Form 6-K Prosensa Holding N.V. For: Nov 16

November 17, 2014 7:05 AM

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 of

the Securities Exchange Act of 1934

November 17, 2014

Commission File Number: 001-35990

______________________

Prosensa Holding N.V.

______________________

J.H. Oortweg 21

2333 CH Leiden

The Netherlands

(Address of principal executive offices)

______________________

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 ��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):

�

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):

�

INCORPORATION BY REFERENCE

�

This report on Form 6-K shall be deemed to be incorporated by reference into the registration statements on Form F-3 (Registration Number 333-197240) and Form S-8 (Registration Number 333-194650) of Prosensa Holding N.V. and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

�

SIGNATURES

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, in Leiden, The Netherlands on November 17, 2014.

�

�	PROSENSA HOLDING N.V.
�	�
�	By:��	/s/Hans G.C.P. Schikan
�	�	Name:	Hans G.C.P. Schikan
�	�	Title:	Chief Executive Officer

�

�	By:��	/s/Berndt A.E. Modig
�	�	Name:	Berndt A.E. Modig
�	�	Title:	Chief Financial Officer

�

EXHIBIT INDEX

�

Exhibit	Description of Exhibit
1	Prosensa Holding N.V. Unaudited Condensed Consolidated Interim Financial Statements as of and for the three months and nine months ended September 30, 2014
2	Prosensa Holding N.V. Managements Discussion and Analysis of Financial Condition and Results of Operations
�	�

Exhibit 1

�

PROSENSA HOLDING N.V.

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

�	Page
Condensed Consolidated Statement of Comprehensive Income (Unaudited)	2
Condensed Consolidated Balance Sheet (Unaudited)	3
Condensed Consolidated Statement of Changes in Equity (Unaudited)	4
Condensed Consolidated Statement of Cash Flows (Unaudited)	5
Notes to the Condensed Consolidated Financial Statements (Unaudited)	6

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

�

Three months ended September 30,

�

Nine months ended September 30,

�

Note

�

2014

�

2013

�

2014

�

2013

�

� (000 except per share data)

�

License revenue

�

1,319

�

14,695

�

4,012

�

Collaboration revenue

�

1,060

�

2,751

�

Total revenue

�

2,379

�

14,755

�

6,763

�

Other income

�

250

�

186

�

702

�

220

�

Research and development expense

�

(8,395

)

�

(4,919

)

�

(19,191

)

�

(13,528

)

General and administrative expense

�

(2,403

)

�

(1,939

)

�

(7,554

)

�

(5,808

)

Other gains - net

�

122

�

Operating loss

�

(10,522

)

�

(4,282

)

�

(11,166

)

�

(12,334

)

Finance income

�

177

�

166

�

633

�

458

�

Finance costs

�

(304

)

�

(177

)

�

(787

)

�

(576

)

Finance cost net

�

(127

)

�

(11

)

�

(154

)

�

(118

)

Net loss

�

(10,649

)

�

(4,293

)

�

(11,320

)

�

(12,452

)

Other comprehensive income

�

Total comprehensive loss*

�

(10,649

)

�

(4,293

)

�

(11,320

)

�

(12,452

)

Loss per share from operations attributable to the equity holders of the Company during the period (in � per share)

�

Basic and diluted loss per share

�

(0.29

)

�

(0.12

)

�

(0.31

)

�

(0.40

)

�

* Total comprehensive loss is fully attributable to equity holders of the Company

�

The notes are an integral part of these condensed consolidated financial statements.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

�

� (000)

�

Note

�

As of September 30, 2014

�

As of December 31, 2013

�

Assets

�

Non-current assets

�

Leasehold improvements and equipment

�

1,963

�

2,177

�

Intangible assets

�

1,146

�

758

�

Other financial assets

�

289

�

Total non-current assets

�

3,198

�

3,224

�

Current assets

�

Trade and other receivables

�

3,493

�

4,403

�

Prepayments

�

1,686

�

931

�

Cash and cash equivalents

�

61,984

�

82,232

�

Total current assets

�

67,163

�

87,566

�

Total assets

�

70,361

�

90,790

�

Equity and liabilities

�

Equity attributable to owners of the parent

�

Share capital

�

361

�

359

�

Share premium

�

119,455

�

119,222

�

Other reserves

�

3,493

�

2,123

�

Accumulated deficit

�

(58,494

)

�

(41,890

)

Unappropriated earnings

�

(11,320

)

�

(16,604

)

Total equity

�

53,495

�

63,210

�

Liabilities

�

Non-current liabilities

�

Borrowings non-current portion

�

8,577

�

7,630

�

Derivative financial instruments

�

Deferred revenue/income

�

10,852

�

Total non-current liabilities

�

8,722

�

18,504

�

Current liabilities

�

Borrowings current portion

�

191

�

Derivative financial instruments

�

Trade and other payables

�

8,063

�

5,150

�

Deferred revenue/income

�

3,727

�

Total current liabilities

�

8,144

�

9,076

�

Total liabilities

�

16,866

�

27,580

�

Total equity and liabilities

�

70,361

�

90,790

�

The notes are an integral part of these condensed consolidated financial statements.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

�

� (000)

�

Common Share

capital

�

Class O Share

capital

�

Class A Share

capital

�

Class B Share

capital

�

Total Share

capital

�

premium

�

Other

reserves

�

Accumulated

deficit

�

Unappropriated

earnings

�

Total

equity

�

Balance at January 1, 2014

�

359

�

359

�

119,222

�

2,123

�

(41,890

)

�

(16,604

)

�

63,210

�

Net loss

�

(11,320

)

�

(11,320

)

Appropriation of result

�

(16,604

)

�

16,604

�

Share-based payments

�

1,370

�

1,370

�

Proceeds from shares issued

�

233

�

235

�

Balance at September 30, 2014

�

361

�

361

�

119,455

�

3,493

�

(58,494

)

�

(11,320

)

�

53,495

�

Balance at January 1, 2013

�

174

�

290

�

56,118

�

1,056

�

(31,998

)

�

(9,892

)

�

15,574

�

Net loss

�

(12,452

)

�

(12,452

)

Appropriation of result

�

(9,892

)

�

9,892

�

Share-based payments

�

692

�

692

�

Proceeds from shares issued

�

63,958

�

64,027

�

Share issuance cost

�

(897

)

�

(897

)

Conversion preference shares

�

255

�

)

�

(74

)

�

(174

)

�

Balance at September 30, 2013

�

359

�

359

�

119,179

�

1,748

�

(41,890

)

�

(12,452

)

�

66,944

�

The notes are an integral part of these condensed consolidated financial statements.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

�

Nine months ended September 30,

�

� (000)

�

Note

�

2014

�

2013

�

Cash flows from operating activities

�

Net loss

�

(11,320

)

�

(12,452

)

Adjustments for:

�

- Amortization/depreciation

�

7,8

�

968

�

917

�

- Costs employee share option plan

�

1,370

�

692

�

- Reversal finance income, net

�

101

�

118

�

- Changes in the fair value of derivatives

�

(30

)

�

(15

)

- Changes in trade and other receivables

�

868

�

(2,916

)

- Changes in prepayments

�

(755

)

�

(1,179

)

- Changes in trade and other payables

�

2,727

�

953

�

- Currency effect (outstanding) receivables and payables

�

120

�

(31

)

- Changes in deferred revenue

�

(14,415

)

�

(4,012

)

�

(20,366

)

�

(17,925

)

Interest received

�

588

�

666

�

Interest paid

�

(15

)

�

(30

)

Net cash used in operating activities

�

(19,793

)

�

(17,289

)

Cash flows from investing activities

�

Purchases of tangible fixed assets

�

(491

)

�

(359

)

Purchases of intangible assets

�

(465

)

�

(37

)

Decrease of other financial assets

�

200

�

Net cash used in investing activities

�

(756

)

�

(396

)

Cash flows from financing activities

�

Proceeds from issuance of share capital

�

235

�

64,027

�

Issuance cost deducted from share premium

�

(897

)

Proceeds from borrowings

�

600

�

702

�

Redemption financial lease

�

(91

)

�

(125

)

Repayments of borrowings

�

(400

)

�

(75

)

Net cash generated from financing activities

�

344

�

63,632

�

Net (decrease)/increase in cash and cash equivalents

�

(20,205

)

�

45,947

�

Currency effect cash and cash equivalents

�

(43

)

�

Cash and cash equivalents at beginning of the period

�

82,232

�

40,738

�

Cash and cash equivalents at end of the period

�

61,984

�

86,714

�

Restricted cash

�

500

�

The notes are an integral part of these condensed consolidated financial statements.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

1. General information

�

The activities of Prosensa Holding N.V. and its subsidiaries (together the Company) primarily consist of developing innovative, RNA-based therapeutics for the treatment of genetic disorders.

�

Since July 3, 2013, the Companys ordinary shares have been listed under the ticker symbol RNA in the United States on the NASDAQ Global Select Market.

�

Effective January 12, 2014, GlaxoSmithKline (GSK) and the Company mutually agreed to terminate the Research and Development Collaboration and License agreement (the research and collaboration agreement) entered into on October 6, 2009. As of the effective date, the Company regained all rights for the development and commercialization of drisapersen, PRO044 and other applicable compounds in its Duchenne muscular dystrophy (DMD) portfolio.

�

The Company is incorporated and domiciled in the Netherlands. The address of its registered office is J.H. Oortweg 21, Leiden. Prosensa Holding N.V. is the ultimate parent of the following group of entities:

�

1.	Prosensa Therapeutics B.V. (100%);

2.	Prosensa Technologies B.V. (100%);

3.	Polybiotics B.V. (100%); and

4.	Prosensa Inc. (100%)

�

The Management Board approved these condensed consolidated financial statements for issuance on November 17, 2014.

�

2. Summary of significant accounting policies

�

2.1 Basis of preparation

�

The condensed consolidated financial statements of the Company were prepared in accordance with International Financial Reporting Standards (IFRS) for interim financial information (IAS 34). Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with IFRS have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Companys annual consolidated financial statements for the year ended December 31, 2013 and accompanying notes included in the Form 20-F filed with the Securities & Exchange Commission (the Companys annual consolidated financial statements or financial statements), which have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB).

�

The principal accounting policies applied in the preparation of these condensed consolidated financial statements have been consistently applied to all the periods presented, unless otherwise stated, and are consistent with those of the Company annual consolidated financial statement.

�

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Companys accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to these condensed consolidated financials, are disclosed in note 4.

�

2.2��Convertible notes

�

Convertible notes that can be converted into share capital at the option of the holder (see note 15) are accounted for as compound financial instruments comprised of the notes and and a conversion option.��If the number of shares to be issued upon conversion varies with changes in the fair value of the underlying shares, the conversion option is classified as a financial liability. The conversion option is recognized initially at fair value (see note 3.2) and is re-measured at each reporting date with changes recognized in the consolidated statement of comprehensive income. The notes are initially recognized at fair value and are subsequently measured at amortized cost. Any difference between the proceeds of the convertible notes issuance (net of transaction costs) and the redemption value is recognized in the income statement over the term of the notes using the effective interest method.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

2.3 Changes in accounting policy and disclosures

�

The accounting policies adopted are consistent with those discussed in the Companys annual consolidated financial statements, except as described below:

�

(a) New and amended standards adopted by the Company

�

The following standards and amendments to standards became effective for annual periods on January 1, 2014, and have been adopted by the Company in the preparation of the condensed consolidated financial statements:

�

Amendment to IAS 36 Impairment of Assets

�

Amendment to IAS 39 Financial Instruments

�

IFRIC 21 Levies

�

The adoption of these new standards and amendments to standards had an immaterial effect on the Companys financial position and results of operations in the periods presented.

�

(b) New standards and interpretations not yet adopted by the Company

�

IFRS 15 Revenue from contracts with customers is effective as from January 1, 2017 with a retrospective effect and could have a significant effect on the consolidated financial statements of the Company. The Company has not early adopted IFRS 15 and has yet to assess IFRS 15s full impact. IFRS 9 Financial Instruments published in July 2014 is effective as from January 1, 2018 with early adoption permitted. The Company has not early adopted IFRS 9 and has yet to assess IFRS 9s full impact. There are no other standards which are currently available for early adoption which are expected to have a significant effect on the condensed consolidated financial statements of the Company.

�

3. Financial risk management

�

3.1 Financial risk factors

�

The Companys activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

�

The condensed consolidated financial statements do not include all financial risk management information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Companys annual consolidated financial statements for the period ended December 31, 2013.

�

There have been no changes in the financial management team that is responsible for financial risk management or in the Companys financial risk management policies since December 31, 2013.

�

Liquidity risk

�

The following table sets forth the Companys financial liabilities based on the remaining period at the balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

� (000)

�

Less than

1 year

�

Between

1 and 2 years

�

Between

2 and 5 years

�

Over 5 years

�

Undefined

�

At September 30, 2014

�

Borrowings

�

1,168

�

7,331

�

Finance lease liabilities

�

Trade and other payables

�

8,063

�

Total

�

8,063

�

1,168

�

7,331

�

At December 31, 2013

�

Borrowings

�

100

�

100

�

200

�

7,792

�

Finance lease liabilities

�

Derivative financial instruments (interest rate swap)

�

Trade and other payables

�

5,150

�

Total

�

5,349

�

108

�

214

�

7,792

�

3.2 Fair value estimation

�

The Company has issued convertible notes to CureDuchenne that are accounted for as compound financial instruments with a conversion option measured at fair value. The different fair value levels have been defined as follows:

�

Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

�

Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

�

Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

�

The fair value of the conversion option upon initial recognition and as of September 30, 2014 has been determined using a decision tree/cumulative probabilities option pricing model. Key inputs to the option pricing model included Level 2 and Level 3 fair value hierarchy inputs and the fair value of the option is classified as Level 3. Changes in fair value are analyzed by the Company at each reporting date. As of September 30, 2014 the change in fair value of the conversion option was nil.

�

The Company had entered into a floating-to-fixed interest rate swap to reduce the impact of volatility in changes to interest rates. During the nine month period ended September 30, 2014, the interest rate swap was settled. The determined fair value of the interest rate swap was the impact between a fixed interest rate of 4.15% and the estimated interest rate at measurement date for the remaining period of the instrument discounted over time. The estimated interest rate and discount rates were Level 2 fair value hierarchy inputs. As of September 30, 2014 and 2013, the change in fair value of the interest rate swap which was recorded through the condensed consolidated statement of comprehensive income amounted to �3 thousand gain and �15 thousand gain, respectively. Until its settlement the interest rate swap was recorded as both a non-current and current liability in the condensed consolidated balance sheet.

�

The carrying amount of the Companys financial assets and financial liabilities is a reasonable approximation of their fair value.

�

4. Critical accounting estimates and judgments

�

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

�

The preparation of financial statements in conformity with IFRS requires the Company to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenues and expenses in the condensed consolidated financial statements. Actual results could differ materially from those estimates and assumptions.

�

The preparation of financial statements in conformity with IFRS also requires the Company to exercise judgment in applying accounting policies. Critical judgments in the application of the Companys accounting policies and the key sources of estimation of uncertainty were the same as those applied to the Companys annual consolidated financial statements.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

The condensed consolidated financial statements do not include all disclosures for critical accounting estimates and judgments that are required in the annual consolidated financial statements and should be read in conjunction with the Companys annual consolidated financial statements for the period ended December 31, 2013.

�

On June 3, 2014, the Company announced that following feedback from the U.S. Food and Drug Administration (FDA), the Company will pursue a New Drug Application (NDA) filing for drisapersen with the FDA, under an accelerated approval pathway based on existing data. On October 10, 2014, the Company commenced the submission of a NDA for drisapersen under a rolling submission with the FDA, under an accelerated approval pathway based on existing data. In addition, the Company intends to file for conditional approval in Europe.

The outcomes of these filings may have a material impact on the Companys further development of drisapersen and other DMD compounds. A negative outcome of the regulatory approval process could alter the Companys development plans and costs, and potentially impact the following accounts in the Companys consolidated financial statements.

Borrowings

�

Certain loans from patient organizations have no fixed redemption schemes, and repayment is due when certain predetermined milestones are met. As of September 30, 2014, the Company recorded �7.5 million of such loans with no fixed redemption schemes. As of September 30, 2014, the maturity dates of the borrowings have been assessed resulting in no material changes to the maturity dates.

�

Valuation of convertible notes

�

To determine the fair value of the conversion feature of the convertible notes issued to CureDuchenne (see note 3.2), the Company uses a decision tree/cumulative probabilities option pricing model. The notes have no fixed redemption scheme, and the conversion feature can be exercised any time prior to maturity. Assumptions are made on relevant factors such as the investor's conversion strategy and the timing of a qualified financing in order to determine the fair value of the conversion feature. A 10% change in the probability assigned to the investors conversion strategy would increase the fair value of the option by a maximum of �23 thousand. A delay of one year in the Companys assumed timing of a qualified financing would decrease the fair value of the conversion option by �11 thousand.

�

Intangible assets

�

As of September 30, 2014, the Company recorded patents and licenses with a net book value of �452 thousand. As of September 30, 2014, there were no changes to managements assumptions used to determine the patent and licenses recoverable amount, which exceeds the carrying value of �452 thousand, and therefore no impairment is required.

�

Deferred revenue & License revenue

�

Upfront license fee payments received under the research and collaboration agreement with GSK were initially deferred and recognized based on the percentage of completion method, which required the Company to estimate the work performed to date as a proportion of the total work expected to be performed.

�

As a result of the termination of the research and collaboration agreement, the Company was released from any performance obligations and recorded �14.7 million license revenue in the first quarter of 2014. As of September 30, 2014, the Companys deferred revenue balance totals �0.2 million of grants deferred (reference is made to note 17).

�

5. Seasonality of Operations

�

The Companys financial results have varied substantially and are expected to continue to vary from quarter to quarter. The Company therefore believes that period to period comparisons should not be relied upon as indicative of future financial results.

�

6. Segment information

�

The Company operates in one reportable segment, which comprises the discovery and development of innovative, RNA-based therapeutics. The Management Board is identified as the chief operating decision maker. The Management Board reviews the consolidated operating results regularly to make decisions about resources and to assess overall performance.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

The Company derived its revenues from a single party, GSK, under the research and collaboration agreement, an exclusive worldwide collaboration for the development and commercialization of RNA-based therapeutics for DMD. The agreement was terminated effective January 12, 2014.

�

7. Leasehold improvements and equipment

�

� (000)

�

Leasehold

improvements

�

Laboratory

equipment

�

Office

equipment

�

Construction

in progress

�

Total

�

Period ended September 30, 2014

�

Opening net book amount

�

262

�

1,486

�

224

�

205

�

2,177

�

Additions

�

494

�

208

�

(166

)

�

538

�

Depreciation charge

�

(27

)

�

(611

)

�

(114

)

�

(752

)

Closing net book amount

�

237

�

1,369

�

318

�

1,963

�

At September 30, 2014

�

Cost

�

355

�

4,966

�

998

�

6,357

�

Accumulated depreciation

�

(118

)

�

(3,597

)

�

(680

)

�

(4,394

)

Net book amount

�

237

�

1,369

�

318

�

1,963

�

Depreciation expense of �636 thousand for the nine months ended September 30, 2014 (nine months ended September 30, 2013: �599 thousand) has been charged to research and development expense. Depreciation expense of �116 thousand for the nine months ended September 30, 2014 (nine months ended September 30, 2013: �144 thousand) has been charged to general and administrative expense.

�

Construction in progress mainly comprises laboratory and computer equipment not ready for use as of September 30, 2014.

�

As of September 30, 2014, acquired laboratory equipment in the amount of �47 thousand was not yet paid for and accordingly not reflected in the consolidated statement of cash flows.

�

8. Intangible assets

�

� (000)�

�

Patents and

licenses

�

Software

�

Total

�

Period ended September 30, 2014

�

Opening net book amount

�

522

�

236

�

758

�

Additions

�

604

�

604

�

Amortization charge

�

(70

)

�

(146

)

�

(216

)

Closing net book amount

�

452

�

694

�

1,146

�

At September 30, 2014

�

Cost

�

939

�

1,336

�

2,275

�

Accumulated amortization and impairment

�

(487

)

�

(642

)

�

(1,129

)

Net book amount

�

452

�

694

�

1,146

�

Amortization expense of �153 thousand for the nine months ended September 30, 2014 (nine months ended September 30, 2013: �120 thousand) has been charged to research and development expense. Amortization expense of �63 thousand for the nine months ended September 30, 2014 (nine months ended September 30, 2013: �54 thousand) has been charged to general and administrative expense.

�

As of September 30, 2014, acquired software in the amount of �139 thousand was not yet paid for and accordingly not reflected in the consolidated statement of cash flows.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

9. Other financial assets

�

� (000)	�	September 30,		�	�	December 31,		�
�	�	2014		�	�	2013		�
Deposit for rental obligations	�	�	89	�	�	�	89	�
Restricted cash	�	�	-	�	�	�	200	�
Total	�	�	89	�	�	�	289	�

�

The restricted cash balance secured a bank loan until its repayment in full during the nine month period ended September 30, 2014. Refer to note 12 of the condensed consolidated financial statements for further detail.

�

10. Trade and other receivables

�

� (000)�	�	September 30,		�	�	December 31,		�
�	�	2014		�	�	2013		�
Trade accounts receivable	�	�	2,495	�	�	�	1,298	�
Amounts to be invoiced to partners	�	�	-	�	�	�	2,380	�
Trade receivables	�	�	2,495	�	�	�	3,678	�
Value-added tax	�	�	478	�	�	�	351	�
Government and other grants to be received	�	�	170	�	�	�	30	�
Advances to personnel	�	�	35	�	�	�	-	�
Interest receivable on bank accounts	�	�	302	�	�	�	344	�
Other receivables	�	�	13	�	�	�	-	�
Total	�	�	3,493	�	�	�	4,403	�

�

As of September 30, 2014, trade receivables include an allowance related to the final settlement of the termination agreement with GSK. No other receivables were impaired or not performing. The carrying amount of the Companys trade receivables are fully denominated in British pounds, while other receivables are fully denominated in Euros.

�

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Company does not hold any collateral as security.

�

On June 27, 2014, the Company was awarded a $200 thousand research grant from Parent Project Muscular Dystrophy (PPMD), a not-for-profit organization founded by parents of children with Duchenne and Becker muscular dystrophy. As of September 30, 2014, the PPMD grant proceeds are included in government and other grants to be received.

11. Prepayments

As of September 30, 2014, the Company has made prepayments to suppliers for (pre)clinical studies and drug substance for a total of �0.7 million and prepayments of �0.5 million on insurance fees.

�

12. Cash and cash equivalents

�

� (000)�	�	September 30, 2014		�	�	December 31, 2013		�
Cash at bank and on hand	�	�	9,124	�	�	�	9,119	�
Short-term bank deposits	�	�	52,860	�	�	�	73,113	�
Total	�	�	61,984	�	�	�	82,232	�

�

In 2006, the Company received a bank loan of �900 thousand from ABN Amro N.V. The loan was fully repaid as of September 30, 2014. Repayment of the loan has been included in the repayment of borrowings line in the cash flows from financing activities. Upon repayment of the loan, �200 thousand of cash that secured the loan and accordingly had been considered restricted and all cash and cash equivalents as of September 30, 2014 are at free disposal of the Company. As of December 31, 2013, the �200 thousand that secured the bank loan was considered restricted cash and recorded as a component of other financial assets. The remaining balance of cash and cash equivalents at December 31, 2013 was at the free disposal of the Company.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

13. Equity

�

Class of shares and stated value	�	September 30, 2014		�	�	December 31, 2013		�
Common shares of �0.01	�	�	36,104,929	�	�	�	35,932,792	�

�

The par value as of September 30, 2014, is �0.01 per share (as of December 31, 2013: �0.01 per share). All issued shares are fully paid. Besides the minimum amount of share capital to be held under Dutch law, there are no distribution restrictions applicable to equity of the Company.

�

In the nine month period ended September 30, 2014, 172,137 shares were issued as a result of the exercise of vested options granted under the Companys share-based compensation plans (refer to the Companys annual consolidated financial statements for details of the plans). The related weighted average share price at the time of exercise was $9.60 per share.

�

14. Trade and other payables

�

� (000)�	�	September 30, 2014		�	�	December 31, 2013		�
Trade payables	�	�	3,194	�	�	�	1,910	�
Holiday payments and holiday rights	�	�	406	�	�	�	457	�
Social security and wage tax	�	�	684	�	�	�	246	�
Other liabilities	�	�	3,779	�	�	�	2,537	�
Total	�	�	8,063	�	�	�	5,150	�

�

Other liabilities

�

Other liabilities mainly consist of accruals for not yet billed services provided by vendors and miscellaneous liabilities.

�

15. Borrowings

�

� (000)	�	September 30, 2014		�	�	December 31, 2013		�
Non-current	�	�		�	�	�		�
Bank borrowings	�	�	-	�	�	�	300	�
Other loans	�	�	8,577	�	�	�	7,330	�
Total non-current	�	�	8,577	�	�	�	7,630	�
Current	�	�	�	�	�	�	�	�
Bank borrowings	�	�	-	�	�	�	100	�
Finance lease liabilities	�	�	-	�	�	�	91	�
Total current	�	�	-	�	�	�	191	�
Total	�	�	8,577	�	�	�	7,821	�

�

On�August 11, 2014 the Company entered into an agreement to sell unsecured convertible notes in the amount of up to �5 million to an affiliate of CureDuchenne, a non-profit organization. An initial note with a principal amount of �500 thousand was issued on September 22, 2014. The remaining notes will be issued if and when specified milestones are met. As of September 30, 2014 no additional notes were issued. The notes must be repaid on the earliest to occur of a change in control, twelve months from when the Company obtains regulatory approval of its first product candidate and June 30, 2019. CureDuchenne has the option, under specified conditions, to convert the notes prior to maturity into the Companys ordinary shares with a maximum value of the notes principal and accumulated interest at a conversion price based on the Companys share price at the time of conversion including a discount. CureDuchenne could have converted the outstanding note for approximately 32 thousand shares based on the Companys share price at September 30, 2014. If certain specified conditions would have been met, CureDuchenne could have converted the outstanding note for a maximum of approximately 80 thousand shares based on the Companys share price at the end of the third quarter of 2014.

�

The conversion option of the notes has been bifurcated and accounted for as a financial liability measured at fair value through profit and loss. The fair value of the embedded derivative is �61 thousand and is classified as Derivative financial instruments under Non-current liabilities as of September 30, 2014.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

In the nine months ended September 30, 2014, the Company received loan installments amounting to �100 thousand from Agentschap NL as part of the innovation credit facility (Innovatiekrediet) of the Dutch Ministry of Economic Affairs. During 2013, the Company received a loan installment of �99 thousand from Agentschap NL, �500 thousand from the Duchenne Childrens Trust as an installment of a �1.5 million funding agreement for research and development at an interest rate that approximates the market interest rate, �250 thousand from Association Fran�aise contre les Myopathies as an installment of a �3.0 million funding agreement and �202 thousand from Everest International Pte Ltd as an installment of a �1.0 million funding agreement for research and development at below market interest rates.

�

In 2006, the Company received a bank loan of �900 thousand from ABN Amro N.V.. The loan bore interest equal to Euribor plus 1.75% per year. The Company fully repaid the outstanding amount of �400 thousand in the nine month period ended September 30, 2014.

�

These condensed consolidated financial statements do not include all disclosures for borrowings that are required in the annual consolidated financial statements and should be read in conjunction with the Companys annual consolidated financial statements for the period ended December 31, 2013.

�

16. Revenue and deferred revenue

�

From October 2009 to January 2014, the Company operated under an exclusive worldwide collaboration with GSK for the development and commercialization of RNA-based therapeutics for DMD, with GSK exclusively licensing worldwide rights to develop and commercialize drisapersen and obtaining an option to exclusively license PRO044 and other specified assets in the Companys DMD portfolio. Under the research and collaboration agreement, GSK paid the Company a total of �41.5 million (�47.4 million) in upfront and milestone payments. Under the research and collaboration agreement, GSK was responsible for all costs of clinical development of drisapersen.

�

On January 12, 2014, the research and collaboration agreement was mutually terminated pursuant to a termination agreement, which terminated all intellectual property license grants as well as any rights arising under the research and collaboration agreement (other than rights to payments that accrued prior to termination of the collaboration). In addition, the termination agreement required GSK to transfer to the Company certain data and know-how, inventory, regulatory filings, clinical trial sponsorships, clinical study reports and material agreements relating to the development of the Companys products.

�

Going forward, the Company will be solely responsible for the cost of developing and commercializing drisapersen and its other product candidates, which may have significant financial and operational implications.

�

The agreement to terminate the research and collaboration agreement released the Company from any performance obligations under the upfront payments already received from GSK. As a result, in the nine month period ended September 30, 2014, the Company recognized �14.5 million deferred license income. The release from any performance obligations also resulted in recognition of �0.2 million revenue related to other services delivered under the research and collaboration agreement with GSK. In the nine month period ended September 30, 2014, collaboration revenue was minimal due to the termination of the research and collaboration agreement.

�

In the nine month period ended September 30, 2013, an amount of �2,576�thousand of the initial upfront payment under the research and collaboration agreement with GSK was recognized as license revenue in the consolidated condensed income statement. In the nine month period ended September 30, 2013, the Company recognized revenue of �1,436�thousand related to other upfront payments under the research and collaboration agreement.

�

These condensed consolidated financial statements do not include all disclosures for revenue and deferred revenue that are required in the annual consolidated financial statements and should be read in conjunction with the Companys annual consolidated financial statements for the period ended December 31, 2013.

�

17. Other income

�

The Company is part of two pan-European consortia, each of which has been awarded a Framework Programme 7 (FP7) research grant of �6 million from the European Commission to support the ongoing clinical study of PRO045 and the development of imaging biomarkers for Duchenne muscular dystrophy (DMD), respectively. The Company has also received a research grant from a private non-profit organization and governmental research grants. Grant proceeds are deferred and recognized in other income based on the percentage of completion method in the amount of �682 thousand in the nine months ended September 30, 2014 (for the nine months ended September 30, 2013: �180 thousand).

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

The Company has obtained certain loans made to support research and development that generally bear interest at a rate below the market interest rate, considered by the Company to be 12% over the last four years. The difference between fair value and the notional amount at inception is treated as a grant received for certain research performed by the Company and recognized in other income over the periods during which research and development expenses are incurred. The Company recognized other income of �9 thousand related to these loans in the nine months ended September 30, 2014 (for the nine months ended September 30, 2013: nil).

�

18. Research and development expense

�

Research and development expenses increased from �13.5 million to �19.2 million in the nine months ended September 30, 2013 and 2014, respectively. The increase is mainly due to the expansion of our development and regulatory activities, directly impacted by the termination of the research and collaboration agreement with GSK, as well as the costs of preparing for the regulatory filing and other costs for drisapersen, and the progressing of clinical studies of PRO044, PRO045 and PRO053.

�

19. General and administrative expense

�

General and administrative expense increased from �5.8 million to �7.6 million in the nine months ended September 30, 2013 and 2014, respectively. The increase is primarily due to share-based compensation and costs associated with operating as a public company in the period ended September 30, 2014 offset by expenses related to our initial public offering (IPO) in the same period in 2013.

�

On July 3, 2014 the Company filed a shelf registration statement (Form F-3) that provides the flexibility to raise up to $150 million in a primary offering if the Company chooses to do so. Costs incurred related to the Form F-3 in the period ended September 30, 2014 were recorded in the consolidated statement of comprehensive income in an amount of �231 thousand.

�

20. Share-based Payments

�

Share-based compensation expenses of �1,370 thousand were recognized during the nine month period ended September 30, 2014 (for the nine month period ended September 30, 2013: �692 thousand). A total of 552,000 options were granted in the nine month period ended September 30, 2014. The exercise price of the options is the quoted share price at the time of grant.�The Company used similar valuation assumptions, such as volatility, as used for previously granted options during the second half of 2013.

�

These condensed consolidated financial statements do not include all disclosures for share-based payments that are required in the annual consolidated financial statements and should be read in conjunction with the Companys annual consolidated financial statements for the period ended December 31, 2013.

�

21. Loss per share

�

Basic

�

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary and preferred shares in issue during the year.

�

Three months ended September 30,

�

Nine months ended September 30,

�

2014

�

2013

�

2014

�

2013

�

Loss attributable to equity holders of the Company in � (000)�

�

(10,649

)

�

(4,293

)

�

(11,320

)

�

(12,452

)

Weighted average number of Common shares in issue

�

36,096,069

�

35,677,928

�

36,005,034

�

31,251,749

�

Diluted

�

Diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Due to the fact that the Company is loss making, all potential ordinary shares had an antidilutive effect if converted, and thus have been excluded from the computation of loss per share.

�

PROSENSA HOLDING N.V.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

�

22. Income tax expense

�

No tax charge or income has been recognized in the nine month period ended September 30, 2014, or the corresponding period in 2013. The Company has a history of tax losses and expects to record a loss for the year ended December 31, 2014. Managements judgment is that sufficient evidence is currently not available that future taxable profit will be available against which the unused tax losses or unused tax credits can be utilized by the fiscal unity, therefore a deferred tax asset is not recognized.

23. Related-party transactions

�

In the period ended September 30, 2014 and 2013, the Management Board was paid regular salaries and contributions to post-employment schemes. Additionally, members of the Supervisory Board received compensation for their services in the form of cash and of share-based compensation. No loans, advances or guarantees were made to Management Board or Supervisory Board members as of September 30, 2014 and 2013.

�

The condensed consolidated financial statements do not include all disclosures for related-party transactions that are required in the annual consolidated financial statements and should be read in conjunction with the Companys annual consolidated financial statements for the period ended December 31, 2013.

�

24. Contingent liabilities

�

In July 2014, the Company and certain of its managing directors and supervisory directors were named as defendants in Singh v. Schikan et al., a purported class action lawsuit filed in the U.S. District Court for the Southern District of New York. The complaint asserts claims under the federal securities laws on behalf of a professed class consisting of all those who purchased the Companys ordinary shares pursuant and/or traceable to the registration statement used in connection with the Companys IPO. The complaint alleges that the Company omitted and/or misstated certain facts in the registration statement concerning the Phase III trial of drisapersen that, as announced on September 20, 2013, did not meet its primary endpoint. The litigation is in its earliest stages, and the Company and the individual defendants intend to defend the action vigorously. The Company is not able at present to reasonably estimate potential losses, if any, in connection with the litigation, but an adverse resolution could have a material adverse effect on the Companys financial position, results of operations and cash flows.

�

25. Events after the balance sheet date

�

No events occurred after the balance sheet date that would have had a material impact on the condensed consolidated financial statements of the Company.

�

�15

Exhibit 2

�

Managements Discussion and Analysis of Financial Condition and Results of Operations

�

This section should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Exhibit 1 of this Quarterly Report and the section contained in our Annual Report on Form 20-F (our Annual Report) Operating And Financial Review And Prospects. This discussion contains certain forward-looking statements within the meaning of Section�27A of the Securities Act of 1933, as amended, and Section�21E of the Securities Exchange Act of 1934, as amended. Many of the forward-looking statements contained in this Quarterly Report can be identified by the use of forward-looking words such as anticipate, believe, could, expect, should, plan, intend, will, estimate and potential, among others. Forward-looking statements appear in a number of places in this report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our managements 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 Item 3. Key Information-D. Risk factors of our 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.

�

These risks and uncertainties include factors relating to:

�	the timing or likelihood of regulatory filings and approvals;

�

�	our expectations regarding acceptance of regulatory submissions for drisapersen and our follow-on product candidates by the FDA and the EMA;

�

�	the timing and conduct of our trials of drisapersen and our other product candidates, including statements regarding the timing of initiation and completion of the trials and when results of the trials will be made public;

�

�	our expectation on the timing, completion and results of confirmatory studies for drisapersen;

�

�	the evaluation of the benefit-to-risk profile of drisapersen treatment across all studies and potential impact on the development and commercial pathway of all our product candidates;

�

�	our plans to pursue research and development of our product candidates for DMD and product candidates for other indications;

�

�	the potential advantages of our RNA modulation therapies, in particular drisapersen and our other product candidates for DMD;

�

�	the clinical utility of drisapersen and our other product candidates;

�

�	our estimates regarding the market opportunity for drisapersen and our other product candidates;

�

�	our ability to establish sales, marketing and distribution capabilities;

�

�	our ability to establish and maintain manufacturing arrangements for our product candidates;

�

�	our intellectual property position, including the outcome of interference proceedings relating to our exon-skipping product candidates, including both drisapersen and PRO053;

�

�	our estimates regarding expenses, future revenues, capital requirements and the need for additional financing;

�

�	the outcome of any, or any discussions we may enter regarding, acquisitions, dispositions, partnerships, license transactions or changes to the Companys capital structure, including future securities offerings;

�

�	the impact of government laws and regulations;

�

�	our competitive position;

�

�	the outcome of litigation and other proceedings in which we are involved; and

�

�	other risk factors discussed under Risk Factors included in our Annual Report on Form 20-F.

�

We are an innovative biotechnology company engaged in the discovery and development of ribonucleic acid-modulating, or RNA-modulating, therapeutics for the treatment of genetic disorders. Our primary focus is on rare neuromuscular and neurodegenerative disorders with a large unmet medical need, including Duchenne muscular dystrophy, myotonic dystrophy and Huntingtons disease. Our clinical portfolio of RNA-based product candidates is focused on the treatment of Duchenne muscular dystrophy, or DMD. Six of our DMD compounds have been granted orphan drug designation in the United States (US) and the European Union (EU).��Drisapersen, our lead product candidate, has been granted orphan drug designation in the US, EU, Australia and Japan and has been granted breakthrough therapy designation by the United States Food and Drug Administration (FDA) for the treatment of DMD.

�

DMD is one of the most prevalent rare genetic diseases globally affecting up to 1 in 3,500 boys and is invariably fatal. The progressive muscle-wasting that characterizes this disease is caused by inadequate production of dystrophin, a protein necessary for muscle function, as a result of mutations in the dystrophin gene. The different mutations, which are mostly deletions of one or more exons, found in the dystrophin gene result in distinct sub-populations of DMD patients. We are designing product candidates to address several sub-populations using our platform technology. Drisapersen aims to address a variety of mutations in the dystrophin gene, such as a deletion of exon 50 or exons 48 to 50 and may address up to 13% of all DMD patients.

�

Drisapersen, which has previously been referred to as PRO051 or GSK2402968, was advanced through clinical development as part of a collaboration with GlaxoSmithKline (GSK) dating back to 2009. This collaboration was mutually terminated in January 2014, and we fully retain all licenses and rights to drisapersen and our DMD portfolio.

�

Our funding requirements may vary substantially from the periods presented in this report. Under our historical collaboration with GSK, GSK reimbursed us for the cost of the clinical trials of drisapersen as well as a substantial portion of the costs of the clinical trials of PRO044 and our natural history study of DMD, and paid us milestone payments upon successful development.�Following the mutual termination of the collaboration in January 2014, we will bear the full cost of any additional clinical trials of drisapersen and our other DMD product candidates and will receive no future payments under the collaboration other than those accrued on the date of the termination.

�

Pursuant to the guidance received from the US FDA on June 2, 2014, we anticipate initiating two confirmatory studies prior to the potential accelerated approval of drisapersen , during the first half of 2015. We are financially responsible for conducting these studies, and as a result of the feedback from the FDA and ongoing communication with the EMA, we expect that we will expend significant additional financial resources on clinical development of drisapersen and the rest of our DMD portfolio.

�

On October 10, 2014, we commenced the submission of a New Drug Application (NDA) for drisapersen under a rolling review with the FDA under an accelerated approval pathway based on existing data. This submission followed our receipt of feedback from a meeting with the FDA that took place on May 14, 2014. In addition, we have been interacting with the European Medicines Agency (EMA), and based on these interactions we�intend to file for conditional approval in Europe. As part of our NDA and our anticipated application to the EMA, we plan to commit to conducting two confirmatory clinical trials, one with drisapersen and one with another of our exon-skipping compounds.

�

We have the most comprehensive pipeline of targeted RNA-modulating products in clinical development for the treatment of DMD, with three other exon skipping compounds in Phase I/II clinical studies and three programs in pre-clinical development. Dose finding studies for PRO044 have been completed and are ongoing for PRO045 and PRO053.

�

Drisapersen aims to restore dystrophin expression and improve muscle condition and function in the largest known sub-population of DMD patients. In clinical trials, drisapersen has been shown to produce novel dystrophin expression and have a beneficial therapeutic effect on DMD patients. We conducted a Phase I/II dose-ranging safety study in which drisapersen was administered to 12 patients subcutaneously, once weekly for 5 weeks. An open-label extension study (DMD114673) of this Phase I/II study was initiated in August 2009 and patients have continued in this study for over four years, with efficacy results available up to 177 weeks and safety results up to 188 weeks. The mean change from baseline for the 10 boys who were able to successfully perform the six minute walk test, or 6MWT, at the beginning of the study after 177 weeks was -25 meters.

�

A Phase II placebo-controlled study (DEMAND II/DMD114117) of drisapersen in 53 DMD patients was completed and demonstrated a statistically significant and clinically meaningful difference in the primary endpoint, which was the distance walked in the 6MWT, between the placebo group and the continuous active-treatment group at a dose of 6 mg/kg/week after 24 weeks. This clinically meaningful benefit was maintained after 48 weeks of treatment, and drisapersen was well tolerated throughout the duration of this study. The data were presented at a scientific meeting in April 2013, and the study results were published in The Lancet Neurology, a peer reviewed journal, in September 2014.

�

Results from a U.S.-based Phase II placebo controlled exploratory study (DEMAND V/DMD114876) of 24 week dosing of drisapersen 3mg/kg/week and 6mg/kg/week were presented on September 25, 2013. Boys in the 6mg/kg/week treatment arm showed a mean 27.1 meter improvement (including a 16.1 meter increase from baseline) over the boys in the placebo group at the end of the treatment period (p=0.069) in the 6MWT, indicating a clinically meaningful outcome for the primary endpoint. The study was not statistically powered to show a significant difference between the arms.

�

The 48 week data from this study were presented on March 17, 2014 at the Muscular Dystrophy Association 2014 Clinical Conference in Chicago, IL. A clinically meaningful treatment difference of 27.9 m over placebo (p=0.177) was maintained for 24 weeks after drisapersen administration ceased. This includes an overall mean increase from baseline of 14.7 meters. In the drisapersen 6 mg/kg/week group, an improvement was seen in the percent-predicted six-minute walk distance (6MWD) of 5.25% (p=0.051) and 4.85% (p=0.154) when compared to placebo at weeks 24 and 48, respectively.

�

A Phase III study of drisapersen (DEMAND III/DMD114044) was initiated in December 2010, and results were announced on September 20, 2013. This study was a randomized, double-blind and placebo-controlled trial, assessing drisapersen at a dose of 6 mg/kg/week in 186 boys. The study did not meet its primary endpoint of a statistically significant difference in the 6MWD at 48 weeks. As a result, GSK suspended dosing in all pending a full evaluation of the benefit-to-risk profile of drisapersen treatment across all studies.

�

In January 2014, we announced findings from subjects who had reached 48 weeks treatment in study DMD114349, an open-label continuation study to follow the placebo-controlled drisapersen studies DMD114117 and DMD114044. At 48 weeks in study DMD114349, there was a mean treatment difference of 46.1 meters (n=113) when comparing subjects treated with drisapersen at 6mg/kg/week (n=69) throughout both studies, versus subjects who had received placebo (n=44) prior to initiating the open-label continuation treatment period. Subjects enrolled from study DMD114117 showed a mean treatment difference of 52 meters (n=30) when comparing subjects treated with drisapersen at 6mg/kg/week (n=17) throughout both studies, versus subjects who had received placebo (n=13) prior to initiating the open-label continuation treatment period. For subjects enrolled in study DMD114349 from study DMD114044, the mean treatment difference at 48 weeks in study DMD114349 was 49 meters (n=83) for those dosed with drisapersen at 6mg/kg/week throughout (n=52) versus subjects previously allocated to placebo treatment (n=31) in study DMD114044.

�

In combination with the feedback from patients and investigators regarding the willingness and desire of patients to resume treatment with drisapersen, we have commenced a comprehensive re-dosing program for all patients previously treated with drisapersen, with the first patients re-initiating treatment in the United States and Belgium from September 2014.

�

PRO044 addresses a separate sub-population of up to 6% of DMD patients. We developed PRO044 using our exon-skipping technology to generate a product candidate with the same mechanism of action as drisapersen. PRO044 has completed a Phase I/II study in Europe, and results were presented in October 2013. We expect that an extension study for PRO044 will commence in the first quarter of 2015, and we expect to commence a placebo-controlled study in the second quarter of 2015, which may serve as the second confirmatory study required for an accelerated approval of drisapersen. PRO044 is currently subject to a clinical hold in the United States, and we expect to submit data to the FDA with the objective of having the hold lifted. We have four additional compounds that address other distinct sub-populations of DMD patients. PRO045 and PRO053 (each addressing a population of up to 8% of all DMD patients) are currently in dose finding studies. We expect preliminary data to be available for PRO045 in the fourth quarter of 2014 and for PRO053 in the first half of 2015, with additional studies of these compounds to begin in 2015. PRO052 and PRO055 are in advanced preclinical development. We are also moving PROSPECT into preclinical development. PROSPECT involves a new and innovative application of our exon-skipping technology platform to specifically target rarer mutations in the dystrophin gene. This approach employs multi-exon skipping induced by a single antisense oligonucleotide and is initially designed to address mutations in the exon 10 to 40 region. Initial applicability is up to 20% of DMD patient population.

�

Patent Interference Proceedings

The United States Patent and Trademark Office has declared two patent interferences involving Prosensas examined and allowed composition claims to exon 53 and exon 51 oligonucleotides and Sarepta Therapeutics Inc.s (Sarepta) issued composition claims to exon 53 and exon 51.� Sareptas claims are in patents licensed from the University of Western Australia.� Prosensas claims are in patents licensed from Leiden University Medical Center.� Patent Interference No. 106,007 was declared on July 18, 2014 and identifies Prosensas examined and allowed exon 53 composition claims in U.S. Patent Application 11/233,495 as interfering with Sareptas issued exon 53 composition claims in U.S. Patent 8,455,636.� Patent Interference No. 106,008 was declared on July 24, 2014 and identifies Prosensas examined and allowed exon 51 composition claims in U.S. Patent Application 13/550,210 as interfering with Sareptas issued exon 51 composition claims in U.S. Patents 7,807,816 and 7,960,541.� In addition, Patent Interference No. 106,013 (RES) was declared on September 29, 2014 and identifies Prosensas examined and allowed exon 51 method of use claims in U.S. Patent Application 14/198,992 as interfering with Sareptas issued exon 51 methods of use claims in U.S. Patent 8,486,907.� We also expect that a fourth interference will be declared between Prosensas examined and allowed exon 53 method claims in U.S. Patent Application 14/248,279 and Sareptas issued exon 53 method claims in U.S. Patent 8,455,636.� In each of these cases, Prosensas patent applications have earlier filing dates than the applicable Sarepta patents.

�

Results of Operations - Comparison of the Three Months Ended September 30, 2014 and 2013

�

Three months ended September 30,

�

2014

�

2013

�

Change

�

(� in '000)

�

License revenue

�

1,319

�

(100.0

)

Collaboration revenue

�

1,060

�

(100.0

)

Total revenue

�

2,379

�

(100.0

)

Other income

�

250

�

186

�

34.4

�

Research and development expense

�

(8,395

)

�

(4,919

)

�

70.7

�

General and administrative expense

�

(2,403

)

�

(1,939

)

�

23.9

�

Other gains - net

�

136.4

�

Operating loss

�

(10,522

)

�

(4,282

)

�

145.7

�

Finance income

�

177

�

166

�

6.6

�

Finance costs

�

(304

)

�

(177

)

�

71.8

�

Finance cost net

�

(127

)

�

(11

)

�

1,054.5

�

Net loss

�

(10,649

)

�

(4,293

)

�

148.1

�

Total revenue

�

License revenue was nil in the three month period ended September 30, 2014, compared to �1.3 million in the corresponding period in 2013 due to the termination of the research and collaboration agreement with GSK.

�

The decrease in collaboration revenue to nil in the three month period ended September 30, 2014 from �1.1 million in the three month period ended September 30, 2013 is due to the termination of the research and collaboration agreement with GSK. Pursuant to the termination of our collaboration with GSK, we do not expect any future license or collaboration revenue under the collaboration. Any new collaboration arrangements we may enter into and the terms we are able to negotiate may impact our revenue for future periods. We therefore believe that period to period comparisons should not be relied upon as indicative of our future revenues.

�

Prior to the termination of the collaboration with GSK, the timing of our operating cash flows varied significantly from the recognition of the related revenue, as revenue from some upfront or initiation payments was deferred and recognized as revenue when earned, while other revenue was earned when received, such as milestone payments or service fees. Our revenue has varied substantially from quarter to quarter and year to year, depending upon, among other things, the number of milestones achieved and the level of revenues earned for development efforts.

�

Other income

�

Other income for the three months ended September 30, 2014, amounted to �0.3 million (three months ended September 30, 2013: �0.2 million). We are part of two pan-European consortia, each of which has been awarded Framework Programme 7 (FP7) research grants from the European Commission, and we have also received governmental research grants. Grant proceeds are deferred, and other income is recognized based on the percentage of completion method.

�

We obtained certain loans made to support research and development that generally bear interest at a rate below the market interest rate, considered by us to be 12% over the last four years. The difference between fair value and the notional amount at inception is treated as a grant received for certain research performed by us and is deferred and recognized in other income over the periods which research and development expenses are incurred. We recognized other income for an amount of �3 thousand related to these loans in the three months ended September 30, 2014 (for the three months ended September 30, 2013: nil).

�

Research and Development Expense for the Three Months Ended September 30, 2014 and 2013

�

Project expenses by project

�

Three months ended September 30,

�

2014

�

2013

�

Change

�

(� in '000)

�

DMD Projects

�

6,322

�

3,354

�

88.5

�

PRO044

�

451

�

281

�

60.5

�

PRO045 and PRO053

�

1,371

�

1,022

�

34.1

�

Other DMD projects

�

4,500

�

2,051

�

119.4

�

Non-DMD projects

�

259

�

218

�

18.8

�

Infrastructure costs

�

1,814

�

1,347

�

34.7

�

Total

�

8,395

�

4,919

�

70.7

�

Research and development expense increased from �4.9 million in the three months ended September 30, 2013 to �8.4 million in the three months ended September 30, 2014. Our research and development expense is highly dependent on the development phases of our projects and therefore fluctuates highly from period to period.

�

The variance in our research and development expense during the three months ended September 30, 2014, and the corresponding period in 2013 is primarily related to the following projects:

�

DMD projects. The DMD project expenses mainly consist of salaries, costs for production of the compounds, costs paid to contract research organizations and costs relating to preparing our regulatory filings for drisapersen. During the three month period ended September 30, 2014, we mostly incurred expenses related to the expansion of our development and regulatory capabilities, other expenses for drisapersen (�3.2 million), costs for progressing clinical Phase I/II studies of both PRO045 and PRO053 (�1.4 million) and preparation for the PRO044 extension study planned to start in the first quarter of 2015. In the three month period ended September 30, 2014, we also incurred expenses for our other projects supporting the DMD program, such as the Natural History study and PROSPECT.

�

�	Non-DMD projects.�The expenses for our non-DMD projects DM1 and HD mainly consist of outsourced studies.

�

�	Infrastructure costs: we incur a significant amount of costs associated with our research and development that are less dependent on individual ongoing programs and they are therefore not allocated to specific projects.

�

General and Administrative Expense

�

General and administrative expense increased from �1.9 million to �2.4 million in the three months ended September 30, 2013 and 2014, respectively. The increase is primarily due to share-based compensation and costs associated with the regulatory filing in the three month period ended September 30, 2014 compared to the same period in 2013.

�

On July 3, 2014, we filed a shelf registration statement (Form F-3) that provides the flexibility to raise up to $150 million in a primary offering if we choose to do so. Costs incurred related to the Form F-3 in the three month period ended September 30, 2014 were recorded in the consolidated statement of comprehensive income for an amount of �63 thousand.

�

Other Gains-net

�

Other gains mainly related to currency effects on outstanding receivables and were insignificant in the three month period ended September 30, 2014 and in the same perod in 2013.

�

Finance Income

�

Finance income amounted �0.2 million in the three months ended September 30, 2014 and in the same period in 2013 and is due to higher average cash balances outstanding in the three month period ended September 30, 2014, offset by lower interest rates in 2014.

�

Finance Cost

�

Finance cost increased �0.1 million in the three months ended September 30, 2014, compared to the three months ended September 30, 2013. Higher finance costs were mainly due to higher outstanding borrowing balances in the three month period ended September 30, 2014.

�

Results of Operations - Comparison of the Nine Months Ended September 30, 2014 and 2013

�

Nine months ended September 30,

�

2014

�

2013

�

Change

�

(� in '000)

�

License revenue

�

14,695

�

4,012

�

266.3

�

Collaboration revenue

�

2,751

�

(97.8

)

Total revenue

�

14,755

�

6,763

�

118.2

�

Other income

�

702

�

220

�

219.1

�

Research and development expense

�

(19,191

)

�

(13,528

)

�

41.9

�

General and administrative expense

�

(7,554

)

�

(5,808

)

�

30.1

�

Other gains - net

�

122

�

542.1

�

Operating loss

�

(11,166

)

�

(12,334

)

�

(9.5

)

Finance income

�

633

�

458

�

38.2

�

Finance costs

�

(787

)

�

(576

)

�

36.6

�

Finance cost net

�

(154

)

�

(118

)

�

30.5

�

Net loss

�

(11,320

)

�

(12,452

)

�

(9.1

)

Total Revenue

�

License revenue increased �10.7 million in the nine month period ended September 30, 2014, compared to the corresponding period in 2013 due to the termination of the research and collaboration agreement with GSK and the related release of deferred revenue balances.

�

Collaboration revenue is revenue from contracts, typically for research and development activities related to the services provided under the research and collaboration agreement. The decrease in collaboration revenue to �0.1 million in the nine month period ended September 30, 2014 from �2.8 million in the nine month period ended September 30, 2013 is due to the termination of the research and collaboration agreement. Pursuant to the termination of our collaboration with GSK, we do not expect any future license or collaboration revenue under the collaboration. Any new collaboration arrangements we may enter into and the terms we are able to negotiate may impact our revenue for future periods. We therefore believe that period to period comparisons should not be relied upon as indicative of our future revenues.

�

Prior to the termination of the collaboration with GSK, the timing of our operating cash flows may vary significantly from the recognition of the related revenue, as revenue from some upfront or initiation payments was deferred and recognized as revenue when earned, while other revenue was earned when received, such as milestone payments or service fees. Our revenue has varied, and varies substantially from quarter to quarter and year to year, depending upon, among other things, the number of milestones achieved and the level of revenues earned for ongoing development efforts.

�

Other income

�

Other income for the nine month period ended September 30, 2014, amounts to �0.7 million (nine month period ended September 30, 2013: �0.2 million). We are part of two pan-European consortia, each of which has been awarded Framework Programme 7 (FP7) research grants from the European Commission, and we have also received governmental research grants. Grant proceeds are deferred, and other income is recognized based on the percentage of completion method.

�

We obtained certain loans made to support research and development that generally bear interest at a rate below the market interest rate, considered by us to be 12% over the last four years. The difference between fair value and the notional amount at inception is treated as a grant received for certain research performed by us and is deferred and recognized in other income over the periods during which research and development expenses are incurred. We recognized other income related to these loans in an amount of �9 thousand in the nine months ended September 30, 2014 (for the nine months ended September 30, 2013: nil).

�

Research and Development Expense for the Nine Months Ended September 30, 2014 and 2013

�

Project expenses by project

�

Nine months ended September 30,

�

2014

�

2013

�

Change

�

(� in '000)

�

DMD Projects

�

13,263

�

8,376

�

58.3

�

PRO044

�

674

�

952

�

(29.2

)

PRO045 and PRO053

�

4,181

�

2,858

�

46.3

�

Other DMD projects

�

8,408

�

4,566

�

84.1

�

Non-DMD projects

�

737

�

617

�

19.4

�

Infrastructure costs

�

5,191

�

4,535

�

14.5

�

Total

�

19,191

�

13,528

�

41.9

�

Research and development expense increased from �13.5 million in the nine month period ended September 30, 2013 to �19.2 million in the nine month period ended September 30, 2014. Our research and development expense is highly dependent on the development phases of our projects and therefore fluctuates highly from period to period.

�

The variance in our research and development expense during the nine month period ended September 30, 2014, and the corresponding period in 2013 is primarily related to the following projects:

�

DMD projects. The DMD project expenses mainly consist of salaries, costs for production of the compounds, costs paid to contract research organizations and costs relating to preparing our regulatory filings for drisapersen. During the nine month period ended September 30, 2014, we mostly incurred expenses related to the expansion of our development and regulatory capabilities, other expenses for drisapersen (�5.1 million), costs for progressing clinical Phase I/II studies of both PRO045 and PRO053 (�4.2 million) and preparation for the PRO044 extension study planned to start in the first quarter of 2015 (�0.7 million). In the nine month period ended September 30, 2014, we also incurred research and development expenses for our other projects supporting the DMD program, such as the Natural History study and PROSPECT.

�

�	Non-DMD projects.�The expenses for our non-DMD projects DM1 and HD mainly consist of outsourced studies.

�

�	Infrastructure costs: we incur a significant amount of costs associated with our research and development that are less dependent on individual ongoing programs and they are therefore not allocated to specific projects.

�

General and Administrative Expense

�

General and administrative expense increased from �5.8 million to �7.6 million in the nine month period ended September 30, 2013 and 2014, respectively. The increase is primarily due to share-based compensation expense and costs associated with operating as a public company in the period ended September 30, 2014 offset by expenses related to our initial public offering (IPO) in the same period in 2013.

�

On July 3, 2014 we filed a shelf registration statement (Form F-3) that provides the flexibility to raise up to $150 million in a primary offering if we choose to do so. Costs incurred related to the Form F-3 in the period ended September 30, 2014 were recorded in the consolidated statement of comprehensive income for an amount of �231 thousand.

�

Other Gains-net

�

Other gains mainly related to currency effects on outstanding receivables in the nine month period ended September 30, 2014, and were insignificant in the nine month period ended September 30, 2013.

�

Finance Income

�

Finance income increased �0.2 million in the nine month period ended September 30, 2014, compared to the same period in 2013 mainly due to higher average cash balances outstanding during the nine month period ended September 30, 2014, offset by lower interest rates in 2014.

�

Finance Cost

�

Finance cost increased �0.2 million in the nine month period ended September 30, 2014, compared to the nine month period ended September 30, 2013. Higher finance costs were mainly due to higher outstanding borrowing balances in the nine month period ended September 30, 2014.

�

Liquidity and Capital Resources

�

To date, we have financed our operations through private placements of our equity securities and our IPO, upfront, milestone and expense reimbursement payments received from GSK, as well as funding from patient organizations, governmental bodies and bank loans.

�

Cash Flows

�

Our cash and cash equivalents as of September 30, 2014, were �62.0 million. The table below summarizes our consolidated unaudited statement of cash flows for each of the nine month period ended September 30, 2014 and 2013:

�

�	�	Nine months ended September 30,						�
�	�	2014		�	�	2013		�
�	�	(� in '000)						�
Net cash used in operating activities	�	�	(19,793	)	�	�	(17,289	)
Net cash used in investing activities	�	�	(756	)	�	�	(396	)
Net cash generated from financing activities	�	�	344	�	�	�	63,632	�
Net (decrease)/increase in cash and cash equivalents	�	�	(20,205	)	�	�	45,947	�
Currency effect cash and cash equivalents	�	�	(43	)	�	�	29	�
Cash and cash equivalents at beginning of the period	�	�	82,232	�	�	�	40,738	�
Cash and cash equivalents at end of the period	�	�	61,984	�	�	�	86,714	�

�

The net cash used in operating activities of �19.8 million in the nine month period ended September 30, 2014, increased from net cash used in operating activities of �17.3 million in 2013 mainly due to a higher operating loss excluding license income and share based compensation expenses (both non-cash items) for a net amount of �8.6 million and increased cash generated from changes in working capital for an amount of �6.0 million. For an explanation of the operating loss, please see Results of Operations.

�

The net cash used in investing activities increased to �0.8 million in the nine month period ended September 30, 2014 from �0.4 million in the nine month period ended September 30, 2013 due to higher investments in fixed assets offset by the decrease in restricted cash.

�

The decrease in net cash generated from financing activities to net cash generated of �0.3 million in the nine month period ended September 30, 2014 from net cash generated of �63.6 million in the nine month period ended September 30, 2013 is due to a decrease in proceeds from issuance of share capital of �62.9 million in the nine month period ended September 30, 2014 compared to the same period in 2013 which included the proceeds from our IPO, a decrease in received borrowings of � 0.1 million and an increase in repayments of borrowings of �0.3 million in total in the nine month period ended September 30, 2014 compared to the same period in 2013.

�

Funding Requirements

�

Pursuant to the guidance received from the US FDA on June 2, 2014, we anticipate initiating two confirmatory studies prior to the potential accelerated approval of drisapersen, during the first half of 2015. We are financially responsible for conducting these studies, and as a result of the feedback from the FDA and ongoing communication with the EMA, we expect that we will expend significant additional financial resources on clinical development of drisapersen and the rest of our DMD portfolio.

�

We believe that our existing cash and cash equivalents and research funding that we expect to receive will be sufficient to fund our operating expenses, debt service obligations and capital expenditure requirements for at least the next 12 months. 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 present and future funding requirements will depend on many factors, including, among other things:

�

the time and costs involved in obtaining regulatory approval for drisapersen as well our other compounds and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of these compounds;

�

the progress, timing and completion of preclinical testing and clinical trials for any current or future compounds, including our DMD compounds;

�

the number of potential new compounds we identify and decide to develop;

�

the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims or infringements raised by third parties;

�

the marketing activities undertaken in connection with the anticipated commercialization of our DMD compounds and any other current or future compounds and costs involved in the creation of an effective sales and marketing organization;

�

the amount of revenues, if any, we may derive either directly or in the form of royalty payments from future sales of our products; and

�

�"

the outcome of litigation and other proceedings in which we are involved.

�

Capital Expenditures

�

The following table sets forth our capital expenditures for the nine month period ended September 30, 2014 and 2013.

�

�	�	Nine months ended September 30,						�
�	�	2014		�	�	2013		�
Investments in tangible fixed assets	�	�	491	�	�	�	359	�
Investments in intangible assets	�	�	465	�	�	�	37	�
Total	�	�	956	�	�	�	396	�

�

For the nine month period ended September 30, 2014, we made total investments of �1.1 million in tangible and intangible fixed assets related to the expansion of our development and regulatory capabilities, of which �1.0 million was paid. We plan to make further investments in the three months period ended December 31, 2014 in line with previous quarters during 2014.

�

JOBS Act exemptions

�

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 electing to take advantage of the following exemptions:

�

�	not providing an auditor attestation report on our system of internal controls over financial reporting;

�

�	not providing all of the compensation disclosure that may be required of non-emerging growth public companies under the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act; and

�

�	not disclosing certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officers compensation to median employee compensation.

�

These exemptions will apply for a period of five years following the completion of our IPO 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 $1.0 billion in annual revenue, have more than $700 million in market value of our ordinary shares held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period.

�

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Form 6-K Prosensa Holding N.V. For: Nov 16

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