UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May, 2017

 

Commission File Number: 001-36582

 

Auris Medical Holding AG

(Exact name of registrant as specified in its charter)

 

Bahnhofstrasse 21 

6300 Zug, Switzerland 

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F

X

Form 40-F

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes

No

X

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes

No

X

 

INCORPORATION BY REFERENCE

 

Exhibits 99.1 and 99.2 to this Report on Form 6-K shall be deemed to be incorporated by reference into the registration statements on Form F-3 (Registration Numbers 333-206710 and 333-217305) and Form S-8 (Registration Numbers 333-198037 and 333-200805) of Auris Medical Holding AG and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

 

Exhibit 99.3 to this Report on Form 6-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

			Auris Medical Holding AG
			By:	/s/ Hernan Levett
				Name:	Hernan Levett
				Title:	Chief Financial Officer

Date: May 11, 2017

 

EXHIBIT INDEX

 

Exhibit Number	Description
99.1	Unaudited Condensed Consolidated Interim Financial Statements
99.2	Management’s Discussion and Analysis of Financial Condition and Results of Operations
99.3	Press Release dated May 11, 2017

 

 

Exhibit 99.1

 

Unaudited Condensed Consolidated Interim Financial Statements as of March 31, 2017 and December 31, 2016 and for the Three Months Ended March 31, 2017 and 2016

 

Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Loss
Condensed Consolidated Interim Statement of Financial Position
Condensed Consolidated Interim Statement of Changes in Equity
Condensed Consolidated Interim Statement of Cash Flows
Notes to the Condensed Consolidated Interim Financial Statements

 

 

 

Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Loss (unaudited)
For the Three Months Ended March 31, 2017 and 2016 (in CHF)

 

			THREE MONTHS ENDED MARCH 31
	Note		2017		2016
Research and development			(5,981,419)		(6,140,175)
General and administrative			(1,425,491)		(1,222,032)
Operating loss			(7,406,910)		(7,362,207)
Interest income			31,297		10,885
Interest expense	4		(421,435)		(2,745)
Foreign currency exchange loss, net			(338,160)		(1,544,845)
Revaluation gain from derivative financial instruments	4, 5		233,123		—
Transaction costs	5		(506,234)		—
Loss before tax			(8,408,319)		(8,898,912)
Income tax gain	3		8,191		—
Net loss attributable to owners of the Company			(8,400,128)		(8,898,912)
Other comprehensive loss:
Items that will never be reclassified to profit or loss
Remeasurements of defined benefit liability, net of taxes of CHF 0			227,827		(260,469)
Items that are or may be reclassified to profit or loss
Foreign currency translation differences, net of taxes of CHF 0			19,925		41,820
Other comprehensive income/(loss), net of taxes of CHF 0			247,752		(218,649)
Total comprehensive loss attributable to owners of the Company			(8,152,376)		(9,117,561)
Basic and diluted loss per share			(0.22)		(0.26)

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements 

Condensed Consolidated Interim Statement of Financial Position (unaudited)
As of March 31, 2017 and December 31, 2016 (in CHF)

 

			MARCH 31, 2017		DECEMBER 31, 2016
	Note
ASSETS
Non-current assets
Property and equipment			336,350		369,294
Intangible assets			1,556,823		1,482,520
Other non-current financial assets			76,702		114,778
Total non-current assets			1,969,875		1,966,592
Current assets
Other receivables			371,451		296,531
Prepayments			877,280		952,595
Cash and cash equivalents			33,846,525		32,442,222
Total current assets			35,095,256		33,691,348
Total assets			37,065,131		35,657,940
EQUITY AND LIABILITIES
Equity
Share capital	5		17,731,881		13,731,881
Share premium			113,348,971		112,838,815
Foreign currency translation reserve			(63,619)		(83,544)
Accumulated deficit			(120,462,704)		(112,344,303)
Total shareholders' equity attributable to owners of the Company			10,554,529		14,142,849
Non-current liabilities
Loan	4		8,954,361		10,151,498
Derivative financial instruments	4,5		4,974,474		117,132
Employee benefits			1,895,110		2,092,434
Deferred tax liabilities	3		188,391		196,582
Total non-current liabilities			16,012,336		12,557,646
Current liabilities
Loan	4		3,295,145		2,212,706
Trade and other payables			2,094,386		1,837,997
Accrued expenses			5,108,735		4,906,742
Total current liabilites			10,498,266		8,957,445
Total liabilities			26,510,602		21,515,091
Total equity and liabilities			37,065,131		35,657,940

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements

Condensed Consolidated Interim Statement of Changes in Equity (unaudited)
As of March 31, 2017 and 2016 (in CHF)

  

					ATTRIBUTABLE TO OWNERS OF THE COMPANY
	NOTE		SHARE CAPITAL		SHARE PREMIUM			FX TRANSLATION RESERVE		ACCUMULATED DEFICIT		TOTAL EQUITY
As of January 1, 2016			13,721,556		112,662,910			(63,821)		(81,578,733)		44,741,912
Total comprehensive loss
Net loss			—		—			—		(8,898,912)		(8,898,912)
Other comprehensive income/(loss)			—		—			41,820		(260,469)		(218,649)
Total comprehensive income/(loss)			—		—			41,820		(9,159,381)		(9,117,561)
Transactions with owners of the Company
Share based payments	7		—		—			—		79,511		79,511
Issue of bonus shares	5		10,325		177,767			—		—		188,092
Balance at March 31, 2016	5		13,731,881		112,840,677			(22,001)		(90,658,603)		35,891,954
As of January 1, 2017			13,731,881		112,838,815			(83,544)		(112,344,303)		14,142,849
Total comprehensive loss
Net loss			—		—					(8,400,128)		(8,400,128)
Other comprehensive income								19,925		227,827		247,752
Total comprehensive income/(loss)			—		—			19,925		(8,172,301)		(8,152,376)
Transactions with owners of the Company
Transaction costs	5		—		(397,685)			—		—		(397,685)
Share based payments	7		—		—			—		53,900		53,900
Capital increase	5		4,000,000		907,841			—		—		4,907,841
Balance at March 31, 2017	5		17,731,881			113,348,971		(63,619)		(120,276,042)		10,554,529

 

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements 

Condensed Consolidated Interim Statement of Cash Flows (unaudited)
For the Three Months Ended March 31, 2017 and 2016 (in CHF)

 

	Note	THREE MONTHS ENDED MARCH 31, 2017		THREE MONTHS ENDED MARCH 31, 2016
Cash flows from operating activities
Net loss		(8,400,128)		(8,898,912)
Adjustments for:
Depreciation		32,943		24,481
Unrealized foreign currency exchange loss, net		362,564		1,579,233
Net interest expense/(income)		383,263		(10,885)
Share based payments	7	53,900		79,511
Transaction costs		506,234		—
Employee benefits		30,502		32,151
Fair value derivative financial instruments		(233,121)		—
Deferred tax gain	3	(8,191)		—
		(7,272,034)		(7,194,421)
Changes in:
Other receivables		(36,844)		(24,220)
Prepayments		75,315		71,491
Trade and other payables		256,391		1,821
Accrued expenses		201,994		(172,825)
Net cash used in operating activities		(6,775,178)		(7,318,154)
Cash flows from investing activities
Purchase of intangible assets		(74,303)		—
Interest received		29,943		10,885
Net cash used in / from investing activities		(44,360)		10,885
Cash flows from financing activities
Proceeds from public offering	5	9,321,807		—
Transaction costs		(227,422)		—
Interests paid	4	(307,452)		—
Net cash from financing activities		8,786,933		—
Net increase/(decrease) in cash and cash equivalents		1,967,395		(7,307,269)
Cash and cash equivalents at beginning of the period		32,442,222		50,237,300
Net effect of currency translation on cash		(563,092)		(1,537,415)
Cash and cash equivalents at end of the period		33,846,525		41,392,616

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements 

AURIS MEDICAL HOLDING AG

 

Notes to the Condensed Consolidated Interim Financial Statements 

as of March 31, 2017 and December 31, 2016 and for the Three Months Ended March 31, 2017 and 2016 (in CHF)

 

1.

Reporting entity

 

Auris Medical Holding AG (the “Company”) is domiciled in Switzerland. The Company’s registered address is at Bahnhofstrasse 21, 6300 Zug. These condensed consolidated interim financial statements comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Company is the ultimate parent of the following Group entities:

 

·

Auris Medical AG, Basel, Switzerland (100%) with a nominal share capital of CHF 2,500,000

 

·

Otolanum AG, Zug, Switzerland (100%) with a nominal share capital of CHF 100,000

 

·

Auris Medical Inc., Chicago, United States (100%) with a nominal share capital of USD 15,000

 

·

Auris Medical Ltd., Dublin, Ireland (100%) with a nominal share capital of EUR 100

 

The Group is primarily involved in the development of pharmaceutical products for the treatment of inner ear and vestibular disorders, in particular tinnitus and hearing loss. Its most advanced projects are in the late stage of clinical development.

 

2.

Basis of preparation

 

Statement of compliance

 

These condensed consolidated interim financial statements as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 have been prepared in accordance with International Accounting Standard Interim Financial Reporting (“IAS 34”) and should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2016.

 

These condensed consolidated interim financial statements include all adjustments, that are necessary to fairly state the results of the interim period and the Group believes that the disclosures are adequate to make the information presented not misleading. Interim results are not necessarily indicative of results to be expected for the full year. Management does not consider the business to be seasonal or cyclical.

 

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, have been condensed or omitted as permitted by IAS 34. The condensed consolidated statement of financial position as of December 31, 2016 was derived from the audited consolidated financial statements.

 

The interim condensed consolidated financial statements were authorized for issuance by the Company’s Audit Committee on May 9, 2017.

 

Functional and reporting currency

 

These interim condensed consolidated financial statements are presented in Swiss Francs (“CHF”), which is the Company’s functional currency (“functional currency”) and the Group’s reporting currency.

 

Significant accounting policies

 

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its audited consolidated financial statements as of and for the year ended December 31, 2016 and have been applied consistently to all periods presented in these condensed consolidated interim financial statements, unless otherwise indicated.

 

New standards, amendments and interpretations adopted by the Group

 

The Group has not early adopted any standard, interpretation or amendment that was issued, but is not yet effective.

 

A number of new standards, amendments to standards and interpretations are effective for the Group’s 2017 reporting year. The application of these new standards, amendments to standards and interpretations does not have material impact on the financial statements of the Group.

 

3.

Taxation

 

The Group’s income tax expense recognized in the condensed consolidated statement of profit or loss is presented as follows:

 

	Three months ended March 31,
	2017	2016
Deferred income tax expense	—	—
Deferred income tax gain	8,191	—
Total income tax expense	8,191	—

 

The tax effect of taxable temporary differences that give rise to deferred income tax liabilities or to deferred income tax assets as of March 31, 2017 and 2016 is presented as follows:

 

	March 31,	March31,
	2017	2016
Deferred Tax liabilities
Intangible assets	(338,493)	(327,637)
Hercules Loan & Warrant	(70,400)	—
Total	(408,893)	(327,637)
Deferred Tax assets
Net operating loss (NOL)	220,502	—
Total	220,502	—
Deferred Tax, net	(188,391)	(327,637)

 

4.

Loan and Warrant

 

On July 19, 2016, the Company entered into a Loan and Security Agreement (the “Hercules Loan and Security Agreement”) for a secured term loan facility of up to US$20.0 million with Hercules Capital, Inc. as administrative agent (“Hercules”) and the lenders party thereto. An initial tranche of US$12.5 million was drawn on July 19, 2016, concurrently with the execution of the Hercules Loan and Security Agreement. The loan matures on January 2, 2020 and bears interest at a minimum rate of 9.55% per annum, and is subject to the variability of the prime interest rate. The loan is secured by a pledge of the shares of Auris Medical AG owned by the Company, all intercompany receivables owed to the Company by its Swiss subsidiaries and a security assignment of the Company’s bank accounts.

 

The loan was initially recognized at transaction value with deductions of the fair value of the warrant at transaction date and directly attributable transactions costs.

 

Subsequent to initial recognition, the loan is measured at amortized cost using the effective interest method. Applying this method, the calculated value of the loan as of March 31, 2017 is CHF 12,249,506. Of the CHF 12,249,506, amortization payments due within the next 12 months in an amount of CHF 3,295,145 are reclassified as current liabilities.

 

In connection with the loan facility, the Company issued Hercules a warrant to purchase up to 241,111 of its common shares at an exercise price of US$3.94 per share. As of July 19, 2016, the warrant is exercisable for 156,726 common shares. Upon Hercules making the second advance under the loan facility, the warrant shall become exercisable for the additional 84,391 common shares. The warrant expires on July 19, 2023. The fair value calculation of the warrant is based on the Black-Sholes option price model. Assumptions are made regarding inputs such as volatility and the risk free rate in order to determine the fair value of the warrant. As the warrant is part of the loan transaction, its fair value was deducted from the loan proceeds and accounted for separately as non-current financial liability. Following the initial recognition, the warrant is measured at fair value and the changes in fair value are shown as profit or loss.

 

As of March 31, 2017, the fair value of the warrant amounts to CHF 82,380. Therefore, the fair value decreased by the amount of total CHF 325,800 (fair value as of July 19, 2016: CHF 408,180).

 

5.

Capital and reserves

 

Share capital

 

The issued share capital of the Company consisted of:  

 

	Common Shares
	Number
	2017	2016
As of January 1	34,329,704	34,303,891
Common shares issued for capital increase with a nominal value of CHF 0.40 each	10,000,000
Common shares issued for restricted share awards with a nominal value of CHF 0.40 each		25,813
Total, as of March 31	44,329,704	34,329,704

 

All shares have a nominal value of CHF 0.40 and are fully paid in. As of March 31, 2017, the nominal value of the 44,329,704 issued shares amounted to CHF 17,731,881.60 (as of December 31, 2016, the nominal value of 34,329,704 issued shares amounted to CHF 13,731,881.60).

 

Equity Offering on NASDAQ Global Market

 

On February 21, 2017, we completed a public offering (the “February 2017 Offering”) of 10,000,000 common shares with a nominal value of CHF 0.40 each and 10,000,000 warrants, each warrant entitling its holder to purchase 0.70 of a common share. The net proceeds to the Company from the February 2017 Offering were approximately CHF 9.1 million (US$ 9.1 million), after deducting underwriting discounts and other estimated offering expenses payable by us. The Company had transaction costs amounting to CHF 903,920. The transactions costs were recorded as CHF 397,685 in equity for the issuance of the common shares and CHF 506,234 to transaction costs in the statement of profit or loss and comprehensive loss for the issuance of the warrants.

 

The underwriter was granted a 30-day option to purchase up to 1,500,000 additional common shares and/or 1,500,000 additional warrants. On February 15, 2017, the Underwriter partially exercised its 30-day option to purchase additional common shares and/or warrants in the amount of 1,350,000 warrants.

 

Consequently, the Company issued warrants to purchase up to 7,945,000 of its common shares at an exercise price of US$1.20 per share. The warrants are exercisable during a five-year period beginning on date of issuance. The fair value calculation of the warrants is based on the Black-Sholes option price model. Assumptions are made regarding inputs such as volatility and the risk free rate in order to determine the fair value of the warrant. If a warrant is exercised, the Company will receive variable proceeds because the Company’s functional currency is CHF and the exercise price is in USD, which results in the warrants being considered liability instruments. Therefore, the warrants were assigned fair values using the Black-Scholes model. The residual value was assigned to the common share sold along with each warrant in accordance with IAS 32 Financial instruments: presentation.

 

As of March 31, 2017, the fair value of the warrants amounts to CHF 4,892,094. The fair value decreased by CHF 198,369 since the initial recognition (fair value as of February 21, 2017: CHF 5,090,463).

 

Issue of common shares upon exercise of options

 

During the three months ended March 31, 2017, no options were exercised.

 

On January 7, 2016, the Company granted 25,813 restricted shares to employees under the Equity Incentive Plan as a compensation bonus for 2015. These shares vested upon grant and have a sales restriction for 3 years. The Company recorded a corresponding payroll charge of CHF 188,092 in 2015. As a result of the grant, the nominal share capital increased by CHF 10,325.

 

Controlled Equity Offering

 

On June 1, 2016, the Company entered into a Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may offer and sell, from time to time common shares, with a nominal value of CHF 0.40 per share, having an aggregate offering price of up to US$ 35 million through Cantor. Any common shares offered and sold will be issued pursuant to the Company’s shelf registration statement on Form F-3 (Registration No. 333-206710) as supplemented by a prospectus supplement, dated June 1, 2016. In the first quarter of 2017, the Company did not offer or sell any common shares under the Sales Agreement.

 

6.

Employee benefits

 

	THREE MONTHS ENDED
	MARCH 31, 2017	MARCH 31, 2016
Salaries	1,063,009	808,410
Pension costs	92,410	84,779
Share based compensation expense	53,900	79,511
Other employee costs and social benefits	174,165	52,385
Total employee benefits	1,383,483	1,025,085

 

7.

Share based payments

 

Share based compensation expense of CHF 53,900 was recognized for the three months ended March 31, 2017 (for the three months ended March 31, 2016: CHF 79,511).

 

8.

Loss per share

 

	THREE MONTHS ENDED
	MARCH 31, 2017	MARCH 31, 2016
Loss attributable to owners of the Company	(8,400,128)	(8,898,912)
Weighted average number of shares outstanding	39,048,805	34,329,704
Basic and diluted loss per share	(0.22)	(0.26)

 

For the three months ended March 31, 2017 and March 31, 2016 basic and diluted loss per share are calculated based on the weighted average number of shares issued and outstanding and excludes shares to be issued under the stock option plans, as they would be anti-dilutive. As of the date hereof, the Company has 987,560 options outstanding under its stock option plans, of which 103,320 are considered forfeited due to the termination of the

 

beneficiaries’ employment relationships. The average number of options outstanding between January 1, 2017 and March 31, 2017 was 1,030,402 (629,010 for the period between January 1, 2016 and March 31, 2016).

 

9.

Events after the Reporting Period

 

On May 9, 2017 and April 24, 2017, respectively, the Company announced results from AMPACT 1 and AMPACT2 (AM-101 in the Post-Acute Treatment of Peripheral Tinnitus 1 and 2), two open-label extension studies of the Phase 3 TACTT2 and TACTT3 clinical trials, respectively. The AMPACT studies were conducted at the request of the US Food and Drug Administration (FDA) to generate safety data from chronic intermittent use of Keyzilen^® for up to 12 months. Participation in the AMPACT studies was offered to individuals who had completed the TACTT2 and TACTT3 trials; they were given the choice to receive up to three treatment cycles with each cycle comprising three intratympanic administrations of Keyzilen^®, followed by a treatment-free observation period of 12 weeks. A total of 257 TACTT2 participants rolled over into AMPACT1 and provided safety data; 228 of these patients provided exploratory efficacy data. A total of 485 TACTT3 participants rolled over into AMPACT2 and provided safety data; 422 of these patients provided exploratory efficacy data. At the time of enrollment into the AMPACT studies, all patients were in the post-acute stage, i.e. more than three months from tinnitus onset.

 

Both AMPACT1 and AMPACT2 confirmed the good safety profile of Keyzilen^®. The primary safety endpoint was the incidence of clinically relevant hearing deterioration five weeks after the start of a treatment cycle. In line with the results from previous trials with Keyzilen^®, such incidence was low, amounting to 6% and 8% in AMPACT1 and AMPACT2, respectively. During the course of the studies, the patients' hearing threshold at the average of 4, 6 and 8 kHz was essentially stable. In both studies, the vast majority of adverse events that were considered related to the study drug or treatment procedure were rated as either mild or moderate in intensity. Three and seven patients, respectively, experienced a total of four and eight non-fatal, serious adverse events, none of which was considered related to the study drug. Confirming previous data, 93% and 97%, respectively, of tympanic membranes were already closed at the time of the first follow-up visit.

 

Exploratory efficacy analyses collected in AMPACT1 show improvements in the TFI as well as other tinnitus metrics. The TFI decreased on average by 8.2 points (95% confidence interval 6.2 to 10.1; baseline of 42.7 points) to the last follow-up visit. The more treatment cycles the study participants received, the larger the reduction in the TFI was; the difference between three cycles and one cycle reached statistical significance. Similar results were achieved on subjective tinnitus loudness and tinnitus annoyance. In addition, 41% of AMPACT1 participants achieved a reduction in their tinnitus severity (extreme-severe-moderate-mild-none) by at least one grade and 28% reported that their tinnitus severity had improved “much” or “very much” compared to baseline.

 

Exploratory efficacy analyses collected in AMPACT2 show improvements in the TFI that were more pronounced for Stratum A patients (originally enrolled in TACTT3 during the acute stage; i.e. up to three months from onset) compared to Stratum B patients (originally enrolled during the post-acute stage). For Stratum A patients, the TFI decreased on average by 7.6 points (95% confidence interval 5.5 to 9.6; baseline of 40.3 points) to the last follow-up visit. For Stratum B patients, the TFI decreased on average by 3.5 points (1.4 to 5.6; baseline of 42.3 points) when enrolled in TACTT3 between three and six months from onset and by 2.5 points (-1.1 to 6.1; baseline of 45.3 points) when enrolled in TACTT3 between six and 12 months from onset. Efficacy outcomes from AMPACT1 and AMPACT2 are of exploratory nature and should be interpreted in conjunction with the design of the preceding TACTT1 and TACTT2 trials and their respective outcomes.

 

 

 

 

 

Exhibit 99.2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This management’s discussion and analysis is designed to provide you with a narrative explanation of our financial condition and results of operations. We recommend that you read this in conjunction with our unaudited condensed consolidated interim financial statements as of and for the three months ended March 31, 2017 and 2016 included as Exhibit 99.1 to this Report on Form 6-K, which have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting. We also recommend that you read our management’s discussion and analysis and our audited consolidated financial statements and the notes thereto, which appear in our Annual Report on Form 20-F for the year ended December 31, 2016 (the “Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to the U.S. Securities and Exchange Act of 1934, as amended.

 

Unless otherwise indicated or the context otherwise requires, all references to “Auris Medical” or the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to Auris Medical Holding AG and its subsidiaries.

 

We prepare and report our consolidated financial statements and financial information in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). None of our financial statements were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). We maintain our books and records in Swiss Francs. We have made rounding adjustments to some of the figures included in this management’s discussion and analysis. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. Unless otherwise indicated, all references to currency amounts in this discussion and analysis are in Swiss Francs.

 

This discussion and analysis is dated as of May 11, 2017.

 

Overview

 

We are a clinical-stage biopharmaceutical company focused on the development of novel products for the treatment of inner ear and vestibular disorders. Our most advanced product candidates are in Phase 3 clinical development. Keyzilen^® (AM-101) is being developed for the treatment of acute inner ear tinnitus and has received fast track designation from the FDA. In two Phase 2 clinical trials, Keyzilen^® demonstrated a favorable safety profile and statistically significant improvement in tinnitus loudness and other patient reported outcomes. In August 2016, we announced that the trial Efficacy and Safety of AM-101 in the Treatment of Acute Peripheral Tinnitus 2 (TACTT2), the first of two pivotal Phase 3 clinical trials with Keyzilen^®, did not meet the two co-primary endpoints of statistically significant changes in tinnitus loudness and tinnitus burden as measured by the Tinnitus Functional Index (TFI), compared to placebo.

 

Following analysis of the TACTT2 data, we amended the protocol for the TACTT3 trial, the second Phase 3 clinical trial with Keyzilen^®. TACTT3 is being conducted in several European countries. Under the amended protocol, the trial size has been increased, certain patient subgroups have been included in confirmatory testing and the TFI has been elevated from a key secondary endpoint to an alternate primary efficacy endpoint. We have commenced enrollment under the amended protocol and expect to have top-line results from the expanded TACTT3 trial in early 2018.

 

We are also developing AM-111 for acute inner ear hearing loss. We are conducting two pivotal Phase 3 trials in the treatment of idiopathic sudden sensorineural hearing loss, titled HEALOS and ASSENT. HEALOS is enrolling 255 patients in Europe and Asia, and ASSENT is enrolling 300 patients in the United States, Canada and South Korea. We expect to complete enrollment into HEALOS in the second quarter of 2017 and to have top-line data from HEALOS in the fall of 2017. ASSENT started enrollment in June 2016, and we expect to have top-line data from the trial in the second half of 2018.

 

On February 2, 2017, we entered into an asset purchase agreement with Otifex, pursuant to which we agreed to purchase and Otifex has agreed to sell us certain preclinical and clinical assets related to a formulation for the intranasal application of Betahistine, which we refer to as AM-125. We plan to develop the formulation for vestibular disorders.

 

 

To date, we have financed our operations through public offerings of our common shares, private placements of equity securities, and short- and long-term loans. On July 19, 2016, we entered into a Loan and Security Agreement (the “Hercules Loan and Security Agreement”) for a secured term loan facility of up to US$20.0 million with Hercules Capital, Inc. as administrative agent (“Hercules”) and the lenders party thereto. We have no products approved for commercialization and have never generated any revenues from royalties or product sales. As of March 31, 2017, we had cash and cash equivalents of CHF 33.8 million. Based on our current plans, we do not expect to generate royalty or product revenues unless and until we obtain marketing approval for, and commercialize, Keyzilen^®, AM-111, AM-125 or any of our other product candidates.

 

As of March 31, 2017, we had an accumulated deficit of CHF 120.5 million. We expect to continue incurring losses as we continue our clinical and pre-clinical development programs, apply for marketing approval for our product candidates and, subject to obtaining regulatory approval of our product candidates, build a sales and marketing force in preparation for the potential commercialization of our product candidates.

 

Recent Developments

 

On May 9, 2017 and April 24, 2017, respectively, we announced results from AMPACT 1 and AMPACT2 (AM-101 in the Post-Acute Treatment of Peripheral Tinnitus 1 and 2), two open-label extension studies of the Phase 3 TACTT2 and TACTT3 clinical trials, respectively. The AMPACT studies were conducted at the request of the US Food and Drug Administration (FDA) to generate safety data from chronic intermittent use of Keyzilen^® for up to 12 months. Participation in the AMPACT studies was offered to individuals who had completed the TACTT2 and TACTT3 trials; they were given the choice to receive up to three treatment cycles with each cycle comprising three intratympanic administrations of Keyzilen®, followed by a treatment-free observation period of 12 weeks. A total of 257 TACTT2 participants rolled over into AMPACT1 and provided safety data; 228 of these patients provided exploratory efficacy data. A total of 485 TACTT3 participants rolled over into AMPACT2 and provided safety data; 422 of these patients provided exploratory efficacy data. At the time of enrollment into the AMPACT studies, all patients were in the post-acute stage, i.e. more than three months from tinnitus onset.

 

Both AMPACT1 and AMPACT2 confirmed the good safety profile of Keyzilen^®. The primary safety endpoint was the incidence of clinically relevant hearing deterioration five weeks after the start of a treatment cycle. In line with the results from previous trials with Keyzilen^®, such incidence was low, amounting to 6% and 8% in AMPACT1 and AMPACT2, respectively. During the course of the studies, the patients' hearing threshold at the average of 4, 6 and 8 kHz was essentially stable. In both studies, the vast majority of adverse events that were considered related to the study drug or treatment procedure were rated as either mild or moderate in intensity. Three and seven patients, respectively, experienced a total of four and eight non-fatal, serious adverse events, none of which was considered related to the study drug. Confirming previous data, 93% and 97%, respectively, of tympanic membranes were already closed at the time of the first follow-up visit.

 

Exploratory efficacy analyses collected in AMPACT1 show improvements in the TFI as well as other tinnitus metrics. The TFI decreased on average by 8.2 points (95% confidence interval 6.2 to 10.1; baseline of 42.7 points) to the last follow-up visit. The more treatment cycles the study participants received, the larger the reduction in the TFI was; the difference between three cycles and one cycle reached statistical significance. Similar results were achieved on subjective tinnitus loudness and tinnitus annoyance. In addition, 41% of AMPACT1 participants achieved a reduction in their tinnitus severity (extreme-severe-moderate-mild-none) by at least one grade and 28% reported that their tinnitus severity had improved “much” or “very much” compared to baseline.

 

Exploratory efficacy analyses collected in AMPACT2 show improvements in the TFI that were more pronounced for Stratum A patients (originally enrolled in TACTT3 during the acute stage; i.e. up to three months from onset) compared to Stratum B patients (originally enrolled during the post-acute stage). For Stratum A patients, the TFI decreased on average by 7.6 points (95% confidence interval 5.5 to 9.6; baseline of 40.3 points) to the last follow-up visit. For Stratum B patients, the TFI decreased on average by 3.5 points (1.4 to 5.6; baseline of 42.3 points) when enrolled in TACTT3 between three and six months from onset and by 2.5 points (-1.1 to 6.1; baseline of 45.3 points) when

 

enrolled in TACTT3 between six and 12 months from onset. Efficacy outcomes from AMPACT1 and AMPACT2 are of exploratory nature and should be interpreted in conjunction with the design of the preceding TACTT1 and TACTT2 trials and their respective outcomes.

 

On July 20, 2015, the USPTO declared Patent Interference No. 106,030 involving our issued U.S. patent No. 9,066,865 (the “865 Patent”) and Otonomy, Inc.’s (“Otonomy”) U.S. patent application No. 13/848,636 (the “636 Application”). On January 26, 2017, the USPTO issued a decision on the interference granting Auris benefit of priority. As a result of the decision, judgment was entered against Otonomy and all claims in the ’636 Application were refused. In addition, claims 1-8 of the ’865 Patent were cancelled as the result of the USPTO’s determination that the written description of the specification lacked full scope support for treating middle or inner ear disease with fluoroquinolone. However, claim 9, which is directed to a method of treating viral and bacterial infections with intratympanic injection of a fluoroquinolone antibiotic in a poloxamer 407 composition under certain specifications, was affirmed. Otonomy appealed the decision on March 27, 2017 and we submitted a notice of cross-appeal on April 5, 2017.

 

On February 21, 2017, we completed a public offering of 10,000,000 common shares with a nominal value of CHF 0.40 each and 10,000,000 warrants, each warrant entitling its holder to purchase 0.70 of a common share at $1.20 per share. The warrants expire five years after the date they were issued. The net proceeds to the Company from the offering were approximately CHF 9.1 million, after deducting underwriting discounts and other estimated offering expenses payable by us. On February 15, 2017, the underwriter partially exercised its 30-day option to purchase additional common shares and/or warrants in the amount of 1,350,000 warrants.

 

Collaboration and License Agreements

 

There have been no material changes to our collaboration and license agreements from those reported in “Item 5—Operating and Financial Review and Prospects–Operating results—Collaboration and License Agreements” in the Annual Report.

 

Research and Development Expense

 

Our research and development expense is highly dependent on the development phases of our research projects and therefore may fluctuate substantially from period to period. Our research and development expense mainly relates to the following key programs:

 

·

Keyzilen® (AM-101). We are conducting a Phase 3 clinical development program with Keyzilen® comprising two Phase 3 trials and two open label follow-on trials. In August 2016, we announced that the TACTT2, the first of two pivotal Phase 3 clinical trials with Keyzilen®, did not meet the two co-primary endpoints of statistically significant changes in tinnitus loudness and tinnitus burden as measured by the TFI, compared to placebo. We expect top-line results of the amended TACTT3 trial in early 2018. We announced top-line data from AMPACT1 and AMPACT2 on May 9 and April 24, 2017, respectively. We anticipate that our research and development expenses in connection with these clinical trials will be lower in 2017 than in 2016, reflecting the lower number of active trials.

 

·

AM-111. We are conducting two pivotal Phase 3 trials in the treatment of ISSNHL, titled HEALOS and ASSENT. HEALOS is enrolling 255 patients in Europe and Asia, and ASSENT is enrolling 300 patients in the United States, Canada and South Korea. We expect to complete enrolment into HEALOS in the second quarter of 2017 and to have top-line data from HEALOS in the fall of 2017. ASSENT started enrollment in June 2016, and we expect to have top-line data from the trial in the second half of 2018.

 

·

AM-125. In 2017, we plan to initiate a second Phase 1 trial in healthy volunteers to further test the safety and tolerability and the pharmacokinetics of AM-125. We expect to obtain the results of the study in the first quarter of 2018.

 

Other research and development expenses mainly relate to our pre-clinical studies of AM-102 (second generation tinnitus treatment). The expenses mainly consist of costs for production of the pre-clinical compounds and costs paid to academic and other research institutions in conjunction with pre-clinical testing.

 

For a discussion of our other key financial statement line items, please see “Item 5—Operating and Financial Review and Prospects–Operating results—Financial Operations Overview” in the Annual Report.

 

Results of Operations

 

The numbers below have been derived from our unaudited condensed consolidated interim financial statements as of and for the three months ended March 31, 2017 and 2016. The discussion below should be read along with this financial information, and it is qualified in its entirety by reference to them.

 

Comparison of the three months ended March 31, 2017 and 2016

 

	Three months ended March 31,
	2017	2016	Change
	(in thousands of CHF)		%
Research and development	(5,981)	(6,140)	(3%)
General and administrative	(1,426)	(1,222)	17%
Operating loss	(7,407)	(7,362)	1%
Interest income	31	11	182%
Interest expense	(421)	(3)	13,933%
Foreign currency exchange gain/(loss), net	(338)	(1,545)	(78%)
Revaluation gain/(loss) from derivative financial instruments	233	-	n/a
Transaction costs	(506)	-	n/a
Loss before tax	(8,408)	(8,899)	(6%)
Income tax gain	8	-	n/a
Net loss attributable to owners of the Company	(8,400)	(8,899)	(6)%
Other comprehensive loss:
Items that will never be reclassified to profit or loss
Remeasurements of defined benefits liability	228	(261)	(187%)
Items that are or may be reclassified to profit or loss
Foreign currency translation differences	20	42	(52%)
Other comprehensive gain/(loss)	248	(219)	(213%)
Total comprehensive loss attributable to owners of the Company	(8,152)	(9,118)	(11%)

   

 

Research and development expense

 

	Three months ended March 31,
Research and Development	2017		2016		Change
	(in thousands of CHF)				%
Clinical projects	(4,189)		(4,169)		0%
Pre-clinical projects	(142)		(81)		75%
Drug manufacturing and substance	(486)		(401)		21%
Employee benefits	(825)		(566)		46%
Other research and development expenses	(340)		(923)		(63%)
Total	(5,981)		(6,140)		(3%)

 

Research and development expenses amounted to CHF 6.0 million in the three months ended March 31, 2017. This represents a decrease of about CHF 0.1 million over the CHF 6.1 million research and development expenses for the three months ended March 31, 2016. Research and development expenses reflected the following:

 

·

Clinical projects. In the three months ended March 31, 2017 clinical expenses were at the same level as in the three months ended March 31, 2016. Lower service and milestone costs for our Keyzilen® studies, mainly reflecting the completion of TACTT2, AMPACT1 and AMPACT2, were offset by higher AM-111 related expenses due to progression of our HEALOS and ASSENT trials.

 

·

Pre-clinical projects. In the three months ended March 31, 2017, pre-clinical expenses increased primarily due to AM-102 and AM-111 related pre-clinical projects.

 

·

Drug manufacture and substance. In the three months ended March 31, 2017, drug manufacture and substance related costs slightly increased over the three months ended March 31, 2016, due to higher costs related to raw material purchases and expenses for process validation.

 

·

Employee benefits. Employee expenses were higher in the three months ended March 31, 2017 than in the same period in 2016 due to an increase in headcount and higher compensation expenses.

 

Other research and development expenses.

 

·

Other research and development expenses decreased by CHF 0.6 million in the three months ended March 31, 2017 compared with the corresponding period in 2016 due to lower intellectual property and regulatory related expenses.

 

General and administrative expense

 

General and administrative expense amounted to CHF 1.4 million in the three months ended March 31, 2017 compared to CHF 1.2 million in the same period in the previous year, mainly as a result of higher capital tax related to the 2014 assessment by the tax authorities and higher employee benefits due to higher headcount and increased compensation expenses.

 

We expect that general and administrative expense will increase in the future as our business expands and we continue to incur costs associated with operating as a public company and protecting our intellectual property portfolio.

 

Interest income

 

Interest income increased in the three months ended March 31, 2017 compared to the three months ended March 31, 2016, due to higher return on short-term deposits.

 

Interest expense

 

Interest expense increased by CHF 0.4 million in the three months ended March 31, 2017 compared to the prior year period. The increase mainly relates to interest expense paid for the US$ 12.5 million loan drawn on July 19, 2016, under the Hercules Loan and Security Agreement.

 

Foreign currency exchange gain/(loss), net

 

For the three months ended March 31, 2017 the depreciation of the U.S. dollar against the Swiss Franc triggered a net foreign unrealized currency loss on U.S. dollar denominated cash and cash equivalents of CHF 0.3 million compared to the unrealized loss of CHF 1.5 million in the same period in the previous year.

 

Revaluation gain/(loss) from derivative financial instruments

 

In connection with the Hercules Loan and Security Agreement, the Company issued Hercules a warrant to purchase up to 241,117 of its common shares at an exercise price of US$ 3.94 per share. As of July 19, 2016, the warrant was exercisable for 156,726 common shares. As of March 31, 2017 the fair value of the warrant amounted to CHF 82,380. The revaluation gain of the derivate for the three months ended March 31 2017 amounted to CHF 34,754 which is an increase in the same amount when comparing to the same period in 2016. Since its initial recognition, the fair value decreased by CHF 325,800 resulting in a revaluation gain in the corresponding amount (fair value as of July 19, 2016: CHF 408,180).

 

On February 21, 2017, the company issued 10,000,000 warrants, each warrant entitling its holder to purchase 0.70 of a common share at an exercise price of US$ 1.20. Additionally, the underwriter was granted a 30-day option to purchase up to 1,500,000 additional common shares and/or 1,500,000 additional warrants. On February 15, 2017, the underwriter partially exercised its option for 1,350,000 warrants. As of March 31, 2017, the fair value of the warrants amounted CHF 4,892,094. Since its initial recognition, the fair value decreased by CHF 198,369 resulting in a gain in the corresponding amount (fair value as of February 21, 2017: CHF 5,090,463).

 

Transaction costs

 

Transaction costs increased by CHF 0.5 million in the three months ended March 31, 2017 compared to the previous period. The increase relates to the fees and transaction costs related to the public offering completed on February 21, 2017 that were allocated to the derivative financial instrument.

 

Cash flows

 

Comparison of the three months ended March 31, 2017 and 2016

 

The table below summarizes our cash flows for the three months ended March 31, 2017 and 2016:

 

	Three months ended March, 31
	2017	2016
	(in thousands of CHF)
Net cash used in operating activities	(6,775)	(7,318)
Net cash used in investing activities	(44)	11
Net cash from financing activities	8,787	0
Net effect of currency translation on cash	(563)	(1,537)
Cash and cash equivalents at the beginning of the period	32,442	50,237
Cash and cash equivalents at the end of the period	33,847	41,393

 

The decrease in net cash used in operating activities from CHF 7.3 million in the three months ended March 31, 2016, to CHF 6.8 million in the three months ended March 31, 2017, was mainly due to lower research and development expenses as well as a positive change in accrued liabilities and account payables, partially offset by higher general and administrative expenses compared to the same period in 2016.

 

Cash from financing activities in the three months ended March 31, 2017, includes the net proceeds of the public offering of 10,000,000 common shares with a nominal value of CHF 0.40 each and 10,000,000 warrants, each warrant entitling its holder to purchase 0.70 of a common share. The net proceeds to the Company from the offering were approximately CHF 9.1 million, after deducting underwriting discounts and other estimated offering expenses payable by us. Cash from financing

 

activities in the three months ended March 31, 2017, also includes the interest payments due to the financing parties under the Hercules Loan and Security Agreement,

 

Cash and funding sources

 

On June 1, 2016, we entered into a Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which we may offer and sell, from time to time common shares, with a nominal value of CHF 0.40 per share, having an aggregate offering price of up to US$35 million through Cantor. Any common shares offered and sold will be issued pursuant to our shelf registration statement on Form F-3 (Registration No. 333-206710) as supplemented by a prospectus supplement, dated June 1, 2016. In the first quarter of 2017, we did not offer or sell any common shares under the Sales Agreement.

 

On July 19, 2016, we entered into the Hercules Loan and Security Agreement for a secured term loan facility of up to US$20.0 million. An initial tranche of US$12.5 million was drawn on July 19, 2016, concurrently with the execution of the loan agreement. The loan matures on January 2, 2020 and bears interest at a minimum rate of 9.55% per annum, and is subject to the variability of the prime interest rate. In connection with the loan facility, we issued Hercules a warrant to purchase up to 241,117 of our common shares at an exercise price of US$3.94 per share. As of July 19, 2016, the warrant was exercisable for 156,726 common shares. Upon Hercules making the second advance under the loan facility, the warrant shall become exercisable for the additional 84,391 common shares. The warrant expires on July 19, 2023. The loan is secured by a pledge of the shares of Auris Medical AG, our principal operating subsidiary, owned by us, all intercompany receivables owed to us by our Swiss subsidiaries and a security assignment of our bank accounts.

 

On February 21, 2017, we completed a public offering of 10,000,000 common shares with a nominal value of CHF 0.40 each and 10,000,000 warrants, each warrant entitling its holder to purchase 0.70 of a common share. The net proceeds to the Company from the offering were approximately CHF 9.1 million, after deducting underwriting discounts and other estimated offering expenses payable by us. The underwriter was granted a 30-day option to purchase up to 1,500,000 additional common shares and/or 1,500,000 additional warrants. On February 15, 2017, the underwriter partially exercised its option in the amount of 1,350,000 warrants.

 

Funding requirements

 

We expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements until the first quarter of 2018. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including but not limited to:

 

·

the scope, rate of progress, results and cost of our clinical trials, nonclinical testing, and other related activities;

 

·

the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates and any products that we may develop;

 

·

the number and characteristics of product candidates that we pursue;

 

·

the cost, timing, and outcomes of regulatory approvals;

 

·

the cost and timing of establishing sales, marketing, and distribution capabilities; and

 

·

the terms and timing of any collaborative, licensing, and other arrangements that we may establish, including any required milestone and royalty payments thereunder.

 

We expect that we will require additional funding to complete our development programs with Keyzilen^®,AM-111 and AM-125, obtain regulatory approval for them and to commercialize our product candidates Keyzilen^®, AM-111, AM-125 or any other product candidate. If we receive regulatory approval for Keyzilen^®,AM-111 or AM-125, and if we choose not to grant any licenses to partners, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. Additional funds

 

may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are not able to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. Likewise, if we are unable to refinance amounts outstanding under our existing term loan facility before such amounts are due we may be unable to repay such amounts, which could result in foreclosure of the collateral pledged to secure such loan.

 

We may raise additional capital through the sale of equity or convertible debt securities. In such an event, your ownership interest will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect your rights as a holder of our common shares.

 

For more information as to the risks associated with our future funding needs, see “Item 3—Key Information—Risk factors” in the Annual Report.

 

Contractual Obligations and Commitments

 

The following table presents information relating to our contractual obligations as of March 31, 2017:

 

		Payments Due by Period
		Less Than 1 Year				Between 1 and 3 Years				Between 3 and 5 Years				Total
		(in thousands of CHF)
Operating lease obligations (1)			161				298				224				683
Long-term debt obligations (2)			3,675				9,557				-				13,232
Derivative Financial Instruments (3)			-				-				4,974				4,974
Total			3,836				9,855				5,198				18,889

________________

(1)

Operating lease obligations consist of payments pursuant to non-cancellable operating lease agreements relating to our leases of our office space and are not accounted for on the balance sheet. The lease term is 5 years. The lease expires on September 30, 2021 with an option to extend for another five years.

 

(2)

Long-term debt obligations consist of amortization payments and the end of term fee due under the Hercules Loan and Security Agreement converted to CHF at an exchange rate of CHF 1.001 to US$1.00. The secured term loan under the Hercules Loan and Security Agreement has a maturity date of January 2, 2020, with an interest-only period through July 1, 2017, and amortized payments of principal and interest thereafter in equal monthly instalments until the maturity date.

 

(3)

Derivative Financial instruments relate to the warrants issued in connection with the Hercules Loan and Security Agreement and the warrants issued in the public offering in February 2017.

 

Under the terms of our collaboration and license agreement with Xigen, we are obliged to make development milestone payments on an indication-by-indication basis of up to CHF 1.5 million upon the successful completion of a Phase 2 clinical trial and regulatory milestone payments on a product-by-product basis of up to CHF 2.5 million, subject to a mid-twenties percentage reduction for smaller indications, e.g., those qualifying for orphan drug status, upon receiving marketing approval for a product. The milestones are not included in the table above as they have not met the recognition criteria for provisions and the timing of these is not yet determinable as it is dependent upon the achievement of earlier mentioned milestones.

 

Off-Balance Sheet Arrangements

 

As of the date of this discussion and analysis, we do not have any, and during the periods presented we did not have any, off-balance sheet arrangements except for the Operating Lease mentioned in “Item 5—Operating and Financial Review and Prospects—Tabular disclosure of contractual obligations” in the Annual Report.

 

Significant Accounting Policies and Use of Estimates and Judgment

 

There have been no material changes to the significant accounting policies and estimates described in “Item 5—Operating and Financial Review and Prospects–Operating results—Significant accounting policies and use of estimates and judgment” in the Annual Report.

 

Recent Accounting Pronouncements

 

There are no IFRS standards as issued by the IASB or interpretations issued by the IFRS interpretations committee that are effective for the first time for the financial year beginning on or after January 1, 2017 that would be expected to have a material impact on our financial position.

 

JOBS Act Exemption

 

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company”. As an emerging growth company, we are not required to provide an auditor attestation report on our system of internal controls over financial reporting. This exemption will apply for a period of five years following the completion of our initial public offering (2019) or until we no longer meet the requirements of being an “emerging growth company,” whichever is earlier. We would cease to be an emerging growth company if we have more than US$1.0 billion in annual revenue, have more than US$700 million in market value of our common shares held by non-affiliates or issue more than US$1.0 billion of non-convertible debt over a three-year period.

 

Cautionary Statement Regarding Forward Looking Statements

 

Forward-looking statements appear in a number of places in this discussion and analysis and include, but are not limited to, statements regarding our intent, belief or current expectations. Many of the forward-looking statements contained in this discussion and analysis can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section entitled “Item 3—Key Information—Risk factors” in the Annual Report. These risks and uncertainties include factors relating to:

 

·

our operation as a development-stage company with limited operating history and a history of operating losses;

 

·

our need for substantial additional funding before we can expect to become profitable from sales of our products, including sufficient funding to ensure that our assets exceed our liabilities;

 

·

our dependence on the success of Keyzilen® (AM-101) and AM-111, which are still in clinical development and may eventually prove to be unsuccessful, including the likelihood that the TACTT3 clinical trial with Keyzilen® will not meet its endpoints;

 

·

the chance that we may become exposed to costly and damaging liability claims resulting from the testing of our product candidates in the clinical or in the commercial stage;

 

·

the chance our clinical trials may not be completed on schedule, or at all, as a result of factors such as delayed enrollment or the identification of adverse effects;

 

·

uncertainty surrounding whether any of our product candidates will receive regulatory approval, which is necessary before they can be commercialized;

 

·

if our product candidates obtain regulatory approval, our being subject to expensive, ongoing obligations and continued regulatory overview;

 

·

enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval and commercialization;

 

·

the chance that we do not obtain orphan drug exclusivity for AM-111, which would allow our competitors to sell products that treat the same conditions;

 

·

dependence on governmental authorities and health insurers establishing adequate reimbursement levels and pricing policies;

 

·

our products may not gain market acceptance, in which case we may not be able to generate product revenues;

 

·

our reliance on our current strategic relationships with INSERM or Xigen and the potential failure to enter into new strategic relationships;

 

·

our reliance on third parties to conduct our nonclinical and clinical trials and on third-party, single-source suppliers to supply or produce our product candidates;

 

·

our ability to comply with the requirement under our term loan facility with Hercules, including repayment of amounts outstanding when due;

 

·

our ability to meet the continuing listing requirements of Nasdaq and remain listed on the Nasdaq Global Market; and

 

·

other risk factors discussed under “Item 3—Key Information—Risk factors” included in the Annual Report.

 

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

 

Exhibit 99.3

 

Auris Medical News Release

 

Auris Medical Provides Business Update and Reports First Quarter 2017 Financial Results

 

·

Progressing toward completed enrollment of the AM-111 Phase 3 HEALOS trial

 

·

Key Opinion Leader event scheduled for June 16 in New York City

 

·

Conference call set for 8 am ET (2 pm CET) today

 

Zug, Switzerland, May 11, 2017 – Auris Medical Holding AG (NASDAQ: EARS), a clinical-stage company dedicated to developing therapeutics that address important unmet medical needs in otolaryngology, today provided a business update and announced financial results for the first quarter ended March 31, 2017.

 

“The first quarter was one of continued progress for all programs and recognition of the significant unmet medical need of acute inner ear hearing loss with receipt of fast track designation for AM-111. In addition, we recently announced results from the AMPACT studies that confirm the long-term safety of Keyzilen^®,” commented Thomas Meyer, Auris Medical’s founder, Chairman and Chief Executive Officer. “We are now moving toward key development milestones that reflect our work to address what are known as the big three otology disorders: hearing loss, tinnitus and vertigo. For AM-111 in hearing loss, we expect to complete enrollment of the Phase 3 HEALOS trial in the upcoming weeks. Furthermore, we continue to progress with the Phase 3 Keyzilen^® TACTT3 trial for tinnitus and are preparing to initiate a second Phase 1 trial for AM-125 in vertigo. We look forward to reviewing these development programs at our Key Opinion Leader event on June 16 in New York City.”

 

Development Program Updates

 

AM-111 for Acute Inner Ear Hearing Loss

 

·

Received fast track designation from the U.S. Food and Drug Administration (FDA) for AM-111 in acute sensorineural (inner ear) hearing loss, highlighting the seriousness of the condition as well as the unmet medical need.

 

·

Progressed with enrollment in the Phase 3 HEALOS trial, which is being conducted in Europe and Asia. The trial aims to enroll approximately 255 patients with severe to profound idiopathic sudden sensorineural hearing loss. Auris Medical expects to complete enrollment in the second quarter and announce top-line results from this trial in the fall of this year.

 

·

Continued ramping up the Phase 3 ASSENT trial, which is being conducted in the US, Canada and South Korea. The trial aims to enroll approximately 300 patients with severe to profound idiopathic sudden sensorineural hearing loss. Auris Medical expects to announce top-line results from this trial in the second half of 2018.

 

 

Auris Medical Holding AG · Bahnhofstrasse 21 · CH-6300 Zug · Tel. +41 41 729 71 94 · www.aurismedical.com

·

Scheduled to host a scientific symposium at the 21st IFOS ENT World Congress on June 26, 2017, in Paris, France. The symposium, Recent Advances in the Treatment of Acute Hearing Loss, will feature several experts in the field of hearing loss research.

 

Keyzilen^® (AM-101) for Acute Inner Ear Tinnitus

 

·

Completed the AMPACT1 and AMPACT2 open-label extension studies and reported results that confirm the long-term safety of Keyzilen®. In addition, exploratory efficacy analyses further support early treatment from onset of inner ear tinnitus and suggest potential benefits of repeating treatment cycles. The AMPACT studies were conducted at the request of the FDA to generate safety data from chronic intermittent use of Keyzilen® for up to 12 months.

 

·

Progressed with enrollment in the Phase 3 TACTT3 trial, which is being conducted in Europe. The trial previously enrolled more than 300 patients during the acute tinnitus stage (Stratum A) and approximately 330 patients during the post-acute tinnitus stage (Stratum B). An additional 60 patients are now being enrolled in each stratum. Auris Medical expects to announce top-line results from the expanded trial in early 2018.

 

AM-125 for Vertigo

 

·

Entered into an agreement with Otifex Therapeutics Pty. Ltd. to purchase various assets related to intranasal betahistine, including preclinical and clinical data as well as certain intellectual property rights. In a Phase 1 trial conducted by Otifex, intranasal betahistine showed good tolerance and a significantly higher bioavailability than reported for oral betahistine administration.

 

·

Progressed with plans to develop betahistine in a spray formulation for the intranasal treatment of vertigo. Auris Medical plans to initiate a second Phase 1 trial in 2017 to further test the safety, tolerability and pharmacokinetics of AM-125.

 

Other Developments

 

·

Elected Mats Blom, MBA, to the board of directors. He currently serves as Senior Vice President and Chief Financial Officer (CFO) of Zealand Pharma A/S. Prior to joining Zealand, Blom was CFO of Swedish Orphan International, Active Biotech AB and Anoto Group AB. He holds a BA in Business Administration and Economics from the University of Lund and an MBA from IESE University of Navarra, Barcelona.

 

·

Extended the AM-102 King’s College London collaboration, which is focused on the discovery of small molecule compounds for a second-generation tinnitus treatment. Auris Medical expects to select a lead compound by the end of this year.

 

·

Completed a public offering of 10,000,000 common shares and 11,350,000 warrants with net proceeds of $9.1 million. The common shares and warrants were sold in units comprised of one common share and one warrant at the price of $1.00 per unit. Each warrant entitles its holder to purchase 0.70 of a common share at the price of $1.20 per share.

 

First Quarter 2017 Financial Results

 

·

Cash and cash equivalents at March 31, 2017, totaled CHF 33.8 million.

 

·

Total operating expenses for the first quarter of 2017 were CHF 7.4 million compared to CHF 7.4 million for the first quarter of 2016.

 

·

Research and development expenses for the first quarter of 2017 were CHF 6.0 million compared to CHF 6.1 million for the first quarter of 2016.

 

·

General and administrative expenses for the first quarter of 2017 were CHF 1.4 million compared to CHF 1.2 million for the first quarter of 2016.

 

·

Net loss for the first quarter of 2017 was CHF 8.4 million, or CHF 0.22 per share, compared to CHF 8.9 million, or CHF 0.26 per share, for the first quarter of 2016.

 

The Company continues to expect that its operating expenses in 2017 will be in the range of CHF 28 to 32 million and that existing cash and cash equivalents will enable the funding of operations into the first quarter of 2018.

 

Upcoming Events

 

·

18th Annual Bio€quity Europe, May 22-23, 2017, in Paris, France

 

·

World Tinnitus Congress and International Tinnitus Seminar, May 22-24, 2017, in Warsaw, Poland

 

·

Auris Medical Key Opinion Leader Meeting, June 16, 2017, in New York City, USA

 

·

21st IFOS ENT World Congress, June 24-28, 2017, in Paris, France

 

Key Opinion Leader Meeting & Webcast Scheduled for June 16, 2017

 

Auris Medical will host a Key Opinion Leader breakfast at 8 am ET on Friday, June 16, 2017, in New York City. The meeting will focus on Auris Medical’s development-stage pipeline and feature a keynote presentation by Elias Michaelides, MD, who serves as Associate Professor of Surgery, Otolaryngology and Director of the Hearing and Balance Program at Yale School of Medicine.

 

To reserve a seat, please contact Cindy McGee via e-mail at investors@aurismedical.com. A live webcast of the event will be available in the Investor Relations section of the Auris Medical website at www.aurismedical.com and a replay of the presentation will be available following the event.

 

Today’s Conference Call & Webcast Information

 

Auris Medical will host a conference call and webcast to discuss the first quarter 2017 financial results and to provide a general business update today, May 11, 2017, at 8 am ET (2 pm CET). To participate in this conference call, dial 1-877-280-3459 (USA) or

 

+1-646-254-3374 (International), and enter passcode 5733572. A live webcast of the conference call will be available in the Investors section of the Auris Medical website at www.aurismedical.com and a replay of the conference call will be available following the live call.

 

About Auris Medical

 

Auris Medical is a Swiss biopharmaceutical company dedicated to developing therapeutics that address important unmet medical needs in otolaryngology. The Company is focused on the Phase 3 development of treatments for acute inner ear hearing loss (AM-111) and for acute inner ear tinnitus (Keyzilen^®; AM-101) by way of intratympanic administration with biocompatible gel formulations. In addition, Auris Medical is pursuing intranasal betahistine for Meniere’s disease and vestibular vertigo (AM-125) as well as early-stage research and development projects. The Company was founded in 2003 and is headquartered in Zug, Switzerland. The shares of Auris Medical Holding AG trade on the NASDAQ Global Market under the symbol “EARS.”

 

Forward-looking Statements

 

This press release may contain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements other than historical fact and may include statements that address future operating, financial or business performance or Auris Medical’s strategies or expectations. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “outlook” or “continue,” and other comparable terminology. Forward-looking statements are based on management’s current expectations and beliefs and involve significant risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements. These risks and uncertainties include, but are not limited to, prevailing market conditions, whether the Company will consummate the offering of shares and warrants on the expected terms, or at all, the satisfaction of closing conditions related to the offering and risks related to the application of the net proceeds, if any, from the offering. There can be no assurance that the Company will be able to complete the offering at the anticipated size or on the anticipated terms, or at all. In any event, the Company may continue to need additional funding and may be unable to raise capital when needed, which could force the Company to delay, reduce or eliminate its product development programs or commercialization efforts. Other risks and uncertainties relating to the Company's business include the timing and conduct of clinical trials of Auris Medical’s product candidates, including the likelihood that the TACTT3 clinical trial with Keyzilen^® will not meet its endpoints, the clinical utility of Auris Medical’s product candidates, the timing or likelihood of regulatory filings and approvals, Auris Medical’s intellectual property position and Auris Medical’s financial position, including the impact of any future acquisitions, dispositions, partnerships, license transactions or changes to Auris Medical’s capital structure, including future securities offerings. These risks and uncertainties also include, but are not limited to, those described under the caption “Risk Factors” in Auris Medical’s Annual Report on Form 20-F and future filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and Auris Medical does not undertake any obligation to update them in light of new information, future developments or otherwise, except as may be required under applicable law. All forward-looking statements are qualified in their entirety by this cautionary statement.

 

 Company contact: Cindy McGee, Head of Investor Relations and Corporate Communications, +41 61 201 1350, investors@aurismedical.com

 

 

Media contact: David Schull, Russo Partners, 1-858-717-2310,

david.schull@russopartnersllc.com

 

AURIS MEDICAL HOLDING AG 

Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Loss (unaudited)  

For the Three Months Ended March 31, 2017 and 2016 (in CHF)

 

		THREE MONTHS ENDED MARCH 31
		2017		2016
Research and development		(5,981,419)		(6,140,175)
General and administrative		(1,425,491)		(1,222,032)
Operating loss		(7,406,910)		(7,362,207)
Interest income		31,297		10,885
Interest expense		(421,435)		(2,745)
Foreign currency exchange loss, net		(338,160)		(1,544,845)
Revaluation gain from derivative financial instruments		233,123		—
Transaction costs		(506,234)		—
Loss before tax		(8,408,319)		(8,898,912)
Income tax gain		8,191		—
Net loss attributable to owners of the Company		(8,400,128)		(8,898,912)
Other comprehensive loss:
Items that will never be reclassified to profit or loss
Remeasurements of defined benefit liability		227,827		(260,469)
Items that are or may be reclassified to profit or loss
Foreign currency translation differences		19,925		41,820
Other comprehensive income/(loss)		247,752		(218,649)
Total comprehensive loss attributable to owners of the Company		(8,152,376)		(9,117,561)
Basic and diluted loss per share		(0.22)		(0.26)

   

 

AURIS MEDICAL HOLDING AG

 

Condensed Consolidated Interim Statement of Financial Position (unaudited)

 

(in CHF)

 

		MARCH 31, 2017		DECEMBER 31, 2016
ASSETS
Non-current assets
Property and equipment		336,350		369,294
Intangible assets		1,556,823		1,482,520
Other non-current financial assets		76,702		114,778
Total non-current assets		1,969,875		1,966,592
Current assets
Other receivables		371,451		296,531
Prepayments		877,280		952,595
Cash and cash equivalents		33,846,525		32,442,222
Total current assets		35,095,256		33,691,348
Total assets		37,065,131		35,657,940
EQUITY AND LIABILITIES
Equity
Share capital		17,731,881		13,731,881
Share premium		113,348,971		112,838,815
Foreign currency translation reserve		(63,619)		(83,544)
Accumulated deficit		(120,462,704)		(112,344,303)
Total shareholders’ equity attributable to owners of the Company		10,554,529		14,142,849
Non-current liabilities
Loan		8,954,361		10,151,498
Derivative financial instruments		4,974,474		117,132
Employee benefits		1,895,110		2,092,434
Deferred tax liabilities		188,391		196,582
Total non-current liabilities		16,012,336		12,557,646
Current liabilities
Loan		3,295,145		2,212,706
Trade and other payables		2,094,386		1,837,997
Accrued expenses		5,108,735		4,906,742
Total current liabilites		10,498,266		8,957,445
Total liabilities		26,510,602		21,515,091
Total equity and liabilities		37,065,131		35,657,940