proximately uSD 450 million. Cultivation is

highly labour-intensive (approximately

150,000 crocuses need to be picked, and

their stigma removed, to produce 1 kilo of

saffron), which is the main reason for the

high cost of saffron.

the saffron market is poorly document-

ed, as much of the trade in saffron occurs in

informal markets (most notably in the Mid-

dle east) and there can be significant alter-

ation of the product as it flows through the

supply chain. Both the amount of saffron

and the price of saffron can vary significant-

ly from year to year. evolva believes that

prices for agriculturally derived saffron cur-

rently average around uSD 1,500 per kg with

significant variation depending on the grade.

evolva believes that by providing saffron

at significantly lower prices and with a ro-

bust and stable supply chain that is free of

both geopolitical and adulteration issues, use

of saffron in the world can be significantly

expanded. In particular:

� evolva believes that a significant latent

demand for saffron exists, mainly in

Asia. providing a more affordable, fer-

mentation-derived form of saffron to

mid-market consumers in, for example,

India and other Asian countries can po-

tentially lead to increased use.

� evolva believes that many potential uses

of saffron in mass market consumer

goods (such as skin creams, teas, air

fresheners, baked and savoury goods) are

SaFFRON

vaNIllIN

17

inhibited by a combination of the price,

supply chain and physical form (which

comes in threads) of saffron today. pro-

viding a form of saffron that removes

these constraints should allow such use.

� producing the key components of saf-

fron on an individual basis will allow

the production of customised varieties

of saffron that are particularly rich in

aroma, taste and/or colour and that can

be adapted to specific food formulations

and regional preferences.

the saffron market is poorly document-

ed, however, based on 2012 statements

made by a representative of the national

Saffron Council, information published in

The Hindu Business Line and other third-

party sources, as well as its own estimates

regarding potential market expansion, evol-

va estimates that the total addressable mar-

ket for its saffron product (i.e. the size of the

total market in which its saffron product will

compete) will amount to approximately uSD

800 million in the year 2020.

Status and plans

Research on saffron is primarily con-

ducted at evolva’s Chennai site. After identi-

fying pathways and filing multiple patent

applications, evolva has introduced the

pathway into yeast and produced individu-

ally the key saffron components responsible

for the three prime attributes of saffron,

namely flavour, fragrance and colour. evolva

is currently optimising the production pro-

cess in order to enable commercial produc-

tion of these components.

evolva expects fermentation-derived

saffron to be available for commercial

launch in 2016. evolva’s current aim is to

bring its saffron product as far as possible

towards manufacturing and commercialisa-

tion before it considers entering into a prod-

uct partnership with respect to the product.

Pomecin™

pomecinstM are evolva’s proprietary

compounds, originating from plants, for

the prevention of mould and yeast growth,

with potential uses in crop protection, per-

sonal care, food preservation and consumer

health care.

evolva has conducted pre- and post-

harvest field studies with two pomecintM

compounds that indicate a potential to pre-

vent fungal attacks in various crops. evolva

has also developed an innovative formula-

tion of pomecintM for topical treatment of

onychomycosis (nail fungus). one family of

patents is granted and in force and other

related subject matter is covered in currently

pending patent applications.

evolva has decided to exploit the

pomecintM family of antifungals in collabor-

ation with partners, with only limited further

investment by evolva beyond their current

stage. A number of early-stage partnering

discussions are in progress, but evolva has no

certainty that any of these discussions will

result in a signed agreement.

POMECIN™

18

Legacy Products

Legacy Products

Although it believes these legacy prod-

ucts are potentially highly attractive and

have significant value, any continuing devel-

opment of these products would be done ei-

ther via out-licensing or a spin-off and evol-

va does not plan to make any further

material investment with respect to such

products, with the exception of certain small

investments to maintain their value.

eV-077 and eV-035, the two pharma-

ceutical product families constituting these

legacy products are described below.

Ev-077 for treatment of complications of diabetes

eV-077 is a novel, reversible antagonist

of isoprostanes and prostanoids. It is an oral,

small-molecule compound, belonging to a

new chemical class. the compound is in clin-

ical phase IIa for treatment of vascular in-

flammation and complications of diabetes.

In August 2012, evolva announced top-

line results for 32 patients enrolled in a

phase IIa study for eV-077. the study showed

promising efficacy data, indicating that

300 mg eV-077 given orally twice daily to

patients with type 2 diabetes provided anti-

platelet (anti-thrombotic) activity, reduced

exercise-induced proteinuria (excess protein

in the urine) and increased blood flow in the

forearm.

the analysis also indicated that eV-077

was generally well tolerated, though some

adverse events were observed with respect to

increases in liver enzymes, which were tran-

sient or resolved after discontinuation.

In December 2012, evolva discussed the

future clinical development programme of

eV-077 with BfArM (the German drug au-

thority), in particular with respect to the ob-

served adverse events. the proposed clinical

development programme was perceived as a

reasonable approach by BfArM and the next

clinical trial is intended to be a dose range-

finding study in diabetic patients, investigat-

ing lower doses of eV-077 than the one ad-

ministered in the initial phase IIa study with

the intention to find a dose level for eV-077

that retains the efficacious effects observed

to date, whilst avoiding the increases in liver

enzymes. Consistent with evolva’s strategy, it

is intended to partner eV-077 via out-licens-

ing or spin-off, prior to conducting this

study.

evolva owns all rights to eV-077.

Multiple patent applications have been filed

regarding the compositions and uses of

eV-077, some of which have already been

granted.

Until 2010, the activities of Evolva were primarily focused on the discovery and clinical devel-

opment of novel pharmaceutical products. However, Evolva gradually refocused its strategy to

discovering, developing and producing innovative ingredients that have application in the health,

nutrition and wellness sectors. Evolva has a small number of clinical-stage or preclinical pharma-

ceutical product candidates, which, due to this strategy shift, it considers to be “legacy products”.

Ev-077

19

Legacy Products

Ev-035 for the treatment of bacterial infections

Marketed antibiotics are increasingly los-

ing their efficacy primarily because of bacter-

ial resistance and new antibacterial agents are

urgently needed to close this widening gap in

medical practice. particularly problematic is

the rise of multidrug-resistance among po-

tentially life-threatening pathogens.

eV-035 is a novel bacterial type II topoi-

somerase inhibitor, belonging to the chem-

ical class of 2-pyridones, showing excellent

broad-spectrum activity against pathogens

such as Staphylococcus, Streptococcus, en-

terococcus, escherichia, pseudomonas, Aci-

netobacter and Haemophilus, as well as sev-

eral potential biothreat agents. Most

importantly, eV-035 shows activity not only

on drug-sensitive strains, but also on those

resistant to marketed antibiotics (including

quinolones), and has a very low propensity of

developing new resistance. eV-035 has a

very favourable in vitro safety profile and its

pharmacokinetic properties allow for intra-

venous as well as oral dosing.

In early in vivo infection models, eV-

035 has shown an efficacy comparable or

better than gold standard drugs against

both Gram-positive and Gram-negative

strains, including e. coli and MRSA, as well

as other multidrug-resistant pathogens. In

2012, further biochemical and microbio-

logical profiling of the selected lead com-

pound confirmed its broad range of activ-

ity on multidrug-resistant pathogens, in

combination with excellent tolerability. In

September 2012, evolva presented exten-

sive preclinical data on eV-035 at ICAAC, the

world’s premier international conference on

antimicrobial agents and infectious diseases.

Ev-035

20

Partnerships

Partnerships

Evolva has, and intends to maintain, a number of partnerships around its technology and research

capabilities – deploying its technology to provide a competitive edge to partner companies and

sharing in the returns they make. 2012 saw additional partnerships in food and nutrition, as well

as good progress on existing projects. The first quarter of 2013 brought several breakthroughs in

our partnering portfolio.

evolva’s revenues to date have been de-

rived from research and development pro-

jects with partners in the uS, europe and

Asia. these R&D partnerships involve the

use of the technology platform to develop

new products and production methods for

new and existing products that are of inter-

est to our partners. We expect these R&D

partnerships to continue to contribute the

majority of revenues for at least the next

two to three years. However, it is a key part

of our strategy to gradually build an add-

itional and, ultimately, primary revenue

base through the commercialisation of our

products, either with or without partners.

evolva has been working with Inter-

national Flavors & Fragrances (IFF) since

January 2011 on the implementation of a

commercially viable biosynthetic route for

the production of vanillin. IFF has the exclu-

sive right to commercialise any fermenta-

tion-derived vanillin product developed as a

result of the partnership in certain market

segments. evolva achieved a key milestone

on this project, prompting a payment by IFF

in the first half of 2012. on 5 February 2013,

evolva and IFF announced entering into the

pre-production phase to develop and scale

up, via a third-party, fermentation-derived

vanillin for commercial application through

a cost-effective, natural and sustainable

route. the two companies are working to

confirm scalability and yield targets through

a yeast-based fermentation route during

the pre-manufacturing phase.

In May 2012, we added a second project

with IFF. Just as in the first IFF project, the

objective is to implement a commercially vi-

able biosynthetic route for the sustainable

production of a flavouring ingredient.

In the early days of 2012, we announced

a partnership with Roquette. this project

aims to find novel and optimised biosyn-

thetic production routes for an ingredient

with important applications in food prod-

ucts. the Roquette collaboration involves

some 7% of evolva’s R&D headcount. evol-

va achieved the first milestone in the pro-

ject in September 2012.

the collaboration with BaSF, which got

underway in March 2011, is now focusing

on the more promising of the initial two

projects. evolva has produced a yeast strain

that achieves a fermentation yield that sig-

nificantly exceeds the requirement for this

project. Based on this achievement, BASF

has made a low six-digit Swiss franc mile-

stone payment to evolva.

the active part of the research collabor-

ation with Roche came to an end during the

first half of 2012, with Roche taking certain

compounds forward internally. More

recently Roche has decided to reprioritise

its focus indications, and rights to these

compounds have been returned to evolva.

evolva is evaluating how to progress the

compounds, whether internally or with

third parties.

the partnerships with the US Depart-

ment of Defense came to a successful con-

clusion, leading to a new series of antibac-

terials which was presented at several

scientific conferences.

We made good progress on the smaller

projects, such as Divinocell and Diabat and

evolva landed an additional project within

the IMI framework. the Innovative Medi-

cines Initiative (IMI) is europe’s largest

public-private initiative aiming to speed up

the development of better and safer medi-

cines for patients.

In the first quarter of 2013 alone, evolva

announced the following partnerships:

In March 2013, evolva entered into a

product partnership with Cargill, Inc., a

global producer and marketer of food, agri-

cultural, financial and industrial products,

for the development of fermentation-

derived stevia components (steviol glyco-

sides) and their subsequent commerciali-

sation. In connection with this partnership,

Cargill also invested CHF 4.5 million in

evolva’s capital increase that was complet-

21

Partnerships

ed on 27 March 2013. Additionally, evolva

stands to receive up to uSD 7.5 million in

milestone payments and has the right to a

45% participation in the final business. If

evolva decides not to exercise this option, it

will receive royalty payments from global

sales of the co-developed steviol glycoside

products; these royalties will scale from mid-

single digit to low double-digit percentages

as a function of sales volume and other

parameters.

Cargill brings to the collaboration

its vast manufacturing and commercial ex-

pertise in bulk sweeteners, food ingredients,

and of course stevia sweeteners. Cargill is a

global market leader in the stevia-based

sweetener category with consumer prod-

ucts and as an ingredient, which can be

found in a variety of branded food products

and beverages sold in the uS, europe,

Mexico, and South America.

In January 2013, evolva entered into an

R&D partnership with ajinomoto Co., Inc.

(Japan), a global manufacturer of season-

ings, processed foods, beverages, amino

acids, pharmaceuticals and speciality chem-

icals, pursuant to which Ajinomoto will

fund evolva’s R&D activities focused on

developing new production routes for a

natural ingredient for use by Ajinomoto in

products for personal care.

the partnership is designed to run for

three and half years and involves evolva’s

application of the technology platform ini-

tially to build a new pathway for the ingredi-

ent and subsequently to improve production

yield through scale-up and manufacturing

phases. evolva expects that on average seven

of its full-time scientists will be working on

this partnership at any given time.

Ajinomoto paid evolva an upfront ex-

clusivity and technology access fee and will

pay evolva quarterly research fees during

the partnership. evolva will receive add-

itional payments from Ajinomoto upon

achieving certain milestones in terms of

yield, productivity and production costs.

the aggregate exclusivity and technology

access and research fees as well as mile-

stone payments made to evolva during the

partnership are expected to amount to

more than CHF 10 million. If Ajinomoto

commercialises a product using the rele-

vant ingredient, it will pay evolva royalties

as a percentage of the product sales.

22

Technology

23

Technology

Technology

Evolva’s technologies are based on yeast. Every day, all over the world, yeast is used to make

food and drink. Breads, beers, wines and many other products are made using yeast. Many soci-

eties have been using yeast for such purposes for thousands of years. Yeast forms a normal part

of our daily diet.

Yeast’s importance has led to it being

well studied scientifically, and in recent years

this has led it to being used in the production

of not only food and food ingredients, but

also pharmaceuticals and vaccines.

evolva’s approach bridges the modern

and the traditional uses of yeast. on the

modern side, we create yeasts with the abil-

ity to make existing and new ingredients. on

the traditional side, our production methods

would be recognisable to any brewer.

Despite the fact that our technology is

rather complex, we use it for just two things:

We create new ways to make “tried and

tested” natural ingredients – for example

the ingredients that make saffron look, taste

and smell like saffron. the existing produc-

tion methods for many such ingredients

have significant problems (too expensive, too

variable, not pure enough, too limited in

scale, not ecologically sustainable, etc.) and

by solving these problems we can widen the

number of people who can enjoy, and benefit

from these ingredients.

We create novel functional compounds.

using our technologies yeast can be used to

make diverse, novel, functional compounds

with potential utility as novel pharmaceut-

icals, crop protection products, etc. Manu-

facture of these compounds can then take

place either by fermentations, or by chemical

synthesis.

Benefits

Improving existing ingredients

Making natural ingredients by fermenta-

tion confers a series of important benefits.

Improved product quality

Many natural ingredients contain un-

desirable elements – for example elements

that make the product bitter, that discolour it,

or that make it difficult to formulate. By mak-

ing pure ingredients by fermentation, evolva

can avoid such contaminants, improving

product quality. For example with stevia, the

bitter tasting components that occur in agri-

culturally produced stevia can be avoided

when using fermentation. the increased

standardisation of products from fermenta-

tion can also be an important quality benefit.

Improved supply chain integrity

Many natural ingredients involve long

and complex supply chains, including mul-

tiple groups in multiple countries. this not

only raises costs, but makes ensuring the in-

tegrity of the supply chain challenging. With

fermentation the supply chain can be greatly

shortened and simplified (being located close

to key customers, if desired). this makes it

less costly, intrinsically more robust, and far

easier to safeguard.

In addition many natural ingredients

vary sharply in their annual production, with

drought, floods, pests or similar “events” fur-

ther complicating supply chains and prices.

For many specialty crops a shortfall in one

year’s harvest cannot be made up until the

next year. By contrast fermentation is far

more stable, and a shortfall in one batch can

be made up the next week.

Reduced cost

nature has not evolved to maximise the

efficiency of production. the saffron crocus

produces very little saffron per crocus; musk

cannot be obtained from the musk deer

without killing it, and so on. this inefficiency

imposes cost, and this cost in turn often lim-

its the potential uses of many ingredients.

Fermentation allows for far more efficient

production of such ingredients, reducing the

cost (often substantially) and making them

affordable to many more individuals all over

the world.

Improved sustainability

Many agricultural production systems

are perfectly sustainable. But not all. the in-

efficiency of nature (see above) can mean

that growing the plant, or raising the animal,

takes more land, more water or more energy

24

Technology

than it really should. extracting the ingredi-

ent from its original source may require solv-

ents or other processes which generate

significant waste. In such cases making the

ingredient by fermentation can improve a

product’s sustainability, freeing land or other

resources for other uses.

Improved product “customisation”

Many natural ingredients (for example

saffron or stevia) are mixtures of different

components. these components each con-

tribute their own taste, smell, colour, func-

tionality, etc. to the mixture. But not all of

these properties may be desirable in all prod-

ucts, or desired by all consumer demograph-

ics – a blue colour may be desirable in a

sweet, but not in a meat coating, etc. Fer-

mentation allows ingredients to be broken

down to their individual components, and

hence allows companies to customise their

offer more precisely to the needs and desires

of particular customers.

Improved solubility and bio-availability

evolva’s glycosylation technologies allow

many ingredients to be improved in terms of

their solubility and bio-availability. this can

improve their efficacy, make them easier to

formulate and reduce their cost of production.

Making “impossible” ingredients possible

In some cases the ingredients we make

occur in nature, but only in settings that have

made their commercialisation to date “impos-

sible”. evolva’s approach can liberate the avail-

ability of such ingredients. two examples: � natural product drugs, scents and crop

protection products. Many interesting

compounds are made by plants, marine

organisms and other species. However,

often they are made in such small

amounts, or the species is so rare, or dif-

ficult to harvest (corals for example) that

the compounds remain out of reach.

Many of these compounds can be fer-

mented using evolva technologies, mak-

ing them accessible to the world.

� endogenous human metabolites. Many

fascinating and important molecules oc-

cur naturally in humans. Yet harvesting

these molecules from humans (or our

relatives) is often ethically unacceptable

and/or economically impractical. pro-

duction of many of these metabolites by

chemical synthesis is often impossible.

Such molecules can be made by fermen-

tation in our yeasts.

Creating new active ingredients

Whilst much of our work focuses on find-

ing new ways to make existing ingredients, we

also create new compounds, based on the

creation of biosynthetic pathways that do not

occur in nature, or that use non-natural

building blocks as their starting point. Very

often, though not always, this approach is

combined with functional selection for ingre-

dients that have particularly desirable proper-

ties (break a protein:protein interaction, stop a

virus replicating through a cell, etc.).

Such novel active ingredients have their

primary utility in the pharmaceutical indus-

try, but are also relevant to crop protection,

specialty chemicals and some other sectors.

Importantly the compounds that we ob-

tain in this manner have highly attractive

structural characteristics, in particular: � A high level of novelty (c. 80% novelty,

including c. 20% core scaffold novelty);

� A low molecular weight, averaging

around 300 daltons;

� Relatively high three-dimensional com-

plexity despite the small size;

� Good observance of all drug-likeness

rules (lipophilicity, number of rotatable

bonds, etc).

Technical implementation

evolva has four significant technology

capabilities, all associated with getting yeast

to make valuable products.

Combinatorial genetics

Evolva can create billions of different

yeast cells expressing multiple new gene

combinations.

We have an array of technologies that

allow us to rapidly insert and express tens to

hundreds of genes in billions of individual

yeast cells in a highly combinatorial fashion.

this allows us to explore large numbers of

gene combinations and hence find those

gene combinations that are necessary to

make (biosynthesise) a given ingredient. It

also allows us to find those gene combina-

tions that give the highest production rate

(and hence the lowest production cost). the

same approach can create novel pathways

that generate diverse small molecules for

drug discovery and similar activities. the

genes that we use are either sourced (in

compliance with the CBD) from various spe-

cies or constructed de novo based on online

databases or other sequence data.

25

Technology

Screening and analytical technologies

Evolva has an array of advanced screen-

ing tools that can select those yeast cells that

produce desirable ingredients from a back-

ground of a large number of cells.

We have both function-led and struc-

ture-led screening tools that allow us to rap-

idly identify which yeasts are making desired

ingredients and/or which have acquired de-

sired functions (as a result of making certain

ingredients).

� Function-led screens are typically based on

fluorescence- or survival-based read-outs

and have throughputs of up to 1 billion

screening events per day. We have used

such screens to discover novel molecules

with potential utility against cancer and

infectious disease, amongst others. the

approach can also be used to find new

functionalities for food ingredients.

� Structure-led screens use state-of-the-

art capabilities that combine ultra-high

performance liquid chromatography

with time-of-flight mass spectroscopy,

nMR and a large internal database for

the identification. they are primarily used

to elaborate production pathways for

known ingredients.

Pathway optimisation technologies

Evolva has a number of tools that can

improve the efficiency with which yeast pro-

duces the desired product, which results in a

lower cost as well as other benefits.

once a biosynthetic route has been

established, it is important to improve it with

respect to purity of product, yield, speed of

conversion and final titre. the more these

elements are optimised, the lower the cost of

production of the ingredient. In addition to

our combinatorial genetics approach, one

important tool is the ability to simultan-

eously insert (and test) multiple (>10) genes

into the yeast genome. We also optimise

pathways using a combination of molecular

engineering, enzyme co-factor balancing,

metabolic engineering and pathway flux

analysis.

Decoration technologies

Evolva has proprietary technologies that

allow it to enhance the properties of ingredi-

ents, as well as their economics.

We have multiple collections of enzymes

that allow us to “decorate” ingredients and

hence enhance their properties. one particu-

lar focus is glycosylation (the process of

attaching glucose or other sugars to mol-

ecules). Glycosylation allows us to: � Make ingredients (such as stevia and

saffron) whose natural properties de-

pend on their glycosylation patterns.

� Improve the bio-availability of certain

molecules, hence improving their

effectiveness in nutritional or pharma-

ceutical use (or allowing a reduced

amount of the relevant molecule to have

the same effect as the larger amount).

� Improve manufacturing efficiencies by

orders of magnitude, resulting in reduc-

tions in the relevant ingredient’s manu-

facturing cost.

other decoration technologies allow us

to functionalise molecules for further

chemical derivatisation, alter lipophilicity or

stability, etc.

26

27

Corporate Governance

Evolva Holding SA is a Swiss stock corporation established under the laws of Switzerland with

registered office in Reinach (Canton Basel-Landschaft). Its business purpose is to to engage

in the research, development and marketing of products and processes with applications in

food, nutritional, pharmaceutical and other areas. The Company is listed on the SIX Swiss Stock

Exchange and is therefore subject to the rules of SIX, including the Directive on Information

Relating to Corporate Governance.

Group structure year-end 2012

Name Domicile Issued share capital Shareholder % of equity capital held

evolva SA Switzerland CHF 6,369,540 evolva Holding SA 100%

evolva Biotech A/S Denmark DKK 4,311,583 evolva SA 100%

evolva Biotech private limited India InR 169,930 evolva SA 60% 1

evolva nutrition, Inc. uSA uSD 0.01 evolva SA 100%

evolva, Inc. uSA uSD 0.01 evolva SA 100%

Arpida uK ltd. united Kingdom GBp 1,000 evolva Holding SA 100%


Group structure and shareholders

Group structure

As of 31 December 2012, the evolva

group (“evolva”) consisted of evolva Holding

SA (“the Company”) as holding company and

the following non-listed direct or indirect

subsidiaries:

Shareholder structure

the section “Stock review” on page 10-11

of this annual report contains extensive infor-

mation on evolva’s shareholder structure.

During 2012, shareholders submitted a

limited number of disclosures regarding their

crossing of reportable thresholds under the

Swiss disclosure rules (Art. 20 Stock exchange

Act, SeStA). the detailed notifications are

available on the evolva website

www.evolva.com and on the SIX website

www.six-swiss-exchange.com.

Cross-shareholdings

As of 31 December 2012, no cross-share-

holdings existed.

Capital structure

Issued share capital

As of 31 December 2012, 173,343,279

registered common shares were issued and

outstanding with a nominal value of CHF

0.20 each, representing a nominal share

capital of CHF 34,668,655.80. All shares are

1 Ventureast trustee Company (p) limited (“Ventureast”) and ApIDC Venture Capital (p) limited (“ApIDC”) hold, collectively, 40% of the shares (i.e. 6,683 shares) in evolva Biotech private limited. pursuant to a conversion agreement entered into by the Company, evolva SA, evolva India, ApIDC and Ventureast in December 2009 (and amended in September 2011), (i) ApIDC and Ventureast shall contribute their shares in evolva Biotech private limited to evolva SA in exchange for 27,813 newly issued shares of evolva SA, with a nominal value of CHF 20 each, and (ii) thereafter, ApIDC and Ventureast shall contribute such shares in evolva SA to the Company in exchange for 10,697,260 shares, in each case subject to the terms and conditions of such agreement, including approval of the relevant Indian governmental authorities. once approved and completed, evolva Biotech private limited will become a wholly owned direct subsidiary of evolva SA.

28


fully paid up. An overview of changes in is-

sued capital during 2012 is included in the

notes to the Consolidated Financial State-

ments on page 68 of this report.

Treasury shares

As of 31 December 2011, evolva held

7,508,346 shares in treasury. In 2012, 4.67

million of these treasury shares were de-

livered to YA Global and 1.08 million served

as consideration for the purchase of the

resveratrol-related assets from Fluxome

Science A/S. A description of the SeDA

arrangement with YA Global is available in

the notes to the Consolidated Financial

Statements on page 70 of this report.

Overview treasury shares 2012

Number of shares

Start of year 7,508,346

Consideration for purchase of resveratrol assets -1,077,006

SeDA advances -4,667,480

end of year 1,763,860

Conditional capital for incentive option

plans

As of 31 December 2011, conditional

capital of CHF 5,622,977.60 was available for

the issuance of 28,114,888 shares under the

incentive option plan to employees of the

Company or its subsidiaries, Board members

and other key persons. During 2012, 98,648

shares were issued under the 2009 evolva

plan. on balance, conditional capital of CHF

5,603,248.00 was available for the issuance

of 28,016,240 shares under the incentive op-

tion plans as of 31 December 2012. For de-

tails regarding the terms and conditions of

such options, please refer to the notes to the

Consolidated Financial Statements on pages

71-72.

authorised capital for internal Group

reorganisation purposes

Article 3b of the Articles of Association

was related to the intended conversion of a

direct participation of Ventureast trustee

Company (p) limited (“Ventureast”) and

ApIDC Venture Capital (p) limited (“ApIDC”) in

evolva Biotech private limited (“evolva India”)

into a participation in evolva SA, immediately

followed by a conversion of this new partici-

pation in evolva SA into a participation in

evolva Holding SA. this authorisation expired

on 9 June 2012 and was not extended.

Capital for financing purposes

A small part of the conditional capital

for financing purposes has been used in

2012 for an earn-out payment related to the

acquisition of Abunda nutrition, Inc.

29


Development of share capital for financing purposes, available in the Articles

(in million shares) Combined capital authorised capital Conditional capital Total

Articles of Association old 3a new 3a new 3abis

Year-end 2009 14.0 - - 14.0

AGM 2010 +8.5 - - +8.5

Year-end 2010 22.5 - - 22.5

AGM 2011 -22.5 +60.0 +32.0 +69.5

Abunda acquisition - -25.0 - -25.0

Issue treasury shares - -8.0 - -8.0

Year-end 2011 0.0 27.0 32.0 59.0

Abunda earn-out - - -0.3 -0.3

AGM 2012 - +50.0 +23.0 +73.0

Year-end 2012 0.0 77.0 54.7 131.7

For detailed information regarding the

capital structure, reference is made to the

Articles of Association, which are available

on the evolva website.

Changes in capital

For changes in capital that took place in

2009 or earlier, reference is made to the 2009

annual report.

Development issued share capital

Number of shares Nominal value (CHF)

Year-end 2009 139,178,594 27,835,718.80

option exercise 381,531 76,306.20

Year-end 2010 139,560,125 27,912,025.00

Abunda acquisition 25,000,000 5,000,000.00

Issue treasury shares from authorised capital 8,000,000 1,600,000.00


Year-end 2011 172,905,010 34,581,002.00

Issue from conditional capital, related to Abunda earn-out 339,621 67,924.20


Year-end 2012 173,343,279 34,668,655.80

30


Description of the shares

As of 31 December 2012, the Company

had only common shares outstanding. no

bearer shares or participation certificates

have been issued. All shares have a nominal

value of CHF 0.20. each share carries one

vote at the shareholders’ meetings of the

Company – subject to limitations as de-

scribed below. the shareholders’ meeting

may at any time convert registered shares

into bearer shares and bearer shares into

registered shares through an amendment of

the Articles of Association.

limitations on transferability and nom-

inee registration

A transfer of shares is effected by a cor-

responding entry in the books of a bank or

depository institution following an assign-

ment in writing by the selling shareholder

and notification of such assignment to the

Company by the bank or the depository insti-

tution. A transfer of shares further requires

that a shareholder file a share registration

form in order to be registered in the share

register of the Company with voting rights.

Failing such registration, a shareholder may

not vote at or participate in a shareholders’

meeting.

A purchaser of shares will be recorded in

the Company’s share register as a sharehold-

er with voting rights if the purchaser dis-

closes its name, citizenship or registered of-

fice and address and gives a declaration that

it has acquired the shares in its own name

and for its own account.

the Articles of Association (Art. 5) pro-

vide that a person or entity not explicitly

stating in its registration request that it will

hold the shares for its own account (“nom-

inee”) may be entered as a shareholder in the

share register with voting rights for shares

up to a maximum of 5% of the outstanding

nominal share capital. Shares held by a nom-

inee that exceed this limit are only registered

in the share register with voting rights if

such nominee declares in writing to disclose

name, address and shareholding of any per-

son or legal entity for whose account it is

holding 1% or more of the outstanding

nominal share capital. the limit of 5% shall

apply correspondingly to nominees who are

related to one another through capital own-

ership or voting rights or have a common

management or are otherwise interrelated.

the Company has nominee agreements with

two nominees. this should facilitate share-

holder identification and the voting proced-

ure for shareholders’ meetings.

A share being indivisible, the Company

will only recognise one representative for

each share. Furthermore, shares may only be

pledged to the bank that administers the

bank entries of such shares for the account

of the pledging shareholders; in such case,

the Company must be notified.

Convertible bonds and options

As of 31 December 2012, the Company

did not have any convertible bonds or war-

rants outstanding.

evolva Holding SA has established sev-

eral incentive option plans in order to at-

tract, motivate and retain key staff and thus

enhance the value of the Company by giving

key people an opportunity to become share-

holders of the Company. the terms of the

incentive option plans are determined by the

Board of Directors.

At year-end 2012, conditional capital for

the issuance of 28,016,240 shares under op-

tion plans remains. the majority of the in-

centive options vest over four to five years.

In case of termination of contract, non-vest-

ed options are generally forfeited. pre-emp-

tive subscription rights of the shareholders

are excluded in case of exercise of the op-

tions. For further information about the in-

centive option plans, reference is made to

the notes to the Consolidated Financial

Statements on pages 71-72.

In addition, ApIDC and Ventureast hold

conversion options for 10,679,260 shares

(6.2% of the issued share capital at year-end

2012) in evolva Holding SA.

Board of Directors

the Articles of Association (Statuten)

(the “Articles”) provide that the Board of

Directors (Verwaltungsrat) of the Company

(the “Board of Directors”) may consist of a

minimum of five directors and a maximum

of eleven directors. As of 31 December 2012,

the Board of Directors consists of nine

directors (including the Chief executive

officer of the Company). Directors are

appointed to and removed from the Board

of Directors exclusively by a shareholders’

resolution. the maximum term of office for

a member of the Board of Directors is three

years. A year means, in this context, the

period running between one ordinary share-

holders’ meeting (Generalversammlung) and

the next. Re-election is allowed.

31


the Board of Directors is entrusted with

the ultimate direction of the Company’s

business and the supervision of the persons

entrusted with the Company’s management.

It represents the Company towards third

parties and manages all matters which have

not been delegated to another body of the

Company by law, the Articles or by other

regulations. the Board of Directors’ non-

transferable and irrevocable duties include:

� the ultimate direction of the Company

and the power to issue the necessary

directives in this regard;

� the determination of the organisation of

the Company;

� the administration of its accounting sys-

tem, its financial controls as well as its

financial planning;

� the appointment and removal of the

persons entrusted with the management

and representation of the Company, as

well as the determination of their signa-

tory power;

� the ultimate supervision of the persons

entrusted with the management of the

Company, in particular with respect to

their compliance with the law, the Art-

icles, regulations and directives;

� the preparation of the annual report and

the shareholders’ meeting, including the

execution of its resolutions;

� the notification of the judge in case of

over-indebtedness;

� the passing of resolutions regarding the

subsequent payment of capital with re-

spect to non-fully paid-in shares;

� the passing of resolutions confirming

increases of the share capital and the

respective amendments of the Articles;

� the examination of the professional

qualifications of the auditors; and

� the non-delegable and inalienable duties

and powers of the Board of Directors

pursuant to the Federal Act on Merger,

Demerger, transformation and transfer

of Assets (the “Swiss Federal Merger Act”) and any other applicable law.

In accordance with Swiss law, the Art-

icles and the organisational Regulations, the

Board of Directors has delegated evolva’s

executive management to the Chief execu-

tive officer (the “Ceo”) who is supported by

the Group Management team.

the Board of Directors constitutes itself.

It elects from among its members a Chair-

man and, if necessary, one or several Vice-

chairmen. It further appoints a secretary

who need not be a member of the Board of

Directors. According to the Company’s Board

Regulations (organisationsreglement) enacted

by the Board of Directors and revised most

recently on 11 December 2009, the Board of

Directors meets at the invitation of the

chairman or the secretary as often as re-

quired, but in any event at least four times

per year.

In 2012, the Board of Directors met eight

times (as compared to seven times in 2011),

of which four meetings were held by way of

conference call. the average duration of the

regular meetings of the Board of Directors in

2012 was six hours (as compared to six hours

in 2011).

the agenda for the meetings of the

Board of Directors is prepared by the Chair-

man and the Ceo of the Company. In general,

the main agenda items are the progress of

the R&D pipeline, the Company’s financial

situation, risks and strategic opportunities.

the Board of Directors receives an extensive

reporting set ahead of each meeting, con-

sisting of activity reports and financial re-

ports. In most cases, the Chief Financial of-

ficer of the Company and other members of

the Group Management team attend meet-

ings of the Board of Directors, except when

the Board of Directors reviews the Group

Management team’s performance. the Board

of Directors may ask for additional informa-

tion and consult with external experts if it

deems necessary.

Resolutions of the Board of Directors are

passed by way of simple majority of the

votes cast. In the case of a tie, the acting

Chairman has the casting vote. to validly

pass a resolution, a majority of the members

of the Board of Directors must attend the

meeting. Absent members cannot be repre-

sented. no quorum is required for confirma-

tion resolutions and amendments of the Art-

icles in connection with capital increases

pursuant to articles 652g and 653g of the Co

as well as approvals pursuant to articles 23

and 70 of the Swiss Federal Merger Act in

case that the transferred assets do not ex-

ceed 10% of the total assets of the Company.

Board committees

In accordance with good corporate gov-

ernance, the Board of Directors has estab-

lished an Audit Committee (the “AC”) and a

nomination and Compensation Committee

(the “NCC”).

audit committee

As of 31 December 2012, the AC consists

of Martin Gertsch (Chairman), Stuart Strath-

dee and erich Schlick. In 2012, the AC met

three times (as compared to three times in

2011).

the AC assists the Board of Directors in

the supervision of the financial management

Claus Braestrup

Martin Gertsch

Ganesh Kishore

erich Schlick

nicole Dubois

33


of the Company. It is responsible for the

guidelines for the Company’s risk manage-

ment and internal control system, the review

of the compliance system, the review of the

auditors’ audit plans, the review of annual

and interim financial statements, the moni-

toring of the performance and independence

of external auditors (including the authorisa-

tion of non-audit services by the auditors

and their compliance with applicable rules),

the review of the audit results and the moni-

toring of the implementation of the findings

by management. After examination by the

AC, the (interim) accounts are approved, and

recommended to the shareholders of the

Company for approval, by the Board of

Directors.

Nomination and Compensation Committee

As of 31 December 2012, the nCC con-

sists of the following non-executive mem-

bers: Claus Braestrup (Chairman), nicole

Dubois and thomas Videbaek. In 2012, the

nCC met two times (as compared to three

times in 2011). In addition the nCC held a

number of discussions by telephone.

the nCC assists the Board of Directors in

nomination and compensation related mat-

ters. It provides the Board of Directors with

recommendations on the nomination and

compensation of members of the Board of

Directors and the Ceo, policies for the nom-

ination and compensation of the Group

Management team and the Group’s other

employees and the basic principles for the

establishment, amendment and implemen-

tation of incentive plans.

Composition of the Board of Directors

the following table sets forth the name,

function and committee membership of

each member of the Board of Directors as of

31 December 2012, followed by a short de-

scription of each member’s nationality, busi-

ness experience, education and activities. As

of 31 December 2012, all members of the

Board of Directors are non-executive, except

for neil Goldsmith. other than disclosed

below, none of the non-executive directors

have any significant business connections

with the Company or its subsidiaries.

Composition of the Board of Directors year-end 2012

Name Function Committee membership First elected End current period

Sir tom McKillop Chairman - 2010 2013

Claus Braestrup Vice-Chairman nCC (Chair) 2010 2014

nicole Dubois Member nCC 2010 2013

Martin Gertsch Member AC (Chair) 2012 2015

neil Goldsmith Managing Director and Ceo - 2009 2015

Ganesh Kishore Member - 2011 2013

erich Schlick Member AC 2009 2013

Stuart Strathdee Member AC 2011 2014

thomas Videbaek Member nCC 2012 2015

the business address for each member of

the Board of Directors is Duggingerstrasse 23,

4153 Reinach, Switzerland.

34


Sir Tom McKillop,

British national, born in 1943.

Sir tom has been a member of the Board of

Directors since 10 June 2010 and its Chair-

man since May 2012.

Sir tom was educated at Irvine Royal

Academy, Glasgow university (where he took

a BSc Hons and phD in Chemistry), and Cen-

tre de mécanique ondulatoire appliquée

(paris). He had a long and successful career at

ICI, where he held a number of increasingly

senior R&D positions until his appointment

in 1989 as technical Director and Deputy

Chairman of ICI pharmaceuticals, a role in

which he had global responsibility for

research, development, medical and produc-

tion. In 1994, he was appointed Chief execu-

tive officer of Zeneca pharmaceuticals –

Zeneca having demerged from ICI in 1993 –

and, on completion of the merger of Astra

and Zeneca in April 1999, he became Chief

executive of AstraZeneca plc, a position he

held until retiring on 31 December 2005. He

was president of the Science Council in the

uK 2007-2011 and is currently a non-execu-

tive director of Almirall SA, uCB SA and

theravectys SAS. During his career he has

received many scholarly awards and fellow-

ships and was knighted in 2002 for services

to the pharmaceutical industry.

Claus Braestrup,

Danish national, born in 1945.

Claus Braestrup has been a member of the

Board of Directors since 10 June 2010 and its

Vice-Chairman since May 2012.

Mr Braestrup holds a Master’s degree in

Chemical engineering and an MSc in Bio-

chemistry. He is Doctor of Medical Science

and former Adjunct professor in neuroscience

at the university of Copenhagen. He started

his career in research and consultancy posi-

tions. He then moved to novo nordisk A/S,

where he served as Vice-president of pharma-

ceutical Research, president of the CnS Divi-

sion and president of the Diabetes Care Divi-

sion. He subsequently took the post of Head

of preclinical Drug Research at Schering AG,

before joining H. lundbeck A/S as executive

Vice-president, Research and Development.

From 2003 to 2008 he was president and Ceo

of H. lundbeck A/S. Claus Braestrup is mem-

ber of the Board of Bavarian nordic A/S, San-

taris pharma A/S, probiodrug AG (chair) Gyros

AB and Aniona (chair).

Nicole Dubois,

French national.

nicole Dubois has been a member of the

Board of Directors since 10 June 2010.

Ms Dubois is a strategy and manage-

ment consultant to major european and uS

corporations, in particular in the health care

sector. She has worked for BCG and later in-

dependently and in partnership with other

strategy consulting groups. She has worked

with Ceos and executive committees of For-

tune Global 500 companies, as well as with

entrepreneurial entities and non-profit insti-

tutions, spanning widely diverse organisa-

tions in fields ranging from telecommunica-

tions to health care. For the past ten years,

her main focus has been on the pharma-

ceutical sector. Her areas of expertise include

strategy implementation, global marketing,

executive leadership and post-merger inte-

gration and transformation. Ms Dubois holds

a phD from the Sorbonne, an MBA from Har-

vard, and is a graduate of ecole normale su-

périeure (ulm). At various times in her career,

she has also taught at these institutions or at

other universities. She is the author of the

book “les Multinationales”. Ms Dubois has no

other Board memberships.

Martin Gertsch,

Swiss national, born in 1965.

Martin Gertsch has been a member of the

Board of Directors since May 2012.

Martin Gertsch is an experienced Board

member and Chief Financial officer (CFo) in

the life science industry and currently serves

as Vice-president of the Board and Chairman

of the Audit Committee of Santhera pharma-

ceuticals. He has been appointed CFo of

Acino Holding AG effective 1 April 2013. He

is former Vice-president Head of Finance

eMeA at DepuySynthes and former Chief Fi-

nancial and Chief operating officer of Dele-

nex therapeutics and eSBAtech, two private-

ly held biotech companies. From 2002 to the

beginning of 2006, he was Chief Financial

officer of Straumann, which he had joined in

1997 as head of group controlling and re-

porting. Between 1986 and 1997, Mr Gertsch

was an audit engagement manager at price-

waterhouseCoopers, Basel, Switzerland. Mr

Gertsch is a Swiss certified fiduciary and

Swiss certified public accountant. He has

also completed several executive-level devel-

opment programmes at IMD (International

Institute for Management Development) in

lausanne, Switzerland.

Neil Goldsmith,


neil Goldsmith is a co-founder of evolva SA

and has been a member of the Board of

Directors and Ceo since the combination

between Arpida ltd. and evolva SA in 2009,

and, prior to the combination, a member of

the Board of Directors and Ceo of evolva SA

since its founding in April 2004.

35


neil Goldsmith

Mr Goldsmith has a 25-year track record

in building successful biotech companies

from the ground up. He was a co-founder of

topotarget A/S and personal Chemistry AB

(now called Biotage AB), which are now list-

ed on the Copenhagen and Stockholm ex-

changes, respectively. prior to that, Mr Gold-

smith was Chief executive officer of Auda

pharmaceuticals (acquired by phytera, Inc.),

GX Biosystems and pnA Diagnostics (ac-

quired by Boehringer Mannheim). previously,

he was Vp Business Development for phar-

macia Biosensor (later BIAcore AB), and a

Board member of Quadrant Healthcare. Mr

Goldsmith started his career in biotech at

Scientific Generics in Cambridge, uK after a

short spell in consumer marketing. He re-

ceived a First Class Honours BA degree in

Zoology from Balliol College, university of

oxford, and is a graduate of the new enter-

prise programme at the Scottish enterprise

Foundation, university of Stirling. Mr Gold-

smith does not hold any significant external

Board memberships.

Ganesh M. Kishore,

US national, born in 1953.

Mr Kishore has been a member of the Board

of Directors since May 2011.

Dr. Kishore received his phD in biochem-

istry from the Indian Institute of Science

after which he pursued postdoctoral research

in chemistry and biology at the university of

texas at Austin. In 1980, he joined Monsanto

where he held senior positions in the areas of

biotechnology and in the nutrition and Con-

sumer products division. During his tenure at

Monsanto he was involved in the develop-

ment of major products such as Aspartame

(the active ingredient of several major sweet-

ener products) as well as a key agricultural

crop protection technology. Dr. Kishore joined

Dupont in 2002 as the Chief technology of-

ficer for its Agriculture and nutrition plat-

form and took over the role of Chief Biotech-

nology officer for the company in 2005. He

left Dupont in 2007 to join Burrill & Company

as a Managing Director for Burrill life Sci-

ences Venture Fund. Dr. Kishore is currently

Ceo of MlSCF (Malaysian life Sciences Capi-

tal Fund), which is an indirect shareholder in

evolva through Abunda SR llC. His other

Board mandates include Advanta ltd., Kaiima,

Gevo, Inc., Glori energy, Sentinext, Mogene lC

and Akermin. Moreover he is on the Board of

several academic institutions.

Erich Schlick,

German national, born in 1952.

prof. Dr. erich Schlick has been a member of

the Board of Directors since 11 December

2009 and was its Chairman from 11 Decem-

ber 2009 until May 2012.

prof. Dr. Schlick has over 25 years of

experience in the health care sector. He spent

five years at the uS national Cancer Institute,

and over 15 years with BASF pharma, includ-

ing ten years as the executive Board member

responsible for worldwide R&D. prof. Dr.

Schlick established BASF pharma’s immunol-

ogy business, and its uS biotech centre spe-

cialising in immunology and monoclonal anti-

bodies. From 2001 to September 2005, prof.

Dr. Schlick worked for 3i, where his last posi-

tion was Head of 3i’s Healthcare team in Ger-

many and Deputy Head of 3i Healthcare

Worldwide. In September 2005, prof. Dr.

Schlick joined Wellington partners as a Gen-

eral partner of the Wellington life Science

Fund, which is a principal shareholder in the

Company. prof. Dr. Schlick is a qualified medi-

cal doctor (university of Heidelberg) and a

Sir tom McKillop

36


Stuart Strathdee

professor of immune pharmacology at the

university of Heidelberg. His other Board

memberships include Immatics (Germany),

Sensimed (Switzerland), Symetis (Switzerland)

and Zentralinstitut für Seelische Gesundheit

Mannheim, university of Heidelberg (univer-

sity Centre for psychiatry).

Stuart Strathdee,


Mr Strathdee has been a member of the

Board of Directors since May 2011.

Having completed his phD in Applied

physics, Mr Strathdee joined tate & lyle plc

in 1977 as a management trainee. He retired

from the company in July 2009, having

served on the main Board as an executive

Director in various roles for 14 years. During

his time at tate & lyle, Mr Strathdee held a

variety of senior management positions in-

cluding Group treasurer, Managing Director

of both united Molasses and tate & lyle’s

International Division and was Corporate

Development Director reporting to the Chief

executive officer from July 2003. leadership

highlights include: the development of tate

& lyle’s sucralose ingredient business; crea-

tion of Vietnam’s leading sugar business; the

public takeover of Australia’s largest sugar

farming company; creation of a joint venture

to construct the Middle east’s largest sugar

refinery; the acquisition of publicly listed

Zambia Sugar Company, now Africa’s leading

sugar milling company. Dr. Strathdee has a

phD in Atomic and Molecular physics from

Queens university Belfast. He is currently

member of the Board of James Finlay ltd.

Thomas videbaek,


Mr Videbaek has been a member of the Board

of Directors since May 2012.

thomas Videbaek has been novozymes’

executive Vice-president of BioBusiness since

September 2007, responsible for all new busi-

ness ventures outside of novozymes’ estab-

lished areas. He is also a member of the novo-

zymes executive Management group. Mr

Videbaek joined novo nordisk as a chemist in

1988 and worked in various positions in the

textiles and Starch divisions, both in Denmark

and in the uS. In 1996, he also assumed re-

sponsibility for Food and Feed enzymes and

was appointed Director for Strategic Market-

ing, Food and Feed enzymes. At the end of

1998, thomas was appointed General Man-

ager for novozymes Switzerland and also

Vice-president for Cereal Food and Beverage

Marketing. He returned to Denmark in 2003

and became Vice-president for Supply Chain

operations where he was responsible for es-

tablishing a global organisation in charge of

the supply chain at novozymes. thomas

Videbaek holds a Master of Chemical

engineering from Dtu, Dept. of nutrition and

Biochemistry, Copenhagen 1986, and a phD

from Dtu in 1990. He also holds a BCom (In-

ternational Business) from the Copenhagen

Business School (1992). thomas Videbaek has

no other Board memberships.

Information and control instruments

the Company employs an extensive re-

porting framework in order to secure an effi-

cient information and risk management sys-

tem. Risk management is applied in all

functional areas, but particularly in the areas

of discovery, product development and finan-

cial management.

Management information is secured via

regular updates on the status of the R&D pro-

jects and detailed project plans are discussed

at least on a monthly basis. From each sub-

sidiary and on a Group basis, management

receives liquidity updates on a biweekly basis

as well as monthly, quarterly and annual fi-

nancial reports. Deviations from budgets are

analysed by the Company’s financial staff and,

if necessary, adjustments to operating

budgets are made. Management reports

usually monthly on the overall progress to the

Board of Directors. At the meetings of the

Board of Directors, detailed reports of the

various functional areas are discussed.

external auditors review the Company’s

risk management and financial reporting sys-

tems on a regular basis and recommend

changes if required.

Executive management

In accordance with Swiss law, the Art-

icles and the organisational Regulations, the

Board of Directors has delegated the execu-

tive management of the Company to the

Ceo. the Ceo heads the executive manage-

ment team of evolva (the “Group Manage-ment Team”), which comprises the Senior

executive officers of the Company, the Chief

executive officer of evolva nutrition, Inc.,

one of evolva’s uS subsidiaries, and the Man-

aging Director of evolva Biotech private lim-

ited, the Company’s Indian subsidiary.

37


Composition of the Group Management Team

Name appointed Position

neil Goldsmith 2004 Chief executive officer and Managing Director

norbert Bender* 2011 Chief Medical officer

Jakob Dynnes Hansen 2007 Chief Financial officer

Jutta Heim 2009 Chief Scientific officer

pascal longchamp 2005 Chief Business officer

panchapagesa Murali 2006 Chief executive officer of evolva Biotech private ltd. (India)

Simon Waddington 2011 Chief executive officer of evolva nutrition, Inc.

* Mr Bender resigned in February 2013 and will take up a position at another company on 1 June 2013.

thomas Videbaek

under the control of the Board of Direct-

ors, the Group Management team conducts

the operational management of evolva pur-

suant to the organisational Regulations and

reports to the Board of Directors on a regular

basis. the Ceo is also a member of the Board.

Composition of the Group Management

Team

the following table sets forth the name

and principal position of each member of the

Group Management team as of 31 December

2012, followed by a short description of each

member’s nationality, birth year, business ex-

perience, education and activities. With the

exception of norbert Bender and Simon

Waddington, all members of the Group Man-

agement team as of 31 December 2012 were

(i) appointed upon consummation of the

combination on 11 December 2009, and (ii)

members of evolva SA’s management team

immediately prior to the combination. Con-

sequently, the date of each such member’s

appointment to the Group Management

team set forth in the table below, as well as

in the short descriptions that follow there-

after, is the date of such member’s appoint-

ment to the management team of evolva SA.

the business address for each member of

the Group Management team is Dugginger-

strasse 23, 4153 Reinach, Switzerland.

Neil Goldsmith, please refer to “Board of

Directors” beginning on page 34.

Norbert Bender,

German national, domiciled in Switzerland,

born in Germany in 1949.

Dr. Bender has been the Company’s Chief

Medical officer since May 2011. He resigned

in February 2013 and will take up a position

at another company on 1 June 2013.

norbert Bender is an M.D. from the uni-

versity of Frankfurt, Germany, and has a phD

in Biochemistry and pharmacy from the

same institution. He practiced for ten years

as a medical doctor in internal medicine at

the Frankfurt university Hospital. He subse-

quently worked for more than 20 years in

various senior functions in pharmaceutical

(Hoechst, Knoll) and biotech companies (Car-

dion, trigen, Virologik), in both europe and

north America. During his career, he also

worked for pRA International, a leading

clinical research organisation, managing its

Mannheim office. Dr. Bender has particular

expertise in the cardiovascular space and has

been involved in the successful development

of Ramipril and its fixed combinations, Revi-

parine, Sibutramine and Adalimumab. He has

worked as a medical consultant to evolva

between october 2010 and May 2011. nor-

bert Bender does not hold any significant

external Board mandates.

norbert Benderpascal longchamp

38


Simon Waddington

Jutta Heim

Jakob Dynnes Hansen,


Mr Hansen has been the Chief Financial of-

ficer of evolva since September 2007.

Mr Hansen has 25 years of experience in

biotech/pharmaceuticals and financing. prior

to joining evolva, he was CFo of nuevolution

A/S and before that Zealand pharma A/S,

where he led several financing rounds and

major partnership agreements. prior to Zea-

land pharma, Mr Hansen was Senior Vice-

president, at unibank (now nordea), where

he was involved in more than 50 corporate

finance transactions. prior to unibank, Mr

Hansen was Head of Market Research at

novo nordisk and he has worked for the

united nations (unIDo) in Jakarta, Indone-

sia. Mr Hansen holds an MSc in economics

from university of Copenhagen and an MBA

from Insead. Mr Hansen does not hold any

significant external Board memberships.

Jutta Heim,

German national, born in 1951.

prof. Dr. Jutta Heim has been the Company’s

Chief technology/Scientific officer since

August 2009. prof. Dr. Heim was a member

of the Board of Directors of evolva SA from

April 2005 until november 2009.

until 2009, prof. Dr. Heim was Chief

Scientific officer of Basilea pharmaceutica

AG, a Swiss biopharmaceutical company,

where she was in charge of all anti-infective,

dermatology and oncology discovery acti-

vities. prior to joining Basilea pharmaceutica,

prof. Dr. Heim worked for 22 years in

Switzerland and the united States for Ciba-

Geigy/novartis, where she was involved in

the successful development and launch of

biopharmaceutical anti-thrombotic and

fibrinolytic products, initiated a molecular

genetics department in oncology and be-

came novartis’ Senior Scientific expert in

Molecular Biology and a member of the Re-

search Management Board. Most recently,

she headed the novartis lead Discovery

Center with worldwide responsibility. prof.

Dr. Heim has published numerous papers in

the areas of natural products, recombinant

proteins and applied molecular biology, in

particular in the area of oncology. She re-

ceived a phD from the university of tübingen

in 1981 and holds a professorship in Bio-

technology at the Biocentre of the university

of Basel. prof. Dr. Heim is a member of the

Advisory Board of “Jubiläumsstiftung uni-

versität Zürich”. prof. Dr. Heim does not hold

any significant external Board memberships.

Pascal longchamp,

Swiss national, born in 1962.

Dr. pascal longchamp was appointed the

Company’s Chief Business officer in 2010.

prior to that, Dr. longchamp was Vice-

president Business Development since March

2005.

Dr. longchamp has spent over 15 years

in the biotechnology and pharmaceutical in-

dustries, covering R&D, Management and

Business Development positions on the West

Coast (uSA) and in Switzerland. previously,

he was the Director of Business Development

at phyllom (2003), and a part of Maxygen’s

successful Ipo. At Maxygen, Dr. longchamp

was in charge of two corporate alliances and

promotion of its gene shuffling platform

technology to third parties. At phistem,

Maxygen and phyllom, Dr. longchamp was

responsible for corporate development, stra-

tegic alliances, in- and out-licensing, leading

international research collaboration and uS

government contract with the Department

panchapagesa Murali

Jakob Dynnes Hansen

39


of Defense. He received a phD in Genetics

and Microbiology from the university of

lausanne, followed by postdoctoral re-

searches at uC Berkeley in Molecular Biology

and at lawrence Berkeley national labora-

tory in Biodefence. Dr. longchamp has an

MBA from HeC Business School, lausanne.

Dr. longchamp is a founder and Chairman of

the Board of phistem sarl.

Panchapagesa Murali,

Indian national, born in 1961.

Dr. panchapagesa Murali has been the Chief

executive officer of evolva Biotech private

limited, the Company’s Indian subsidiary,

since September 2006.

Dr. Murali has over 20 years of experi-

ence in pharmaceutical & health care R&D,

including management of more than ten

clinical trials, in particular in respiratory

diseases. previously, he was Founder and

Director (for 16 years) of Dalmia Centre for

Research and Development, developing and

launching natural product-based therapeut-

ics, and Founder and Chairman of MlC &

netpeople group of It & telecom companies

(networking solutions, banking security and

communication services). Dr. Murali is a for-

mer Indo-uS scientist at Battelle-Kettering,

ohio, and fellow of unilever India. He re-

ceived a phD in Microbiology and Microbial

technology from Madurai Kamaraj univer-

sity. Dr. Murali is the president of the Asso-

ciation of Biotechnology led enterprises in

India. He is on the Board of Dalmia Research

and Development limited and a member of

the Governing Board of Dalmia Centre for

Research and Development. Dr. Murali is

Vice-president and treasurer of the Indian

Red Cross Society. He is also Chairperson of

the Biotech panel of the Confederation of

Indian Industrys tamil nadu and a member

of the Vision Group of the Government of

Karnataka.

Simon Waddington,


Simon Waddington is Ceo of evolva nutri-

tion, Inc., a wholly owned subsidiary of the

Company.

He was previously president and Ceo of

Abunda nutrition, Inc. which was acquired

by evolva SA in July 2011, and entrepreneur-

in-Residence at the uS life science venture

capital firm Burrill & Company, where he sup-

ported the formation and management of

start-ups across the life sciences. prior to that,

he spent more than a decade as a venture

capitalist. He was a managing partner at poly-

technos Venture partners, based in Munich,

Germany, where he led and supported invest-

ments in numerous life science and advanced

materials-related companies in europe, Israel

and the uS. prior to that, he started and ran

Monsanto’s european corporate venturing

activities from Brussels, Belgium, where he

sourced and supported innovations across the

medical, agricultural, nutrition, health care

services and advanced materials sectors. Be-

fore that he was product Development Man-

ager for Zeneca’s biopolymers business, which

pioneered the fermentation-based production

of biodegradable polymers from renewable

feedstocks. prior to that, he served as a Senior

Research Scientist for ICI specialising in sur-

face and interface science. Simon earned his

phD in physics from liverpool university and

his MBA from the Harvard Business School.

He does not hold any significant external

Board memberships.

Compensation, shareholding and loans

evolva’s remuneration system is gov-

erned by the Board of Directors, upon rec-

ommendation of the nomination and Com-

pensation Committee. In the year under

review, evolva did not involve external con-

sultants in this process.

the nomination and Compensation

Committee evaluates the system on a regular

basis in the light of remuneration changes

occurring in other international biotech

companies. the system was extensively re-

vised in 2010. During 2012, no adjustments

took place.

the system is designed to remunerate

existing and future employees in a way that

incentivises them to an excellent perfor-

mance and that competes with remunera-

tion offered by other public biotech compa-

nies in countries where evolva is active

(Switzerland, Denmark, uSA, India).

the compensation of Group Manage-

ment consists of a base salary plus a variable

bonus of up to 20% of the base salary (more

in exceptional circumstances) and incentive

options. the bonus is linked to specific Com-

pany goals (and not to individual or team

goals) that are agreed with the Board at the

start of a year. Depending on the achieve-

ment of the agreed Company goals, all em-

ployees receive a bonus in proportion to the

individual base salary. If only few Company

goals have been achieved, no bonus will be

paid. For 2012, the key company goals were

related to total revenues, cash position at

year-end, performance in partnerships, pro-

gress on product development and enhance-

ment of technology base. In 2012, about

70% (2011: 70%) of the company goals were

40


achieved. In 2013 the Board intends to award

both cash bonuses and stock options in line

with this performance and overall company

remuneration policy. priority was given to

completing the recent fundraise before final-

ising plans in this respect.

evolva does not include any severance

packages in employment contracts, apart

from the salaries paid during the notice pe-

riod. notice periods for management team

members do not exceed six months.

options are granted to incentivise and

retain people with the right professional and

personal skills and to ensure that the inter-

ests of management and other employees

are aligned with those of the shareholders.

All full-time staff members (incl. manage-

ment) are granted options after six months’

employment. the size of the individual op-

tion grant is determined by the individual

employee’s position in the Company. In addi-

tion, employees may at the end of a year be

granted options based on their performance

during the previous year. performance is

measured as the achievement of key results

such as discovery breakthroughs, clinical

milestones, partnerships, improvement of

administrative procedures, etc. the options

vest over 4 to 5 years in order to retain valu-

able talent and to secure that employees fo-

cus on value generation over the medium to

longer term.

In January 2012, a new share-based op-

tion plan (eVe IV) was established. options

under this plan were granted on 1 January

2012 and will vest over four years. options

under this plan were granted to Board mem-

bers, management team and other employees.

In addition, evolva established a second

share-based option plan (eVe V) in 2012.

under this plan, all members of Board and

management and some staff members vol-

untarily agreed to purchase share options

with a part of their salary. the option plan

was launched in July 2012 with the aim to

reduce the Company’s cash outflow over a

twelve-month period. options for this plan

were purchased as at 1 July 2012, and they

vest over a period of six to twelve months.

the compensation of the non-executive

members of the Board of Directors includes a

fixed annual fee, a fee per attended Board

meeting and (if relevant) an annual fee for

membership of the two Board committees

(nomination and Remuneration Committee

and Audit Committee). the cash fees are the

same for all Board members except for the

Chairman of the Board, who receives a high-

er compensation. Furthermore, non-execu-

tive directors receive a fixed number of op-

tions at the start of each calendar year. As

described in the previous paragraph, Board

and management waived all or part of their

cash compensation in the period between

July 2012 and June 2013, in exchange for op-

tions under the eVe V plan. extensive infor-

mation regarding compensation can be

found in the 2012 Financial Statements and

in the ‘Remuneration report 2012 evolva

Holding SA’ which is available on evolva’s

website.

Shareholders’ participation

voting rights

each share in evolva carries one vote.

the execution of voting rights is limited only

if a shareholder is not properly registered in

relation to a share transfer (see further under

“limitations on transferability and nominee

registration”). each shareholder may author-

ise in writing another shareholder, a Com-

pany representative, a specially designated

independent shareholder representative or a

depositary representative to represent him

or her at the shareholders’ meeting. A share-

holder wanting to vote at a shareholders’

meeting has to be entered in the register no

later than seven days before the meeting

takes place.

Quorum

the Articles of Association do not pre-

scribe a quorum for shareholders’ meetings.

unless the law requires otherwise, the

General Meeting of shareholders passes

resolutions and elections with a simple

majority of the votes represented. Swiss law

requires a two-thirds majority of the votes

represented for resolutions concerning: � changes to the Company’s business

purpose

� the creation of shares with privileged

voting rights

� restrictions on the transferability of

registered shares

Option series 2012 EvE Iv EvE v

Directors (excl. Ceo) 792,000 1,181,250

Group Management team 2,164,000 1,134,005

employees and consultants 2,201,650 1,355,033

Total 5,157,650 3,670,288

41


� an authorised or conditional increase in

the share capital

� an increase in the share capital by way of

capitalisation of reserves, against contri-

bution in kind for the acquisition of

assets or involving the grant of special

privileges

� the restriction or elimination of pre-

emptive rights of shareholders

� a relocation of the registered office

� the dissolution of the Company other

than by liquidation (for example, by way

of merger)

the introduction or abolition of any pro-

vision in the Articles introducing a majority

greater than that required by law must be

resolved in accordance with such greater

majority.

Convocation

under Swiss law, an annual ordinary

shareholders’ meeting must be held within

six months after the end of the Company’s

financial year. Shareholders’ meetings may

be convened by the Board of Directors or, if

necessary, by the Company’s auditors. the

Board of Directors is further required to con-

vene an extraordinary shareholders’ meeting

if so resolved by a shareholders’ meeting or if

so requested by holders of shares holding in

at least 10% of the nominal share capital.

A shareholders’ meeting is convened by

publishing a notice in the Swiss Official

Gazette of Commerce (Schweizerisches

Handelsamtsblatt) at least 20 days prior

to such a meeting. In addition, holders of

registered shares may be informed by a letter

sent to the address indicated in the share

register.

agenda

Shareholders holding shares represent-

ing the lower of 10% of the share capital or

a nominal value of CHF 1 million have the

right to request that a specific proposal be

discussed and voted upon at the next share-

holders’ meeting, setting forth the item and

proposal. According to the Articles of Asso-

ciation, the request to put an item on the

agenda has to be made at least 45 days prior

to the meeting.

Changes of control and defence measures

Duty to make an offer

A shareholder that, either directly, indir-

ectly or acting in concert with third parties,

controls 33 1⁄3 % of the voting rights

(whether exercisable or not), is obliged to

make an offer to acquire all listed shares.

Swiss law allows a corporation to deviate

from this rule in its Articles of Association. the

Company has opted not to use this possibility.

Clauses on changes of control

the Company has no special arrange-

ments taking effect in the event of a change

of control, other than the customary clauses

concerning the exercise of stock options.

auditors

At the extraordinary General Meeting on

26 november 2009, the shareholders ap-

pointed ernst & Young AG, Basel, Switzerland

as auditors of the Company starting from the

business year 2009 with effect on 11 Decem-

ber 2009. ernst & Young was re-elected by

the evolva shareholders’ meetings on 10

June 2010, 18 May 2011 and 9 May 2012.

ernst & Young have been auditors to evolva

SA since 2005. the lead auditor is Mr Jürg

Zürcher since business year 2009. During

2012 ernst & Young charged CHF 249,000

(2011: CHF 320,000) for audit and audit-relat-

ed fees and CHF 16,000 (2011: CHF 120,000)

for tax services.

the monitoring of the performance and

independence of external auditors (including

the authorisation of non-audit services by

the auditors and their compliance with ap-

plicable rules) is the responsibility of the

Audit Committee. this committee reviews

the external auditor’s audit plan and over-

sees its execution. the external auditor

ernst & Young was present in two meetings

of the Audit Committee in 2012.

Information policy

the Company puts much weight on

keeping its shareholders informed. Many dif-

ferent channels are used, including the

twice-yearly financial results releases,

ad hoc news releases, the annual report, the

website, shareholders’ meetings, roadshows,

conferences and press contacts. the website

www.evolva.com offers interested parties the

possibility to subscribe to the Company’s

news releases. the Company is at the share-

holders’ service to respond to questions or

requests. the Company’s website offers the

possibility to subscribe to press releases via

email distribution.

42

Consolidated Financial Statements

43


Consolidated Statement of Financial positionCHF Note 31 December 2012 31 December 2011

aSSETSNon-current assets

property, plant and equipment 12 9,941,669 10,821,705

Intangible assets 14 66,669,116 68,825,619

Rent deposits - 2,303,086 2,333,308

Total non-current assets 78,913,871 81,980,632

Current assets

Inventory 15 59,654 45,964

prepayments and accrued income 16 495,013 756,455

other receivables 17 302,042 500,950

trade receivables 18 496,929 517,684

Restricted cash 19 1,000,000 -

Cash and cash equivalents 19 9,105,251 22,693,641

Total current assets 11,458,888 24,514,694

Total assets 90,372,760 106,495,327

EQuiTY AND liAbiliTiESEquity

Share capital 20 34,668,656 34,581,002

treasury shares 22 (313,623) (1,247,119)

Share premium - 64,589,077 63,131,938

other reserves - 20,508,362 17,203,540

Cumulative translation differences - 2,944,579 4,056,083

Accumulated loss (61,136,006) (45,046,058)

Total equity attributable to equity holder of the parent before NCi 61,261,047 72,679,386

non-controlling interests (nCI) - (22,349) 541,270

Total equity 61,238,698 73,220,655

Non-current liabilities

Deferred tax liabilities 11 11,089,224 12,949,184

pension liabilities 27 343,798 17,066

Contingent consideration 6 - 2,806,250

Mortgage loans 13 - 2,200,000

preferred redeemable shares 25 3,972,494 3,974,072

long-term lease liabilities 30 3,594,500 3,764,604

Total non-current liabilities 19,000,017 25,711,177

Current liabilities

trade accounts payables 4 1,015,113 1,741,072

Accrued and other current liabilities 28 2,143,648 2,221,762

Deferred income 29 1,989,136 634,692

Short-term portion of mortgage loans 13 4,740,000 2,628,000

Short-term portion of lease liabilities 30 246,146 337,970

Total current liabilities 10,134,042 7,563,495

Total equity and liabilities 90,372,760 106,495,327

the accompanying notes form an integral part of these consolidated financial statements.

44


Consolidated Statement of Financial performance

Consolidated Statement of Comprehensive Income

CHF Note Period from 1 January to 31 December

2012 2011

Income from research & development partnerships - 6,354,772 10,543,828

Income from research & development grants - 659,670 536,392

Total income 7/29 7,014,442 11,080,221

Research & development expenses 8 (19,524,405) (27,493,461)

General & administrative expenses - (7,543,794) (9,521,813)

Total operating expenses (27,068,199) (37,015,274)

Operating loss (20,053,757) (25,935,053)

Financial income 9 211,568 1,813,512

Financial expenses 9 (956,653) (2,573,087)

Change of fair value of contingent consideration 6 2,643,232 2,640,000

Net loss before tax (18,155,610) (24,054,628)

Income tax (expenses) 10 1,502,044 1,122,344

Net loss for the period (16,653,566) (22,932,284)

Attributable to:

Shareholders of the parent (16,089,948) (22,451,971)

non-controlling interests (563,618) (480,314)

Basic and diluted loss per share attributable to ordinary shareholders of parent 24 (0.09) (0.14)

CHF Period from 1 January to 31 December

2012 2011

net loss for the period (16,653,566) (22,932,284)

translation differences (1,111,503) 4,476,664

Other comprehensive (loss) / income (1,111,503) 4,476,664

Total comprehensive loss (17,765,069) (18,455,620)


45


Consolidated Statement of Cash FlowCHF Note Period from 1 January to 31 December

2012 2011

Operating activities

net loss for the period (16,653,566) (22,932,284)

Non-cash adjustments to reconcile net loss for the period to net cash flows

- Changes in deferred tax assets 11 (807,399) (347,536)

- Changes in deferred tax liabilities 11 (1,052,561) (764,523)

- Depreciation of tangible assets 12 1,325,188 2,475,912

- Impairment of assets under IFRIC 18 - - 1,353,319

- Amortisation of intangible assets 14 1,960,041 1,012,190

- Interest income 9 (29,771) (156,011)

- Interest expenses 9 689,093 770,039

- Share-based compensation charges 26 3,253,602 5,042,889

- other share-based charges1 - - 600,000

- Change in current assets - 471,074 2,165,639

- Change in current liabilities - 143,552 (3,180,138)

- Change in contingent consideration 6 (2,643,232) (2,640,000)

- Change in pension liabilities / prepaid pension 27 326,732 (427,558)

- Interest payments received 9 26,113 156,011

- Interest expenses paid 9 (454,631) (530,384)

Net cash flow from operating activities (13,445,766) (17,402,435)

investing activitiespurchases of property, plant and equipment 12 (491,132) (965,325)

purchases of intellectual property rights3 14 (89,156) -

Change in rent deposit - 30,222 14,254

Cash flow from investing activities (550,066) (951,071)

Financing activities

Finance lease payments 30 (264,038) (304,584)

Cash inflow from acquisition of Abunda nutrition - - 3,108,347

proceeds from exercise of stock options 26 32,554 96,172

proceeds from sales of treasury shares 23 1,894,995 824,998

Amortisation of mortgage loans 13 (88,000) (88,000)

Restricted cash allocation 19 (1,000,000) -

proceeds from sales of treasury shares Ventureast2 - - 515,502

purchase of non-controlling interests in evolva India - - (515,502)

Capital increase costs - - (100,000)

Cash flow from financing activities 575,511 3,536,933

Net change in cash position (13,420,321) (14,816,573)

Net decrease in cash and cash equivalents (13,420,321) (14,816,573)

exchange gains/(loss) on cash and cash equivalents - (168,070) (204,615)

Cash and cash equivalents, beginning of period - 22,693,641 37,714,829

Cash and cash equivalents, end of period 19 9,105,251 22,693,641


1 non-cash financing expenses regarding issuance of 664,967 shares as payment of SeDA commitment fee in 2011 – equivalent to CHF 600,0002 In 2011, evolva acquired an additional 1.2% shareholding of evolva India Biotech private ltd. from Indian Investor Ventureast/ApIDC in exchange for the sale of treasury shares.

proceeds of CHF 515,502 were transferred directly to Ventureast/ApIDC.3 In 2012, evolva acquired Ip from Fluxome A/S for a total value of CHF 1,295,589. CHF 1,206,433 has been settled with evolva shares, whereas CHF 89,156 has been paid in cash.

46

Cons

olid

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are

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he p

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47

Notes to the Consolidated Financial Statements


1. The company

evolva Holding SA (the “Company”) together with its subsidiaries (collectively “evolva” or the “Group”) is an international biosynthetic com-

pany which discovers and develops ingredients and processes for food, nutrition and pharmaceutical products.

evolva Holding SA is incorporated in Switzerland and has been the parent company of the evolva Group since 11 December 2009. the shares

of the Company are listed on the Swiss Stock exchange (SIX). the Group comprises the following subsidiaries: evolva SA (Reinach, Switzerland),

evolva nutrition (San Francisco, uSA), evolva Biotech private limited (Chennai, India), evolva Biotech A/S (Copenhagen, Denmark) and Arpida

uK (london, united Kingdom) as inactive entity. evolva, Inc. (palo Alto, uSA) has been wound down in 2012 as the contract with the uS Depart-

ment of Defense expired in early 2012.

As at 31 December 2012, the total headcount in evolva amounts to 82 full-time employees (Fte), of which 61 Fte are directly involved in R&D

activities while the remaining staff are employed with managerial, commercial and administrative tasks.

the legal domicile of the Company is:

evolva Holding SA

Duggingerstrasse 23

4153 Reinach, Switzerland

these consolidated financial statements were authorised for public disclosure in accordance with a resolution of the Board of Directors of

the Company dated 5 April 2013. they are recommended by the Board for approval by the shareholders at the Annual General Meeting on

7 May 2013.

2. Summary of significant accounting policies

2.1. Basis of preparationthe financial statements of evolva are prepared in accordance with the historical cost convention except for the revaluation to fair value of

certain financial assets and liabilities. evolva’s financial statements comply with the International Financial Reporting Standards (IFRS) as

issued by the International Accounting Standards Board (IASB) as well as with the following significant accounting policies. the financial

statements are presented in Swiss francs (CHF) and all values are rounded to the nearest CHF 1 except where otherwise stated.

2.2. Critical accounting estimates and judgementsthe preparation of the consolidated financial statements requires management to use certain critical accounting estimates. It also requires

management to exercise its judgement in the process of applying the Company’s accounting policies. Such estimates and assumptions

affect the reported amounts and disclosures in the consolidated financial statements and accompanying notes. Management evaluates on

an ongoing basis its estimates and assumptions on revenue recognition for contract revenue, allowances on current assets, valuation of

tangible assets, impairment of long-lived intangibles and goodwill, share-based compensation, provisions and income taxes. Management

bases its estimates and assumptions on historical experience, input from advisors and on various market and non-market specific assump-

tions that management believes to be reasonable under the circumstances. Based on the result of these estimates, management makes its

judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual outcomes could

differ from those estimates.

48


the following areas involve assumptions and estimates that can have a significant impact on the consolidated financial statements:

� evolva is subject to income taxes in several jurisdictions. Judgement is required in determining the current and deferred assets and liabil-

ities for income taxes. the assessment as to whether deferred tax assets relating to tax loss carry-forwards and temporary differences have

to be recognised requires significant judgement.

� Actuarial valuations in connection with defined benefit pension plans where various assumptions (i.e. discount rates, expected return on

assets and mortality rates) bear significant uncertainties due to the long-term nature of the plans (refer to note 27).

� In connection with the acquisition of Abunda nutrition, Inc. and the purchase price accounting in accordance with IFRS 3, evolva had to

establish the fair value of the acquired assets and liabilities using management assumptions and estimates (refer to note 6).

� In accordance with IFRS 3, the contingent consideration related to the purchase price allocation is recognised at fair value. the fair value

is based on the estimated number of earn-out shares in evolva Holding SA which the Company may transfer to the former shareholders

of Abunda. the number of earn-out shares will depend on the impact of public announcements related to the assets acquired from

Abunda within 19 months after the acquisition. the estimated number of shares is multiplied by the evolva share price at the reporting

date. As a result, the value of the contingent consideration will be subject to changes over time reflecting changes in the fair value.

� evolva measures the cost of equity-settled transactions with key employees and directors by reference to the fair value of the equity in-

struments at the date at which they are granted and subtracting any payment by the recipient. estimating the fair value requires deter-

mining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the

grant. In case of options, this also requires determining the most appropriate inputs to the valuation model including the expected life of

the option, volatility and dividend yield and making assumptions about them. the assumptions and models used are disclosed in note 26.

the following areas involve a higher degree of judgement or complexity and can have a significant impact on the consolidated financial

statements:

� Acquisitions of companies are deemed as business combinations or as asset deals. the Company always performs detailed analyses of the

operational and financial implications before taking over a company. nevertheless, an acquisition or a merger with a company involves a

high degree of judgement.

2.3. Principles of consolidationSubsidiaries

Subsidiaries in which the Company has a controlling interest, directly or indirectly, are consolidated. Control is defined as the power to govern

the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is normally evidenced when the

Company owns, either directly or indirectly, more than 50% of the voting rights or potential voting rights of a company’s share capital that

are currently exercisable. Investments in which the Company does not exercise significant influence (generally ownership of less than 20% of

voting rights) are accounted for at cost. As of 31 December 2012, the Company holds only subsidiaries with more than 50% of the voting

rights.

Intra-Group transactions

Intercompany balances and transactions have been eliminated in the consolidation process. Intercompany transactions result from one

company providing services to another Group company or the transfer of assets within the Group.

49


Basis of consolidation

the consolidation commences from the date on which control is transferred to the Company and subsidiaries are no longer consolidated

from the date that control ceases. the consolidated financial statements include the accounts of evolva Holding SA (Switzerland), evolva SA

(Switzerland), evolva, Inc. (uSA), evolva nutrition Inc. (uSA), evolva Biotech A/S (Denmark), evolva Biotech private limited (India) and Arpida

uK (united Kingdom).

Changes in the scope of consolidation

tlt Medical AG in liq. has been liquidated and deconsolidated as of the reporting date.

Business combinations

Business combinations are accounted for using the acquisition method. the cost of an acquisition is measured as the aggregate of the con-

sideration transferred, measured at the acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each

business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of

the acquiree’s identifiable net assets. Acquisition costs incurred are expensed.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in

accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combina-

tion is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair

value as of the acquisition date through profit and loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to

the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39 in

profit or loss. If the contingent consideration is classified as equity, it shall not be remeasured until it is finally settled within equity.

Goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually iden-

tified and separately recognised.

Goodwill is initially measured at cost being the excess of the aggregate of consideration transferred, non-controlling interests and the ac-

quirer’s previously held equity interests in the acquiree over the net identifiable assets acquired and liabilities assumed. If this consideration is

lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised as a gain in the statement of financial per-

formance (badwill).

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill

acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to

benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

the carrying amount of goodwill will be tested annually for impairment or when events or changes in circumstances indicate that the carrying

amount is not recoverable. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating

units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (higher of value in use or fair value less

cost to sell) is less than their carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed

in future periods.

50


Foreign currency translation

the consolidated financial statements are expressed in Swiss francs (CHF). each company in the Group uses its corresponding functional cur-

rency and items in the financial statements of each entity are measured using that functional currency. transactions in foreign currencies are

initially recorded in the functional currency using the exchange rate at the date of the transaction. Monetary assets and liabilities denom-

inated in foreign currencies are translated in the functional currency using the exchange rate at the reporting date. non-monetary items that

are measured at historical cost in a foreign currency are translated using the exchange rates as of the dates of the initial transactions.

upon consolidation, assets and liabilities of all subsidiaries reporting in foreign currency are translated into Swiss francs using the exchange

rate at the reporting date. their statement of financial performance and cash flow statement are translated at the average exchange rates in

which the transactions have taken place. the exchange differences arising on the translation into Swiss francs are recognised in the statement

of comprehensive income. on disposal of a foreign operation, the deferred cumulative amount recognised within equity relating to that par-

ticular foreign operation is recognised in the statement of financial performance as gain or loss on sale of that foreign operation.

Revenue recognition

Revenue from conducting research and development for a third-party is based on the stage of completion of research performed to date as a

percentage of total research to be performed and/or by the milestones achieved.

Revenue received from R&D partners as payment for access to evolva’s technology is recognised over the period during which the technology

is being applied to the relevant partner project.

Funding received from partners as compensation for evolva’s purchase of partner-specific related assets is presented in the statements of

financial position as deferred income and released over the period in which the Company is providing services with the particular asset. As

evolva has full control over these assets, evolva capitalises and depreciates these assets over their useful life in accordance with IFRIC 18.

public R&D grants (from the european union or national organisations or national governments) are recognised as income from R&D grants

over the relevant project period to match the related costs they are intended to compensate, on a cost-to-cost basis. public grants are recog-

nised, if there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates

to an expense item, it is recognised as income over the defined period to match the grant on a systematic basis to the costs that it is intended

to compensate.

Interest income is recognised on a time proportion basis using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments which are

readily convertible to known amounts and have a maturity of three months or less from the date of acquisition. this definition is also used for

the definition of cash and cash equivalents in the consolidated statement of cash flow.

Financial assets and liabilities

Financial instruments carried on the statement of financial position include cash and cash equivalents, receivables, financial investments (rent

deposits), trade accounts payable, certain accrued and other current liabilities as well as contingent consideration.

Cash and cash equivalents, accounts receivable, other receivables and rent deposits represent financial assets classified as loans and receiva-

bles whereas trade accounts payable, selected accrued and other current liabilities are financial liabilities at amortised cost, respectively, with

fixed or determinable payments that are not quoted in an active market. they arise when the Company provides or receives money, goods or

services directly to a supplier or from a client, respectively, with no intention of trading the receivable or payable. they are included in current

assets and current liabilities, except for maturities longer than twelve months after the reporting date, in which case they are classified as

non-current assets and non-current liabilities and shown separately in the statement of financial position. non-current assets/liabilities are

51


Group of assets useful life (years)

Buildings 50

leasehold & building improvements 5-20

Furniture & fixtures 5-8

laboratory equipment 4-6

office & It equipment 3-8

measured at amortised cost, i.e. the amount at which the financial asset or liability is measured at initial recognition minus principal

repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and

the maturity amount.

Financial liabilities designated upon initial recognition as at fair value through profit or loss include contingent considerations. Gains or

losses on contingent considerations are recognised in the statement of financial performance.

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

the Company assesses at each reporting date whether there is objective evidence that the financial assets are impaired. Impairment losses are

recognised in the statement of financial performance.

Plant and equipment

plant and equipment are recorded at historical cost less accumulated depreciation and amortisation. Depreciation expense is recorded utilising

the straight-line method over the estimated useful life of the assets or, if shorter, the term for the leasehold improvements. Assets are written

down to their estimated residual value, which usually is determined as zero. the useful lives are summarised as follows:

Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, as appropriate, only when it is probable that

future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. the carrying

amount of the replaced part is derecognised. Repairs and maintenance costs are expensed as incurred.

Intangible assets

Costs of purchasing intellectual property rights are capitalised as intangible assets when it is probable that future economic benefits will be

generated. Costs of applying for patents for internally developed products and costs of defending existing patents are considered discovery

expenses and are expensed as incurred.

Intangible assets (other than goodwill) are initially valued at cost or, if acquired within the context of a business combination, recorded at fair

value. Generally, intangible assets are amortised over their useful lives on a straight-line basis. Intellectual property on acquired in-process

research and development is amortised on a straight-line basis once commercialisation of related products starts. patents and patent

applications are amortised over their patent lifetime.

Inventory

Inventory consists of chemical and biological agents as well as not used laboratory consumables. Inventory is measured at weighted average cost.

Impairment of long-lived assets

property, plant and equipment and intangible assets (other than goodwill) are reviewed for impairment whenever events or changes in cir-

cumstance indicate that the carrying amount of such assets may not be recoverable. When the recoverable amount of the property, plant and

equipment, being the higher of its fair value less costs to sell or its value in use, is less than its carrying amount, then an impairment in the

52


carrying amount is recorded. evolva estimates its value in use based on the future cash flows expected to result from the use of the asset. For

purposes of assessing impairment, assets are grouped at the lowest level at which cash inflow can be separately identified. property, plant and

equipment to be disposed of are not depreciated and reported at the lower of carrying amount or fair values less cost to sell.

leases

leases are classified as operating leases where a significant portion of the risks and rewards of ownership are retained by the lessor. payments

made under operating leases (net of any incentives received from the lessor) are charged to the statement of financial performance on a

straight-line basis over the period of the lease.

leases of tangible fixed assets are classified as finance lease if evolva retains substantially all the risks and rewards of ownership. Finance

leases are capitalised at the lease commencement at the lower of the fair value of the leased asset and the present value of minimum lease

payments. each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance

outstanding. the corresponding rental obligations, net of finance charges, are included in other short-term and other long-term payables. the

interest element of the finance cost is charged to the statement of financial performance over the lease period so as to produce a constant

periodic rate of interest on the remaining balance of the liability for each period. the asset acquired under finance lease is depreciated over

the shorter of the useful life of the asset and the lease term.

Provisions

evolva recognises provisions when it has a present legal or constructive obligation to transfer economic benefits as a result of past events and

if a reasonable estimate of the obligation can be made and an outflow of resources is probable.

Share-based compensation

Key persons of evolva are eligible to participate in incentive option plans. the fair value of these options is estimated at the grant date and

recorded as an expense over the vesting period. the expense is charged to the statement of financial performance within operating expenses

and a corresponding increase is recorded in equity. At each reporting date, evolva revises its estimates of the number of options that are

expected to vest. It recognises the impact of the revision of original estimates, if any and significant, in the statement of financial performance

and a corresponding adjustment to equity. Any subsequent cash flows from exercises of vested options are recorded as an increase in equity.

the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when

the options are exercised.

Treasury shares

own equity instruments which are reacquired (treasury shares) are recognised at cost and deducted from equity. no gain or loss is recognised

in the statement of financial performance on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference

between the carrying amount and the consideration received or paid is recognised in equity.

Pension and other past employment benefits

In accordance with employment contracts, some of the evolva companies pay a monthly contribution to private pension plans. Contributions

are recognised as employee benefit expenses when they are due.

For the defined benefit plans the pension liability is calculated regularly by an independent actuary using the projected unit credit method. the

defined benefit obligation is measured as the present value of the estimated future cash flows using a discount rate based on the interest rate

of high-quality corporate bonds. the charge for such pension plans, representing the net periodic cost, is included in the staff costs. plan as-

sets are recorded at their fair values. Actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are

53


recognised over the average remaining service lives of the related employees. they are recorded if these differences exceed 10% of the higher

amount of the present value of the defined benefit obligation and the fair value of plan assets at the beginning of the year (corridor method).

Research and development expenses

expenses for research and development comprise:

� Technology and discovery expenses: Salary and other compensation to discovery staff and consultants; intellectual property costs; labora-

tory costs and other expenses directly related to the technology and discovery activities, including corresponding depreciation of property and

equipment.

� Product development expenses: Salary and other compensation to development staff and consultants; intellectual property costs; costs

related to trials and other development of evolva’s product candidates, including costs of manufacturing; expenses for services under col-

laboration agreements as well as outsourced development at contract research institutions and the corresponding depreciation of property

and equipment.

Research and development expenses are fully charged to the statement of financial performance as incurred. evolva considers that regula-

tory and other uncertainties inherent in the development of its products preclude it from capitalising development costs under IFRS. Costs

incurred related to products which have achieved regulatory approval by the uS Food and Drug Administration or comparable regulatory body

are likely to be capitalised because it is probable that these costs will give rise to future economic benefits.

General and administrative expenses

General and administrative expenses consist of salary and other compensation to management, Board as well as commercial and administra-

tive staff; costs related to business development, investor relations, legal services, auditing, tax, financial advice and other expenses related to

general and administrative functions.

Deferred income taxes

Deferred taxes are provided using the liability method for all temporary differences between the tax bases of assets and liabilities and their

carrying values for financial reporting purposes, except for those temporary differences related to investments in entities where the timing of

their reversal can be controlled and it is probable that the difference will not reverse in the foreseeable future. Deferred tax assets relating to

the carry-forward of unused tax losses and other deductible temporary differences are recognised to the extent that future taxable profit is

expected to be available. the recognition and utilisation of deferred tax assets is assessed on an annual basis. Deferred taxes are based on tax

rates currently enacted or substantially enacted and which are expected to apply when the related deferred tax asset is realised or the deferred

tax liability is settled.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax

liabilities and when the deferred income taxes relate to the same tax jurisdiction.

Earnings/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the net profit/(loss) attributable to ordinary shareholders of the parent by the weighted

average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing the net profit attributable to the

ordinary shareholders of the parent by the weighted average number of shares outstanding during the period adjusted for the conversion of all

dilutive potential ordinary shares.

54


Borrowing costs

Borrowing costs which are directly attributable to an acquisition, construction or production of a qualifying asset as part of the cost of that

asset are capitalised. All other borrowing costs are recognised as expenses in the period in which they are being incurred.

Dividends

the Company may declare dividends upon the recommendation of the Board of Directors and the approval of shareholders at their Annual

General Meeting. the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable

future.

Segment reporting

evolva reports the financial performance of its operating segments according to the “management approach” required by IFRS 8. Generally,

the information to be disclosed is what management uses internally for evaluating segment performance and deciding how to allocate re-

sources. evolva operates in one segment of research and development. the Board of Directors and the Group Management being the chief

operating decision makers assess the performance of the operating segment and allocate resources on a consolidated level. evolva generates

revenue from R&D partnerships and the Company expects to generate revenues from commercialisation of its product candidates in future.

2.4. Changes in accounting policiesthe accounting policies which were adopted are consistent with those of the previous year, except for those described below.

Various standards and interpretations of the IFRS have been revised or were introduced with effective date 1 January 2012, or before. the follow-

ing changes in standards had neither an effect on accounting policies nor on reported amounts or disclosures in these financial statements:

� IAS 12 Amendment - Deferred tax: Recovery of underlying Assets.

� IFRS 7 Amendment - Disclosures: transfers of Financial Assets.

the Group will apply the following rules for the first time as of the dates stated in the respective standard. Currently being evaluated are the

following relevant standards and interpretations:

Various Annual Improvements to IFRSs. effective for annual periods beginning on or after 1 January 2013.

IAS 1 Amendment - presentation of Items of other Comprehensive Income. effective for annual periods beginning on or after 1 July 2012. employee Benefits. effective for annual periods beginning on or after 1 January 2012.

IAS 19 (revised) upon application of IAS 19R retrospectively as at 1 January 2012, evolva will recognise accumulated actuarial losses against opening equity and any movements therein immediately in other comprehensive income. According to IAS 19R, evolva would report a pension liability of CHF 1.3 million as at 1 January 2012, resp. CHF 1.1 million as at 31 December 2012, which would result in a decrease of equity of the same amount. CHF 0.1 million would impact evolva’s oCI.

IAS 27 (revised) Separate Financial Statements. effective for annual periods beginning on or after 1 January 2013.

IAS 28 (revised) Investments in Associates and Joint Ventures. effective for annual periods beginning on or after 1 January 2013.

IAS 32 Amendment – offsetting Financial Assets and Financial liabilities. effective for annual periods beginning on or after 1 January 2014.

55


IFRS7 Amendment – Disclosures-offsetting Financial Assets and Financial liabilities. effective for annual periods beginning on or after 1 January 2013.

IFRS 9 Financial Instruments (issued in 2009 and 2010). effective for annual periods beginning on or after 1 January 2015.

IFRS 10 Consolidated Financial Statements. effective for annual periods beginning on or after 1 January 2013.

IFRS 11 Joint Arrangements. effective for annual periods beginning on or after 1 January 2013.

IFRS 12 Disclosure of Interests in other entities. effective for annual periods beginning on or after 1 January 2013.

IFRS 13 Fair Value Measurement. effective for annual periods beginning on or after 1 January 2013.

IFRIC 20 Stripping Costs in the production phase of a Surface Mine. effective for annual periods on or after 1 January 2013.

3. Risk management disclosure in accordance with Swiss Code of Obligations

Management regularly evaluates the Group’s identified operating and financial risks in regard to their probability and potential impact. With

the consent of the Board of Directors, appropriate measures are taken to eliminate or to mitigate the risks identified. the remaining risks for

the Group are continuously being monitored. the Board of Directors reviews the Group’s risk management on a regular basis.

4. Financial risk management

Financial risk factors

Financial risk management is governed by policies and guidelines approved by management. these policies cover foreign exchange risk,

interest rate risk, liquidity risk and credit risk.

liquidity risk

evolva’s objective when managing its liquidity is to secure sufficient funding for its operating activities, to ensure the Company’s ability to

continue as going concern and to preserve capital on the required statutory level.

Management regularly updates its cash flow projections to enable the Group companies to finance its research, development and commercialisa-

tion activities for at least one to two years. to date, evolva has financed its cash requirements primarily from revenues and equity financing.

the interest rates on the mortgage loans (related to the former facility in Allschwil) are either fixed to maturity or variable. Refer to note 13

for further details on mortgages and related interest rates. Standard mortgage covenants have been agreed with the bank. the Group is in

compliance with the bank covenants as at 31 December 2012 and the previous year.

the table below analyses evolva’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of

financial position to the contractual maturity date. the amounts disclosed in the table are the contractual undiscounted cash flows.

56


Market risk

the evolva Group sources supplies of materials as well as discovery, development, consulting and other services in several countries and

operates three non-Swiss subsidiaries with significant operational activities. the Group is therefore exposed to foreign currency movements

affecting its net result and financial position, as expressed in Swiss francs. evolva monitors its currency exposures by regularly assessing future

spending plans in foreign currencies.

Foreign currency sensitivity analysis

evolva applies a sensitivity analysis to assess its foreign exchange exposure risks. evolva’s sensitivity analysis provides an approximate

quantification of the exposure in the event that certain parameters were to be met under a specific set of circumstances. the risk estimates

provided herein assume a simultaneous, parallel foreign exchange rates shift in which the CHF gains in value against all currencies by 5%.

less than 3 months

between 3 months

and 1 year

between 1 year

and 5 years Over 5 years TotalCarrying amount

31 December 2012

lease liabilities 120,907 362,721 1,787,540 3,596,873 5,868,041 3,840,646

Accrued and other current liabilities 775,242 1,029,229 339,178 – 2,143,648 2,143,648

trade accounts payables 1,015,113 – – – 1,015,113 1,015,113

Mortgage loans – 4,910,345 – – 4,910,345 4,740,000

preferred redeemable shares – – 1,661,986 6,451,398 8,113,384 3,972,494

Total 1,911,261 6,302,295 3,788,703 10,048,271 22,050,531 15,711,901

31 December 2011

lease liabilities 148,266 444,801 2,355,006 2,676,711 5,624,783 4,102,574

Accrued and other current liabilities 851,441 252,988 1,117,332 – 2,221,762 2,221,762

trade accounts payables 1,695,774 45,298 – – 1,741,072 1,741,072

Mortgage loans – 2,721,044 2,272,600 – 4,993,644 4,828,000

Contingent liability – – 2,806,250 – 2,806,250 2,806,250

preferred redeemable shares – – – 7,877,860 7,877,860 3,974,072

Total 2,695,480 3,464,131 8,551,188 10,554,571 25,265,369 19,673,730

2012 uSD EuR GbP Other Total

Monetary assets 83,094 196,149 372 4,184 283,800

Monetary liabilities (5,418) (42,550) (1,636) (6,407) (56,012)

Net exposure 77,675 153,599 (1,264) (2,223) 227,787

2011

Monetary assets 201,538 233,048 253 9,447 444,286

Monetary liabilities (26,469) (99,767) (6,936) (792) (133,964)

Net exposure 175,070 133,280 (6,683) 8,655 310,322

57


the sensitivity analysis includes financial assets and liabilities related to third parties. As of 31 December 2012 and 2011, no hedge accounting

has been applied.

Interest rate risk

Interest rate risk arises from movements in interest rates, which could have adverse effects on evolva’s net result or financial position. loans

secured by property have either long-term fixed interest rates or if the interest rate is variable, evolva has the option of swapping into fixed

interested rates within a notice period of six months. other than cash and time deposits, the Group has no other material assets or liabilities

subject to interest income or expense.

Credit risk

Credit risk results mainly from counterparty’s failure to meet its obligation towards evolva. the major part of the Group’s revenues is derived

from commercial contracts with large international companies and government contracts for which the credit risk is limited. Cash and cash

equivalents are held with financial institutions with BBB- or better rating (Standard & poor’s long-term credit rating).

Fair value estimate of financial assets and liabilities

the carrying amount of the financial assets such as account receivables and other receivables as well as the financial liabilities such like trade

accounts payables and accruals and other liabilities are recorded at cost approximating fair value due to the short-term nature.

the fair value of the contingent consideration is calculated using valuation techniques that are not exclusively based on observable market

data / unobservable inputs (level 3 fair value measurements). See further information in note 6.

Capital management

the key objective of the Group’s capital management is to ensure evolva’s funding for its key activities planned on a mid-term basis, typically

two to three years. to maintain or adjust the capital structure, the Group may issue new shares, obtain convertible loans or extend existing

loans. until now, the company has been primarily financed with equity. In future new funding may also come as equity but the company will

pursue other types of financing if it deems the relevant terms and conditions to be attractive.

net debt includes interest-bearing loans and borrowings, loans from venture partners, trade and other payables, less cash and cash equiva-

lents. Capital includes convertible preference shares, equity attributable to equity holders of the parent less net unrealised gains reserve.

no changes were made to objectives, policies or processes during the years ending as at 31 December 2012 and 2011.

5. Changes in operation

As at 28 november 2012 (signing date), evolva SA acquired all scientific and technical assets related to fermentation-derived resveratrol from

Fluxome Sciences A/S (Fluxome), a private Danish company. under the asset deal, evolva SA acquired all patents, patent applications and

other intellectual property rights of resveratrol (CHF 1,295,589) as well as laboratory equipment (CHF 155,961).

In addition, evolva shall make the following payments to Fluxome A/S:

� 6 months after signing CHF 0.4 million in cash - calculated as 5% of the net cash raised by evolva in its public offering up to CHF 8 million;

� 12 months after signing, additional CHF 0.4 million in cash - calculated as 5% of the additional net cash raised by evolva in its public of-

fering up to CHF 16 million.

58


If evolva raises less than CHF 8 million resp. CHF 16 million, the remainder shall be paid in evolva Holding SA shares.

Based on the transaction details above, the Company has accounted for a financial liability of CHF 0.8 million as at reporting date.

In addition, royalties of 5% on resveratrol sales up to accumulated royalties of DKK 20 million (c. CHF 3.2 million) shall be paid to the seller.

there is no time limit on the royalty. During the reporting period, the company did not pay any royalties as no sales occurred.

6. Business combinations

there have been no business combinations in 2012.

on 17 May 2011, evolva Holding SA entered into an agreement with the shareholders of Abunda nutrition, Inc. (“Abunda”), a privately-held

biotech company domiciled in San Francisco, uSA, for the acquisition of 100% of the shares in Abunda.

the acquisition was conducted as a two-step merger process between Abunda and two newly created subsidiaries of evolva. After the merger

process, Abunda (renamed evolva nutrition, Inc.) was the sole surviving entity. All shares and other securities in Abunda were cancelled and in

exchange Abunda shareholders received at closing of the acquisition 25 million evolva Holding SA shares. In addition former Abunda share-

holders may receive up to 12 million evolva Holding SA shares depending on the impact on the evolva stock of potential public announcements

related to the assets acquired from Abunda as well as certain cash payments depending on revenues generated by the assets acquired from

Abunda. Moreover, evolva Holding SA granted at closing of the acquisition 2,643,626 options to key staff and advisors of Abunda in replace-

ment for existing options in Abunda.

the acquisition was consummated on 8 July 2011 whereupon evolva nutrition became a direct wholly owned subsidiary of evolva Holding SA

and the latter gained full control over evolva nutrition.

evolva’s primary reasons for the acquisition were to gain access to a synergistic combination of Ip, certain promising product candidates and

an experienced team with a successful track record in the nutrition industry.

At closing of the acquisition, former Abunda shareholders held in total 15.2% of the shares of evolva Holding SA.

the fair values of the identifiable assets and liabilities of the acquired company at the date of acquisition were determined as follows:

Final purchase price allocation Fair value recognised on acquisition Previous carrying value

CHF uSD uSD Cash & cash equivalents 3,108,347 3,692,851 3,692,851

prepayments and other receivables 130,712 155,292 155,292

Financial investments (rent deposits) 5,926 7,040 7,040

It & telecom 4,155 4,937 4,937

Ip rights (patents, patent applications) 34,492,724 40,978,857 -

trade accounts payables (99,113) (117,750 ) (117,750)

Accruals and other payables (141,742) (168,396) (168,396)

Deferred tax liabilities (12,072,453 ) (14,342,600 ) -

Fair value of net assets acquired 25,428,556 30,210,231 3,573,974

Goodwill arising on acquisition 12,260,206 14,565,659 -

Total purchase consideration 37,688,762 44,775,890 -

Fair value of share consideration 30,000,000

Fair value of earn-out consideration 5,446,250

Fair value of options consideration 2,242,512

Total consideration transferred 37,688,762

59


Fair value of intellectual property (IP)

the primary reason for the acquisition was to gain ownership of Abunda’s Ip portfolio in the food and nutrition area, in particular patents and

patent applications covering stevia. Based on cash flow projections for the relevant products over the next 20 years, evolva estimates the total

value of acquired patents and patents applications to be CHF 34.5 million.

Consideration transferred

the consideration transferred to Abunda shareholders comprised the initial transfer of 25 million evolva Holding SA shares at a closing price

of CHF 1.20 per share 1, in total CHF 30 million. In addition evolva estimated a fair value of CHF 5.4 million for the contingent consideration,

which consisted of

a. up to 12 million evolva Holding SA shares (stock earn-out) depending on the impact on the evolva stock of potential announcements

related to the assets acquired from Abunda within 19 months after the closing. the fair value was estimated using a probability weighted

average approach of stock earn-outs associated with a range of potential outcomes and combined with the share price at the closing date

of the acquisition.

b. cash payments (cash earn-out) related to potential revenues linked to agreements entered into for the assets contributed by Abunda

within 19 months after the closing. the cash earn-out amounted to a low two-digit percentage of the relevant revenues. the fair value

was estimated using a probability weighted average approach of cash earn-outs associated with a range of potential outcomes.

Moreover, evolva was obliged to replace existing options in Abunda with options in evolva with basically the same financial value. As

practically all Abunda options fully vested with the change of control, the fair value of these fully vested options was considered as part of the

consideration transferred.

Fair value of contingent consideration

As the contingent consideration is classified as a financial liability, evolva measures the fair value of the contingent consideration at each re-

porting date using partly unobservable inputs (level 3). the fair value is determined using a probability weighted average approach of the as-

sociated stock earn-out and cash earn-outs. Changes in fair value are presented in the consolidated statement of financial performance as

Change of fair value of contingent consideration.

on 14 March 2012, evolva issued 339,621 shares as stock earn-out payment in connection with a public announcement in December 2011

related to assets acquired from Abunda. the transaction results in a decrease of the contingent consideration of CHF 163,018.

As at 31 December 2012, the fair value of the contingent consideration amounts to CHF 0 compared to CHF 2.8 million as at 31 December 2011.

As the earn-out period expires as at 7 February 2013, the management does not expect any announcements related to the assets acquired from

Abunda between the year-end date and 7 February 2013. As a consequence the contingent consideration has fully been removed from the

Company’s liability resulting in a gain of CHF 2.6 million.

1 SIX closing price of evolva Holding SA share as at 8 July 2011.

60


Goodwill

Goodwill is recognised as an asset from the acquisition date and is measured as the excess of the consideration transferred over the interest

in the net fair value of the identifiable net assets acquired.

the estimated goodwill reflects expected synergies of combining the activities and the teams of evolva and Abunda, in particular the access

to an extensive industry expertise of the Abunda team members and their network in the food and nutrition industry.

none of the goodwill is expected to be deductible for tax purposes.

additional information to the acquisition of abunda

For the period from 1 January to 31 December 2011, evolva nutrition has generated losses of CHF 2,784,583, of which CHF 1,412,374

incurred since acquisition date. the acquisition costs for evolva nutrition amount to approximately CHF 633,334 and are recorded as part of

the general and administrative costs.

7. Segment and geographical information

the Group has identified one segment, namely research and development of novel food, nutritional and pharmaceutical products.

the geographical breakdown of total revenues below reflects the location where evolva’s invoices are generated:

until end of 2011, the Group generated the majority of its income from contracts with two agencies under the uS Department of Defense.

During the last three years, evolva has signed several new contracts with international commercial partners. Since 2012, evolva generates its

revenues only from contracts with commercial clients, compared with 2011, when 51% of evolva’s revenues were derived from the Department

of Defense. there was no income from transfer of assets from the Department of Defense in 2012 (2011: 17%).

the geographical breakdown of non-current assets (excluding rent deposits) is as follows:

CHF 2012 2011

invoicing entity

Switzerland 6,354,772 5,783,073

united States of America - 4,351,470

Rest of the world 659,670 945,678

Total income 7,014,442 11,080,221

CHF 2012 2011

Switzerland 26,848,341 26,157,573

Rest of the world 49,762,443 53,489,751


61


8. Research and development

Research and development expenses include the following functions:

9. Financial result

10. Income taxes

Consolidated income tax statement comprises:

CHF 2012 2011

Charges related to bank accounts (45,490) (317,018)

Interest expenses (643,603) (453,022)

SeDA commitment fee - (600,000)

Foreign exchange loss (267,560) (1,203,048)

Total financial expenses (956,653) (2,573,087)

Interest income 29,771 156,011

Foreign exchange gain 181,797 1,657,501

Total financial income 211,568 1,813,512

Net financial result (745,085) (759,575)

CHF 2012 2011

Current income taxes of which corresponding to the current period (1,652) (11,385)

Deferred income taxes of which related to the origination or reversal of temporary differences 1,503,696 1,133,729

Total income tax (expense) 1,502,044 1,122,344

CHF 2012 2011

technology & discovery 16,034,794 19,304,782

product development 3,489,611 8,188,679

Total R&D expenses 19,524,405 27,493,461

62


the main elements contributing to the difference between the Company’s overall expected tax rate (as a weighted average of the tax rates in

the tax jurisdictions in which evolva operates) and the effective income tax expense are:

Impact of expenses not entitled for deduction for tax purposes includes mainly expenses for evolva’s share option plan, pension accounting

and SeDA expenses (note 23) under IFRS which are not deductible under any jurisdiction where evolva currently has operations.

11. Deferred tax assets and liabilities

net deferred tax liabilities resulted from capitalisation of intellectual property rights in evolva nutrition, Inc.

CHF 2012 2011

tax loss carried forward 1,154,935 347,536

Total deferred tax assets 1,154,935 347,536

temporary differences on patents and patent applications (12,244,159) (13,296,720)

Total deferred tax liabilities (12,244,159) (13,296,720)

Total net deferred tax liabilities (11,089,224) (12,949,184)

CHF 2012 2011

Accounting loss before income tax (18,155,610) (24,054,628)

expected tax rate (27.9%) (26.0%)

expected tax income at Group level 5,065,099 6,253,017

Impact of expenses not entitled for deduction for tax purposes (1,299,484) (1,488,468)

Impact of current losses for which no deferred tax is recognised (2,816,021) (4,257,907)

Change in contingent consideration 737,416 686,270

Impact of different tax rates (184,965) (70,568)

Effective income tax (expense) 1,502,044 1,122,344

63


the movement of net deferred income taxes and liability position is as follows:

evolva has tax loss carry-forwards, which are available to offset future taxable income. the loss carry-forwards with their expiry dates are as

follows:

unrecognised tax loss carry-forwards and deductible temporary differences would give rise to deferred tax assets of CHF 19,635,279 in 2012

and CHF 19,796,241 in 2011.

CHF 2012 2011

Within one year 18,291,228 14,143,741

later than one year and no later than five years 132,385,733 105,315,431

More than five years 39,539,137 43,421,497

Total tax loss carry-forwards 190,216,098 162,880,669

- of which recorded 3,339,869 821,682

- of which unrecorded 186,876,229 162,058,987

CHF 2012

1 January 2011 (446,458)

tax income during the period 1,133,729

Deferred taxes acquired in business combination (12,072,453)

translation effects (1,564,002)

31 December 2011 (12,949,184)

tax income during the period 1,480,089

translation effects 379,871

31 December 2012 (11,089,224)

64


12. Property, plant and equipment

CHFlaboratoryequipment

Furnitures and fixtures

Office and iT equipment

leaseholdimprovements building land Other Total

Historical cost

1 January 2011 8,338,997 1,409,909 1,091,556 4,663,190 - - 304,048 15,807,700

Additions 416,007 4,400 153,282 118,475 - - 321,643 1,013,806

Disposals (42,020) (8,962) (32,340) - - - (2,422) (85,744)

Acquisition - 337 3,818 - - - - 4,155

Reclass from assets held for sale - - - - 4,874,694 445,500 - 5,320,194

transfers (1,570) (445,100) 1,570 445,100 - - - -

translation effects (88,584) (51,397) (46,942) (39,857) - - 186 (226,595)

31 December 2011 8,622,829 909,270 1,174,636 5,186,908 4,874,694 445,500 623,455 21,837,293

Accumulated depreciation

1 January 2011 (4,473,310) (214,078) (679,830) (602,357) - - (229,068) (6,198,643)

Additions (1,297,231) (87,623) (190,225) (447,247) (327,557) - (126,029) (2,475,912)

Impairment assets under IFRIC 18 (1,353,319) - - - - - - (1,353,319)

Disposals 2,373 4,337 30,553 - - - - 37,263

Reclass from assets held for sale - - - - (977,541) - - (977,541)

transfers - - - - - - - -

translation effects (111,754) 4,146 24,398 39,857 - - (323) (43,677)

31 December 2011 (7,233,242) (293,302) (818,797) (1,009,747) (1,305,098) - (355,419) (11,015,605)

Net book value at 31 December 2011 1,389,587 615,968 355,840 4,177,161 3,569,596 445,500 268,036 10,821,705

Historical cost

1 January 2012 8,622,829 909,270 1,174,636 5,186,908 4,874,694 445,500 623,455 21,837,293

Additions 375,419 - 39,725 30,090 - - 45,898 491,132

Disposals - - - - - - - -

transfers 364,450 - - - - - (364,450) -

translation effects (139,441) (14,387) (19,989) (18,702) - - (7,552) (200,071)

31 December 2012 9,223,258 894,883 1,194,372 5,198,296 4,874,694 445,500 297,351 22,128,354

Accumulated depreciation

1 January 2012 (7,233,243) (293,302) (818,797) (1,009,747) (1,305,098) - (355,419) (11,015,605)

Additions (417,126) (74,728) (186,698) (363,790) (218,372) - (64,473) (1,325,188)

Disposals - - - - - - - -

transfers (116,173) - - - - - 116,173 -

translation effects 116,672 3,562 13,305 14,183 - - 6,368 154,090

31 December 2012 (7,649,870) (364,469) (992,190) (1,359,354) (1,523,470) - (297,351) (12,186,703)

Net book value at 31 December 2012 1,573,388 530,415 202,182 3,838,942 3,351,224 445,500 - 9,941,669

65


transfers in 2012 are related to reclassification of laboratory equipment, which initially was used for other purposes and has been reclassified

as laboratory equipment in 2012.

the Group recorded depreciations of CHF 1,183,554 in 2012 (2011: CHF 2,340,950) as part of technology and discovery expenses, CHF 25,027

(2011: CHF 11,883) as product development expenses and CHF 116,607 (2011: CHF 123,080) as part of general and administrative expenses in

the statement of financial performance.

13. Mortgages and loans

evolva’s property in Allschwil, Switzerland, has a book value of CHF 3,796,724 (2011: CHF 4,015,096) and associated mortgages amount to CHF

4,740,000 (2011: CHF 4,828,000) as at 31 December 2012. the value of the premises has been assessed by an independent real estate expert as

at 31 December 2011. the valuation did not result in any impairment. evolva deems the value of its building to be not below market value as

at 31 December 2012.

CHF 2,200,000 of the mortgage loans are due to repayment by 31 December 2013. the remaining credit facility of CHF 2,540,000 is agreed on

a short-term credit contract which can be swapped into a fixed credit contract within a notice period of six months.

14. Intangible assets

patents and patent applications are amortised in accordance with the patent life of 20 years. evolva has previously acquired certain rights to

intellectual property that has been developed by other companies but which can be used in combination with evolva’s technology platform

(“Ip assets”). they are amortised over a period of ten years.

As at 28 november 2012, evolva acquired intellectual property rights from Fluxome Sciences A/S related to a product called resveratrol at a

value of CHF 1,295,589 (note 5).

CHF 2012 2011

Current (short-term) 4,740,000 2,628,000

non-current - 2,200,000

Total 4,740,000 4,828,000

66


CHF iP assets Patents & patent applications Goodwill Total

Historical cost

1 January 2011 280,717 - 16,848,598 17,129,315

Additions from acquisition - 34,492,724 12,260,207 46,752,931

translation effects - 4,472,023 1,589,550 6,061,573

31 December 2011 280,717 38,964,747 30,698,355 69,943,819

Accumulated amortisation

1 January 2011 (105,750) - - (105,750)

Amortisation of the year (38,072) (908,757) - (946,829)

translation effects - (65,361) - (65,361)

31 December 2011 (143,822) (974,118) - (1,117,940)

Net book value at 31 December 2011 136,895 37,990,629 30,698,355 68,825,619

Historical cost

1 January 2012 280,717 38,964,747 30,698,355 69,943,819

Additions from acquisition - 1,295,589 - 1,295,589

translation effects - (1,144,950) (406,965) (1,551,914)

31 December 2012 280,717 39,115,386 30,291,390 69,687,494

Accumulated amortisation

1 January 2012 (143,822) (974,118) - (1,117,940)

Amortisation of the year (38,072) (1,921,969) - (1,960,041)

translation effects - 59,603 - 59,603

31 December 2012 (181,894) (2,836,484) - (3,018,377)

Net book value at 31 December 2012 98,823 36,278,903 30,291,390 66,669,116

Amortisation of intangible assets is fully recorded as technology and discovery expense.

Impairment testing of goodwill

Goodwill is tested for possible impairment annually at Group level. Management deems the Group with its technology platform as one cash-

generating unit (CGu). evolva performed the impairment test determining the recoverable amount based on the CGu’s fair value less costs to

sell represented by the market capitalisation. As at 31 December 2012, evolva’s market capitalisation is higher than the carrying value of the

cash-generating unit resulting in no impairment.

67


Sensitivity analyses

Depending on the future development of the market price of its shares, evolva may be required to record impairment to the goodwill. If, based

on the share price at year-end of CHF 0.36 (2011: CHF 0.54), the share price was to drop more than 2% (2011: 22%), an impairment of the

goodwill position would be required. Since reporting date evolva’s share price has increased to a level, which makes impairment of the goodwill

position unlikely for the time being.

15. Inventory

As at reporting date, no write-down of inventories has been recognised.

16. Prepayments and accrued income

17. Other receivables

18. Trade receivables

Accounts receivables result from partnership collaboration contracts with commercial clients. As at reporting date, no trade receivables are

overdue and no allowance for bad debt has been recognised.

CHF 2012 2011

laboratory consumables 45,965 35,622

Chemical agents 13,689 10,342

Total inventory 59,654 45,964

CHF 2012 2011

prepayments 81,000 343,541

Accrued income 265,686 411,781

other accruals 148,327 1,133

Total 495,013 756,455

CHF 2012 2011

Withholding tax 5,501 48,093

Credit balance VAt 210,675 308,298

other receivables 85,867 144,559

Total 302,042 500,950

68


19. Cash and cash equivalents

1 CHF 150,000 is pledged as security for credit card debts.

the Group has, in addition to the total cash and cash equivalents disclosed above, CHF 1 million restricted cash to fulfil collateral requirements

of its outstanding mortgage loans.

the effective interest rate received on cash and cash equivalents amounts to 0.18% (2011: 0.52%).

20. Share capital

the development of issued share capital over the past two years is as follows:

Total number of shares Evolva Holding Sa CHF

1 January 2011 139,560,125 27,912,025

Share issue from conditional capital 344,885 68,977

Share issue from authorised capital 33,000,000 6,600,000

Share issue from capital increase - -

31 December 2011 172,905,010 34,581,002

Share issue from conditional capital 438,269 87,654

Share issue from authorised capital - -

Share issue from capital increase - -

31 December 2012 173,343,279 34,668,656

CHF 2012 2011

Cash at bank and in hand1 8,922,822 21,881,702

Short-term bank deposits 182,429 811,939

Total cash and cash equivalents 9,105,251 22,693,641

69


21. Conditional and authorised capital

the development of conditional and authorised capital over the past two years is as follows:

22. Treasury shares

the development of treasury shares held by the Group over the past two years is as follows:

Conditional shares Authorised shares

Number of shares CHF Number of shares CHF

1 January 2011 43,386,144 8,677,229 31,906,510 6,381,302

Approved by AGM 2011 17,073,629 3,414,726 37,500,000 7,500,000

Issued (344,885) (68,977) (33,000,000) (6,600,000)

expired - - - -

31 December 2011 60,114,888 12,022,978 36,406,510 7,281,302

Approved by AGM 2012 23,000,000 4,600,000 50,000,000 10,000,000

Issued (438,269) (87,654) - -

expired - - (9,406,510) (1,881,302)

31 December 2012 82,676,619 16,535,324 77,000,000 15,400,000

bonus shares1 SEDA & other financing4 Total treasury shares

Shares CHF Shares CHF Shares CHF

1 January 2011 1,557,018 - - - 1,557,018 -

Issuance - - 8,000,000 1,600,000 8,000,000 1,600,000

Sale2 (284,268) - (1,764,404) (352,881) (2,048,672) (352,881)

31 December 2011 1,272,750 - 6,235,596 1,247,119 7,508,346 1,247,119

Issuance - - - - -

Sale3 (1,077,006) - (4,667,480) (933,496) (5,744,486) (933,496)

31 December 2012 195,744 - 1,568,116 313,623 1,763,860 313,623

1 treasury shares presented as at 1 January 2011 arose from an issuance of bonus shares by evolva SA before the reverse acquisition of Arpida AG in 2009. Hence their book value is nil.

2 As part of a coordinated share sale by the key shareholders of evolva, 284,268 shares were sold on behalf of Ventureast/ApIDC in 2011. the proceeds from the sale of these treasury shares were directly transferred to Ventureast/ApIDC. In exchange for the treasury shares sold, evolva SA increased its participation in evolva India by 1.2% to 60%

3 In 2012, 1,077,006 shares have been transferred to Fluxome Science A/S as part of the consideration for intellectual property and laboratory equipment acquired (note 5). 4 Refer to note 23 for further information on SeDA.

70


23. Standby equity financing (SEDa) and treasury shares

on 15 August 2011, evolva entered into a Standby equity Distribution Agreement (SeDA) with YA Global Master SpV ltd. (YA Global) as part of the

medium-term funding of evolva’s operations. under the terms of the agreement, YA Global has committed to provide up to CHF 30 million in

equity financing over a 36-month period in individual advances of up to CHF 600,000. In exchange for the funds to be provided, YA Global will

receive evolva Holding SA shares. It remains at the sole discretion of evolva to determine when to draw the advances and the amount to draw.

evolva Holding SA created eight million treasury shares out of its authorised capital in 2011 to be used for the share issues under the SeDA

agreement as well as for other financing purposes.

Within the reporting period, evolva has drawn CHF 1,894,955 (net proceeds) from SeDA, leading to delivery of 4,667,480 shares to YA Global.

In 2011, evolva delivered 1,099,437 shares to YA Global for total net proceeds of CHF 824,998.

24. loss per share

Basic loss per share is calculated by dividing the net loss attributable to ordinary shareholders by the weighted average number of ordinary

shares outstanding during the year. For the calculation of diluted loss per share, profit and loss and the weighted average number of ordinary

shares are adjusted for the effects of all dilutive potential ordinary shares outstanding during the year.

For the years ended 31 December 2012 and 31 December 2011, basic and diluted loss per share is based on the weighted average number of

shares issued and outstanding, and excludes shares to be issued upon the exercise of options or conversion of preferred shares as these po-

tential ordinary shares would be anti-dilutive. In case evolva shows a profit in the future, the options may have a dilutive effect on the net

profit per share and will need to be considered for the purpose of this calculation.

25. Preferred redeemable shares

evolva Biotech private limited (India) received financing from 2005 to 2010 from Ventureast and ApIDC, two Indian venture capital funds. At

each investment, the investors have been issued with convertible preference shares that are redeemable after ten years unless they have been

converted to shares in evolva Holding SA. Based on the terms of the preference shares and a discount rate of approximately 6%, part of these

compounded instruments has been recognised as long-term debt while the remainder has been recognised as part of equity / non-controlling

interests.

CHF 2012 2011

net loss attributable to shareholders of the parent (CHF) (16,089,948) (22,451,971)

Weighted average number of shares outstanding 173,323,434 156,426,918

Basic and diluted loss per share (CHF) (0.09) (0.14)

71


Since 2007, the two investors provided additional financing of totally CHF 6,565,000, of which CHF 2,941,000 (45%) has been recognised in

equity as increase of non-controlling interests while the remainder has been accounted for as long-term debt. In 2011, CHF 515,502 from sales

of treasury shares were transferred to the two investors in connection with the acquisition of 1.2% of interests in evolva India (note 22).

Interests charged on behalf of these preferred redeemable shares amount to CHF 234,462 in 2012 and to CHF 239,655 in 2011.

26. Incentive share and option programmes

the Board of Directors administers the Group’s option plans. the granting of options to management, employees and members of the Board

of Directors is done according to the Company’s option plan regulations.

In January 2012, a new share-based option plan (eVe IV) was established. options under this plan were granted on 1 January 2012 and will

vest over four years. options under this plan were granted to Board members, Management team and other employees.

In addition, evolva established a second share-based option plan (eVe V) in 2012. under this plan, all members of Board and management and

some staff members voluntarily agreed to exchange part of their cash compensation into share options. the option plan was launched in July

2012 with the aim to reduce the Company’s cash outflow over a twelve-months period. options for this plan were purchased as at 1 July 2012

and vest over a period of six to twelve months.

the table below illustrates the number-weighted average exercise price in CHF (WAep), the number of options outstanding (options) and the

weighted average years remaining contractual life (WAYCl) as at 31 December 2012.

A summary of options granted, exercised, forfeited and outstanding for the above plans is as follows:

Year of grant WAEP Options WAYCl

2009 - eVe I 0.33 13,635,891 6.9

2010 - eVe Ib 1.08 160,000 7.0

2011 - eVe II 1.64 2,731,505 8.3

2011 - eVe III (Abunda replacement) 0.20 2,543,626 7.0

2012 - eVe IV 0.55 5,157,650 9.0

2012 - eVe V 0.37 3,670,288 10.5

Total 0.50 27,898,960 7.9

Number of options WAEP

2012 2011 2012 2011

outstanding at 1 January 19,450,350 14,617,809 0.51 0.33

Granted 8,985,298 5,695,251 0.48 0.96

exercised 98,648 344,885 0.33 0.29

Forfeited 438,040 517,825 0.70 0.69

expired - - - -

Outstanding at 31 December 27,898,960 19,450,350 0.50 0.51

- of which exercisable 17,578,314 10,047,505 0.43 0.38

72


In 2012 and 2011, the following share-based payment expense for evolva option plans was recorded in evolva’s statement of financial perfor-

mance:

the fair value of the granted options has been determined by using a binomial option valuation model. the resulting expenses for the Com-

pany are recognised over the vesting period. the key parameters in the valuation model were as follows:

In addition to all eVe plans, a total of 1,058,714 former Arpida options are outstanding and exercisable. the exercise price is between CHF 0.67

and CHF 22.00. All former Abunda option plans expire between 2017 and 2019. there have been no exercises of former Arpida options during

the reporting period.

27. Employee benefits and compensation

evolva maintains retirement plans covering its employees in Switzerland, Denmark and India. the plans for evolva Biotech A/S (DK) and evolva

Biotech private limited (India) are considered to be defined contribution plans and therefore no actuarial calculations under IAS 19 have been

performed. expenses of CHF 134,653 (2011: CHF 107,311) were recognised for the Danish plan and expenses of CHF 61,644 were recognised

for the Indian plan in 2012 (2011: CHF 66,600).

the Swiss plan is considered a defined benefit plan in accordance with IAS 19. the plan is structured according to the principles of the Swiss

occupational Benefits law (BVG) and is substantially identical to the BVG programme except that the Company plan also covers salaries above

the salary limit of the BVG. the Company and its employees pay retirement contributions, which are defined as a percentage of the employees’

insured salaries, to a collective pension fund operated by an insurance company. Interest is credited to the employees’ accounts at the min-

imum rate provided in the plan, payment of which is guaranteed by the insurance contract. Additionally, the plan provides benefits on the

death or long-term disability of plan participants.

2012 2011

technology & discovery 947,917 1,651,984

product development 508,403 923,546

General & administrative 1,797,282 2,467,359

Total expenses 3,253,602 5,042,889

Evolva option plans EVE V EVE iV EVE iii EVE ii EVE ib EVE i

Grant date 1.7.2012 1.1.2012 8.7.2011 31.3.2011 1.1.2010 8.12.2009

expiration date 31.12.2022 31.12.2021 31.12.2019 30.3.2021 31.12.2019 7.12.2019

Share price at grant CHF 0.40 CHF 0.54 CHF 1.20 CHF 1.50 CHF 1.04 CHF 1.35

exercise price CHF 0.37 CHF 0.55 CHF 0.20 CHF 1.64 CHF 1.08 CHF 0.33

Volatility 52.5% 52.5% 60.0% 60.0% 60.0% 60.0%

expected dividend yield 0% 0% 0% 0% 0% 0%

Risk-free rate 0.68% 1.117% 2.095% 2.329% 1.888% 1.888%

Fair value per option at grant CHF 0.23 CHF 0.26 CHF 1.02 CHF 0.82 CHF 0.65 CHF 0.98

73


For accounting purposes, this insurance contract represents the sole asset of the plan. the fair value of plan assets is the estimated cash

surrender value at the respective reporting date.

the amounts recognised in the statement of financial position for the Swiss plan are determined as follows:

Change in plan assets

Funding status

CHF 2012 2011

benefit obligation at 1 January 6,450,637 4,960,686

Current service costs 521,226 155,370

Interest costs 136,552 142,754

plan participants' contributions 299,480 439,788

Benefits paid / transfers in/out (1,062,840) 20,933

Actuarial (gains)/losses (602,940) 731,106

benefit obligation at 31 December 5,742,115 6,450,637

CHF 2012 2011

Fair value of plan assets at 1 January 4,918,763 3,846,937

expected return on plan assets 117,171 109,853

Actuarial gains/(losses) (133,188) (132,364)

employer contributions 299,480 633,616

plan participants' contributions 299,480 439,788

Benefits paid / transfers in/(out) (1,062,840) 20,933

Fair value at 31 December 4,438,866 4,918,763

CHF 2012 2011

Fair value of plan assets 4,438,866 4,918,763

present value of funded obligations 5,742,115 6,450,637

Over/(under)funding (1,303,249) (1,531,874)

unrecognised actuarial (gains)/losses 959,451 1,514,808

Net recognised asset/(liability) (343,798) (17,066)

74


The net periodic costs recognised in the statement of financial performance

of the total charge, CHF 225,445 (2011: CHF 117,452), CHF 29,406 (2011: CHF 22,667) and CHF 71,881 (2011: CHF 65,938) were included in

technology and discovery, product development, and general and administrative expenses, respectively. the actual return on pension plan

assets is presented below:

the Company expects to contribute approximately CHF 320,000 to the plan in 2013.

Overview and experience adjustments

CHF 2012 2011

Service costs 521,226 155,370

Interest costs 136,552 142,754

expected return on plan assets (117,171) (109,853)

Recognition of actuarial (gains)/losses 85,605 17,786

Net periodic cost 626,212 206,057

2012 2011

expected return on plan assets 117,171 109,853

Actuarial loss on assets (133,188) (132,364)

actual return on plan assets (16,017) (22,511)

CHF 2012 2011 2010 2009 2008

plan assets 4,438,866 4,918,763 3,846,937 3,413,577 1,164,360

Defined benefit obligation 5,742,115 6,450,637 4,960,646 3,989,816 1,728,308

Over/(under)funding (1,303,249) (1,531,874) (1,113,709) (576,239) (563,948)

experience adjustments:

- Fair value of plan assets 117,171 109,853 85,339 65,746 31,612

- Defined benefit obligation (loss) (823,516) 737,392 (127,105) (268,627) (19,952)

75


the principal actuarial expectations used for the Swiss plans were as follows:

Assumptions regarding the mortality experience are based on published statistics (BVG 2010).

Staff costs

28. accrued and other current liabilities

29. Deferred income

Some of the Company’s R&D partnering contracts include a technology access fee payment to evolva. these technology access fee payments

are presented in the statement of financial position as deferred income and are released over the period during which the Company is provid-

ing the services. As at 31 December 2012, evolva reports deferred income of CHF 1,989,136 (2011: CHF 634,692).

2012 2011

Discount rate 1.90% 2.25%

Return on plan assets within the period 1.90% 2.50%

Future salary increases 2.00% 2.00%

price inflation rate 1.00% 1.00%

long-term interest on retirement savings 1.90% 2.50%

Future pension increases 0.00% 0.00%

CHF 2012 2011

Wages and salaries 8,854,637 9,780,429

Share-based compensation 3,253,602 5,042,889

Social security costs 619,588 734,284

pension costs 559,616 612,633

other staff-related costs 386,049 477,517

Total staff-related costs 13,673,491 16,647,752

CHF 2012 2011

Accrued R&D costs 91,750 742,482

Accrued Fluxome consideration (note 5) 818,711 -

Accrued vacation 775,242 751,441

Accrued salaries and social security 210,518 252,988

other accruals 247,428 474,849

Total 2,143,648 2,221,762

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30. Finance lease

the Company has entered into rental contracts for office and laboratory space in Switzerland and for laboratory equipment in Denmark.

Some elements of these contracts qualify as a finance lease. At signing of the contracts, the rental period was 15 respectively 14 years unless

terminated earlier or extended.

the elements not qualifying for finance lease are disclosed in note 32 “Commitments and contingencies”.

In case evolva terminates the rental contract in Reinach, Switzerland, an amount of CHF 3,212,170 will become payable for leasehold

improvements. this amount gradually declines to CHF 0 by 30 november 2026.

31. Compensation to management and Board and related party transactions

the total remuneration for evolva’s Group Management team and Board of Directors during 2012 and 2011 was as follows:

Total compensation of Board of Directors and Group Management Team

Finance lease commitments 2012 2012 2011 2011

CHF

Future minimum lease payments

Present value of future minimum lease payments

Future minimum lease payments

Present value of future minimum lease payments

Within one year 483,629 431,692 593,066 524,722

Between one and five years 1,787,540 1,370,455 2,355,006 1,783,153

More than five years 3,596,873 2,038,499 2,676,711 1,794,699

Total minimum lease payments 5,868,041 3,840,646 5,624,783 4,102,574

less amounts representing financing charges (2,027,395) (1,522,209)

Total at 31 December 3,840,646 4,102,574

CHF 2012 2011

Short-term benefits: wages and salaries / Board compensation1 1,802,447 2,030,997

post-employment benefits (pension fund) 346,010 400,194

other long-term benefits - -

termination benefits - -

Share-based payments (fair value according to IFRS 2)2 1,960,583 4,815,649

Total compensation 4,109,040 7,246,840

1 Short-term employee benefits comprise salaries and bonus payments (none in 2012). In July 2012, Board and management members accepted to replace some of their cash compensation for 2012 and 2013 with stock options of evolva.

2 Based on the grant-date fair value of stock options granted in 2012 (resp. 2011) using a binominal assessment model.

77


Group Management Team compensation3

Board of Directors compensation

3 evolva’s Group Management team includes the Management team of evolva Holding SA plus the Ceos of evolva nutrition, Inc. and evolva Biotech private limited (India).4 Due to the acquisition of evolva nutrition, Inc. in July 2011, the 2011 numbers do not include the remuneration to the Ceo of evolva nutrition, Inc. for the first half-year 2011.5 Shows number of stock options granted in reporting period. options might vest over different periods, depending on the vesting scheme (refer to note 26).

32. Commitments and contingencies

Operating lease commitments

the future minimum lease payments under non-cancellable operating leases that are not accounted were as of year-end:

CHF 2012 2011

Short-term employee benefits4 1,576,197 1,740,997


Total compensation 1,903,994 2,123,066

Stock options (numbers)5 3,298,005 -

CHF 2012 2011

Short-term employee benefits 226,250 290,000


Total compensation 244,463 308,125

Stock options (numbers)5 1,973,250 560,000

CHF 2012 2011

Within one year 784,143 920,638

later than one year and not later than five years 2,771,709 3,221,757

later than five years 5,360,004 3,138,763

Total 8,915,856 7,281,157

78


Contingent liabilities

As part of its R&D operations, evolva has entered into agreements with other firms that either a) give evolva access to the partners’ intellec-

tual property rights, or b) provide for these firms to conduct discovery or development work at their risk. under these agreements, evolva will

be due to make certain milestone payments to the firms depending on whether evolva decides to progress the relevant products to defined

development and/or marketing milestones. evolva does not expect any significant payments before 2016. In the event that some of the

products reach market, evolva will have to pay 1.5-4% royalty on product revenues or up to 20% royalty on evolva licensing revenues.

In addition, the former owners of Abunda nutrition, Inc. are entitled to a share earn-out which will be determined based on the change in the

Company’s market cap related to announcements regarding the former Abunda assets. the earn-out consideration expires as at 7 February

2013. evolva does not expect any payments resulting from this agreement in 2013.

Other commitments

the Company has entered into various purchase commitments for services and materials as part of its ordinary business. these commitments

are not in excess of current market prices and reflect normal business operations.

33. Events subsequent to the reporting date

on 17 January 2013, evolva signed a 3½ year collaboration agreement with Ajinomoto Co., Inc., Japan, for the joint development of novel

fermentation production routes for a natural functional ingredient for application in personal care. the total fees and milestone payments to

evolva during the collaboration will amount to more than CHF 10 million. In case of commercialisation, evolva will receive a royalty as a

percentage on products sold.

As at 7 February 2013, the earn-out period related to the acquisition of Abunda Inc. expired. In 2012, 339,621 shares were transferred as

stock earn-out payment in connection with a public announcement related to assets acquired from Abunda Inc. (note 6). As no further public

announcements were made in this connection between the reporting date and the date of approval of these financial statements, the

remaining stock earn-out and cash earn-out payments expired.

As at 6 March 2013, the Company signed a collaboration agreement with Cargill, Inc. to jointly develop and commercialise fermentation-

derived steviol glycosides. Cargill will be responsible for commercialization and has agreed to make a CHF 4.5 million equity investment in

evolva. Additionally, evolva is entitled to receive up to uSD 7.5 million in milestone payments and has the right to a 45% participation in the

final business.

As at 27 March, 2013 the Company successfully closed a financing round of CHF 31.3 million, which includes CHF 4.5 million from Cargill as

mentioned above. the total new shares subscribed amount to 52,214,472.

As at 25 March 2013, the Company has issued 14 million treasury shares (from authorised capital) at nominal value, which will be held for use

under the Company’s agreements with SeDA and Ventureast respectively.

Between the reporting date and the authorisation of these consolidated financial statements by the Board of Directors as at 5 April 2013,

evolva has issued 1.6 million shares for SeDA advances, which contributed to a CHF 0.6 million cash inflow.

79

Report of the Statutory Auditor on the Consolidated Financial Statements

To the General Meeting of Evolva Holding Sa, Reinach

As statutory auditor, we have audited the consolidated financial statements of evolva Holding SA, Reinach, which comprise the consolidated

statement of financial position, consolidated statement of financial performance, consolidated statement of comprehensive income, consoli-

dated statement of cash flow and the consolidated statement of equity and notes to consolidated financial statement (pages 43 to 78) for the

year ended 31 December 2012.

Board of Directors’ responsibility

the Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with

International Financial Reporting Standards (IFRS) and the requirements of Swiss law. this responsibility includes designing, implementing and

maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free

from material misstatement, whether due to fraud or error. the Board of Directors is further responsible for selecting and applying appropriate

accounting policies and making accounting estimates that are reasonable in the circumstances.

auditor’s responsibility

our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accord-

ance with Swiss law and Swiss Auditing Standards and International Standards on Auditing. those standards require that we plan and perform

the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.

the procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consoli-

dated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system

relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system.

An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made,

as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained

is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the financial position,

the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.

Report on other legal requirements

We confirm that we meet the legal requirements on licensing according to the Auditor oversight Act (AoA) and independence (article 728 Code

of obligations [Co] and article 11 AoA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 Co and Swiss Auditing Standard 890, we confirm that an internal control system exists,

which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

ernst & Young ltd

Jürg Zürcher David Haldimannlicensed audit expert licensed audit expert(Auditor in charge)

Basel, 5 April 2013

80


81

Statutory Financial Statements of Evolva Holding SA

Statutory Financial Statements 2012 of Evolva Holding SA

Statement of financial position as of

CHF 31 December 2012 31 December 2011

Assets

Current assets

Cash and cash equivalents 104,815 4,263,969

other receivables 171,665 51,412

prepaid expenses - 101,931

Total current assets 276,480 4,417,311

Non-current assets

Investments in subsidiaries 43,481,666 48,481,666

long-term receivables - subsidiaries 6,799,254 3,739,200

equipment 304,000 342,000

Intangible assets 80,000 100,000

Rent deposit1 2,150,000 2,150,000


Total assets 53,091,400 59,230,177

liabilities and shareholders' equity

Current liabilities

trade accounts payables 53,700 -

other payables third parties 57,362 394,507

other payables related parties - 4,120

Accrued expenses and other current liabilities 574,873 597,867

Total current liabilities 685,936 996,494

Non-current liabilities

non-current financial liabilities related parties - 2,854,468

Total non-current liabilities - 2,854,468

Total liabilities 685,936 3,850,961

Shareholders' equity

Share capital 34,668,656 34,581,002

legal reserves

- Capital contribution reserves 27,390,345 26,444,025

- Reserve for treasury shares 313,623 1,247,119

- Accumulated deficit (6,892,933) (5,567,968)

- loss for the period (3,074,227) (1,324,965)

Total shareholders' equity 52,405,464 55,379,215

Total liabilities and shareholders' equity 53,091,400 59,230,177

1 See note 7.

82

Statutory Financial Statements of Evolva Holding SA

1 See note 7.

Statements of financial performance Period from 1 January to 31 December

CHF 2012 2011

Revenue

Management fee income - 3,488,593

Total revenues - 3,488,593

Staff costs (2,043,146) (2,418,002)

Rent and maintenance expenses1 - (1,349,940)

Administrative expenses (1,029,792) (1,451,193)

Depreciation tangible and intangible assets (58,000) (38,000)

Total operating expenses (3,130,939) (5,257,135)

extraordinary income 20,938 474,677

Financial income 57,283 77,806

Financial expenses (21,509) (108,906)

Net loss (3,074,227) (1,324,965)

83

Notes to the Statutory Financial Statements of Evolva Holding SA


evolva Holding SA (“the Company”) is the continuing company resulting from the combination on 11 December 2009 of Arpida AG, Reinach,

Baselland, and evolva SA, Allschwil, Baselland.

the Company is subject to the provisions of the Articles of Association and to article 620 et seq. of the Swiss Code of obligations, which de-

scribes the legal requirements for limited companies (“Aktiengesellschaft”).

the legal domicile of the company is:

evolva Holding SA

Duggingerstrasse 23

4153 Reinach, Switzerland

1. Fire insurance value of plant and equipment

2. Conditional and authorised capital

Conditional shares Authorised shares

Number of shares CHF Number of shares CHF

1 January 2011 43,386,144 8,677,229 31,906,510 6,381,302

Approved by AGM 2011 17,073,629 3,414,726 37,500,000 7,500,000

Issued2 (344,885) (68,977) (33,000,000) (6,600,000)

expired - - - -

31 December 2011 60,114,888 12,022,978 36,406,510 7,281,302

Approved by AGM 20121 23,000,000 4,600,000 50,000,000 10,000,000

Issued2 (438,269) (87,654) - -

expired - - (9,406,510) (1,881,302)

31 December 2012 82,676,619 16,535,324 77,000,000 15,400,000

1 the Annual General Meeting of 9 May 2012 approved the increase of conditional capital for financing purposes by CHF 4,600,000 (equal to 23,000,000 registered shares) and the increase of authorised capital for financing purposes by CHF 10,000,000 (equal to 50,000,000 registered shares) pursuant to article 3a and article 3abis of the Articles of Association and extension.

2 In 2012, CHF 19,730 (98,648 shares) of conditional capital was used for shares issued under evolva’s incentive option plans. In addition, CHF 67,924.20 (339,621 shares) were issued with regard to an earn-out payment to former Abunda shareholders.

CHF 2012 2011

Fire insurance value equipment 1,000,000 3,375,000

84


3. Treasury shares

In 2011, evolva Holding SA created eight million treasury shares from authorised capital to be used for the initial and future share issues under

the SeDA agreement and for other financing purposes. these treasury shares are kept in evolva SA’s books at nominal value. As at 31 Decem-

ber 2012, evolva SA holds 1,568,116 treasury shares at nominal value of CHF 0.20/share in its books (CHF 313,623). A reserve for treasury shares

has been recorded in evolva Holding in accordance with SCo.

4. Subsidiaries

In 2012, evolva Holding has transferred its participation in evolva nutrition, Inc. to evolva SA and dissolved its subsidiary tlt Medical ltd. in liq.

5. Major shareholders

the following table shows the shareholders with holdings of more than 3% as reported as at 31 December 2012:

6. Recoverability of subordination of loans

evolva Holding SA has subordinated intercompany loans of CHF 6,799,254 in favour of its subsidiary evolva SA as at 31 December 2012.

Research and development activities are primarily run by evolva SA and its operating subsidiaries whereas evolva Holding SA is the listed

company and has no research and development activities. In order to fund evolva’s research and development activities, evolva Holding grants

loans to its subsidiaries. the recoverability of these loans is ensured by the fair value of evolva Holding SA’s subsidiary whose accounts are kept

on a going concern basis. the fair value of evolva SA and the long-term recoverability of these loans depend on the future ability to close new

partnership contracts and the market success of evolva’s products in development. even though evolva is making promising progress, some

uncertainties remain as to whether success can be achieved.

Shareholder Holding in % of total outstanding shares

Abunda SR, llC 14.49%

Sunstone 9.75%

Wellington partners 6.66 %

Aravis Venture 5.45%

Renaissance 4.97%

entrepreneurs Funds 4.34%

Source: SIX reporting of significant shareholders

Name location Nominal capital Holding Purpose

evolva SA Switzerland CHF 6,369,540 100 % R&D

Arpida uK ltd. (inactive) united Kingdom GBp 1,000 100 % trade

85


7. Rent facilities and lease commitments not recorded in the statement of financial position

During the reporting period the Company has transferred the main rent agreement to one of its subsidiaries. As a consequence, no rent and

maintenance expenses have incurred during the reporting period and fire insurance values have been reduced to CHF 1 million. nevertheless,

the rent deposit remains with the Company. Due to this transfer, there are no unrecorded lease commitments to be disclosed in the reporting

year (2011: CHF 3,849,902).

8. Risk management

the Company regularly evaluates its identified financial and operating risks in regard to their probability and potential impact. With the con-

sent of the Board of Directors, appropriate measures are taken to eliminate or to mitigate the risks identified. the remaining risks for the

Company are monitored appropriately. the Board of Directors reviews the Company’s risk management on a regular basis.

9. Compensation and equity positions

In 2012, the Board of Directors and the the Group Management team agreed voluntarily to exchange part of their cash compensation into

share options. this option plan was launched in July 2012 and aims to save salary costs (cash) through a 12-month period. options were

purchased as at 1 July 2012 and vest over a period of six to twelve months. the total charge of this option plan amounts to CHF 480,102

(calculated with a binominal assessment model) and is included in the share option compensation tables for the financial year 2012 below.

9.1 Compensation and equity position of the Board of Directors

the total compensation paid to the members of the Board of Directors in 2012 is as follows:

Amounts in CHF base compensation Variable compensationOther

compensation4 Total

Cash1 Share options3 Cash Share options3

Sir tom McKillop, Chairman 22,500 121,339 - - 1,811 145,650

Claus Braestrup 35,000 58,567 - - 2,818 96,385

erich Schlick5 - 55,713 - - - 55,713

Ganesh Kishore 30,000 52,860 - - 2,415 85,275

Jean-philippe tripet 25,000 30,034 - - 2,013 57,047

Martin Gertsch 12,500 28,533 - - 1,006 42,039

Michel pettigrew 25,000 30,034 - - 2,013 57,047

nicole Dubois 32,500 54,287 - - 2,616 89,403

Stuart Strathdee 33,750 55,713 - - 2,717 92,180

thomas Videbaek 10,000 22,826 - - 805 33,631

neil Goldsmith2 - - - - - -

Total 226,250 509,906 - - 18,213 754,369

1 As of 1 July 2012, cash compensation for directors was reduced by 50% or more in exchange for share options with the same theoretical value. 2 neil Goldsmith is being remunerated as Ceo of evolva and receives no compensation for his Board activities.3 Based on the grant-date fair value of stock options granted in 2012 using a binominal assessment model.4 Includes employers’ contributions to pension plans, social security, life insurances, etc.5 erich Schlick represents one of evolva’s core shareholders (Wellington partners). Based on Wellington’s general policy, erich Schlick waived his right to receive a cash compensa-

tion for his Board activities.

86


the total compensation paid to the members of the Board of Directors in 2011 was as follows:

1 erich Schlick represents one of evolva’s core shareholders (Wellington partners). Based on Wellington’s general policy, erich Schlick waived his right in 2011 to receive a cash compensation for his Board activities.

2 neil Goldsmith is remunerated as Ceo of evolva and receives no compensation for his Board activities.3 Based on the grant-date fair value of stock options granted in 2011 using a binominal assessment model.4 Includes employers’ contributions to pension plans, social security, life insurances, etc.

note that in prior years remuneration received for the attendance of meetings was disclosed as variable compensation. For the reporting year

this remuneration has been combined with the base compensation.

9.2 Compensation and equity position of the Group Management Team

the total compensation paid to the Group Management team and the highest total compensation in 2012 by evolva Holding SA are as follows:

1 In 2012, management members accepted to replace some of their cash compensation for 2012 and 2013 in share options of evolva with the same theoretical value.2 Based on the grant-date fair value of stock options granted in 2012 using a binominal assessment model.3 Includes employers’ contributions to pension plans, social security, life insurances, etc.


compensation4

Total

Cash Share options3 Cash Share options3

erich Schlick, Chairman1 - 60,413 - - - 60,413

Jean-philippe tripet 50,000 60,413 - - 3,125 113,538

Ingelise Saunders 20,000 60,413 - - 1,250 81,663

Sir tom McKillop 42,500 60,413 - - 2,656 105,569

Claus Braestrup 45,000 60,413 - - 2,813 108,226

nicole Dubois 42,500 60,413 - - 2,656 105,569

Michel pettigrew 47,500 60,413 - - 2,969 110,882

Stuart Strathdee 22,500 - - - 1,406 23,906

Ganesh Kishore 20,000 - - - 1,250 21,250

neil Goldsmith2 - - - - - -

Total 290,000 422,890 - - 18,125 731,015


compensation3 Total

Cash1 Share options2 Cash Share options2

neil Goldsmith, Ceo 283,642 54,170 - 165,218 51,546 554,576

Senior executive officers 1,292,555 156,296 - 385,508 276,251 2,110,610

Total Group Management Team 1,576,197 210,466 - 550,726 327,797 2,665,186

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the total compensation paid to the Group Management team and the highest total compensation in 2011 by evolva Holding SA were as

follows:

1 Includes employers’ contributions to pension plans, social security, life insurances, etc.

In the year under review, the Company did not issue or assume any guarantees for any shareholder or member of the Board of Directors or the

management. no shareholder and no member of the Board of Directors or the management has received any loans from the Company.

the number of evolva Holding shares and options held by members of the Board of Directors and the Group Management team at the end of

2012 was as follows:

1 Includes shares owned by family members.2 numbers included under Group Management team.3 Ganesh Kishore and Stuart Strathdee have an indirect shareholding in evolva, through their participation in Abunda SR.4 prior to the acquisition of Abunda, Stuart Strathdee, Ganesh Kishore and Simon Waddington (former Ceo of Abunda nutrition Inc.) owned stock options in Abunda nutrition Inc.

As at the acquisition date, these stock options were converted into evolva Holding SA options.5 Vested options include options issued in lieu of cash remuneration. total options granted under this plan for the Board of Directors are expected to be 1,181,250. Approximately

50% of these options have effectively been granted as at 31 December 2012. the second part will be granted in mid-2013. As for accounting disclosure requirements and to be consistent with disclosures in the published annual report of evolva Group and this report, the full amount of 1,181,250 has been allocated to the Board members in the table above. As for management, the total number of options granted under this plan amounts to 1,134,005 and is included in the table above as fully vested options.


compensation1 Total

Cash Share options Cash Share options

neil Goldsmith, Ceo 343,428 - - - 61,677 405,105

Senior executive officers 1,367,569 - 30,000 - 320,392 1,717,961

Total Group Management Team 1,710,997 - 30,000 - 382,069 2,123,066

No. of Shares1 No. of Share options

board of Directors Vested5 unvested Total

Sir tom McKillop (Chairman) - 439,800 139,200 579,000

Claus Braestrup (Vice-Chairman) - 164,800 139,200 304,000

nicole Dubois - 146,050 139,200 285,250

Martin Gertsch - 125,000 - 125,000

Ganesh Kishore 1,346,6003 342,5704 79,200 421,770

erich Schlick - 152,300 139,200 291,500

Stuart Strathdee 3,3713 345,3244 79,200 424,524

thomas Videbaek - 100,000 - 100,000

neil Goldsmith2 - - - -

Total board of Directors 1,349,971 1,815,844 715,200 2,531,044

Group Management team

neil Goldsmith 1,117,662 2,975,082 1,776,990 4,752,072

other team members 580,038 5,332,5694 2,456,150 7,788,719

Total Group Management Team 1,697,700 8,307,651 4,233,140 12,540,791

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10. Events subsequent to the reporting date

� on 17 January 2013, evolva signed a 3½ year collaboration agreement with Ajinomoto Co., Inc., Japan, for the joint development of

novel fermentation production routes for a natural functional ingredient for application in personal care. the total fees and milestone

payments to evolva during the collaboration will amount to more than CHF 10 million. In case of commercialisation, evolva will receive a

royalty as a percentage on product sold.

� As at 6 March 2013, the Company signed a collaboration agreement with Cargill, Inc. to jointly develop and commercialise fermentation-

derived steviol glycosides. Cargill will be responsible for commercialisation and has agreed to make a CHF 4.5 million equity investment in

evolva. Additionally, evolva stands to receive up to uSD 7.5 million in milestone payments and has the right to a 45% participation in the

final business.

� As at 27 March 2013, the Company successfully closed a financing round of CHF 31.3 million, which includes CHF 4.5 million from Cargill

mentioned above. the total new shares subscribed amount to 52,214,472.

� As at 25 March 2013, the Company has issued 14 million treasury shares (from authorised capital) at nominal value to be held by evolva

SA under the agreement with SeDA and Ventureast purposes.

� Between the reporting date and the authorisation of these financial statements by the Board of Directors as at 5 April 2013, evolva has

issued 1.6 million shares for SeDA advances, which contributed to a CHF 0.6 million cash inflow.

89

Report of the Statutory Auditor on the Financial Statements

To the General Meeting of Evolva Holding Sa, Reinach

As statutory auditor, we have audited the accompanying financial statements of evolva Holding SA, Reinach, which comprise the statement

of financial position, statement of financial performance and notes (pages 81 to 88), for the year ended 31 December 2012.

Board of Directors’ responsibility

the Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the

company’s articles of incorporation. this responsibility includes designing, implementing and maintaining an internal control system relevant

to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. the Board of Directors is

further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the

circumstances.

auditor’s responsibility

our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss

law and Swiss Auditing Standards. those standards require that we plan and perform the audit to obtain reasonable assurance whether the

financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. the proce-

dures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements,

whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s

preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose

of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of

the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the

financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements for the year ended 31 December 2012 comply with Swiss law and the company’s articles of incorporation.

Report on other legal requirements

We confirm that we meet the legal requirements on licensing according to the Auditor oversight Act (AoA) and independence (article 728 Co

(and article 11 AoA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 Co and Swiss Auditing Standard 890, we confirm that an internal control system exists,

which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.

We recommend that the financial statements submitted to you be approved.

ernst & Young ltd

Jürg Zürcher David Haldimannlicensed audit expert licensed audit expert(Auditor in charge)

Basel, 5. April 2013

90

Evolva Holding SaDuggingerstrasse 23CH-4153 ReinachSwitzerlandtel. +41 61 485 2000Fax +41 61 485 [email protected]

Evolva SaDuggingerstrasse 23CH-4153 ReinachSwitzerlandtel. +41 61 485 2000Fax +41 61 485 2001

Evolva a/Slersø parkallé 42-44DK-2100 Copenhagen oeDenmarktel. +45 35 200 230Fax +45 35 200 231

Evolva Nutrition, Inc.101 larkspur landing Circle, Suite 222larkspurCA 94939, uSA

Evolva Biotech Private limited401–405, 4th Floor, ticel Bio parktaramani Road, taramaniChennai 600 113 tamil nadu, Indiatel. +91 44 4297 1050Fax +91 44 4297 1060

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