UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                 

Commission file number 001-37452

CELYAD S.A.

(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)

Belgium

(Jurisdiction of incorporation or organization)

Rue Edouard Belin 2

1435 Mont-Saint-Guibert, Belgium

(Address of principal executive offices)

Christian Homsy, MD, MBA

Chief Executive Officer

Celyad SA

Rue Edouard Belin 2

1435 Mont-Saint-Guibert, Belgium

Tel: +32 10 394 100 Fax: +32 10 394 141

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
American Depositary Shares, each representing one ordinary share, no nominal value per share	The Nasdaq Stock Market LLC
Ordinary shares, no nominal value per share*	The Nasdaq Stock Market LLC*

* Not for trading, but only in connection with the registration of the American Depositary Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report.

Ordinary shares, no nominal value per share: 9,867,844 as of December 31, 2017

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☐  Yes    ☒  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ☐  Yes    ☒  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of ”large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ☐             Accelerated filer  ☒            Non-accelerated filer  ☐            Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board  ☒ Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    ☐  Item 17    ☐  Item 18

If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

TABLE OF CONTENTS

		PAGE
INTRODUCTION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
Item 1.	Identity of Directors, Senior Management and Advisers		4
Item 2.	Offer Statistics and Expected Timetable		4
Item 3.	Key Information		4
	A. Selected Financial Data		4
	B. Capitalization and Indebtedness		6
	C. Reasons for the Offer and Use of Proceeds		6
	D. Risk Factors		6
Item 4.	Information on the Company		44
	A. History And Development of the Company		44
	B. Business Overview		44
	C. Organizational Structure		73
	D. Property, Plants and Equipment		74
Item 4A.	Unresolved Staff Comments		74
Item 5.	Operating and Financial Review and Prospects		74
	A. Operating Results		77
	B. Liquidity and Capital Resources		86
	C. Research and Development, Patents and Licenses, Etc.		90
	D. Trend Information		90
	E. Off-Balance Sheet Arrangements		90
	F. Tabular Disclosure of Contractual Obligations		91
	G. Safe Harbor		91
Item 6.	Directors, Senior Management and Employees		91
	A. Directors and Senior Management		91
	B. Compensation		97
	C. Board Practices		102
	D. Employees		104
	E. Share Ownership		104
Item 7.	Major Shareholders and Related Party Transactions		104
	A. Major Shareholders		104
	B. Related Party Transactions		106
	C. Interests of Experts and Counsel		109
Item 8.	Financial Information		109
	A. Consolidated Statements and Other Financial Information		109
	B. Significant Changes		110
Item 9.	The Offer and Listing		110
	A. Offer and Listing Details		110
	B. Plan of Distribution		111
	C. Markets		111
	D. Selling Shareholders		111
	E. Dilution		111
	F. Expenses of the Issue		111
Item 10.	Additional Information		112
	A. Share Capital		112
	B. Memorandum and Articles of Association		112
	C. Material Contracts		112
	D. Exchange Controls		112
	E. Taxation		112
	F. Dividends and Paying Agents		122
	G. Statement by Experts		122
	H. Documents on Display		122
	I. Subsidiary Information		123

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Item 11.	Quantitative and Qualitative Disclosures About Market Risk.	123
Item 12.	Description of Securities Other Than Equity Securities	123
	A. Debt Securities	123
	B. Warrants and Rights	124
	C. Other Securities	124
	D. American Depositary Shares	124
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	126
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	126
Item 15.	Controls and Procedures	127
Item 16.	Reserved
Item 16A.	Audit Committee Financial Expert	129
Item 16B.	Code of Ethics	129
Item 16C.	Principal Accountant Fees and Services	129
Item 16D.	Exemptions from the Listing Standards for Audit Committees	130
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	130
Item 16F.	Change in Registrant’s Certifying Accountant	130
Item 16G.	Corporate Governance	130
Item 16H.	Mine Safety Disclosure	131
PART III
Item 17.	Financial Statements	132
Item 18.	Financial Statements	132
Item 19.	Exhibits	132

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INTRODUCTION

Unless otherwise indicated, “Celyad,” “the company,” “our company,” “we,” “us” and “our” refer to Celyad S.A. and its consolidated subsidiaries.

We own various trademark registrations and applications, and unregistered trademarks and service marks, including “CELYAD”, “C-CATH_ez” and our corporate logo. All other trademarks or trade names referred to in this Annual Report on Form 20-F are the property of their respective owners. Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 20-F are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Annual Report on Form 20-F may be referred to without the ^® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

Our audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our consolidated financial statements are presented in euros. All references in this Annual Report on Form 20-F to “$,” “US$,” “U.S.$,” “U.S. dollars,” “dollars” and “USD” mean U.S. dollars and all references to “€”, “EUR”, and “euros” mean euros, unless otherwise noted. Throughout this Annual Report on Form 20-F, references to ADSs mean ADSs or ordinary shares represented by ADSs, as the case may be.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F, or Annual Report, contains forward-looking statements. All statements other than present and historical facts and conditions contained in this Annual Report, including statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for future operations, are forward-looking statements. When used in this Annual Report, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

• the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;

• our ability to advance drug product candidates into, and successfully complete, clinical trials;

• our ability to successfully manufacture drug product for our clinical trials, including drug product with the desired number of T cells under our clinical trial protocols, and our ability to improve and automate these manufacturing procedures in the future;

• our reliance on the success of our drug product candidates;

• the timing or likelihood of regulatory filings and approvals;

• our ability to develop sales and marketing capabilities;

• the commercialization of our drug product candidates, if approved;

• the pricing and reimbursement of our drug product candidates, if approved;

• the implementation of our business model, strategic plans for our business, drug product candidates and technology;

• the scope of protection we are able to establish and maintain for intellectual property rights covering our drug product candidates and technology;

• our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties;

• cost associated with enforcing or defending intellectual property infringement, misappropriation or violation; product liability; and other claims;

• regulatory development in the United States, the European Union and other jurisdictions;

• estimates of our expenses, future revenues, capital requirements and our needs for additional financing and ability to obtain such financing when needed;

• the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;

• our ability to maintain and establish collaborations or obtain additional grant funding;

• the rate and degree of market acceptance of our drug product candidates, if approved;

• our financial performance;

• developments relating to our competitors and our industry, including competing therapies;

• our ability to effectively manage our anticipated growth;

• our ability to attract and retain qualified employees and key personnel;

• our ability to build our finance infrastructure, improve our accounting systems and controls and remedy the material weakness identified in our internal control over financial reporting;

• our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;

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• statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and share performance;

• our expectations regarding our passive foreign investment company, or PFIC, status;

• the future trading price of our ADSs and our ordinary shares and impact of securities analysts’ reports on these prices; and

• other risks and uncertainties, including those listed in the section of this Annual Report titled “Item 3.D.—Risk Factors.”

You should refer to the section of this Annual Report titled “Item 3.D.—Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Annual Report and the documents that we reference in this Annual Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This Annual Report contains market data and industry forecasts that were obtained from industry publications. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market position, market opportunity and market size information included in this Annual Report is generally reliable, such information is inherently imprecise.

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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

Our consolidated audited financial statements have been prepared in accordance with IFRS, as issued by the IASB. We derived the selected statements of consolidated income (loss) data, selected statements of consolidated financial position and selected statements of consolidated cash flows, each as of December 31, 2017, 2016 and 2015 from our consolidated audited financial statements

appended to this Annual Report. Our selected consolidated statements of consolidated income (loss) data, selected statements of consolidated financial position and selected statements of consolidated cash flows as of December 31, 2014 and 2013 and for the years ended December 31, 2014 and 2013 have been extracted from our audited consolidated financial statements, which are not included herein. This data should be read together with, and is qualified in its entirety by reference to, “Item 5—Operating and Financial Review and Prospects” as well as our financial statements and notes thereto appearing elsewhere in this Annual Report. Our historical results are not necessarily indicative of the results to be expected in the future.

Statement of Income (Loss) Data:

(€‘000)	For the year ended December 31
	2017			2016			2015			2014			2013
Revenues		3,540			8,523			3			146			—
Cost of sales		(515	)		(53	)		(1	)		(115	)		—
Gross profit		3,025			8,471			2			31			—
Research and development expenses		(22,908	)		(27,675	)		(22,766	)		(15,865	)		(9,046	)
General and administrative expenses		(9,310	)		(9,744	)		(7,230	)		(5,016	)		(3,972	)
Net other operating income		2,590			3,340			322			4,413			64
Amendment of Celdara Medical and Dartmouth College agreements		(24,341	)		—			—			—			—
Write-off C-Cure and Corquest assets and derecognition of related liabilities		(1,932	)		—			—			—			—
Operating loss		(52,876	)		(25,609	)		(29,672	)		(16,437	)		(12,954	)
Financial income		933			2,204			542			277			60
Financial expenses		(4,454	)		(207	)		(236	)		(41	)		(1,595	)
Share of loss of investments accounted for using the equity method		—			—			252			(252	)		—
Loss before taxes		(56,396	)		(23,612	)		(29,114	)		(16,453	)		(14,489	)
Income taxes		1			6			—			—			—
Loss for the year (1)		(56,395	)		(23,606	)		(29,114	)		(16,453	)		(14,489	)
Basic and diluted loss per share (in €)		(5.86	)		(2.53	)		(3.43	)		(2.44	)		(3.53	)
Weighted average number of outstanding shares		9,627,601			9,313,603			8,481,583			6,750,383			4,099,216

(1) For 2017, 2016 and 2015, the Group does not have any non-controlling interests and the losses for the year are fully attributable to owners of the parent.

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Selected Statement of Financial Position Data:

	2017		2016		2015		2014		2013
	Euro		Euro		Euro		Euro		Euro
Cash and cash equivalents		23,253		48,357		100,175		27,633		19,058
Short term investments		10,653		34,230		7,338		2,671		3,000
Total assets		77,626		138,806		159,525		43,976		32,386
Total equity		47,535		90,885		111,473		26,684		16,898
Total non-current liabilities		22,146		36,646		36,562		11,239		12,099
Total current liabilities		7,945		11,275		11,490		6,053		3,389
Total liabilities		30,091		47,922		48,052		17,292		15,488
Total equity and liabilities		77,626		138,806		159,525		43,976		32,386

Selected statements of consolidated cash flows

(€‘000)	For the year ended December 31
	2017			2016			2015			2014			2013
Net cash used in operations		(44,441	)		(24,692	)		(27,303	)		(17,414	)		(10,638	)
Net cash from/(used in) investing activities		17,613			(30,157	)		(10,691	)		(1,768	)		(3,532	)
Net cash from financing activities		605			3,031			110,535			27,757			31,583
Net cash and cash equivalents at the end of the period		23,253			48,357			100,175			27,633			19,058

Exchange Rate Information

The following table sets forth, for each period indicated, the low and high exchange rates for euros expressed in U.S. dollars, the exchange rate at the end of such period and the average of such exchange rates on the last day of each month during such period, based on the noon buying rate of the Federal Reserve Bank of New York for the euro. As used in this document, the term “noon buying rate” refers to the rate of exchange for the euro, expressed in U.S. dollars per euro, as certified by the Federal Reserve Bank of New York for customs purposes. The exchange rates set forth below demonstrate trends in exchange rates, but the actual exchange rates used throughout this Annual Report may vary.

	2013		2014		2015		2016		2017
High		1.3816		1.3927		1.2015		1.1569		1.2041
Low		1.2774		1.2101		1.0524		1.0364		1.0416
Rate at end of period		1.3779		1.2101		1.0927		1.0541		1.2022
Average rate per period		1.3281		1.3297		1.1104		1.1069		1.1298

The following table sets forth, for each of the last six months, the low and high exchange rates for euros expressed in U.S. dollars and the exchange rate at the end of the month based on the noon buying rate as described above.

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	October 2017		November 2017		December 2017		January 2018		February 2018		March 2018
High		1.1847		1.1936		1.2022		1.2488		1.2482		1.2440
Low		1.1580		1.1577		1.1725		1.1922		1.2211		1.2216
Rate at end of period		1.1648		1.1898		1.2022		1.2428		1.2211		1.2320

On December 29, 2017, the noon buying rate of the Federal Reserve Bank of New York for the euro was €1.00 = US$1.2022. Unless otherwise indicated, currency translations in this annual report reflect the December 29, 2017 exchange rate.

On March 30, 2018, the noon buying rate of the Federal Reserve Bank of New York for the euro was €1.00 = $1.2320.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Our business faces significant risks. You should carefully consider all of the information set forth in this Annual Report and in our other filings with the U.S. Securities and Exchange Commission, or the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this report and our other SEC filings. See “Special Note Regarding Forward-Looking Statements” above.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred losses in each period since our inception and anticipate that we will continue to incur losses for the foreseeable future.

We are not profitable and have incurred losses in each period since its inception. For the years ended December 31, 2017 and 2016, we incurred a loss for the year of €56.4 million and €23.6 million, respectively. As of December 31, 2017, we had an accumulated deficit of €180.4 million. We expect these losses to increase as we continue to incur significant research and development and other expenses related to our ongoing operations, continue to advance our drug product candidates through preclinical studies and clinical trials, seek regulatory approvals for our drug product candidates, scale-up manufacturing capabilities and hire additional personnel to support the development of our drug product candidates and to enhance our operational, financial and information management systems.

Even if we succeed in commercializing one or more of our drug product candidates, we will continue to incur losses for the foreseeable future relating to our substantial research and development expenditures to develop our technologies. We anticipate that our expenses will increase substantially if and as we:

• continue our research, preclinical and clinical development of our drug product candidates;

• expand the scope of therapeutic indications of our current clinical trials for our drug product candidates;

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• initiate additional preclinical studies or additional clinical trials of existing drug product candidates or new drug product candidates;

• further develop the manufacturing processes for our drug product candidates;

• seek regulatory approvals for our drug product candidates that successfully complete clinical trials;

• establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval, in the European Union and the United States;

• make milestone or other payments under any in-license agreements;

• maintain, protect and expand our intellectual property portfolio; and

• create additional infrastructure to support our operations as a U.S. public company.

We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.

Our prior losses and expected future losses have had and will continue to have an adverse effect on our shareholders’ equity and working capital. Further, the losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period to period comparison of our results of operations may not be a good indication of our future performance.

We have generated only limited revenue from sales of C-Cath_ez to date, and do not expect to generate material revenue until we receive regulatory approval for one of our drug product candidates.

We have generated only limited revenue from sales of C-Cath_ez, our proprietary catheter for injecting cells into the heart, to research laboratories and clinical stage companies. We expect that revenue from sales of C-Cath_ez will remain insignificant as we sell C-Cath_ez only to research laboratories and clinical stage companies. We have no drug products approved for commercial sale, have not generated any revenue from drug product sales, and do not anticipate generating any revenue from drug product sales until after we have received regulatory approval, if at all, for the commercial sale of a drug product candidate. Our ability to generate revenue and achieve profitability depends significantly on our success in many factors, including:

• completing research regarding, and preclinical and clinical development of, our drug product candidates;

• pursuing regulatory approvals and marketing authorizations for drug product candidates for which we complete clinical trials;

• developing a sustainable and scalable commercial-scale manufacturing process for our drug product candidates, including establishing our own manufacturing capabilities and infrastructure or establishing and maintaining commercially viable supply relationships with third parties;

• launching and commercializing drug product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor;

• obtaining market acceptance of our drug product candidates as viable treatment options;

• addressing any competing technological and market developments;

• identifying, assessing, acquiring and/or developing new drug product candidates;

• negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;

• maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and

• attracting, hiring, and retaining qualified personnel.

Even if one or more of the drug product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved drug product candidate. Our expenses could increase beyond expectations if we are required by the U.S. Food and Drug

7

Administration, or the FDA, European Medicines Agency, or EMA, or other applicable regulatory agencies, to change our manufacturing processes or assays, or to perform clinical, preclinical, or other types of studies in addition to those that we currently anticipate. If we are successful in obtaining regulatory approvals to market one or more of our drug product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the drug product, the ability to get coverage and adequate reimbursement, and whether we own the commercial rights for that territory. If the number of our addressable disease patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. If we are not able to generate revenue from the sale of any approved drug products, we may never become profitable.

If we fail to obtain additional financing, we will be unable to complete the development and commercialization of our drug product candidates.

Our operations have required substantial amounts of cash since inception. We expect to continue to spend substantial amounts to continue the clinical development of our drug product candidates, including our ongoing and planned clinical trials for CYAD-01 (CAR-T-NKG2D) and any of our future drug product candidates. If approved, we will require significant additional amounts in order to launch and commercialize our drug product candidates.

As of December 31, 2017, we had €23.3 million in cash and cash equivalents and €10.7 million in short-term investments.

We believe that our existing cash and cash equivalents and short-term investments, will be sufficient to fund our operations at least until the end of the first quarter of 2019. However, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We may require additional capital for the further development and commercialization of our drug product candidates and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate.

We cannot be certain that additional funding will be available on acceptable terms, or at all. We have no committed source of additional capital and if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of our drug product candidates or other research and development initiatives. Our licenses may also be terminated if we are unable to meet the payment obligations under the agreements. We could be required to seek collaborators for our drug product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our drug product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves. Any these events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our ADSs or ordinary shares to decline.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our drug product candidates or technologies.

We may seek additional funding through a combination of equity offerings, debt financings, collaborations and/or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of the ADSs or the ordinary shares. The incurrence of indebtedness and/or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to incur additional debt and/or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, issuance of additional equity securities, or the possibility of such issuance, may cause the market price of the ADSs or the ordinary shares to decline. In the event that we enter into collaborations and/or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to technologies or drug product candidates that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential arrangements when we might be able to achieve more favorable terms.

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Risks Related to Product Development, Regulatory Approval and Commercialization

We are heavily dependent on the regulatory approval of CYAD-01 in the United States and Europe, and subsequent commercial success of CYAD-01, both of which may never occur.

We are a clinical-stage biopharmaceutical company with no products approved by regulatory authorities or available for commercial sale. We have generated limited revenue to date and do not expect to generate any revenue from product sales for the foreseeable future. As a result, our future success is currently dependent upon the regulatory approval and commercial success of CYAD-01 in one or more of the indications for which we intend to seek approval. Our ability to generate revenues in the near term will depend on our ability to obtain regulatory approval and successfully commercialize CYAD-01 on our own in the United States, the first country in which we intend to seek approval for CYAD-01. We may experience delays in obtaining regulatory approval in the United States for CYAD-01, if it is approved at all, and the price of our ordinary shares and/or ADSs may be negatively impacted. Even if we receive regulatory approval, the timing of the commercial launch of CYAD-01 in the United States is dependent upon a number of factors, including, but not limited to, hiring sales and marketing personnel, pricing and reimbursement timelines, the production of sufficient quantities of commercial drug product and implementation of marketing and distribution infrastructure.

In addition, we have incurred and expect to continue to incur significant expenses as we continue to pursue the approval of CYAD-01 in the United States, Europe and elsewhere. We plan to devote a substantial portion of our effort and financial resources in order to continue to grow our operational capabilities. This represents a significant investment in the clinical and regulatory success of CYAD-01, which is uncertain. The success of CYAD-01, if approved, and revenue from commercial sales, will depend on several factors, including:

• execution of an effective sales and marketing strategy for the commercialization of CYAD-01;

• acceptance by patients, the medical community and third-party payors;

• our success in educating physicians and patients about the benefits, administration and use of CYAD-01;

• the incidence and prevalence of the indications for which our CYAD-01 drug product candidate is approved in those markets in which CYAD-01 is approved;

• the prevalence and severity of side effects, if any, experienced by patients treated with CYAD-01;

• the availability, perceived advantages, cost, safety and efficacy of alternative treatments, including potential alternate treatments that may currently be available or in development or may later be available or in development or approved by regulatory authorities;

• successful implementation of our manufacturing processes that we plan to include in a future biologics license application and production of sufficient quantities of commercial drug product;

• maintaining compliance with regulatory requirements, including current good manufacturing practices, or cGMPs, good laboratory practices, or GLPs, and good clinical practices, or GCPs; and

• obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity and otherwise protecting our rights in our intellectual property portfolio.

We may also fail in our efforts to develop and commercialize future drug product candidates, including CYAD-101 (the allogeneic version of our CYAD-01 drug product candidate). If this were to occur, we would continue to be heavily dependent on the regulatory approval and successful commercialization of CYAD-01, our development costs may increase and our ability to generate revenue or profits, or to raise additional capital, could be impaired.

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Our THINK trial is ongoing and not complete. Initial success in our ongoing clinical trial may not be indicative of results obtained when this trial is completed. Furthermore, success in early clinical trials may not be indicative of results obtained in later trials.

Our clinical experience with our lead drug product candidate CYAD-01 is limited. We have treated a small number of patients as of the date of this Annual Report. In particular, the results of the CM-CS1 trial and the interim results of the THINK trial should not be relied upon as evidence that our ongoing or future clinical trials will succeed. Trial designs and results from previous or ongoing trials are not necessarily predictive of future clinical trial results, and initial or interim results may not continue or be confirmed upon completion of the trial. These data, or other positive data, may not continue or occur for these patients or for any future patients in our ongoing or future clinical trials, and may not be repeated or observed in ongoing or future trials involving our drug product candidates. There are limited data concerning long-term safety and efficacy following treatment with CYAD-01. Our drug product candidates may fail to show the desired safety and efficacy in later stages of clinical development despite having successfully advanced through initial clinical trials. There can be no assurance that any of these trials will ultimately be successful or support further clinical advancement or regulatory approval of CYAD-01 or other drug product candidates.

There is a high failure rate for drugs and biologics proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials even after achieving promising results in earlier stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development.

In previous clinical trials involving T cell-based immunotherapies, some patients experienced serious adverse events. Our lead drug product candidate CYAD-01 may demonstrate a similar effect or have other properties that could halt its clinical development, prevent its regulatory approval, limit its commercial potential, or result in significant negative consequences.

In previous and ongoing clinical trials involving CAR-T cell products by other companies or academic researchers, many patients experienced side effects such as neurotoxicity and cytokine release syndrome, or CRS, which have in some cases resulted in clinical holds in ongoing clinical trials of CAR-T drug product candidates. There have been life threatening events related to severe neurotoxicity and CRS, requiring intense medical intervention such as intubation or pressor support, and in several cases, resulted in death. Severe neurotoxicity is a condition that is currently defined clinically by cerebral edema, confusion, drowsiness, speech impairment, tremors, seizures, or other central nervous system side effects, when such side effects are serious enough to lead to intensive care. In some cases, severe neurotoxicity was thought to be associated with the use of certain lymphodepletion preconditioning regimens used prior to the administration of the CAR-T cell products. CRS is a condition that is currently defined clinically by certain symptoms related to the release of cytokines, which can include fever, chills, low blood pressure, when such side effects are serious enough to lead to intensive care with mechanical ventilation or significant vasopressor support. The exact cause or causes of CRS and severe neurotoxicity in connection with treatment of CAR-T cell products is not fully understood at this time. In addition, patients have experienced other adverse events in these studies, such as a reduction in the number of blood cells (in the form of neutropenia, thrombocytopenia, anemia or other cytopenias), febrile neutropenia, chemical laboratory abnormalities (including elevated liver enzymes), and renal failure.

Undesirable side effects caused by our CYAD-01 drug product candidate or other T cell-based immunotherapy drug product candidates, could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trials or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from T cell-based immunotherapies are not normally encountered in the general patient population and by medical personnel. We expect to have to

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train medical personnel regarding our T cell-based immunotherapy drug product candidates to understand their side effects for both our planned clinical trials and upon any commercialization of any T cell-based immunotherapy drug product candidates. Inadequate training in recognizing or managing the potential side effects of T cell-based immunotherapy drug product candidates could result in patient deaths. Any of these occurrences could have a material adverse effect on our business, financial condition and prospects.

Our CYAD-01 drug product candidate is a new approach to cancer treatment that presents significant challenges.

We have concentrated our research and development efforts on cell-based immunotherapy technology, and our future success is highly dependent on the successful development of cell-based immunotherapies in general and in particular our approach using NKG2D receptor ligands, an activating receptor of NK cells. We cannot be sure that our T cell immunotherapy technologies will yield satisfactory products that are safe and effective, scalable or profitable.

Our approach to cancer immunotherapy and cancer treatment generally poses a number of challenges, including:

• obtaining regulatory approval from the FDA and other regulatory authorities that have very limited experience with the commercial development of genetically modified T cell therapies for cancer;

• developing and deploying consistent and reliable processes for engineering a patient’s T cells ex vivo and infusing the engineered T cells back into the patient;

• preconditioning patients with chemotherapy or other product treatments in conjunction with delivering each of our drug product candidates, which may increase the risk of adverse side effects;

• educating medical personnel regarding the potential side effect profile of each of our drug product candidates, such as the potential adverse side effects related to cytokine release or neurotoxicity;

• developing processes for the safe administration of these drug product candidates, including long-term follow-up for all patients who receive our drug product candidates;

• sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our drug product candidates;

• developing a manufacturing process and distribution network with a cost of goods that allows for an attractive return on investment;

• establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance, and obtaining adequate coverage, reimbursement, and pricing by third-party payors and government authorities; and

• developing therapies for types of cancers beyond those addressed by our current drug product candidates.

Additionally, because our technology involves the genetic modification of patient cells ex vivo using a virus, we are subject to many of the challenges and risks that gene therapies face, including:

• Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. To date, only two products that involve the genetic modification of patient cells have been approved in the United States.

• In the event of improper insertion of a gene sequence into a patient’s chromosome, genetically modified products could lead to lymphoma, leukemia or other cancers, or other aberrantly functioning cells.

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• Although our viral vectors are not able to replicate, there is a risk with the use of retroviral or lentiviral vectors that they could lead to new or reactivated pathogenic strains of virus or other infectious diseases.

• The FDA recommends a 15 year follow-up observation period for all patients who receive treatment using gene therapies, and we may need to adopt such an observation period for our drug product candidates.

• Clinical trials using genetically modified cells conducted at institutions that receive funding for recombinant DNA research from the National Institutes of Health, are subject to review by the Recombinant DNA Advisory Committee (RAC). Although the FDA decides whether individual protocols may proceed, the RAC review process can impede the initiation of a clinical trial, even if the FDA has reviewed the study and approved its initiation.

Moreover, public perception of therapy safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to the novel treatment mechanics. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment practices that require additional upfront costs and training. Physicians may not be willing to undergo training to adopt this novel and personalized therapy, may decide the therapy is too complex to adopt without appropriate training and may choose not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of this new therapy do not or will not outweigh its costs.

We have limited experience with our new monoclonal antibody manufacturing process, and there can be no guarantee that we will be able to consistently produce the required number of T cells in our drug product candidate.

The manufacturing processes for our CYAD-01 drug product candidate is complex. We recently modified the manufacturing process we use to manufacture our CYAD-01 drug product candidate, with the objective of increasing the yield of T cell expansion in the drug product candidate we produce. However, there can be no assurance that we will be successful in improving the yield of T cell expansion, or that drug product candidates manufactured using this process will have similar or improved safety and clinical activity compared to drug product candidates manufactured using our prior manufacturing process.

Until recently, our CYAD-01 drug product candidate was manufactured using a process, which we refer to as the LY process, intended to reduce the co-expression of NKG2D and stress ligands induced by the manufacturing process. However, this reduction of the co-expression was not sufficient, especially at higher doses, and yielded a higher than anticipated fratricide effect; that is, the expressed T cells in the drug product candidate would kill each other or kill themselves. As a result, the LY process failed to consistently produce the required number of T cells in the drug product candidate, resulting in some cases our inability to manufacture drug product candidate consistent with the protocol for our THINK trial. All 15 patients treated in the THINK trial as of December 31, 2017 were treated with drug product candidate manufactured using the LY process. Of these 15 patients, 10 were dosed at the per-protocol intended dose and five were treated at a dose lower than the per-protocol intended dose due to our inability to obtain sufficient cell numbers in the drug product candidate using this manufacturing method. Of the 10 patients dosed at the per-protocol intended dose, we observed clinical activity in six patients, ranging from stable disease, or SD, to complete response, or CR. However, no signs of clinical activity were shown in patients treated with a dose lower than the per-protocol intended dose.

In response to these manufacturing challenges, we modified the manufacturing process to include a monoclonal antibody, or mAb, that inhibits NKG2D expression on the T cell surface during production. We believe that this method will enable us to consistently manufacture our drug product candidate with significantly higher cell numbers than the LY process. Although we have evaluated this new manufacturing process in both in vivo and ex vivo models in order to demonstrate reproducibility and comparability, and our THINK protocol has been amended for this new approach, there can be no assurance that drug product candidates manufactured using this process will enable us to consistently manufacture drug product candidates with the required number of T cells or that such drug product candidates will have similar or improved safety and clinical activity compared to drug product candidates manufactured using our prior manufacturing process. We have limited experience with this approach. If we fail to consistently manufacture drug product candidate with the required number of T cells we may not observe signs of clinical activity in our THINK clinical trial, which would adversely affect our clinical development, potential approval and commercial viability of our drug product candidate.

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The first patient in our THINK trial to be administered drug product candidate manufactured using the mAb process was treated in late January 2018. As of the date of this Annual Report, four patients have been dosed using the new process. To date, no critical safety issues related to the cell therapy have been reported. There can be no assurance that drug product candidate manufactured using the mAb process will have similar or improved safety and clinical activity compared to drug product candidate manufactured using the LY manufacturing process.

In addition, we may develop additional process changes in the future, as we seek to advance our drug product candidates through the clinic and prepare for a potential commercial launch. In some circumstances, changes in the manufacturing process may require us to perform additional comparability studies or to collect additional clinical data from patients prior to undertaking additional clinical studies or filing for regulatory approval. These requirements may lead to delays in our clinical development and commercialization plans as well as potential increased costs.

We have not yet finalized our clinical development program for CYAD-01 in AML and CRC. The FDA and comparable foreign regulators may not agree with our proposed protocols for these clinical trials, which could result in delays.

We are still considering the clinical development program for CYAD-01 in AML and CRC. Prior to initiating new clinical trials for our drug product candidates, we are required to submit clinical trial protocols for these trials to the FDA and comparable foreign regulators in other jurisdictions where we plan to undertake clinical trials. We may not reach agreement with these regulators, or there may be a delay in reaching agreement. These regulators may want to see additional clinical or preclinical data regarding our CYAD-01 drug product candidate before we initiate new clinical trials. Any of these decisions could have a material adverse effect on our expected clinical and regulatory timelines, business, prospects, financial condition and results of operations.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including:

• the size and nature of the patient population;

• the patient eligibility criteria defined in the protocol;

• the size of the population required for analysis of the trial’s primary endpoints;

• the proximity of patients to trial sites;

• the design of the trial;

• our ability to recruit clinical trial investigators with the appropriate competencies and experience;

• competing clinical trials for similar therapies;

• clinicians’ and patients’ perceptions as to the potential advantages and side effects of the drug product candidate being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating;

• our ability to obtain and maintain patient consents; and

• the risk that patients enrolled in clinical trials will not complete a clinical trial.

In addition, our clinical trials will compete with other clinical trials for drug product candidates that are in the same therapeutic areas as our drug product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified

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clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Moreover, because our drug product candidates represent a departure from more commonly used methods for ischemic heart failure and cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, rather than enroll patients in our clinical trials.

Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of our clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our drug product candidates.

Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials as well as data from any interim analysis of ongoing clinical trials may not be predictive of future trial results. Clinical failure can occur at any stage of clinical development.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Although drug product candidates may demonstrate promising results in early clinical (human) trials and preclinical (animal) studies, they may not prove to be effective in subsequent clinical trials. For example, testing on animals may occur under different conditions than testing in humans and therefore the results of animal studies may not accurately predict human experience. Likewise, early clinical trials may not be predictive of eventual safety or effectiveness results in larger-scale pivotal clinical trials. The results of preclinical studies and previous clinical trials as well as data from any interim analysis of ongoing clinical trials of our drug product candidates, as well as studies and trials of other products with similar mechanisms of action to our drug product candidates, may not be predictive of the results of ongoing or future clinical trials. Drug product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and earlier clinical trials. In addition to the safety and efficacy traits of any drug product candidate, clinical trial failures may result from a multitude of factors including flaws in trial design, dose selection, placebo effect and patient enrollment criteria. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials, and it is possible that we will as well. Based upon negative or inconclusive results, we or our collaborators may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval.

The regulatory approval processes of the FDA, EMA and other comparable regulatory authorities is lengthy, time-consuming, and inherently unpredictable, and we may experience significant delays in the clinical development and regulatory approval, if any, of our drug product candidates.

The research, testing, manufacturing, labeling, approval, selling, import, export, marketing, and distribution of drug products, including biologics, are subject to extensive regulation by the FDA, EMA and other comparable regulatory authorities. We are not permitted to market any biological product in the United States until we receive a Biologics License Application, or BLA, from the FDA or a marketing authorization application, or MAA, from the EMA. We have not previously submitted a BLA to the FDA, MAA to the EMA, or similar approval filings to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish that the drug product candidate is safe, pure, and potent for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing, and controls for the product, and the manufacturing facilities must complete a successful pre-license inspection. We expect the nature of our biologic product candidates to create further challenges in obtaining regulatory approval. For example, the FDA and EMA have limited experience with commercial development of genetically modified T-cell therapies for cancer. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support licensure. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain licensure of the drug product candidates based on the completed clinical trials. Accordingly, the regulatory approval pathway for our drug product candidates may be uncertain, complex, expensive, and lengthy, and approval may not be obtained.

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Obtaining and maintaining regulatory approval of our drug product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our drug product candidates in other jurisdictions.

If we obtain and maintain regulatory approval of our drug product candidates in one jurisdiction, such approval does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a drug product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the drug product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a drug product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our drug product candidates will be harmed.

A Breakthrough Therapy Designation by the FDA for our drug product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our drug product candidates will receive marketing approval.

We may seek a Breakthrough Therapy Designation for some of our drug product candidates. A breakthrough therapy is defined as a product that is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drug product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drug product candidates designated as breakthrough therapies by the FDA may also be eligible for accelerated approval.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our drug product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a drug product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our drug product candidates qualify as breakthrough therapies, the FDA may later decide that the drug product candidates no longer meet the conditions for designation.

A Fast Track Designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

We may seek Fast Track Designation for some of our drug product candidates. If a product is intended for the treatment of a serious or life-threatening condition and the product demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular drug product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.

We may seek Orphan Drug Designation for some of our drug product candidates, and we may be unsuccessful or may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential for market exclusivity.

As part of our business strategy, we may seek Orphan Drug Designation for some of our drug product candidates, and we may be unsuccessful. Regulatory authorities in some jurisdictions, including the United States

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and the European Union, may designate products for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a product intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the product will be recovered from sales in the United States. In the United States, Orphan Drug Designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers.

Similarly, in the European Union, after recommendation from the EMA’s Committee for Orphan Medicinal Products, the European Commission grants Orphan Drug Designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the European Union and for which no satisfactory method of diagnosis, prevention, or treatment has been authorized (or the product would be a significant benefit to those affected). Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the product in the European Union would be sufficient to justify the necessary investment in developing the product. In the European Union, Orphan Drug Designation entitles a party to financial incentives such as reduction of fees or fee waivers.

Generally, if a drug product candidate with an Orphan Drug Designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing application for the same product and indication for that time period, except in limited circumstances. The applicable period is seven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a product no longer meets the criteria for Orphan Drug Designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products can be approved for the same condition or the same products can be approved for different conditions. If one of our drug product candidates that receives an orphan drug designation is approved for a particular indication or use within the rare disease, the FDA may later approve the same product for additional indications or uses within that rare disease that are not protected by our exclusive approval. Even after an orphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Moreover, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition or if another product with the same active moiety is determined to be safer, more effective, or represents a major contribution to patient care. Orphan Drug Designation neither shortens the development time or regulatory review time of a product nor gives the product any advantage in the regulatory review or approval process. While we intend to seek Orphan Drug Designation for some of our drug product candidates, we may never receive such designations. Even if we do receive such designations, there is no guarantee that we will enjoy the benefits of those designations.

Even if we receive regulatory approval of our drug product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our drug product candidates.

If our drug product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, and comparable foreign regulatory authority, requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices, or cGMP, and in certain cases current Good Tissue Practices, or cGTP, regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance, to the extent applicable, with cGMP and adherence

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to commitments made in any BLA, other marketing application, and previous responses to inspection observations. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

Any regulatory approvals that we receive for our drug product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the drug product candidate. The FDA may also require a REMS program as a condition of approval of our drug product candidates, which could entail requirements for long-term patient follow-up, a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our drug product candidates, we will have to comply with requirements including submissions of safety and other post-marketing information and reports, establishment registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval.

The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with our drug product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

• restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market, or voluntary or mandatory product recalls;

• fines, untitled or warning letters, or holds on clinical trials;

• refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;

• product seizure or detention, or refusal to permit the import or export of our drug product candidates; and

• injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. Products may be promoted only for the approved indications and in accordance with the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. The policies of the FDA and of other regulatory authorities may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

We will need to obtain FDA approval of any proposed product trade names, and any failure or delay associated with such approval may adversely impact our business.

Any trade name we intend to use for our drug product candidates will require approval from the FDA, regardless of whether we have secured a formal trademark registration from the United States Patent and Trademark Office, or USPTO. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names and/or medication or prescribing errors. The FDA may also object to any product name we submit if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product names, we may be required to adopt an alternative name for our drug product candidates. If we adopt an alternative name, we would lose the benefit of our existing trademark applications for such drug product candidate, and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our drug product candidates.

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Even if we obtain regulatory approval of our drug product candidates, the products may not gain market acceptance among physicians, patients, hospitals and others in the medical community.

Our autologous engineered-cell therapies may not become broadly accepted by physicians, patients, hospitals, and others in the medical community. Numerous factors will influence whether our drug product candidates are accepted in the market, including:

• the clinical indications for which our drug product candidates are approved;

• physicians, hospitals, and patients considering our drug product candidates as a safe and effective treatment;

• the potential and perceived advantages of our drug product candidates over alternative treatments;

• the prevalence and severity of any side effects;

• product labeling or product insert requirements of the FDA, EMA, or other regulatory authorities;

• limitations or warnings contained in the labeling approved by the FDA or EMA;

• the timing of market introduction of our drug product candidates as well as competitive products;

• the cost of treatment in relation to alternative treatments;

• the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities;

• the willingness of patients to pay out-of-pocket in the absence of coverage by third-party payors and government authorities;

• relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and

• the effectiveness of our sales and marketing efforts.

In addition, although we are not utilizing embryonic stem cells in our drug product candidates, adverse publicity due to the ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects from any clinical trials using these technologies or the failure of such trials to demonstrate that these therapies are safe and effective may limit market acceptance of our drug product candidates due to the perceived similarity between our drug product candidates and these other therapies. If our drug product candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, or others in the medical community, we will not be able to generate significant revenue.

Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.

Coverage and reimbursement may be limited or unavailable in certain market segments for our drug product candidates, which could make it difficult for us to sell our drug product candidates profitably.

Successful sales of our drug product candidates, if approved, depend on the availability of adequate coverage and reimbursement from third-party payors. In addition, because our drug product candidates represent novel approaches to the treatment of cancer, we cannot accurately estimate the potential revenue from our drug product candidates. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors are critical to new product acceptance.

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

• a covered benefit under its health plan;

• safe, effective and medically necessary;

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• appropriate for the specific patient;

• cost-effective; and

• neither experimental nor investigational.

In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. As a result, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Moreover, one payor’s decision to cover a particular drug product or service does not ensure that other payors will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement rate. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our products. Patients are unlikely to use our drug product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our drug product candidates. Because our drug product candidates have a higher cost of goods than conventional therapies, and may require long-term follow up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to achieve profitability may be greater.

We intend to seek approval to market our drug product candidates in the United States, European Union, and in selected other foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions for our drug product candidates, we will be subject to rules and regulations in those jurisdictions. For example, in the countries of the European Union, the pricing of biologics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a drug product candidate. In addition, market acceptance and sales of our drug product candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our drug product candidates and may be affected by existing and future health care reform measures.

Healthcare legislative reform measures and constraints on national budget social security systems may have a material adverse effect on our business and results of operations.

Third-party payors, whether domestic or foreign, or governmental or private, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the ACA, was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research. Some of the provisions of the Affordable Care Act have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges. On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Affordable Care Act to waive, defer, grant exemptions from, or delay the implementation of any provision of the Affordable Care Act that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Congress may consider other legislation to replace elements of the ACA.

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The Tax Cuts and Jobs Act of 2017, or TCJA, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plan, the annual fee imposed on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device exercise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to reduce the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” Congress also could consider subsequent legislation to replace elements of the Affordable Care Act that are repealed. Thus, the full impact of the Affordable Care Act, any law replacing elements of it, and the political uncertainty surrounding any repeal or replacement legislation on our business remains unclear.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and will remain in effect through 2027 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

• the demand for our drug product candidates, if we obtain regulatory approval;

• our ability to set a price that we believe is fair for our products;

• our ability to generate revenue and achieve or maintain profitability;

• the level of taxes that we are required to pay; and

• the availability of capital.

Any denial in coverage or reduction in reimbursement from Medicare or other government programs may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.

Our drug product candidates are biologics, which are complex to manufacture, and we may encounter difficulties in production, particularly with respect to process development or scaling-out of our manufacturing capabilities. If we or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our drug product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

Our drug product candidates are biologics and the process of manufacturing our products is complex, highly-regulated and subject to multiple risks. The manufacture of our drug product candidates involves complex processes, including harvesting cells from patients, selecting and expanding certain cell types, engineering or reprogramming the cells in a certain manner to create CAR-T NKR cells, expanding the cell population to

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obtain the desired dose, and ultimately infusing the cells back into a patient’s body. As a result of the complexities, the cost to manufacture our drug product candidates, is higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and is more difficult to reproduce. Our manufacturing process is susceptible to product loss or failure due to logistical issues associated with the collection of blood cells, or starting material, from the patient, shipping such material to the manufacturing site, shipping the final product back to the patient, and infusing the patient with the product, manufacturing issues associated with the differences in patient starting materials, interruptions in the manufacturing process, contamination, equipment or reagent failure, improper installation or operation of equipment, vendor or operator error, inconsistency in cell growth, and variability in product characteristics. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If for any reason we lose a patient’s starting material or later-developed product candidate at any point in the process, the manufacturing process for that patient will need to be restarted and the resulting delay may adversely affect that patient’s outcome. If microbial, viral, or other contaminations are discovered in our drug product candidates or in the manufacturing facilities in which our drug product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Because our drug product candidates are manufactured for each particular patient, we are required to maintain a chain of identity with respect to materials as they move from the patient to the manufacturing facility, through the manufacturing process, and back to the patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse patient outcomes, loss of product, or regulatory action including withdrawal of our products from the market. Further, as drug product candidates are developed through preclinical to late stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our drug product candidates to perform differently and affect the results of ongoing clinical trials or other future clinical trials.

Although we are working, or will be working, to develop commercially viable processes for the manufacture of our drug product candidates, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required for later-stage clinical trials and commercialization, including, among others, cost overruns, potential problems with process scale-out, process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. We may ultimately be unable to reduce the cost of goods for our drug product candidates to levels that will allow for an attractive return on investment if and when those drug product candidates are commercialized.

In addition, the manufacturing process that we develop for our drug product candidates is subject to FDA and foreign regulatory authority approval process, and we will need to make sure that we or our contract manufacturers, or CMOs, if any, are able to meet all FDA and foreign regulatory authority requirements on an ongoing basis. If we or our CMOs are unable to reliably produce drug product candidates to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the approvals we need to commercialize such drug product candidates. Even if we obtain regulatory approval for any of our drug product candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could have an adverse effect on our business, financial condition, results of operations and growth prospects.

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We may face competition from biosimilars, which may have a material adverse impact on the future commercial prospects of our drug product candidates.

Even if we are successful in achieving regulatory approval to commercialize a drug product candidate faster than our competitors, we may face competition from biosimilars. The Biologics Price Competition and Innovation Act of 2009, or BPCI Act, created an abbreviated approval pathway for biological products that are demonstrated to be biosimilar to, or interchangeable with, an FDA-approved biological product. “Biosimilarity” means that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components and there are no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency of the product. To meet the higher standard of “interchangeability,” an applicant must provide sufficient information to show biosimilarity and demonstrate that the biological product can be expected to produce the same clinical result as the reference product in any given patient and, if the biological product is administrated more than once to an individual, the risk in terms of safety or diminished efficacy of alternating or switching between the use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch.

A reference biological product is granted 12 years of exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after first licensure. First licensure typically means the initial date the particular product at issue was licensed in the United States. This does not include a supplement for the biological product or a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device, or strength, unless that change is a modification to the structure of the biological product and such modification changes its safety, purity, or potency. Whether a subsequent application, if approved, warrants exclusivity as the first licensure of a biological product is determined on a case-by-case basis with data.

This data exclusivity does not prevent another company from developing a product that is highly similar to the innovative product, generating its own data, and seeking approval. Data exclusivity only assures that another company cannot rely upon the data within the application for the reference biological product to support the biosimilar product’s approval.

In the European Union, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In the European Union, a competitor may reference data supporting approval of an innovative biological product, but will not be able do so until eight years after the time of approval of the innovative product and to get its biosimilar on the market until ten years from the aforementioned approval. This 10-year marketing exclusivity period will be extended to 11 years if, during the first eight of those ten years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition, companies may be developing biosimilars in other countries that could compete with our products.

If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.

We currently have no marketing and sales organization and have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our drug product candidates, we may not be able to generate product revenue.

We currently have no sales, marketing, or commercial product distribution capabilities and have no experience in marketing products. We intend to develop an in-house marketing organization and sales force, which will require significant capital expenditures, management resources and time. We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. If we are unable or decide not to establish internal sales, marketing and commercial distribution capabilities for any or all products we develop, we will likely pursue collaborative arrangements regarding the sales and marketing of our products. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be

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successful. We may have little or no control over the marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our drug product candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our drug product candidates.

There can be no assurance that we will be able to develop in-house sales and commercial distribution capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any product in the United States, the European Union, overseas, and as a result, we may not be able to generate product revenue.

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our drug product candidates.

We face competition both in the United States and internationally, including from major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. In addition, many universities and private and public research institutes are active in our target disease areas. As of the date of this Annual Report, our main competitors for CYAD-01 and our other NKR-T cell product candidates include Bellicum Pharmaceuticals, Inc., Bluebird bio, Inc., Celgene Corporation, Cellectis S.A., Gilead Sciences Inc., Mustang Bio, Novartis AG, NantKwest Inc and Ziopharm Oncology, Inc.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective or less costly than any drug product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than we do. Additionally, technologies developed by our competitors may render our potential drug product candidates uneconomical or obsolete, and we may not be successful in marketing our drug product candidates against competitors.

In addition, as a result of the expiration or successful challenge of our patent rights, we could face litigation with respect to the validity and/or scope of patents relating to our competitors’ products. The availability of our competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop and commercialize.

Risks Related to Our Reliance on Third Parties

Cell-based therapies rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or at all.

Engineered-cell therapies require many specialty raw materials, some of which are manufactured by small companies with limited resources and experience to support a commercial product. The suppliers may be ill-equipped to support our needs, especially in non-routine circumstances like an FDA inspection or medical crisis, such as widespread contamination. We also do not have contracts with many of these suppliers, and may not be able to contract with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key raw materials to support clinical or commercial manufacturing.

In addition, some raw materials are currently available from a single supplier, or a small number of suppliers. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose.

We rely on third parties to conduct, supervise and monitor our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug product candidates and our business could be substantially harmed.

We rely on contract research organizations, or CROs, clinical investigators and clinical trial sites to ensure our clinical trials are conducted properly and on time. While we will have agreements governing their

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activities, we will have limited influence over their actual performance. We will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We and our clinical investigators and CROs are required to comply with the GCPs for conducting, recording and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA, the Competent Authorities of the Member States of the EEA, and comparable foreign regulatory authorities, enforce these GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our clinical investigators and CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA, or other foreign regulatory authorities may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA or other regulatory authorities may determine that our clinical trials did not comply with GCPs. In addition, our clinical trials will require a sufficient number of test subjects to evaluate the safety and effectiveness of our drug product candidates. Accordingly, if our clinical investigators or CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process.

Our clinical investigators and CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities that could harm our competitive position. If our clinical investigators or CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our drug product candidates. If any such event were to occur, our financial results and the commercial prospects for our drug product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Further, switching or adding additional CROs involves additional costs and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which could materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

Risks Related to Intellectual Property

We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

We are dependent on patents, know-how, and proprietary technology, both our own and licensed from others. We license technology from the Trustees of Dartmouth College, or Dartmouth College. Dartmouth College may terminate our license, if we fail to meet a milestone within the specified time period, unless we pay the corresponding milestone payment. Dartmouth College may terminate either the license in the event we default or breach any of the provisions of the applicable license, subject to 30 days’ prior notice and opportunity to cure. In addition, the license automatically terminates in the event we become insolvent, make an assignment for the benefit of creditors or file, or have filed against us, a petition in bankruptcy. Furthermore, Dartmouth College may terminate our license, after April 30, 2024, if we fail to meet the specified minimum net sales obligations for any year, unless we pay to Dartmouth College the royalty we would otherwise be obligated to pay had we met such minimum net sales obligation. Any termination of this license could result in the loss of significant rights and could harm our ability to commercialize our drug product candidates. Disputes may also arise between us and our licensor regarding intellectual property subject to a license agreement, including those relating to:

• the scope of rights granted under the license agreement and other interpretation-related issues;

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• whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement;

• our right to sublicense patent and other rights to third parties under collaborative development relationships;

• the amount and timing of milestone and royalty payments;

• whether we are complying with our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our drug product candidates; and

• the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and by us and our partners.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected drug product candidates. We are generally also subject to all of the same risks with respect to protection of intellectual property that we license as we are for intellectual property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize our products could suffer.

We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our drug product candidates.

The patent application process is expensive and time-consuming, and we and our current or future licensors and licensees may not be able to apply for or prosecute patents on certain aspects of our drug product candidates or deliver technologies at a reasonable cost, in a timely fashion, or at all. It is also possible that we or our current licensor, or any future licensors or licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, our patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, such as with respect to proper priority claims, inventorship, claim scope or patent term adjustments. Under our existing license agreement with Dartmouth College, we have the right, but not the obligation, to enforce our licensed patents. If our current licensor, or any future licensors or licensees, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised and we might not be able to prevent third parties from making, using, and selling competing products. If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and unenforceable. Moreover, our competitors may independently develop equivalent knowledge, methods, and know-how. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business, financial condition and operating results.

We currently have issued patents and patent applications directed to our drug product candidates and medical devices, and we anticipate that we will file additional patent applications both in the United States and in other countries, as appropriate. However, we cannot predict:

• if and when any patents will issue from patent applications;

• the degree and range of protection any issued patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents;

• whether others will apply for or obtain patents claiming aspects similar to those covered by our patents and patent applications; or

• whether we will need to initiate litigation or administrative proceedings to defend our patent rights, which may be costly whether we win or lose.

We cannot be certain, however, that the claims in our pending patent applications will be considered patentable by the USPTO or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid and enforceable by courts in the United States or foreign countries.

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The strength of patents in the biotechnology and pharmaceutical field can be uncertain, and evaluating the scope of such patents involves complex legal and scientific analyses. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our drug product candidates or uses thereof in the United States or in other foreign countries. Even if the patents do successfully issue, third parties may challenge the validity, enforceability, or scope thereof, which may result in such patents being narrowed, invalidated, or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing their products to avoid being covered by our claims. If the breadth or strength of protection provided by the patent applications we hold with respect to our drug product candidates is threatened, this could dissuade companies from collaborating with us to develop, and could threaten our ability to commercialize, our drug product candidates. Further, because patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our drug product candidates. Furthermore, for U.S. applications in which all claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For U.S. applications containing a claim not entitled to priority before March 16, 2013, there is a greater level of uncertainty in the patent law in view of the passage of the America Invents Act, which brought into effect significant changes to the U.S. patent laws, including new procedures for challenging pending patent applications and issued patents.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however the life of a patent, and the protection it affords, is limited. Further, the extensive period of time between patent filing and regulatory approval for a drug product candidate limits the time during which we can market a drug product candidate under patent protection, which may particularly affect the profitability of our early-stage drug product candidates. If we encounter delays in our clinical trials, the period of time during which we could market our drug product candidates under patent protection would be reduced. Without patent protection for our drug product candidates, we may be open to competition from biosimilar versions of our drug product candidates.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on drug product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. For example, a 2017 report from the Office of the United States Trade Representative identified a number of countries, including India and China, where challenges to the procurement and enforcement of patent rights have been reported. Several countries, including India and China, have been listed in the report every year since 1989. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

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Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.

In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and any other elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. Trade secrets, however, may be difficult to protect. We seek to protect our proprietary processes, in part, by entering into confidentiality agreements with our employees, consultants, outside scientific advisors, contractors and collaborators. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, outside scientific advisors, contractors, and collaborators might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

Third-party claims of intellectual property infringement against us or our collaborators may prevent or delay our product discovery and development efforts.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. Recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and post-grant review have been implemented. This reform adds uncertainty to the possibility of challenge to our patents in the future.

Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our drug product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our drug product candidates may give rise to claims of infringement of the patent rights of others.

Although we have conducted analyses of the patent landscape with respect to our drug product candidates, and based on these analyses, we believe that we will be able to commercialize our drug product candidates, third parties may nonetheless assert that we infringe their patents, or that we are otherwise employing their proprietary technology without authorization, and may sue us. There may be third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture, or methods of use or treatment that cover our drug product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our drug product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies or the manufacture, use, or sale of our drug product candidates infringes upon these patents. If any such third-party patents were held by a court of competent jurisdiction to cover our technologies or drug product candidates, the holders of any such patents may be able to block our ability to commercialize the applicable drug product candidate unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, our ability to commercialize our drug product candidates may be impaired or delayed, which could in turn significantly harm our business.

Third parties asserting their patent rights against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our drug product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and may impact our reputation. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties, or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. In that event, we would be unable to further develop and commercialize our drug product candidates, which could harm our business significantly.

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We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming, and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To cease such infringement or unauthorized use, we may be required to file patent infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding or a declaratory judgment action against us, a court may decide that one or more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one or more of our patents at risk of being invalidated, held unenforceable, interpreted narrowly, or amended such that they do not cover our drug product candidates. Such results could also put our pending patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. Interference or derivation proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to, or the correct inventorship of, our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation, interference, or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our ordinary shares.

Issued patents covering our drug product candidates could be found invalid or unenforceable if challenged in court or before the USPTO or comparable foreign authority.

If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our drug product candidates, the defendant could counterclaim that the patent covering our drug product candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post-grant review, and equivalent proceedings in foreign jurisdictions, such as opposition or derivation proceedings. Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our drug product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our drug product candidates. Such a loss of patent protection could have a material adverse impact on our business.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves, both technological and legal complexity, and is therefore costly, time-consuming, and inherently uncertain. Numerous recent changes to the patent laws and proposed changes to the rules of the USPTO may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, the Leahy-Smith America Invents Act, or AIA, enacted in 2011 involves significant changes in patent legislation. An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a ‘‘first-to-file’’ system for deciding which party should be granted a patent when two or more

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patent applications are filed by different parties claiming the same invention. A third party that files a patent application with the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application.

Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and provide opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action.

In addition, recent court rulings in cases such as Association for Molecular Pathology v. Myriad Genetics, Inc. (Myriad I); BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litig. (Myriad II); and Promega Corp. v. Life Technologies Corp. have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to naturally-occurring substances are not patentable. Although we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress, or the USPTO may impact the value of our patents.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.

We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.

Failure to comply with proper procedure for obtaining and maintaining patents could have an adverse effect on our business.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. Although an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

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Risks Related to Our Organization, Structure and Operation

We are highly dependent on our Chief Executive Officer and members of our executive management team, and if we are not successful in motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on members of our executive management team, particularly our chief executive officer, Christian Homsy (permanent representative of LSS Consulting SPRL). We do not maintain “key man” insurance on the life of Christian Homsy, or the lives of any of our other employees. The loss of the services of any members of our executive management team, and our inability to find suitable replacements, could result in delays in product development and harm our business.

Competition for skilled personnel in the biotechnology and pharmaceutical industries is intense and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided warrants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by movements in our share price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies.

We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

As of December 31, 2017, we employed 70 full-time employees, seven part-time employees (75.4 full time equivalent employees) and 10 senior managers under management services agreements. As our drug product candidates move into later stage clinical development and towards commercialization, we must add a significant number of additional managerial, operational, sales, marketing, financial, and other personnel. Future growth will impose significant added responsibilities on members of management, including:

• identifying, recruiting, integrating, maintaining, and motivating additional employees;

• managing our internal development efforts effectively, including the clinical and FDA review process for our drug product candidates, while complying with our contractual obligations to contractors and other third parties; and

• improving our operational, financial and management controls, reporting systems, and procedures.

Our future financial performance and our ability to commercialize our drug product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our drug product candidates and, accordingly, may not achieve our research, development, and commercialization goals.

If we engage in future acquisitions or strategic collaborations, this may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We may evaluate various acquisitions and strategic collaborations, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic collaboration may entail numerous risks, including:

• increased operating expenses and cash requirements;

• the assumption of additional indebtedness or contingent liabilities;

• assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;

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• the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;

• retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

• risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or drug product candidates and regulatory approvals; and

• our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. We do not currently carry biological or hazardous waste insurance coverage.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.

Risks from the improper conduct of employees, agents, contractors, consultants or collaborators could adversely affect our reputation and our business, prospects, operating results, and financial condition.

We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents, contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which we operate, including, without limitation, healthcare, employment, foreign corrupt practices, environmental, competition, and patient privacy and other privacy laws and regulations. Such improper actions could subject us to civil or criminal investigations, and monetary and injunctive penalties, and could adversely impact our ability to conduct business, operating results, and reputation. In particular, our business activities may be subject to the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate, including the U.K. Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to

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influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments.

Additionally, in many other countries, the health care providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are subject to regulation under the FCPA. Recently the Securities and Exchange Commission, or SEC, and Department of Justice have increased their FCPA enforcement activities with respect to pharmaceutical companies. There is no certainty that all of our employees, agents, contractors, consultants or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, and financial condition.

Our relationships with health care professionals, customers, independent contractors, consultants and third-party payors may be subject, directly or indirectly, to applicable anti-kickback laws, fraud and abuse laws, false claims laws, health information privacy and security laws, transparency laws and other healthcare laws and regulations, which could expose us to penalties, and could result in contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

Our arrangements with health care professionals, customers, independent contractors, consultants and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships.

In addition, we may be subject to health information privacy and security regulation of the European Union, the United States and other jurisdictions in which we conduct our business. For example, the laws that may affect our ability to operate include:

• the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual, or the purchase or recommendation of an item or service for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs;

• U.S. federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

• the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

• HIPAA, as amended by the Health Information Technology and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose certain obligations, including mandatory contractual terms, on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

• the federal Open Payments Program that was created under the ACA (also known as the Sunshine Act), which requires certain manufacturers of covered pharmaceutical drugs, biologics, devices and medical supplies to track and report annually all payments or other transfers of value provided to physicians and teaching hospitals and certain ownership and investment interests held by physicians or their family members in applicable manufacturers and group purchasing organizations; and

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• analogous state and laws and regulations in other jurisdictions, such as state anti-kickback and false claims laws, which may be broader in scope and also apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and state and laws in other jurisdiction governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations or other sanctions. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws and regulations, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs.

We identified material weaknesses in connection with our internal control over financial reporting. Although we are taking steps to remediate these material weaknesses, we may not be successful in doing so in a timely manner, or at all, and we may identify other material weaknesses.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2017, our management and independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. We have a limited number of personnel in our finance department. The limited number of personnel does not (i) enable effective and proper segregation of duties, (ii) allow for appropriate monitoring of financial reporting matters and internal control over financial reporting, and (iii) allow an effective application and tracking of our current policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions. As a result, a number of adjustments to our consolidated financial statements were identified and made during the course of the audit.

A material weakness is a deficiency, or combination of deficiencies, such that there is reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis by our employees.

See “Item 15—Controls and Procedures” of this Annual Report for further discussion of management’s assessment of the ineffectiveness of our internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2016. However, until we cease to be an “emerging growth company,” as that term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, our independent registered public accounting firm will not be required to attest to and report on the effectiveness of our internal control over financial reporting. As such, our independent registered public accounting firm has not been engaged to express, nor have they expressed, an opinion on the effectiveness of our internal control over financial reporting. Had our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies may have been identified by our independent registered public accounting firm, they may have identified additional control deficiencies that could have also represented one or more material weaknesses. We continue to take several remedial actions to address our material weaknesses. In particular, we plan to design, draft and implement an overall, formalized framework and common policies and procedures for financial consolidation and reporting, with the objective of having such policies and procedures effective by mid-year 2018.

Assessing our procedures to improve our internal control over financial reporting is an ongoing process. We can provide no assurance that our remediation efforts described herein will be successful and that we will not have material weaknesses in the future. Any material weaknesses we identify could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to remedy the material weaknesses and conclude that our internal control over financial reporting is

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effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of the ADSs could decline, and we could be subject to sanctions or investigations by the NASDAQ Stock Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures, our internal computer systems and those of our current and future CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates could be delayed.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations, and those of our third-party research institution collaborators, CROs, CMOs, suppliers, and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, and other natural or man-made disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. Damage or extended periods of interruption to our corporate, development or research facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our drug product candidates. Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our drug product candidates.

We face an inherent risk of product liability as a result of the clinical testing of our drug product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if our drug product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our drug product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

• decreased demand for our products;

• injury to our reputation;

• withdrawal of clinical trial participants and inability to continue clinical trials;

• initiation of investigations by regulators;

• costs to defend the related litigation;

• a diversion of management’s time and our resources;

• substantial monetary awards to trial participants or patients;

• product recalls, withdrawals or labeling, marketing or promotional restrictions;

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• loss of revenue;

• exhaustion of any available insurance and our capital resources;

• the inability to commercialize any drug product candidate; and

• a decline in our share price.

Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators. Although our clinical trials are currently covered by a clinical trial insurance, the amount of such insurance coverage may not be adequate, we may be unable to maintain such insurance, or we may not be able to obtain additional or replacement insurance at a reasonable cost, if at all. Our insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

Our international operations subject us to various risks, and our failure to manage these risks could adversely affect our results of operations.

We face significant operational risks as a result of doing business internationally, such as:

• fluctuations in foreign currency exchange rates;

• potentially adverse and/or unexpected tax consequences, including penalties due to the failure of tax planning or due to the challenge by tax authorities on the basis of transfer pricing and liabilities imposed from inconsistent enforcement;

• potential changes to the accounting standards, which may influence our financial situation and results;

• becoming subject to the different, complex and changing laws, regulations and court systems of multiple jurisdictions and compliance with a wide variety of foreign laws, treaties and regulations;

• reduced protection of, or significant difficulties in enforcing, intellectual property rights in certain countries;

• difficulties in attracting and retaining qualified personnel;

• restrictions imposed by local labor practices and laws on our business and operations, including unilateral cancellation or modification of contracts; and

• rapid changes in global government, economic and political policies and conditions, political or civil unrest or instability, terrorism or epidemics and other similar outbreaks or events, and potential failure in confidence of our suppliers or customers due to such changes or events; and tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers.

We are subject to certain covenants as a result of certain non-dilutive financial support we have received to date.

As from the inception of our company until December 31, 2017, we have received recoverable cash advances, grants and subsidies totaling €24.5 million, to support various research programs from the Walloon Region, or the Region. The support has been granted in the form of recoverable cash advances, or RCAs, and subsidies.

In the event we decide to exploit any discoveries or products from the research funded by under an RCA, the relevant RCA becomes refundable, otherwise the RCA is not refundable. We own the intellectual property rights which result from the research programs partially funded by the Region, unless we decide not to exploit, or cease to exploit, the results of the research in which case the results and intellectual property rights are transferred to the Region. Subject to certain exceptions, however, we cannot grant to third parties, by way of

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license or otherwise, any right to use the results without the prior consent of the Region. We also need the consent of the Region to transfer an intellectual property right resulting from the research programs or a transfer or license of a prototype or installation. Obtaining such consent from the Region could give rise to a review of the applicable financial terms. The RCAs also contain provisions prohibiting us from conducting research for any other person which would fall within the scope of a research program of one of the RCAs. Most RCAs provide that this prohibition is applicable during the research phase and the decision phase but a number of RCAs extend it beyond these phases.

On December 22, 2017, we have notified the Walloon Region of our decision not to exploit the results of the C-Cure program. As a result and as per contractual terms, we proposed to transfer to the Region the research data and intellectual property rights associated with the research and developments projects co-financed. As of the date of this report, the Region has not yet notified us of its decision to take back the research data and intellectual property rights.

Subsidies received from the Region are dedicated to funding research programs and patent applications and are not refundable. We own the intellectual property rights which result from the research programs or with regard to a patent covered by a subsidy. Subject to certain exceptions, however, we cannot grant to third parties, by way of license, transfer or otherwise, any right to use the patents or research results without the prior consent of the Region. In addition, certain subsidies require that we exploit the patent in the countries where the protection was granted and to make an industrial use of the underlying invention. In case of bankruptcy, liquidation or dissolution, the rights to the patents covered by the patent subsidies will be assumed by the Region by operation of law unless the subsidy is reimbursed. Furthermore, we would lose our qualification as a small or medium-sized enterprise, the patent subsidies will terminate and no additional expenses will be covered by such patent subsidies.

We may be exposed to significant foreign exchange risk.

We incur portions of our expenses, and may in the future derive revenues, in currencies other than the euro, in particular, the U.S. dollar. As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. We currently do not engage in hedging transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the euro. Therefore, for example, an increase in the value of the euro against the U.S. dollar could be expected to have a negative impact on our revenue and earnings growth as U.S. dollar revenue and earnings, if any, would be translated into euros at a reduced value. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of operations and cash flows.

The requirements of being a U.S. public company may strain our resources and divert management’s attention.

We are required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, the Securities and Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations adopted by the SEC and the Public Corporation Accounting Oversight Board. Further, compliance with various regulatory reporting requires significant commitments of time from our management and our directors, which reduces the time available for the performance of their other responsibilities. Our failure to track and comply with the various rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, lead to additional regulatory enforcement actions, and could adversely affect the value of the ADSs or the ordinary shares.

The investment of our cash and cash equivalents may be subject to risks that may cause losses and affect the liquidity of these investments.

As of December 31, 2017, we had cash and cash equivalents of €23.3 million and short-term investments of €10.7 million. We historically have invested substantially all of our available cash and cash equivalents in corporate bank accounts. Pending their use in our business, we may invest the net proceeds of the global offering in investments that may include corporate bonds, commercial paper, certificates of deposit and money market funds. These investments may be subject to general credit, liquidity, and market and interest rate risks. We may realize losses in the fair value of these investments or a complete loss of these investments, which would have a negative effect on our financial statements.

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Risks Related to Ownership of Our Ordinary Shares and ADSs

The market price for the ADSs may be volatile or may decline regardless of our operating performance.

The trading price of the ADSs has fluctuated, and is likely to continue to fluctuate, substantially. The trading price of the ADSs depends on a number of factors, many of which are beyond our control and may not be related to our operating performance, including, among others:

• actual or anticipated fluctuations in our financial condition and operating results;

• actual or anticipated changes in our growth rate relative to our competitors;

• competition from existing products or new products that may emerge;

• announcements by us, our partners or our competitors of significant acquisitions, strategic collaborations, joint ventures, collaborations, or capital commitments;

• failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

• issuance of new or updated research or reports by securities analysts;

• fluctuations in the valuation of companies perceived by investors to be comparable to us;

• additions or departures of key management or scientific personnel;

• disputes or other developments related to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies;

• changes to coverage policies or reimbursement levels by commercial third-party payors and government payors and any announcements relating to coverage policies or reimbursement levels;

• announcement or expectation of additional debt or equity financing efforts;

• sales of the ADSs or ordinary shares by us, our insiders or our other shareholders; and

• general economic and market conditions.

These and other market and industry factors may cause the market price and demand for the ADSs to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their ADSs and may otherwise negatively affect the liquidity of our ADSs shares. In addition, the stock market in general, and biotechnology and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.

Fluctuations in the exchange rate between the U.S. dollar and the euro may increase the risk of holding the ADSs.

Our ordinary shares currently trade on Euronext Brussels and Euronext Paris in euros, while the ADSs trade on NASDAQ in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the euro may result in differences between the value of the ADSs and the value of our ordinary shares, which may result in heavy trading by investors seeking to exploit such differences. In addition, as a result of fluctuations in the exchange rate between the U.S. dollar and the euro, the U.S. dollar equivalent of the proceeds that a holder of the ADSs would receive upon the sale in Belgium of any ordinary shares withdrawn from the depositary upon calculation of the corresponding ADSs and the U.S. dollar equivalent of any cash dividends paid in euros on our ordinary shares represented by the ADSs could also decline.

Holders of the ADSs are not treated as shareholders of our company.

Holders of the ADSs are not treated as shareholders of our company, unless they cancel the ADSs and withdraw our ordinary shares underlying the ADSs. The depositary (or its nominee) is the shareholder of the ordinary shares underlying the ADSs. Holders of ADSs therefore do not have any rights as shareholders of our company, other than the rights that they have pursuant to the deposit agreement.

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If securities or industry analysts do not publish research or publish inaccurate research or unfavorable research about our business, the price of the ordinary shares and the ADSs and trading volume could decline.

The trading market for the ordinary shares and the ADSs depends in part on the research and reports that securities or industry analysts publish about us or our business. If no or few securities or industry analysts cover our company, the trading price for the ordinary shares and the ADSs would be negatively impacted. If one or more of the analysts who covers us downgrades the ordinary shares or the ADSs or publishes incorrect or unfavorable research about our business, the price of the ordinary shares and the ADSs would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, or downgrades the ordinary shares or the ADSs, demand for the ADSs and ordinary shares could decrease, which could cause the price of the ADSs and ordinary shares or trading volume to decline.

We have no present intention to pay dividends on our ordinary shares in the foreseeable future and, consequently, your only opportunity to achieve a return on your investment during that time is if the price of the ADSs or the ordinary shares increases.

We have no present intention to pay dividends in the foreseeable future. Any recommendation by our board of directors to pay dividends will depend on many factors, including our financial condition (including losses carried-forward), results of operations, legal requirements and other factors. Furthermore, pursuant to Belgian law, the calculation of amounts available for distribution to shareholders, as dividends or otherwise, must be determined on the basis of our non-consolidated statutory accounts prepared in accordance with Belgian accounting rules. In addition, in accordance with Belgian law and our articles of association, we must allocate each year an amount of at least 5% of our annual net profit under our non-consolidated statutory accounts to a legal reserve until the reserve equals 10% of our share capital. Therefore, we are unlikely to pay dividends or other distributions in the foreseeable future. If the price of the ADSs or the ordinary shares declines before we pay dividends, you will incur a loss on your investment, without the likelihood that this loss will be offset in part or at all by potential future cash dividends.

Our shareholders residing in countries other than Belgium may be subject to double withholding taxation with respect to dividends or other distributions made by us.

Any dividends or other distributions we make to shareholders will, in principle, be subject to withholding tax in Belgium at a rate of 30%, except for shareholders which qualify for an exemption of withholding tax such as, among others, qualifying pension funds or a company qualifying as a parent company within the meaning of the Council Directive (90/435/EEC) July 23, 1990, known as the Parent-Subsidiary Directive, or that qualify for a lower withholding tax rate or an exemption by virtue of a tax treaty. Various conditions may apply and shareholders residing in countries other than Belgium are advised to consult their advisers regarding the tax consequences of dividends or other distributions made by us. Our shareholders residing in countries other than Belgium may not be able to credit the amount of such withholding tax to any tax due on such dividends or other distributions in any other country than Belgium. As a result, such shareholders may be subject to double taxation in respect of such dividends or other distributions. Belgium and the United States have concluded a double tax treaty concerning the avoidance of double taxation, or the U.S.-Belgium Tax Treaty. The U.S.-Belgium Tax Treaty reduces the applicability of Belgian withholding tax to 15%, 5% or 0% for U.S. taxpayers, provided that the U.S. taxpayer meets the limitation of benefits conditions imposed by the U.S.-Belgium Tax Treaty. The Belgian withholding tax is generally reduced to 15% under the U.S.-Belgium Tax Treaty. The 5% withholding tax applies in case where the U.S. shareholder is a company which holds at least 10% of the shares in the company. A 0% Belgian withholding tax applies when the shareholder is a company which has held at least 10% of the shares in the company for at least 12 months, or is, subject to certain conditions, a U.S. pension fund. The U.S. shareholders are encouraged to consult their own tax advisers to determine whether they can invoke the benefits and meet the limitation of benefits conditions as imposed by the U.S.-Belgium Tax Treaty.

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We believe that we were a PFIC for the 2015 taxable year and in prior taxable years, but that we likely were not a PFIC for our 2016 or 2017 taxable years. It is uncertain whether we will be a PFIC for the 2018 taxable year or in future taxable years. Our status as a PFIC is a fact intensive determination and we cannot provide any assurances regarding our PFIC status for past, current or future taxable years. U.S. holders of the ADSs may suffer adverse tax consequences if we are characterized as a PFIC for any taxable year.

Generally, if, for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investment company (PFIC), for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. If we are characterized as a PFIC, U.S. holders of the ADSs may suffer adverse tax consequences, including having gains realized on the sale of the ADSs treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on the ADSs by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of sales of the ADSs.

Our status as a PFIC will depend on the composition of our income, including the receipt of milestones, and the composition and value of our assets (which may be determined in large part by reference to the market value of the ADSs and ordinary shares, which may be volatile) from time to time.

We believe we were a PFIC in our 2015 taxable year and in prior taxable years, but that we likely were not a PFIC for our 2016 or 2017 taxable years. With respect to our 2018 taxable year and possibly future taxable years, it is uncertain whether we will be a PFIC based upon the expected value of our assets, including any goodwill, and the expected composition of our income and assets. Our status as a PFIC is a fact intensive determination made on an annual basis and we cannot provide any assurances regarding our PFIC status for past, current or future taxable years.

Future sales of ordinary shares or ADSs by existing shareholders could depress the market price of the ADSs.

If our existing shareholders sell, or indicate an intent to sell, substantial amounts of ordinary shares or ADSs in the public market, the trading price of the ADSs could decline significantly. In the future we may file one or more registration statements with the SEC covering ordinary shares available for future issuance under our equity incentive plans. Upon effectiveness of such registration statements, any shares subsequently issued under such plans will be eligible for sale in the public market, except to the extent that they are restricted by the lock-up agreements referred to above and subject to compliance with Rule 144 in the case of our affiliates. Sales of a large number of the shares issued under these plans in the public market could have an adverse effect on the market price of the ADSs and the ordinary shares.

We are a Belgian public limited liability company, and shareholders of our company may have different and in some cases more limited shareholder rights than shareholders of a U.S. listed corporation.

We are a public limited liability company incorporated under the laws of Belgium. Our corporate affairs are governed by Belgian corporate and securities law. The rights provided to our shareholders under Belgian corporate law and our articles of association differ in certain respects from the rights that you would typically enjoy as a shareholder of a U.S. corporation under applicable U.S. federal and state laws. Under Belgian corporate law, other than certain information that we must make public and except in certain limited circumstances, our shareholders may not ask for an inspection of our corporate records, while under Delaware corporate law any shareholder, irrespective of the size of its shareholdings, may do so. Shareholders of a Belgian corporation have more limited rights to initiate a derivative action, a remedy typically available to shareholders of U.S. companies, in order to enforce a right of our Company, in case we fail to enforce such right ourselves.

A liability action can be instituted for our account by one or more of our shareholders who, individually or together, hold securities representing at least 1.0% of the votes or a part of the capital worth at least €1.25 million and have not approved of the discharge from liability that was granted to the directors. If the court orders the directors to pay damages, they are due to us, though the amounts advanced by the minority shareholders (for example attorney’s fees) are to be reimbursed by us. If the action is disallowed, the minority shareholders may be ordered to pay the costs, and, should there be grounds therefor, to pay damages to the directors, for example for having conducted provocative and reckless legal proceedings.

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In addition, a majority of our shareholders present or represented at our meeting of shareholders may release a director from any claim of liability we may have, provided that the financial position of the company is accurately reflected in the annual accounts. This includes a release from liability for any acts of the directors beyond their statutory powers or in breach of the Belgian Company Code, provided that the relevant acts were specifically mentioned in the convening notice to the meeting of shareholders deliberating on the discharge. In contrast, most U.S. federal and state laws prohibit a company or its shareholders from releasing a director from liability altogether if he or she has acted in bad faith or has breached his or her duty of loyalty to the company. Finally, Belgian corporate law does not provide any form of appraisal rights in the case of a business combination. As a result of these differences between Belgian corporate law and our articles of association, on the one hand, and the U.S. federal and state laws, on the other hand, in certain instances, you could receive less protection as an ADS holder of our company than you would as a shareholder of a listed U.S. company.

Takeover provisions in the national law of Belgium may make a takeover difficult.

Public takeover bids on our shares and other voting securities, such as warrants or convertible bonds, if any, are subject to the Belgian Act of April 1, 2007 on public takeover bids, as amended and implemented by the Belgian Royal Decree of April 27, 2007, or Royal Decree, and to the supervision by the Belgian Financial Services and Markets Authority, or FSMA. Public takeover bids must be made for all of our voting securities, as well as for all other securities that entitle the holders thereof to the subscription to, the acquisition of or the conversion into voting securities. Prior to making a bid, a bidder must issue and disseminate a prospectus, which must be approved by the FSMA. The bidder must also obtain approval of the relevant competition authorities, where such approval is legally required for the acquisition of our company. The Belgian Act of April 1, 2007 provides that a mandatory bid will be required to be launched for all of our outstanding shares and securities giving access to ordinary shares if a person, as a result of its own acquisition or the acquisition by persons acting in concert with it or by persons acting on their account, directly or indirectly holds more than 30% of the voting securities in a company that has its registered office in Belgium and of which at least part of the voting securities are traded on a regulated market or on a multilateral trading facility designated by the Royal Decree. The mere fact of exceeding the relevant threshold through the acquisition of one or more shares will give rise to a mandatory bid, irrespective of whether or not the price paid in the relevant transaction exceeds the current market price.

There are several provisions of Belgian company law and certain other provisions of Belgian law, such as the obligation to disclose important shareholdings and merger control, that may apply to us and which may make an unfriendly tender offer, merger, change in management or other change in control, more difficult. These provisions could discourage potential takeover attempts that third parties may consider and thus deprive the shareholders of the opportunity to sell their shares at a premium (which is typically offered in the framework of a takeover bid).

Holders of ADSs do not have the same voting rights as holders of our ordinary shares.

Holders of ADSs may exercise voting rights with respect to the ordinary shares represented by the ADSs only in accordance with the provisions of the deposit agreement. The deposit agreement provides that, upon receipt of notice of any meeting of holders of our ordinary shares, the depositary will fix a record date for the determination of ADS holders who shall be entitled to give instructions for the exercise of voting rights. Upon timely receipt of notice from us, if we so request, the depositary shall distribute to the holders as of the record date (1) the notice of the meeting or solicitation of consent or proxy sent by us and (2) a statement as to the manner in which instructions may be given by the holders. You may instruct the depositary of your ADSs to vote the ordinary shares underlying your ADSs. Otherwise, you will not be able to exercise your right to vote, unless you withdraw the ordinary shares underlying the ADSs you hold. However, you may not know about the meeting far enough in advance to withdraw those ordinary shares. We cannot guarantee you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ordinary shares or to withdraw your ordinary shares so that you can vote them yourself. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote, and there may be nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested.

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Holders of ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares.

ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of your ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason, subject to your right to cancel your ADSs and withdraw the underlying ordinary shares. Temporary delays in the cancellation of your ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting or we are paying a dividend on our ordinary shares.

In addition, you may not be able to cancel your ADSs and withdraw the underlying ordinary shares when you owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities.

We are an “emerging growth company” and are availing ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make the ADSs or the ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find the ADSs or the ordinary shares less attractive because we may rely on these exemptions. If some investors find the ADSs or the ordinary shares less attractive as a result, there may be a less active trading market for the ADSs or the ordinary shares and the price of the ADSs or the ordinary shares may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (3) the issuance, in any three-year period, by our company of more than $1.0 billion in non-convertible debt securities held by non-affiliates; and (4) December 31, 2020. We may choose to take advantage of some but not all of these exemptions.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation. We cannot predict if investors will find our ordinary shares less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company. This may limit the information available to holders of ADSs or ordinary shares.

We are a “foreign private issuer,” as defined in the SEC’s rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act, that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, our officers and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, while we currently make annual and semi-annual filings with respect to our listing on Euronext Brussels and Euronext Paris, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. domestic issuers and will not be required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act. Accordingly, there will be less publicly available information concerning our company than there would be if we were not a foreign private issuer.

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As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from NASDAQ corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.

As a foreign private issuer listed on NASDAQ, we are subject to corporate governance listing standards. However, rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in Belgium, which is our home country, may differ significantly from corporate governance listing standards. For example, neither the corporate laws of Belgium nor our articles of association require a majority of our directors to be independent and we could include non-independent directors as members of our Nomination and Remuneration Committee, and our independent directors would not necessarily hold regularly scheduled meetings at which only independent directors are present. Currently, we intend to follow home country practice to the maximum extent possible. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers. See “Item 16G—Corporate Governance.”

We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.

While we currently qualify as a foreign private issuer, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2018. In the future, we would lose our foreign private issuer status if we to fail to meet the requirements necessary to maintain our foreign private issuer status as of the relevant determination date. For example, if more than 50% of our securities are held by U.S. residents and more than 50% of the members of our executive management team or members of our board of directors are residents or citizens of the United States, we could lose our foreign private issuer status.

The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly more than costs we incur as a foreign private issuer. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. We would be required under current SEC rules to prepare our financial statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, rather than IFRS, and modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers. Such conversion of our financial statements to U.S. GAAP could involve significant time and cost. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers such as the ones described above and exemptions from procedural requirements related to the solicitation of proxies.

It may be difficult for investors outside Belgium to serve process on, or enforce foreign judgments against, us or our directors and senior management.

We are a Belgian public limited liability company. Less than a majority of the members of our board of directors and members of our executive management team are residents of the United States. All or a substantial portion of the assets of such non-resident persons and most of our assets are located outside the United States. As a result, it may not be possible for investors to effect service of process upon such persons or on us or to enforce against them or us a judgment obtained in U.S. courts. Original actions or actions for the enforcement of judgments of U.S. courts relating to the civil liability provisions of the federal or state securities laws of the United States are not directly enforceable in Belgium.

The United States and Belgium do not currently have a multilateral or bilateral treaty providing for reciprocal recognition and enforcement of judgments, other than arbitral awards, in civil and commercial matters. In order for a final judgment for the payment of money rendered by U.S. courts based on civil liability to produce any effect on Belgian soil, it is accordingly required that this judgment be recognized or be declared enforceable by a Belgian court in accordance with Articles 22 to 25 of the 2004 Belgian Code of Private International Law. Recognition or enforcement does not imply a review of the merits of the case and is irrespective of any reciprocity requirement. A U.S. judgment will, however, not be recognized or declared enforceable in Belgium if it infringes upon one or more of the grounds for refusal that are exhaustively listed in Article 25 of the Belgian Code of Private International Law. Actions for the enforcement of judgments of U.S. courts might be successful only if the Belgian court confirms the substantive correctness of the judgment of the U.S. court and is satisfied that:

• the effect of the enforcement judgment is not manifestly incompatible with Belgian public policy;

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• the judgment did not violate the rights of the defendant;

• the judgment was not rendered in a matter where the parties transferred rights subject to transfer restrictions with the sole purpose of avoiding the application of the law applicable according to Belgian international private law;

• the judgment is not subject to further recourse under U.S. law;

• the judgment is not compatible with a judgment rendered in Belgium or with a subsequent judgment rendered abroad that might be recognized in Belgium;

• a claim was not filed outside Belgium after the same claim was filed in Belgium, while the claim filed in Belgium is still pending;

• the Belgian courts did not have exclusive jurisdiction to rule on the matter;

• the U.S. court did not accept its jurisdiction solely on the basis of either the nationality of the plaintiff or the location of the disputed goods; and

• the judgment submitted to the Belgian court is authentic.

In addition to recognition or enforcement, a judgment by a federal or state court in the United States against us may also serve as evidence in a similar action in a Belgian court if it meets the conditions required for the authenticity of judgments according to the law of the state where it was rendered. The findings of a federal or state court in the United States will not, however, be taken into account to the extent they appear incompatible with Belgian public policy.

We may be subject at an increased risk of securities class action litigation.

Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant share price volatility in recent years. If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Tax law changes could adversely affect our shareholders and our business and financial condition.

We and our subsidiaries are subject to income and other taxes in Belgium, the United States, and other tax jurisdictions throughout the world. Tax laws and rates in these jurisdictions are subject to change. Our financial condition can be impacted by a number of complex factors, including, but not limited to: (i) interpretations of existing tax laws; (ii) the tax impact of existing or future legislation; (iii) changes in accounting standards; and (iv) changes in the mix of earnings in the various tax jurisdictions in which we operate. The U.S. government has recently enacted comprehensive tax legislation that includes significant changes to the taxation of U.S. business entities. This legislation, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate, limitation of the tax deduction for net interest (except for certain small businesses), limitation of the deduction for net operating losses and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”). The overall impact of this tax reform is uncertain, and it is possible that our shareholders and our business and financial condition could be adversely affected. We continue to examine the impact this tax reform legislation may have on our U.S. operations. We urge our shareholders to consult with their legal and tax advisors with respect to any such legislation and the potential tax consequences of investing in our common shares.

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ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Our legal and commercial name is Celyad SA. Prior to May 5, 2015, our corporate name was Cardio3 Biosciences SA. We are a limited liability company incorporated in the form of a naamloze vennootschap/société anonyme under Belgian law. We are registered with the Register of Legal Entities (RPM Nivelles) under the enterprise number 891.118.115. We were incorporated in Belgium on July 24, 2007 for an unlimited duration. Our fiscal year ends December 31.

Our principal executive and registered offices are located at rue Edouard Belin 2 1435 Mont-Saint-Guibert, Belgium and our telephone number is +32 10 394 100. Our agent for service of process in the United States is C T Corporation System, with an address at 111 8^th Avenue, New York, NY 10011. We also maintain a website at www.celyad.com. The reference to our website is an inactive textual reference only and the information contained in, or that can be accessed through, our website is not a part of this Annual Report.

Our actual capital expenditures for the years ended December 31, 2015, 2016 and 2017 amounted to €0.8 million, €1.8 million and €0.9 million, respectively. These capital expenditures primarily consisted of the acquisition of laboratory equipment and industrial tools, the refurbishment of our research and development laboratories and leasehold improvements of our corporate offices located in Belgium and the United States. We expect our capital expenditures to increase in absolute terms in the near term as we continue to advance our research and development programs and grow our operations. We anticipate our capital expenditure in 2018 to be financed mostly from finance leases.

In March 2018, we dissolved and wound up the affairs of our wholly owned subsidiary OnCyte, LLC, or OnCyte, pursuant to the Delaware Limited Liability Company Act. As a result of the dissolution of OnCyte, all the assets and liabilities of OnCyte, including the contingent consideration payable and our license agreement with Dartmouth College, were fully distributed to and assumed by Celyad SA. Celyad SA will continue to carry out the business and obligations of OnCyte, including under our license agreement with Dartmouth College.

B. Business Overview

Overview

We are a clinical-stage biopharmaceutical company focused on the development of specialized cell-based therapies. We utilize our expertise in cell engineering to target cancer. Our lead drug product candidate, CYAD-01 (CAR-T-NKG2D), is an autologous chimeric antigen receptor, or CAR, using NKG2D, an activating receptor of Natural Killer, or NK, cells transduced on T-lymphocytes, or T cells. NK cells are lymphocytes of the immune system that kill diseased cells. The receptors of the NK cells used in our therapies target the binding molecules, called ligands, that are expressed in cancer cells, but are absent or expressed at very low levels in normal cells. We believe our CAR-T-NKG2D approach has the potential to treat a broad range of both solid and hematologic tumors.

In December 2016, following the successful completion of a proof-of-concept clinical trial we conducted at the Dana-Farber Cancer Institute, in which we observed no treatment related safety concerns and we observed initial signs of clinical activity, we initiated a Phase 1 clinical trial, called THINK (THerapeutic Immunotherapy with NKR-2), to assess the safety and clinical activity of multiple administrations of CYAD-01 in seven refractory cancers, including both solid and hematologic cancers. As of December 31, 2017, we had treated 15 patients with CYAD-01 in the THINK trial, and we did not observe the same Grade 4 or above adverse event in two or more patients and no patient experienced a Grade 5 adverse event. No patient experienced an adjudicated Grade 4 or higher cytokine release syndrome, or CRS, adverse event or neurotoxic adverse event. In six of the 10 patients treated at the per-protocol intended dose we observed signs of clinical activity ranging from Stable Disease, or SD, to Complete Response, or CR. We plan to enroll up to 36 patients in the dose escalation part and up to 86 patients in the extension part of the THINK trial. Based on the promising interim results of the THINK trial, we plan to further evaluate CYAD-01 in a series of additional Phase 1 clinical trials in patients with acute myeloid leukemia, or AML, and colorectal cancer, or CRC.

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Our Lead Drug Product Candidate: CYAD-01

Company Product Pipeline

Introduction

Cancer is the second leading cause of death in the United States after cardiovascular diseases, according to the U.S. Centers for Disease Control and Prevention. According to the American Cancer Society, in 2014, there were an estimated 1.6 million new cancer cases diagnosed and over 550,000 cancer deaths in the United States alone. In the past decades, the cornerstones of cancer therapies have been surgery, chemotherapy and radiation therapy. Since 2001, molecules that specifically target cancer cells have emerged as standard treatments for a number of cancers. For example, Gleevec is marketed by Novartis AG for the treatment of leukemia, and Herceptin is marketed by Genentech, Inc. for the treatment of breast and gastric cancer. Although targeted therapies have significantly improved the outcomes for certain patients with these cancers, there is still a high unmet need for the treatment of these and many other cancers.

Below are the statistics regarding certain forms of solid and hematological cancers and their estimated death rates in the United States for 2017:

	2017 estimates for the United States
	New cases		Deaths
Acute myeloid leukemia		21,380		11,960
Multiple myeloma		30,280		12,790
Colorectal cancer		135,430		50,260
Pancreatic cancer		53,670		43,090
Urinary bladder cancer		79,030		16,870
Ovary cancer		22,440		14,080
Triple negative breast cancer		30,620		>>4,900

Source: SEER, American Cancer Society

CAR T-Cell Therapy

The immune system has a natural response to cancer, as cancer cells express antigens that can be recognized by cells of the immune system. Upon recognition of a cancer antigen, activated T-cells release substances that kill cancer cells and attract other immune cells to assist in the killing process. However, cancer cells can develop the ability to release inhibitory factors that allow them to evade immune response, resulting in the formation of cancers.

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CAR T-cell therapy is a new technology that broadly involves engineering patients’ own T-cells to express CARs so that these re-engineered cells recognize and kill cancer cells, overcoming cancer cells’ ability to evade the immune response. CARs are comprised of the following elements:

• binding domains that encode proteins, such as variable fragments of antibodies that are expressed on the surface of a T-cell and allow the T-cell to recognize specific antigens on cancer cells;

• intracellular signaling domains derived from T-cell receptors that activate the signaling pathways responsible for the immune response following binding to cancer cells. This allows the T cell to trigger the killing activity of the target cancer cell once it is recognized; and

• costimulatory and adaptor domains, which enhance the effectiveness of the T-cells in their immune response.

Once activated, CAR T-cells proliferate and kill cancer cells directly through the secretion of cytotoxins that destroy cancer cells, and these cytokines attract other immune cells to the tumor site to assist in the killing process.

The CAR T-cell manufacturing process starts with collecting cells from a patient’s blood. T-cells are then selected, following which the CAR is introduced into the T-cells using vectors. The CAR T-cells are then expanded prior to injection back into the patient.

Current Investigational Treatments of Cancer Using CAR T-Cells

CAR-T cell therapy is an emerging approach for the treatment of some cancers, such as B-cell malignancies.

CAR CD19 is the most studied CAR. CAR CD19 has an antigen binding domain that recognizes the CD19 antigen that is present on all B lymphocytes. This means that if a cancer originates from B lymphocytes, such as Acute Lymphoblastic Leukemia (ALL), then a CAR bearing the CD19 antibody could potentially recognize it and destroy it. Indeed, results of a clinical trial reported in the New England Journal of Medicine in October 2014 demonstrated that CAR CD19 CAR therapy was effective in treating patients with relapsed and refractory ALL. Treatment was associated with a complete remission rate of 90% and sustained remissions of up to two year after treatment. Despite its promise, CAR CD19 therapy is inherently limited to the treatment of B-cell malignancies. CAR CD19 also targets normal B lymphocytes leading to the need to treat those patients with gamma globulins.

Our Approach

Our lead drug product candidate, CYAD-01, is an autologous CAR-T cell therapy that uses the native sequence of NKG2D in the CAR construct. In CYAD-01, the human natural sequence of NKG2D is expressed outside the T cell and bound to an intracellular domain called CD3 Zeta. This intracellular domain is used in most other CARs and is responsible for the activation of the T cell once NKG2D recognizes and binds to its target. In addition, the complex NKG2D CD3 Zeta binds to endogenous DAP 10, which is a co-stimulatory molecule present on T cells, which means that the activation triggered by the primary stimulatory chain CD3 Zeta is further strengthened by DAP 10, a secondary or co-stimulatory domain.

NKG2D receptor ligands are expressed in numerous solid tumors and blood cancers, including ovarian, bladder, breast, lung and liver cancers, as well as leukemia, lymphoma and myeloma. In preclinical studies, we have observed bioactivity of CYAD-01 when as few as 7% of the cancer cells within a given cell population expressed a NKG2D receptor ligand.

Cells under stress induced by factors such as viral infection, cancer or inflammation express the ligands recognized by the NKG2D receptor, which is naturally present on NK cells. Eight NKG2D ligands have been characterized (namely ULBP families 1 to 6, MICA and MICB). Those ligands are a signal for NK cells that the stressed cells are malfunctioning and should be destroyed. NKG2D ligands are present in most cells, but their expression at the cell surface is tightly regulated, meaning that expression at the cell surface is absent or limited in healthy cells but overexpressed in infected or stressed cells. Preclinical studies have demonstrated that multiple solid and hematological cancer tumors express one or more NKG2D ligands.

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However, in preclinical studies we have not observed the cell surface expression of NKG2D ligands in healthy tissue.

In addition, preclinical mouse studies conducted by Charles Sentman, Ph.D., of our academic collaborator Dartmouth College, have demonstrated that CAR-T NKG2D may have bioactivity beyond a direct cytotoxic effect of the CAR on the targeted tumor cell. Three additional potential modes of such activity are:

• Both regulatory T cells that modulate the immune system and bone marrow immune cells, called myeloid-derived suppressor cells (MDSCs), were shown to express NKG2D ligands when they are present in tumors. Hence, those immune suppressive cells are also a target of CYAD-01, thereby potentially suppressing immune inhibition in the tumor cell.

• Cells from rapidly dividing micro vessels in the tumor mass were shown to express NKG2D ligands. Hence, the blood supply to the tumor is a potential target of CYAD-01.

• In animals in which the tumors were eliminated following the administration of CAR-T NKG2D, a re-challenge by the same tumor cell line was ineffective, rendering the animal potentially “immunized” against this tumor cell line. Surviving animals challenged with other tumor cell lines showed evidence of tumor growth.

CYAD-01 Multi-Faceted Attack on the Tumor

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Preclinical Development

CYAD-01 has been tested in preclinical models of solid and blood cancers, including lymphoma, ovarian cancer, melanoma and myeloma. In preclinical studies, treatment with CYAD-01 significantly increased survival. In studies, 100% of treated mice survived through the follow-up period of the applicable study, which in one study was 325 days. All untreated mice died during the follow-up period of the applicable study.

In one representative study, as shown in the figure below, the treatment with CYAD-01 completely prevented tumor development in mice injected with ovarian cancer cells and followed over a period of 225 days. In contrast, all mice injected with ovarian cancer cells that were treated with unmodified T-cells developed cancerous tumors and died during that period.

Our preclinical models have shown that administration of CYAD-01 is followed by changes in a tumor’s micro-environment resulting from the local release of chemokines, a family of small cytokines.

In a preclinical study, mice that had been injected with 5T33MM cancer cells (a myeloma cancer) and treated with CYAD-01 were rechallenged, either with the 5T33MM cancer cells or a different tumor type (RMA lymphoma cells). The mice that were rechallenged with the same tumor type survived, while the mice that were challenged with a different tumor type died, as shown in the figure below. Of note, at the time of the re-challenge of the surviving animals, no CYAD-01 was detected in the animals, hence the protection against the original tumor is linked to an adaptive immunity mechanism.

We do not believe that this effect has been observed with other CARs.

Moreover, preclinical studies have suggested that CYAD-01 could potentially have a direct effect on tumor vasculature. Tumor vessels express ligands for the NKG2D receptor that are not generally expressed by normal vessels. We believe that this expression may be linked to genotoxic stress, hypoxia and re-oxygenation in tumors and therefore that CYAD-01 could potentially inhibit tumor growth by decreasing tumor vasculature, which enhances the activity through a virtuous circle of anoxia of tumor cells and increased ligand expression of tumor cells.

Preclinical studies also suggest that CYAD-01 is active without lymphodepletion conditioning, which is the destruction of lymphocytes and T-cells, normally by radiation. We believe this absence of a pre-conditioning regimen may significantly expand the range of patients eligible for CAR T-cell treatment, reduce costs, reduce toxicity and thereby improve patient experience and acceptance.

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No significant toxicology findings were reported from preclinical multiple-dose studies at dose levels below 10⁷ CYAD-01 per animal. Some temporary weight loss was noted in animals treated with CYAD-01 at doses of 2x10⁷ per animal, a dose practically unattainable in human equivalents.

Clinical Development Program

The CM-CS1 Phase 1 Clinical Trial

In December 2016, results from the first clinical trial of CYAD-01, called the CM-CS-1 trial, were presented at the American Society of Hematology, or ASH, Annual Meeting. The CM-CS-1 trial was a Phase 1 dose escalation clinical trial conducted at the Dana-Farber Cancer Institute in patients with AML and multiple myeloma, or MM. Patients received doses from 1×10⁶ up to 3×10⁷ CAR-T NKR-2 in a single intravenous injection. One AML patient treated with the highest dose level was observed to have normalized hematologic parameters for six months following treatment. No serious treatment-related adverse events were reported at the four doses tested in this trial, and signs of clinical activity were observed.

THINK Phase 1 Clinical Trial

Overview

In December 2016, we initiated the THINK (THerapeutic Immunotherapy with NKr-2) trial, a multinational (E.U./U.S.), open-label Phase 1 clinical trial to assess the safety and clinical activity of multiple administrations of CYAD-01 in seven metastatic tumor types, including five solid tumors (colorectal, ovarian, bladder, triple-negative breast and pancreatic cancers) and two hematological tumors (AML and MM) in patients who did not respond to or relapsed after first and second line therapies. CYAD-01 is administered as a monotherapy in patients without chemotherapy preconditioning.

The trial contains two consecutive segments: a dose escalation segment with two arms (one in solid tumor types and one in hematological tumor types) at three dose levels adjusted to body weight (up to 3x10⁸, 1x10⁹ and 3x10⁹ CAR-T NKR-2 cells) and an expansion phase that includes seven tumor types (five solid tumors and two hematological tumors). At each dose, the patients are intended to receive three successive administrations of the specified dose, two weeks apart. The dose escalation part of the study is expected to enroll up to 36 patients while the extension phase is planned to enroll up to 86 patients. The primary endpoint of the dose escalation segment is a safety endpoint—the occurrence of dose limiting toxicities in patients during the treatment until 14 days after the last treatment. The primary endpoint in the expansion segment is objective response rate.

Interim Clinical Data as of December 31, 2017

As of December 31, 2017, we had treated 15 patients with CYAD-01 drug product in the THINK trial. Patients have been treated at the first and/or second dose level in both the solid and hematological tumor cohort of the dose escalation part of the trial. We are currently enrolling patients for the third dose level phase in the solid tumor cohort and completing the second dose level phase in the hematological arm.

As of December 31, 2017, we did not observe the same Grade 4 or above adverse event in two or more patients and no patient experienced a Grade 5 adverse event. No patient experienced an adjudicated Grade 4 or higher CRS adverse event or neurotoxic adverse event.

Data as of December 31, 2017
Adverse Events (AEs)	Grade 3			Grade 4			Grade 5		Total % of Patients
	Events (Patients)			Events (Patients)			Events (Patients)
Anaemia		3	(2)		—			—		13.3	%
Back pain		3	(2)		—			—		13.3	%
Febrile neutropenia		3	(2)		—			—		13.3	%
General physical health deterioration		2	(2)		—			—		13.3	%
Hypophosphataemia		4	(2)		—			—		13.3	%
Lymphocyte count decreased		5	(2)		1	(1)		—		20.0	%

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Data as of December 31, 2017
Adverse Events (AEs)	Grade 3		Grade 4			Grade 5		Total % of Patients
	Events (Patients)		Events (Patients)			Events (Patients)
Hypoxia		—		1	(1)		—		6.7	%

All adverse events if occurred in ³ 2 patients and if Grade 3 or below. All events if Grade 4 or above.

Solid (n=8) and hematologic (n=7) cancer patients.

Dose-level 1 (solid and hematologic cohorts) and dose-level 2 (solid cohort and one patient hematologic cohort).

Of the 15 patients treated as of December 31, 2017, 10 were dosed at the per-protocol intended dose and five were treated at a dose lower than the per-protocol intended dose due to an inability to obtain sufficient cell numbers in the drug product using our prior manufacturing method. See “—Manufacturing” below. No patient received chemotherapy preconditioning prior to administration of CYAD-01.

In six of the 10 patients treated at the per-protocol intended dose we observed signs of clinical activity ranging from SD to CR. Signs of clinical activity were observed in patients with AML, CRC and ovarian cancer. No signs of clinical activity were observed in patients treated with a dose lower than the per-protocol intended dose.

Based on the interim individual data of patients treated, we believe that a second cycle of therapy may be beneficial in strengthening the responses seen to date, and we plan to evaluate this approach in future clinical trials. See “—Future Clinical Development” below.

AML Cohort

In all three AML patients treated at the per-protocol intended dose we observed signs of clinical activity as summarized below. A fourth AML patient was treated at a dose lower than the per-protocol intended dose and did not show signs of clinical activity.

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Evidence of Clinical Activity in 3/3 Relapsed/Refractory AML Patients Treated at the Specified Dose

CRi: Complete remission with incomplete hematological recovery

CR (MRD-): Complete response without minimal residual disease

SD HI: Stable disease with hematological improvement

HSCT: Hematopoietic stem cell transplant

One patient receiving the first dose level showed a CR with incomplete hematological recovery. Another patient receiving the first dose level showed morphological leukemia free status (MLFS) (defined as bone marrow blast count under 5%), with a bone marrow blast count at 2%. Blood cell parameters for this patient were close to, but did not meet, the lower cut off for a CR (defined as platelets above 100,000/mm³ and neutrophils above 1,000/mm³) with platelets at 95,000/mm³ and neutrophils at 950/mm³. This patient underwent hematopoietic stem cell transplantation (HSCT) made possible by the MLFS status, and has since further improved to CR with negative minimal residual disease (MRD) (defined as no detection of tumor cells by high sensitivity methods). One patient receiving the second dose level showed SD at the two-month follow-up with reduction in blasts and improvement in hematological parameters.

CRC Cohort

In two of four CRC patients treated at the per-protocol intended dose, we observed signs of clinical activity. These two patients showed SD at the three-month follow-up date, both receiving the first dose level. A fifth CRC patient was treated at a dose lower than the per-protocol intended dose and did not show signs of clinical activity.

Ovarian Cancer Cohort

In the only ovarian cancer patient treated at the per-protocol intended dose—in this case, the second dose level—we observed SD at the two-month follow-up date. A second ovarian cancer patient was treated at a dose lower than the per-protocol intended dose and received only one injection before withdrawing from the study.

Nature of Interim Data

It should be noted that the interim data summarized above are current as of December 31, 2017 and are preliminary in nature. Our THINK trial is not complete. It should also be noted that all of the patients treated prior to December 31, 2017 were treated using drug product candidate manufactured using our prior manufacturing process. See “—Manufacturing” below. There is limited data concerning safety and clinical activity following treatment with our CYAD-01 drug product candidate. These results may not be repeated or observed in ongoing or future studies involving our CYAD-01 drug product candidate.

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Future Clinical Development

AML Clinical Development Program

Based on the promising interim results of the THINK trial, we intend to further explore the administration of CYAD-01 in AML patients.

AML is one of the deadliest cancers in hematological malignancies, with a five-year survival rate of 26.9%. Currently the only available potentially curative therapy for AML is allogenic HSCT. However, this approach has significant limitations, including difficulties in finding appropriate genetically-matched donors and the risk of transplant-related rejection, graft-versus-host disease, or GVHD, and mortality, and is therefore typically only available on a limited basis. First line therapies can result in a complete response, but the risk of relapse is high. Until 2017, there were no therapies approved by the U.S. Food and Drug Administration, or FDA, for relapsed refractory patients. We estimate the incidence of AML in the United States is approximately 21,830 new cases per year.

As an initial matter, as we seek to complete the dose escalation phase of the THINK trial, we plan to recruit only AML patients for the hematological tumor arm. We also plan to evaluate the effect of a second cycle of treatment in AML patients who have responded to an initial cycle of treatment, perhaps as part of the THINK trial, subject to our amending the protocol for this trial.

In addition, we are designing a protocol for a new Phase 1 clinical trial in AML patients that would administer CYAD-01 after patients have undergone a conventional chemotherapy preconditioning program, which is intended to provide an environment for the engineered T cells to thrive, and could result in a higher rate of objective response. However, because chemotherapy preconditioning can lead to undesirable side effects, we expect that a proper risk-benefit ratio will be considered and contrasted with a monotherapy approach as we progress this program into later stages of clinical development. Subject to our agreement with the applicable regulatory bodies on the protocol for this trial, we plan to initiate this trial in mid-2018. In addition, we are designing a protocol for a Phase 1 clinical trial that would evaluate the administration of CYAD-01 in combination with standard-of-care (SOC) therapy. We expect this trial would be initiated after the preconditioning trial is initiated, subject to agreement with applicable regulatory bodies.

Lastly, we are considering a trial to evaluate the administration of CYAD-01 in AML patients who have relapsed after a bone marrow transplant, using T cells from the bone marrow donor. If successful, this approach could potentially open access to a different patient population that does not currently have access to effective treatments.

CRC Clinical Development Program

Based on the promising interim results of the THINK trial, we intend to further explore the administration of CYAD-01 in CRC patients.

CRC is the third most diagnosed cancer and the second in terms of deaths. The median progression free survival rate of patients treated with the current standards of care (regorafinib or trifluridine/tipiracil) is between 1.9 and 3.2 months. We estimate the incidence of CRC in the United States is approximately 134,000 new cases per year.

Similar to our planned approach in AML, we plan to evaluate the effect of a second cycle of treatment in CRC patients that have responded to an initial cycle of treatment, perhaps as part of the THINK trial, subject to our amending the protocol for this trial. We are also considering evaluating CYAD-01 in CRC patients after patients have undergone a conventional chemotherapy preconditioning program.

In addition, we have initiated two open-label Phase 1 clinical studies to further evaluate CYAD-01 in CRC patients:

• The first study, called the SHRINK trial (Standard cHemotherapy Regimen and Immunotherapyy with NKR-2), is designed to assess the safety and clinical activity of multiple administrations of CYAD-01 concurrently with a conventional chemotherapy for CRC called FOLFOX as first line therapy, with the goal of reducing liver metastasis and allowing for surgical resection. This trial is being conducted outside the United States and is currently open for enrollment.

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• The second study, called the LINK trial (Locoregional Immunotherapy with NKR-2), is designed to assess the safety and clinical activity of multiple administrations of CYAD-01 in the hepatic artery in CRC patients with primarily liver metastasis. This patient population has non-resectable liver metastasis, and we hope to demonstrate the ability to stabilize the disease, allowing longer progression free survival, and/or increase the resectability rate of the metastasis in this population. This trial is being conducted outside the United States and is currently open for enrollment.

Allogenic Platform

While autologous CAR-T cells have yielded impressive results in B cell malignancies, addressing larger indications such as CRC using the current centralized manufacturing paradigm may be more challenging, at least from a cost and logistical perspective. However, we believe that an allogeneic approach must address two key challenges: (1) graft versus host disease (GvHD) which is the rejection of the patient tissues by the grafted cells, and (2) rejection of the graft by the host immune system, or transplant rejection. GvHD is mediated by the T Cell Receptor (TCR) complex on T lymphocytes. We have developed a method to interfere with the TCR signaling through the expression of a TCR Inhibiting Molecule (TIM). In preclinical mouse models, we observed that mice treated with TIM transduced T cells did not demonstrate GvHD, while 80% of the animals treated with control T cells died from GvHD within a 50 day window. In addition, we demonstrated in a similar mouse model bearing a colorectal cancer that the antitumor activity of CYAD-101 (the allogeneic version of our CYAD-01 drug product candidate) is maintained. We plan to initiate clinical development of CYAD-101 in 2018, subject to discussions with applicable regulatory authorities.

Seasonality

Our business is currently not materially affected by seasonality.

Manufacturing

We recently modified the manufacturing process we use to produce our CYAD-01 drug product candidate, in order to significantly increase the yield of T cell expansion in the drug product candidate we produce, while at the same time aiming to reduce process complexity and cost.

Until recently, our CYAD-01 drug product candidate was manufactured using a process, which we refer to as the LY process, intended to reduce the co-expression of NKG2D and stress ligands induced by the manufacturing process. However, this reduction of the co-expression was not sufficient, especially at higher doses, and yielded a higher than anticipated fratricide effect; that is, the expressed T cells in the drug product candidate would kill each other or kill themselves. As a result, the LY process failed to consistently produce the required number of T cells in the drug product candidate, resulting in some cases in our inability to manufacture drug product candidate consistent with the protocol for our THINK trial. All 15 patients treated in the THINK trial as of December 31, 2017 were treated with drug product manufactured using the LY process. Of these 15 patients, 10 were dosed at the per-protocol intended dose and five were treated at a dose lower than the per-protocol intended dose due to our inability to obtain sufficient cell numbers in the drug product candidate using this manufacturing method.

In response to these manufacturing challenges, we modified the manufacturing process to include a monoclonal antibody (mAb) that inhibits NKG2D expression on the T cell surface during production. This method has the potential to yield significantly higher cell numbers than the LY process. We have evaluated this new manufacturing process, which we refer to as the mAb process, in both in vivo and ex vivo models, in order to demonstrate reproducibility and comparability, and our THINK protocol has been amended for this new approach.

The first patient in our THINK trial to be administered drug product candidate manufactured using the mAb process was treated in late January 2018. As of the date of this Annual Report, four patients have been dosed using the new process. To date, no critical safety issues related to the cell therapy have been reported. There can be no assurance that drug product candidate manufactured using the mAb process will have similar or improved safety and clinical activity compared to drug product candidate manufactured using the LY manufacturing process.

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In addition, we are seeking to develop an automated and closed system to manufacture our cells, with minimal human interactions, with a goal of further reducing manufacturing costs, minimizing operator errors and allowing the manufacturing process to be run in lower grades or classified manufacturing space. This concept could potentially be deployed as a point-of-care manufacturing system in the future.

Termination of C-Cure and Heart-Xs Programs

Until mid-2016, we were focused on the development of a cardiovascular drug product candidate called C-Cure, an autologous cell therapy for the treatment of patients with ischemic heart failure. This program was funded in part through various research programs from the Walloon Region of Belgium. In June 2016, we reported topline results from a Phase 3 clinical trial for this drug product candidate. Following the announcement of these results, we explored strategic options to further develop and commercialize C-Cure, while we focused on our CAR-T oncology drug product candidates. In December 2017, we elected to shelve this program, as a result of which the research data and intellectual property rights associated with this development program were transferred to the Walloon Region which partially financed the C-Cure program.

Also in December 2017, our board of directors decided to pause the development of the Heart-Xs platform.

Licensing and Collaboration Agreements

Academic and Clinical Collaborations

Dartmouth College and Celdara

Background

In January 2015, we entered into a stock purchase agreement with Celdara Medical, LLC, or Celdara, pursuant to which we purchased all of the outstanding membership interests of OnCyte, LLC, or OnCyte. In connection with this transaction, we, Celdara and OnCyte entered into an asset purchase agreement pursuant to which Celdara sold to OnCyte certain data, protocols, regulatory documents and intellectual property, including the rights and obligations under two license agreements between OnCyte and Dartmouth College, or Dartmouth, related to our CAR-T development programs. In connection with the asset purchase agreement, OnCyte and Celdara entered into a services agreement under which Celdara provided certain development activities related to the development of CAR-T products.

Amended Asset Purchase Agreement

On August 3, 2017, we, Celdara and OnCyte, our wholly-owned subsidiary, entered into an amendment to the asset purchase agreement described above. In connection with the amendment, the following payments were made to Celdara: (i) an amount in cash equal to $10.5 million, (ii) newly issued shares of Celyad valued at $12.5 million, (iii) an amount in cash equal to $6.0 million in full satisfaction of any payments owed to Celdara in connection with a clinical milestone related to our CAR-T NKR-2 product candidate, (iv) an amount in cash equal to $0.6 million in full satisfaction of any payments owed to Celdara in connection with our license agreement with Novartis International Pharmaceutical Ltd., and (v) an amount in cash equal to $0.9 million in full satisfaction of any payments owed to Celdara in connection with our license agreement with Ono Pharmaceutical Co., Ltd.

Under the amended asset purchase agreement, OnCyte is obligated to make certain development-based milestone payments to Celdara up to $40.0 million for our clinical-stage product candidate (using autologous NKR-2 T-cells), the first product candidate in the first of four defined product groups. We are also obligated to make certain development-based milestone payments up to $36.5 million for the first product candidate in one of three additional defined preclinical-stage product groups. Under the prior agreement these payments were payable once per licensed product whereas under the amended asset purchase agreement these payments are now payable for the first CAR-T product in each of these four defined CAR-T product groups. We are also obligated to make sales-based milestone payments up to $76.0 million for the first CAR-T product in the first of the four defined CAR-T product groups and up to $80.0 million for the first CAR-T product in the next three defined CAR-T product groups. Under the amended asset purchase agreement, OnCyte is required to make tiered single-digit royalty payments to Celdara in connection with the sales of CAR-T products within each of the four defined CAR-T product groups, subject to reduction in countries in which there is no patent coverage for the applicable product or in the

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event OnCyte is required to secure licenses from third parties to commercialize the applicable product. Such royalties are payable on a product-by-product and country-by-country basis until the later of (i) the last day that at least one valid patent claim covering the applicable product exists, or (ii) the tenth anniversary of the day of the first commercial sale of the applicable product in such country.

Under the amended asset purchase agreement, in lieu of royalties previously payable on sales by sublicensees, OnCyte is now required to pay Celdara a percentage of sublicense income, including royalty payments, for each sublicense ranging from the mid-single digits to the mid-twenties, depending on which of a specified list of clinical and regulatory milestones the applicable product has achieved at the time the sublicense is executed. These percentages will be applied on a product-by-product basis to each payment included within sublicense income that is attributable to the grant of rights in, or the achievement of a milestone with respect to a specific product that is subject to, such sublicense. Under the amended asset purchase agreement, OnCyte is required to pay Celdara a single-digit percentage of any research and development funding received by OnCyte for each of the four defined CAR-T product groups, not to exceed $7.5 million for each product group. We can opt out of the development of any product if the data does not meet the scientific criteria of success. We may also opt out of development of any product for any other reason upon payment of a termination fee of $2.0 million to Celdara.

In connection with the amended asset purchase agreement, OnCyte and Celdara terminated the services agreement related to certain development activities related to the development of CAR-T products in consideration of a cash payment to Celdara in the amount of $0.9 million out of the $1.8 million remaining contractual amount.

Amended Dartmouth License

As described above, as a result of our acquisition of all of the outstanding membership interests of OnCyte and the asset purchase agreement among us, Celdara and OnCyte, OnCyte became our wholly-owned subsidiary and acquired certain data, protocols, regulatory documents and intellectual property, including the rights and obligations under two license agreements between OnCyte and Dartmouth. The first of these two license agreements concerned patent rights related, in part, to methods for treating cancer involving chimeric NK and NKP30 receptor targeted therapeutics and T cell receptor-deficient T cell compositions in treating tumor, infection, GVHD, transplant and radiation sickness, or the CAR-T License, and the second of these two license agreements concerned patent rights related, in part, to anti-B7-H6 antibody, fusion proteins and methods of using the same, or the B7H6 License. On August 2, 2017, OnCyte and Dartmouth entered into an amendment agreement in order to combine OnCyte’s rights under B7H6 Agreement with OnCyte’s rights under the CAR-T License, resulting in the termination of the B7H6 License, and in order to make certain other changes to the agreement. In connection with the amendment, OnCyte paid Dartmouth a non-refundable, non-creditable amendment fee in the amount of $2.0 million, charged to the income statement of 2017 as part of the costs of the amendments of the Celdara and Dartmouth agreements.

Under the amended license agreement, Dartmouth granted OnCyte an exclusive, worldwide, royalty-bearing license to certain know-how and patent rights to make, have made, use, offer for sale, sell, import and commercialize any product or process for human therapeutics, the manufacture, use or sale of which, is covered by such patent rights or any platform product. Dartmouth reserves the right to use the licensed patent rights and licensed know-how, in the same field, for education and research purposes only. The patent rights included in the amended license agreement also include the patents previously covered by the B7H6 License.

In consideration for the rights granted to us under the amended license agreement, OnCyte is required to pay to Dartmouth an annual license fee as well as a low single-digit royalty based on annual net sales of the licensed products by OnCyte, with certain minimum net sales obligations beginning April 30, 2024 and continuing for each year of sales thereafter. Under the amended license agreement, in lieu of royalties previously payable on sales by sublicensees, OnCyte is now required to pay Dartmouth a percentage of sublicense income, including royalty payments, (i) for each product sublicense ranging from the mid-single digits to low-single digits, depending on which of a specified list of clinical and regulatory milestones the applicable product has achieved at the time the sublicense is executed and (ii) for each platform sublicense in the mid-single digits. These percentages will be applied on a product-by-product basis to each payment included within sublicense income that is attributable to the grant of rights in, or the achievement of a milestone with respect to a specific product that is subject to, such sublicense. Additionally, the agreement

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requires that OnCyte exploit the licensed products, and OnCyte has agreed to meet certain developmental and regulatory milestones. Upon successful completion of such milestones, OnCyte is obligated to pay to Dartmouth certain clinical and regulatory milestone payments up to an aggregate amount of $1.5 million and a commercial milestone payment in the amount of $4.0 million. We are responsible for all expenses in connection with the preparation, filing, prosecution and maintenance of the patents covered under the agreement.

After April 30, 2024, Dartmouth may terminate the amended license if OnCyte fails to meet the specified minimum net sales obligations for any year, unless OnCyte pays to Dartmouth the royalty OnCyte would otherwise be obligated to pay had OnCyte met such minimum net sales obligation. Dartmouth may also terminate the license if OnCyte fails to meet a milestone within the specified time period, unless OnCyte pays the corresponding milestone payment. Either party may terminate the agreement in the event the other party defaults or breaches any of the provisions of the agreement, subject to 30 days’ prior notice and opportunity to cure. In addition, the agreement automatically terminates in the event OnCyte becomes insolvent, make an assignment for the benefit of creditors or file, or have filed against us, a petition in bankruptcy. Absent early termination, the agreement will continue until the expiration date of the last to expire patent right included under the agreement in the last to expire territory. We expect that the last to expire patent right included under this agreement will expire in 2033, absent extensions or adjustments.

Dissolution of OnCyte

In March 2018, we dissolved and wound up the affairs of our wholly owned subsidiary OnCyte, LLC, or OnCyte, pursuant to the Delaware Limited Liability Company Act. As a result of the dissolution of OnCyte, all the assets and liabilities of OnCyte, including the contingent consideration payable and our license agreement with Dartmouth College, were fully distributed to and assumed by Celyad SA. Celyad SA will continue to carry out the business and obligations of OnCyte, including under our license agreement with Dartmouth College.

ONO Pharmaceuticals

On July 11, 2016, we entered into a license and collaboration agreement with ONO Pharmaceuticals Co., Ltd., or ONO, in connection with which we granted ONO an exclusive license for the development, manufacture and commercialization of allogenic products incorporating our NKR-T cell technology in Japan, Korea and Taiwan. Under the terms of the collaboration, ONO is solely responsible for and bears all costs incurred in the research, development and commercialization of such products in its geographies. In addition, we granted ONO an exclusive option to obtain an exclusive license to develop, manufacture and commercialize autologous products incorporating our autologous CAR-T NKR-2 cell technology in Japan, Korea and Taiwan.

In consideration for the rights granted to ONO under the agreement, we received in August 2016 an upfront payment in the amount of 1.25 billion JPY ($12.5 million) and we are eligible to receive additional milestones for up to 30.075 billion JPY ($299 million) in development and commercial milestones. In addition, we are entitled to receive double digit royalties on nets sales of licensed products in licensed territories.

Intellectual Property

Patents and Patent Applications

Patents, patent applications and other intellectual property rights are important in the sector in which we operate. We consider on a case-by-case basis filing patent applications with a view to protecting certain innovative products, processes, and methods of treatment. We may also license or acquire rights to patents, patent applications or other intellectual property rights owned by third parties, academic partners or commercial companies which are of interest to us.

Our patent portfolio includes pending patent applications and issued patents in the United States and in foreign countries.

The term of a U.S. patent may be eligible for patent term extension under the Hatch-Waxman Act to account for at least some of the time the drug or device is under development and regulatory review after the patent is granted. With regard to a drug or device for which FDA approval is the first permitted marketing of the active ingredient, the Hatch-Waxman Act allows for extension of the term of one U.S. patent. The extended patent term cannot exceed the shorter of five years beyond the non-extended expiration of the patent or 14 years from the date of the FDA approval of the drug or device. Some foreign jurisdictions have analogous patent term extension provisions that allow for extension of the term of a patent that covers a device approved by the applicable foreign regulatory agency.

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NKR-T Cell Platform Patents

As of February 28, 2018, our CAR T-cell portfolio includes four patent families exclusively licensed to us by Dartmouth. This portfolio includes nine issued U.S. patents; eight pending U.S. patent applications; and 13 foreign patent applications pending in jurisdictions including Australia, Brazil, Canada, China, Europe, Hong Kong, India, Japan, Mexico and Russia. These patents and patent applications relate to specific chimeric antigen receptors and to T-cell receptor deficient T-cells, and are further detailed below.

A first patent family relates to chimeric NK receptors and methods for treating cancer. There are two granted U.S. patents in this family (US 7,994,298 and US 8,252,914) and a further pending US application. The scope of this patent family includes chimeric natural killer cell receptors (NKR CARs), T-cells with such receptors (NKR CAR-T cells) and methods of treating cancer with these NKR CAR-T cells.

A second patent family is entitled “NKp30 receptor targeted therapeutics” and describes a specific NKR CAR based on the NKp30 receptor. One U.S. patent is granted (US 9,833,476) and there is a further U.S. application pending.

A third family relates to an anti-B7H6 antibody, CARs and BiTE molecules containing the antibody; to CAR-T cells; and methods of treating cancer with the CAR-T cells. One U.S. patent is granted (US9,790,278), and applications are pending in China, Europe, Japan and the United States.

A fourth patent family relates to T-cell receptor-deficient compositions. T-cell receptor, or TCR, deficient human T-cells could be particularly useful to generate allogeneic CAR-T cells. The family includes members that relate to the concept (irrespective of the way the T-cell is made TCR deficient), as well as members describing specific ways of making the cells TCR deficient. There are five granted U.S. patents in this family (US 9,181,527; US 9,273,283; US9,663,763; US9,822,340; and US9,821,011), as well as five further pending US applications and ten applications in other jurisdictions. Claim 1 of patent US9,181,527 was challenged by an anonymous third party in an ex parte re-examination procedure, but the USPTO has determined that the claim was patentable in amended form.

Trade Secrets

In addition to our patents and patent applications, we keep certain of our proprietary information as trade secrets, which we seek to protect by confidentiality agreements with our employees and third parties, and by fragmenting know-how between different individuals, in accordance with standard industry practices.

Competition

The industry in which we operate is subject to rapid technological change. We face competition from pharmaceutical, biopharmaceutical and medical devices companies, as well as from academic and research institutions. Some of these competitors are pursuing the development of medicinal products and other therapies that target the same diseases and conditions that we are targeting.

Some of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and gene therapy industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. The key competitive factors affecting the success of all of our programs are likely to be their efficacy, safety and convenience.

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Many of our competitors have substantially greater financial, technical and other resources.

For a breakdown of our total revenues by activity and geographic market, please see “Note 6—Operating segment information” in our consolidated financial statements appended to this Annual Report.

CAR T-Cell Therapy

Early results from clinical trials have fueled continued interest in CAR T-cell therapies and our competitors as of the date of this Annual Report include Bellicum Pharmaceuticals, Inc., Bluebird bio, Inc., Celgene Corporation, Cellectis S.A., Gilead Sciences Inc., Mustang Bio, Novartis AG, NantKwest Inc and Ziopharm Oncology, Inc.

Government Regulation

U.S. Regulation

Government authorities in the United States at the federal, state and local level and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products, or biologics, such as our drug product candidates. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and an application for marketing authorization must be approved by the regulatory authority.

Certain products may be comprised of components that are regulated under separate regulatory authorities and by different centers at the FDA. These products are known as combination products. A combination product is comprised of a combination of a drug and a device; a biological product and a device; a drug and a biological product; or a drug, a device, and a biological product. Under regulations issued by the FDA, a combination product includes:

• a product comprised of two or more regulated components that are physically, chemically, or otherwise combined or mixed and produced as a single entity;

• two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, or biological and drug products;

• a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling is intended for use only with an approved individually specified drug, device or biological where both are required to achieve the intended use, indication, or effect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use, dosage form, strength, route of administration, or significant change in dose; or

• any investigational drug, device, or biological packaged separately that according to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required to achieve the intended use, indication, or effect.

Under the FDCA, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for review of a combination product. That determination is based on the “primary mode of action” of the combination product, which means the single mode of action that provides the most important therapeutic action of the combination product, i.e., the mode of action expected to make the greatest contribution to the overall intended therapeutic effects of the combination product. Thus, if the primary mode of action of a device-biologic combination product is attributable to the biologic product, that is, if it acts by means of a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product, the FDA center responsible for premarket review of the biologic product (the Center for Biologics Evaluation and Research, or CBER) would have primary jurisdiction for the combination product.

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U.S. Biological Product Development

In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic Act, or FDCA, and the Public Health Service Act, or PHSA, and their implementing regulations. Biologics are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval or license revocation, a clinical hold, untitled or warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

Our drug product candidates must be approved by the FDA through the Biologics License Application, or BLA, process before they may be legally marketed in the United States. The process required by the FDA before a biologic may be marketed in the United States generally involves the following:

• completion of extensive nonclinical, sometimes referred to as preclinical, laboratory tests, animal studies and formulation studies in accordance with applicable regulations, including the FDA’s Good Laboratory Practice, or GLP, regulations;

• submission to the FDA of an IND, which must become effective before human clinical trials may begin;

• performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practices, or GCPs, and other clinical trial-related regulations to establish the safety and efficacy of the proposed drug product candidate for its proposed indication;

• submission to the FDA of a BLA;

• satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the product is produced to assess compliance with the FDA’s current good manufacturing practice, or cGMP, requirements to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality, purity and potency;

• potential FDA audit of the preclinical study sites and/or clinical trial sites that generated the data in support of the BLA; and

• FDA review and approval of the BLA prior to any commercial marketing or sale of the product in the United States.

The data required to support a BLA is generated in two distinct development stages: preclinical and clinical. The preclinical development stage generally involves laboratory evaluations of drug chemistry, formulation and stability, as well as studies to evaluate toxicity in animals, which support subsequent clinical testing. The conduct of the preclinical studies must comply with federal regulations, including GLPs. The sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, as well as other information, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human trials. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical trials and places the IND on clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a drug product candidate at any time before or during clinical trials due to safety concerns, non-compliance, or other issues affecting the integrity of the trial. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that could cause the trial to be suspended or terminated. Where a trial is conducted at, or sponsored by, institutions receiving NIH funding for recombinant DNA research, prior to the submission of an IND to the FDA, a protocol and related documentation is submitted to and the trial is registered with the NIH Office of Biotechnology Activities, or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines. Compliance with the NIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA, however many companies and

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other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. The NIH is responsible for convening the Recombinant NDA Advisory Committee, or RAC, a federal advisory committee, which discusses protocols that raise novel or particularly important scientific, safety or ethical considerations at one of its quarterly public meetings. The OBA will notify the FDA of the RAC’s decision regarding the necessity for full public review of a gene therapy protocol. RAC proceedings and reports are posted to the OBA web site and may be accessed by the public.

The clinical stage of development involves the administration of the drug product candidate to healthy volunteers and patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.

There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Sponsors of certain clinical trials of FDA-regulated products, including biologics, are required to register and disclose certain clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved. However, there are evolving rules and increasing requirements for publication of trial-related information, and it is possible that data and other information from trials involving biologics that never garner approval could in the future require disclosure. In addition, publication policies of major medical journals mandate certain registration and disclosures as a pre-condition for potential publication, even if not currently mandated as a matter of law. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.

Clinical trials are generally conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, and may overlap. Phase 1 clinical trials generally involve a small number of healthy volunteers who are initially exposed to a single dose and then multiple doses of the drug product candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, side effect tolerability and safety of the drug product candidate and, if possible, to gain early evidence on effectiveness. Phase 2 clinical trials typically involve studies in disease-affected patients to determine the dose required to produce the desired benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, as well as identification of possible adverse effects and safety risks and preliminary evaluation of efficacy. Phase 3 clinical trials generally involve large numbers of patients at multiple sites, in multiple countries, and are designed to provide the data necessary to demonstrate the efficacy of the product for its intended use, its safety in use, and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval. Phase 3 clinical trials may include comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing. Generally, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of a BLA.

Post-approval trials, sometimes referred to as Phase IV clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, FDA may condition approval of a BLA on the sponsor’s agreement to conduct additional clinical trials to further assess the biologic’s safety and effectiveness after BLA approval.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the biologic, findings from animal or in vitro testing that suggest a significant risk for human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over

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that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated intervals based on access to certain data from the trial. We may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate. Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug product candidate does not undergo unacceptable deterioration over its shelf life.

BLA and FDA Review Process

Following trial completion, trial data are analyzed to assess safety and efficacy. The results of preclinical studies and clinical trials are then submitted to the FDA as part of a BLA, along with proposed labeling for the product and information about the manufacturing process and facilities that will be used to ensure product quality, results of analytical testing conducted on the chemistry of the drug product candidate, and other relevant information. The BLA is a request for approval to market the biologic for one or more specified indications and must contain proof of safety, purity, potency and efficacy, which is demonstrated by extensive preclinical and clinical testing. The application may include both negative or ambiguous results of preclinical and clinical trials as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic may be marketed in the United States.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee, which is adjusted on an annual basis. PDUFA also imposes an annual prescription drug product program fee. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business.

Once a BLA has been accepted for filing, which occurs, if at all, sixty days after the BLA’s submission, the FDA’s goal is to review BLAs within 10 months of the filing date for standard review or six months of the filing date for priority review, if the application is for a product intended for a serious or life-threatening condition and the product, if approved, would provide a significant improvement in safety or effectiveness. The review process is often significantly extended by FDA requests for additional information or clarification.

After the BLA submission is accepted for filing, the FDA reviews the BLA to determine, among other things, whether the proposed drug product candidate is safe and effective for its intended use, and whether the drug product candidate is being manufactured in accordance with cGMP to assure and preserve the drug product candidate’s identity, strength, quality, purity and potency. The FDA may refer applications for novel drug product candidates or drug product candidates which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and us during the review process. The review and evaluation of a BLA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all.

Before approving a BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In

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addition, before approving a BLA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates the application, manufacturing process and manufacturing facilities, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the BLA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional pivotal Phase III clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, withdraw the application or request a hearing. Even if such data and information is submitted, the FDA may ultimately decide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than we interpret the same data.

There is no assurance that the FDA will ultimately approve a product for marketing in the United States, and we may encounter significant difficulties or costs during the review process. If a product receives marketing approval, the approval may be significantly limited to specific populations, severities of allergies, and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling or may condition the approval of the BLA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-market testing or clinical trials and surveillance to monitor the effects of approved products. For example, the FDA may require Phase IV testing which involves clinical trials designed to further assess the product’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation and Mitigation Strategy, or REMS, to assure the safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.

Expedited Development and Review Programs

The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and nonclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as a Fast Track product concurrently with, or at any time after, submission of an IND, and the FDA must determine if the product qualifies for Fast Track designation within 60 days of receipt of the sponsor’s request. Unique to a Fast Track product, the FDA may consider for review sections of the marketing application on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the application.

Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review, or review within a six-month timeframe from the date a complete BLA is accepted for filing, if it has the potential to provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug or biological product designated for priority review in an effort to facilitate the review.

Additionally, a product may be eligible for accelerated approval. An investigational drug may obtain accelerated approval if it treats a serious or life-threatening condition and generally provides a meaningful advantage over available therapies and demonstrates an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM, that is reasonably likely to predict an effect on IMM or other clinical benefit.

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As a condition of approval, the FDA may require that a sponsor of a drug or biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. If the FDA concludes that a drug shown to be effective can be safely used only if distribution or use is restricted, it will require such post-marketing restrictions as it deems necessary to assure safe use of the drug, such as:

• distribution restricted to certain facilities or physicians with special training or experience; or

• distribution conditioned on the performance of specified medical procedures.

The limitations imposed would be commensurate with the specific safety concerns presented by the product. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Track designation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.

Breakthrough Designation

A product can be designated as a breakthrough therapy if it is intended to treat a serious or life-threatening condition and preliminary clinical evidence indicates that it may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. A sponsor may request that a drug product candidate be designated as a breakthrough therapy concurrently with, or at any time after, the submission of an IND, and the FDA must determine if the drug product candidate qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request. If so designated, the FDA shall act to expedite the development and review of the product’s marketing application, including by meeting with the sponsor throughout the product’s development, providing timely advice to the sponsor to ensure that the development program to gather preclinical and clinical data is as efficient as practicable, involving senior managers and experienced review staff in a cross-disciplinary review, assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor, and taking steps to ensure that the design of the clinical trials is as efficient as practicable.

Accelerated Approval for Regenerative Advanced Therapies

As part of the 21st Century Cures Act, Congress amended the FD&C Act to create an accelerated approval program for regenerative advanced therapies, which include cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products. Regenerative advanced therapies do not include those human cells, tissues, and cellular and tissue based products regulated solely under section 361 of the Public Health Service Act and 21 CFR Part 1271. The new program is intended to facilitate efficient development and expedite review of regenerative advanced therapies, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition. A drug sponsor may request that FDA designate a drug as a regenerative advanced therapy concurrently with or at any time after submission of an IND. FDA has 60 calendar days to determine whether the drug meets the criteria, including whether there is preliminary clinical evidence indicating that the drug has the potential to address unmet medical needs for a serious or life-threatening disease or condition. A new drug application or BLA for a regenerative advanced therapy may be eligible for priority review or accelerated approval through (1) surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or (2) reliance upon data obtained from a meaningful number of sites. Benefits of such designation also include early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval. A regenerative advanced therapy that is granted accelerated approval and is subject to postapproval requirements may fulfill such requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of real world evidence, such as electronic health records; the collection of larger confirmatory data sets; or postapproval monitoring of all patients treated with such therapy prior to its approval.

Pediatric Trials

Under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and efficacy of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDCA requires that a sponsor who is planning to submit a marketing application for a drug or biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within sixty days of an end-of-Phase II meeting or as may be agreed between the sponsor and FDA. The

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initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, and/or other clinical development programs. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of data or full or partial waivers.

Post-Marketing Requirements

Following approval of a new product, a manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available drugs and biologics for off-label uses, manufacturers may not market or promote such off-label uses.

Modifications or enhancements to the product or its labeling or changes of the site of manufacture are often subject to the approval of the FDA and other regulators, which may or may not be received or may result in a lengthy review process. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Any distribution of prescription drug products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act, or the PDMA, a part of the FDCA.

In the United States, once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA. The FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMPs. The cGMP requirements for constituent parts of cross-labeled combination products that are manufactured separately and not co-packaged are the same as those that would apply if these constituent parts were not part of a combination product. For single-entity and co-packaged combination products, there are two ways to demonstrate compliance with cGMP requirements, either compliance with all cGMP regulations applicable to each of the constituent parts included in the combination product, or a streamlined approach demonstrating compliance with either the drug/biologic cGMPs or the medical device quality system regulation rather than demonstrating full compliance with both, under certain conditions. These conditions include demonstrating compliance with specified provisions from the other of these two sets of cGMP requirements. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulations require, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. These regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities. BLA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms. These firms and, where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested by them. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market.

The FDA also may require post-approval testing, sometimes referred to as Phase IV testing, risk minimization action plans and post-marketing surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, untitled or warning letters

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from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.

Other Regulatory Matters

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the Department of Health and Human Services, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments. In the United States, sales, marketing and scientific/educational programs must also comply with federal and state fraud and abuse laws, data privacy and security laws, transparency laws, and pricing and reimbursement requirements in connection with governmental payor programs, among others. The handling of any controlled substances must comply with the U.S. Controlled Substances Act and Controlled Substances Import and Export Act. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities are also potentially subject to federal and state consumer protection and unfair competition laws.

The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

The failure to comply with regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of product approvals, or refusal to allow a firm to enter into supply contracts, including government contracts. In addition, even if a firm complies with FDA and other requirements, new information regarding the safety or efficacy of a product could lead the FDA to modify or withdraw product approval. Prohibitions or restrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

U.S. Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of the FDA approval of our drug product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. PTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.

An abbreviated approval pathway for biological products shown to be biosimilar to, or interchangeable with, an FDA-licensed reference biological product was created by the Biologics Price Competition and Innovation Act of 2009, or BPCI Act, which was part of the Patient Protection and Affordable Care Act, as amended by

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the Health Care and Education Reconciliation Act of 2010, or collectively the ACA. This amendment to the PHSA attempts to minimize duplicative testing. Biosimilarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there be no clinically meaningful differences between the product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical trial or trials. Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference product in any given patient and, for products administered multiple times, that the product and the reference product may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product. However, complexities associated with the larger, and often more complex, structure of biological products as compared to small molecule drugs, as well as the processes by which such products are manufactured, pose significant hurdles to implementation that are still being worked out by the FDA.

A reference biological product is granted twelve years of exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after first licensure. “First licensure” typically means the initial date the particular product at issue was licensed in the United States. This does not include a supplement for the biological product or a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device, or strength, unless that change is a modification to the structure of the biological product and such modification changes its safety, purity, or potency. Whether a subsequent application, if approved, warrants exclusivity as the “first licensure” of a biological product is determined on a case-by-case basis with data submitted by the sponsor.

Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which attaches to the twelve-year exclusivity period for reference biologics, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.

European Union Drug Development

In the European Union, our future drug product candidates will also be subject to extensive regulatory requirements. As in the United States, medicinal products can only be marketed if a marketing authorization, or MA, from the competent regulatory agencies has been obtained.

Clinical Trials

Similar to the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls. Although the EU Clinical Trials Directive 2001/20/EC has sought to harmonize the European Union clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the European Union, the European Union Member States have transposed and applied the provisions of the Directive differently. This has led to significant variations in the Member State regimes. To improve the current system, a new Regulation No. 536/2014 on clinical trials on medicinal drug product candidates for human use, which repealed Directive 2001/20/EC, was adopted on April 16, 2014, and published in the European Official Journal on May 27, 2014. The new Regulation aims at harmonizing and streamlining the clinical trials authorization process, simplifying adverse event reporting procedures, improving the supervision of clinical trials, and increasing their transparency. The new Regulation entered into force on June 16, 2014, and is applicable since May 28, 2016. Until then the Clinical Trials Directive 2001/20/EC will still apply. In addition, the transitory provisions of the new Regulation offer the sponsors the possibility to choose between the requirements of the Directive and the Regulation for one year from the entry into application of the Regulation.

Under the current regime, before a clinical trial can be initiated it must be approved in each of the European Union countries where the trial is to be conducted by two distinct bodies: the National Competent Authority, or NCA, and one or more Ethics Committees, or ECs. More specifically, a clinical trial may not be started until the relevant EC has issued a favorable opinion, and the NCA has not informed the Sponsor of the trial of any grounds for non-acceptance or confirmed that no such grounds exist. Approval will only be granted if satisfactory information demonstrating the quality of the investigational agent and its non-clinical safety has been provided, together with a study plan that details the manner in which the trial will be carried out.

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ECs determine whether the proposed clinical trial will expose participants to unacceptable conditions of hazards, while considering, among other things, the trial design, protocol, facilities, investigator and supporting staff, recruitment of clinical trial subjects, the Investigator’s Brochure, or IB, indemnity and insurance, etc. The EC also determines whether clinical trial participants have given informed consent to participate in the trial. Following receipt of an application (which must be submitted in the national language), ECs must deliver their opinion within 60 days (or sooner if the Member State has implemented a shorter time period). For clinical trials of gene therapy, somatic cell therapy, and all medicinal products containing genetically modified organisms, this timeline may be extended (with an additional 120 days).

Similarly, a valid request for authorization (in the national language) must be submitted to the NCA of each Member State where the trial will be conducted. Sponsors must be notified of the decision within 60 days of receipt of the application (unless shorter time periods have been fixed), in the absence of which, the trial is considered approved. However, for clinical trials of gene therapy, somatic cell therapy, and all medicinal products containing genetically modified organisms, a written authorization by the competent NCA is required. Similar timeline extensions as for ECs exist.

Studies must comply with ethical guidelines and Good Clinical Practice (GCP) guidelines. Monitoring of adverse reactions that occur during clinical trials, including, where applicable, notification of the same to the competent NCA and ECs, is also required. Trials can be terminated early if a danger to human health is established or continuing the trial would be considered unethical. Consequently, the rate of completion of clinical trials may be delayed by many factors, including slower than anticipated patient enrollment or adverse events occurring during clinical trials.

Drug Review and Approval

In the European Economic Area, or EEA (which is comprised of the 28 Member States of the European Union plus Norway, Iceland and Liechtenstein), medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

The Centralized MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, advanced-therapy medicines such as gene-therapy, somatic cell-therapy or tissue-engineered medicines, and medicinal products containing a new active substance indicated for the treatment of HIV, AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and other immune dysfunctions, and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the European Union.

National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in other Member State(s) through the Mutual Recognition Procedure, or MRP. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure, or DCP. Under the DCP an identical dossier is submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the Reference Member State, or RMS. The competent authority of the RMS prepares a draft assessment report, a draft summary of product characteristics, or SmPC, and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Concerned Member States, or CMSs) for their approval. If the CMSs raise no objections, based on a potential serious risk to public health, to the assessment, SmPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national MA in all the relevant Member States (i.e. in the RMS and the CMSs).

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

Marketing Authorization Application

Following positive completion of clinical trials, pharmaceutical companies can submit a MA application. The MA application shall include all information that is relevant to the evaluation of the medicinal products,

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whether favorable or unfavorable. The application dossier must include, among other things, the results of pharmaceutical (physico-chemical, biological, or microbiological) tests, preclinical (toxicological and pharmacological) tests, and clinical trials, including the therapeutic indications, contra-indications, and adverse reactions, and the recommended dosing regimen or posology.

In addition to demonstrating the safety and efficacy of the medicinal product, pharmaceutical companies are required to guarantee the consistent quality of the product. Therefore, the conditions for obtaining a MA include requirements that the manufacturer of the product complies with applicable legislation including Good Manufacturing Practice, or GMP, related implementing measures and applicable guidelines that involve, amongst others, ongoing inspections of manufacturing and storage facilities.

Early Access Mechanisms

Several schemes exist in the EU to support earlier access to new medicines falling within the scope of the Centralized Procedure, in particular (i) accelerated assessment; (ii) conditional MAs ; and (iii) MAs granted under exceptional circumstances.

For a medicine, which is of “major public health interest” (in particular, in terms of therapeutic innovation), accelerated assessment can be requested, taking up to 150 days instead of the usual period of up to 210 days. There is no single definition of what constitutes major public health interest. This should be justified by the applicant on a case-by-case basis. The justification should present the arguments to support the claim that the medicinal product introduces new methods of therapy or improves on existing methods, thereby addressing to a significant extent the greater unmet needs for maintaining and improving public health.

Conditional MAs may be granted on the basis of less complete data than usual in order to meet unmet medical needs of patients and in the interest of public health, subject to specific obligations with regard to further studies and intended to be replaced by a full unconditional MA once the missing data is provided. A conditional MA is valid for one year on a renewable basis.

Medicines for which the MA applicant can demonstrate that the normally required comprehensive efficacy and safety data cannot be provided (for example because the disease which the medicine treats is extremely rare) may be eligible for a MA under exceptional circumstances. These are medicines for which it is never intended that a full MA will be obtained. MAs under exceptional circumstances are reviewed annually to reassess the risk-benefit balance.

Supplementary Protection Certificates and Data/market Exclusivity

In Europe, the extension of effective patent term to compensate originator pharmaceutical companies for the period between the filing of an application for a patent for a new medicinal product and the first MA for such product, has been achieved by means of a Supplementary Protection Certificate (SPC) which can be applied for by the originator pharmaceutical company within six months from the granting of the first MA and comes into effect on expiry of the basic patent. Such SPC attaches only to the active ingredient of the medicinal product for which the MA has been granted. The SPC for an active ingredient has a single last potential expiry date throughout the EEA, and cannot last for more than five years from the date on which it takes effect (i.e., patent expiry. Furthermore, the overall duration of protection afforded by a patent and a SPC cannot exceed 15 years from the first MA. The duration of a medicinal product SPC can be extended by a single six-month period, or pediatric extension, when all studies in accordance with a pediatric investigation plan, or PIP, have been carried out.

Innovative medicines benefit from specific data and marketing exclusivity regimes. These regimes are intended to provide general regulatory protection to further stimulate innovation. The current rules provide for (i) an 8-year data protection (from the MA of an innovative medicine) against the filing of an abridged application for a follow-on product, referring to the data supporting the MA of the innovative medicine (data exclusivity); and (ii) a 10-year protection against the marketing of a follow-on product (marketing exclusivity), with a possible extension by 1 year if, during the first 8 years, a new therapeutic indication (which is considered to bring a significant clinical benefit in comparison with existing therapies) is approved. This protection is often referred to as the “eight, plus two, plus one” rule. Additional reward mechanisms exist, most notably a 10-year orphan medicines’ marketing exclusivity, and a 1-year data exclusivity for developing a new indication for an old substance and for switch data supporting a change in prescription status.

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The current rules also provide for a system of obligations and rewards and incentives intended to facilitate the development and accessibility of pediatric medicinal products, and to ensure that such products are subject to high quality ethical research. Pursuant to such rules, pharmaceutical companies are often required to submit a Pediatric Investigation Plan, or PIP, at a relatively early stage of product development, which defines the pediatric studies to be completed before a MA application can be submitted. Upon completion of the studies in the agreed PIP, the company may be entitled to a “reward”, i.e., the afore-mentioned 6-month pediatric extension of the SPC for non-orphan medicinal products; or a two-year extension of the 10-year marketing exclusivity period for orphan medicines.

Post-marketing and Pharmacovigilance Requirements

When granting a MA, competent authorities (i.e., the EMA or the relevant NCAs) may impose an obligation to conduct additional clinical testing, sometimes referred to as Phase IV clinical trials, or other post-approval commitments, to monitor the product after commercialization. Additionally, the MA may be subjected to limitations on the indicated uses for the product.

Also, after a MA has been obtained, the marketed product and its manufacturer and MA holder will continue to be subject to a number of regulatory obligations, as well as to monitoring/inspections by the competent authorities.

Under applicable pharmacovigilance rules, pharmaceutical companies must, in relation to all their authorized products, irrespective of the regulatory route of approval, collect, evaluate and collate information concerning all suspected adverse reactions and, when relevant, report it to the competent authorities. This information includes both suspected adverse reactions signaled by healthcare professionals, either spontaneously or through post-authorization studies, regardless of whether or not the medicinal product was used in accordance with the authorized SmPC and/or any other marketing conditions, and suspected adverse reactions identified in worldwide-published scientific literature. To that end, a MA holder must have (permanently and continuously) at its disposal an appropriately qualified person responsible for pharmacovigilance and establish an adequate pharmacovigilance system. All relevant suspected adverse reactions, including suspected serious adverse reactions, which must also be reported on an expedited basis, should be submitted to the competent authorities in the form of Periodic Safety Update Reports, or PSURs. PSURs are intended to provide an update for the competent authorities on the worldwide safety experience of a medicinal product at defined time points after authorization. PSURs must therefore comprise a succinct summary of information together with a critical evaluation of the risk/benefit balance of the medicinal product, taking into account any new or changing information. The evaluation should ascertain whether any further investigations need to be carried out, and whether the SmPC or other product information needs to be modified.

To ensure that pharmaceutical companies comply with pharmacovigilance regulatory obligations, and to facilitate compliance, competent authorities will conduct pharmacovigilance inspections. These inspections are either routine (i.e. aimed at determining whether the appropriate personnel, systems, and resources are in place) or targeted to companies suspected of being non-compliant. Reports of the outcome of such inspections will be used to help improve compliance and may also be used as a basis for enforcement action.

Other Regulatory Matters

Advertising of medicines is subject to tighter controls than general consumer goods and specific requirements are set forth in Directive 2001/83/EC, which apply in addition to the general rules. In general, advertising of unapproved medicinal products or of unapproved uses of otherwise authorized medicinal products (e.g., off-label uses) is prohibited, and advertising for prescription medicinal products must be directed only towards health care professionals (i.e., advertising of these products to the general public is prohibited). Member States have implemented the advertising rules differently and the requirements vary significantly depending on the specific country. Advertising of medicinal products in an online setting, including social media, can be particularly challenging given the strict rules in place.

Pricing and Reimbursement

United States

Sales of our products will depend, in part, on the extent to which our products, once approved, will be covered and reimbursed by third-party payors, such as government health programs, commercial insurance and

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managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for medical products and services. The process for determining whether a third-party payor will provide coverage for a drug product, including a biologic, typically is separate from the process for setting the price of a drug product or for establishing the reimbursement rate that a payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the approved drugs for a particular indication.

In order to secure coverage and reimbursement for any drug product candidate that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the drug product candidate, in addition to the costs required to obtain FDA or other comparable regulatory approvals. Whether or not we conduct such studies, our drug product candidates may not be considered medically necessary or cost-effective. A third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage, and adequate reimbursement, for the product. Third party reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development.

The containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs, including biologics, have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our drug product candidate or a decision by a third-party payor to not cover our drug product candidate could reduce physician usage of the drug product candidate and have a material adverse effect on our sales, results of operations and financial condition.

For example, the ACA, enacted in March 2010, has had, a significant impact on the health care industry. The ACA has expanded coverage for the uninsured while at the same time containing overall healthcare costs. With regard to pharmaceutical products, among other things, the ACA expanded and increased industry rebates for drugs covered under Medicaid programs and made changes to the coverage requirements under the Medicare Part D program.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, started in April 2013 and will stay in effect through 2027 unless additional Congressional action is taken. On January 2, 2013, then President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Some of the provisions of ACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges. On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of ACA that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Congress may consider other legislation to replace elements of the ACA.

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The Tax Cuts and Jobs Act of 2017, or TCJA, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plan, the annual fee imposed on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device exercise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to reduce the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” Congress also could consider subsequent legislation to replace elements of ACA that are repealed. Thus, the full impact of ACA, any law replacing elements of it, or the political uncertainty related to any repeal or replacement legislation on our business remains unclear.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country.

European Union

In Europe, pricing and reimbursement for pharmaceutical products are not harmonized and fall within the exclusive competence of the national authorities, provided that basic transparency requirements (such as maximum timelines) defined at the European level are met as set forth in the EU Transparency Directive 89/105/EEC. A Member State may approve a specific price for a medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. For example, in France, effective access to the market assumes that our future products will be reimbursed by social security. The price of medications is negotiated with the Economic Committee for Health Products, or CEPS.

As a consequence, reimbursement mechanisms by public national healthcare systems, or private health insurers also vary from country to country. In public healthcare systems, reimbursement is determined by guidelines established by the legislator or a competent national authority. In general, inclusion of a product in reimbursement schemes is dependent upon proof of the product efficacy, medical need, and economic benefits of the product to patients and the healthcare system in general. Acceptance for reimbursement comes with cost, use and often volume restrictions, which again vary from country to country.

The pricing and reimbursement level for medicinal products will depend on the strength of the clinical data set and, as for most novel therapies, restrictions may apply. In most countries, national competent authorities ensure that the prices of registered medicinal products sold in their territory are not excessive. In making this judgment, they usually compare the proposed national price either to prices of existing treatments and/or to prices of the product at issue in other countries – so-called “international reference pricing” – also taking into account the type of treatment (preventive, curative or symptomatic), the degree of innovation, the therapeutic breakthrough, volume of sales, sales forecast, size of the target population and/or the improvement (including cost savings) over comparable treatments. Given the growing burden of medical treatments on national healthcare budgets, reimbursement and insurance coverage is an important determinant of the accessibility of medicines.

The various public and private plans, formulary restrictions, reimbursement policies, patient advocacy groups, and cost-sharing requirements may play a role in determining effective access to the market of our product candidates. The national competent authorities may also use a range of policies and other initiatives intended to influence pharmaceutical consumption. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our drug product candidates. Historically, products launched in the European Union do not follow price structures of the United States and generally tend to be priced at a significantly lower level.

Other Healthcare Laws and Compliance Requirements

Our business operations in the United States and our arrangements with clinical investigators, healthcare providers, consultants, third-party payors and patients may expose us to broadly applicable federal and state fraud and abuse and other healthcare laws. These laws may impact, among other things, our research,

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proposed sales, marketing and education programs of our drug product candidates that obtain marketing approval. The laws that may affect our ability to operate include, among others:

• the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying remuneration (including any kickback, bribe or rebate), directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, an item, good, facility or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

• federal civil and criminal false claims laws and civil monetary penalty laws, which impose penalties and provide for civil whistleblower or qui tam actions against individuals and entities for, among other things, knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation to pay money to the federal government, including for example, providing inaccurate billing or coding information to customers or promoting a product off-label;

• the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program, obtaining money or property of the health care benefit program through false representations, or knowingly and willingly falsifying, concealing or covering up a material fact, making false statements or using or making any false or fraudulent document in connection with the delivery of or payment for healthcare benefits or services.

• the federal Physician Payments Sunshine Act, enacted as part of the ACA, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies to track and annually report to CMS payments and other transfers of value provided to physicians and teaching hospitals and certain ownership and investment interest held by physicians or their immediate family members in applicable manufacturers and group purchasing organizations;

• HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain requirements on covered entities and their business associates relating to the privacy, security and transmission of individually identifiable health information; and

• state law equivalents of each of the above federal laws, such as state anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state marketing and/or transparency laws applicable to manufacturers that may be broader in scope than the federal requirements, state laws that require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect as HIPAA, thus complicating compliance efforts.

The ACA broadened the reach of the federal fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and certain applicable federal criminal healthcare fraud statutes. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant administrative, civil, and/or criminal penalties, damages, fines, disgorgement, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they also may be subject to administrative, civil, and/or criminal sanctions, including exclusions from government funded healthcare programs.

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Legal Proceedings

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

On July 8, 2016, following the unsuccessful outcome of the conciliation procedure organized under Swiss laws, a Swiss company named AtonRâ Partners SA formalized its claim against us before the Tribunal of First Instance of Geneva (Switzerland), or the Tribunal. AtonRâ Partners SA, or AtonRâ, claims the payment of respectively 95.250 EUR and 300.300 USD as alleged broker intermediary commissions in the context of our fund raising of March 3 2015 and our initial U.S. public offering on the NASDAQ on June 18, 2015. On January 12, 2018, the Tribunal has decided it had no jurisdiction on the case and rejected AtonRâ’s claims. AtonRâ has decided not to appeal the judgment.

C. Organizational Structure

The Company and its subsidiaries, or the Group, is made of the following entities as of December 31, 2017. The following diagram illustrates our corporate structure.

Name	Country of Incorporation and Place of Business	Nature of Business	Proportion of ordinary shares directly held by parent (%)			Proportion of ordinary shares held by the group (%)			Proportion of ordinary shares held by non- controlling interests (%)
Celyad SA	BE	Biopharma		Parent company
Celyad Inc.	US	Biopharma		100	%		100	%		0	%
Biological Manufacturing Services SA	BE	Manufacturing		100	%		100	%		0	%
OnCyte, LLC	US	Biopharma		100	%		100	%		0	%
CorQuest Medical, Inc.	US	Medical Device		100	%		100	%		0	%

OnCyte, LLC was dissolved in March 2018. See “Item 4.A.—History and Development of the Company.”

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D. Property, Plants and Equipment

We rent a 2,284 square meter office space from the Axis Parc developer located at the Axis Parc in Mont-Saint-Guibert pursuant to a lease agreement dated October 15, 2015 as amended from time to time, which expires on September 30, 2025. We also rent a 1,120 square meter office and laboratory space from the Axis Parc developer pursuant to a lease agreement dated November 11, 2017, as amended from time to time, which expires on September 30, 2020. In January 2016, we entered into a six-year lease agreement for our U.S. corporate offices located in Boston, Massachusetts.

We plan to identify additional facilities in the Flemish region of Belgium to construct our contemplated future European manufacturing plant. We have committed to maintain our headquarters and registered office in the Walloon region of Belgium and all of our existing activities will continue to be performed in the Walloon region

ITEM 4A. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

We are a clinical-stage biopharmaceutical company focused on the development of specialized cell-based therapies. We utilize our expertise in cell engineering to target cancer. Our lead drug product candidate, CYAD-01 (CAR-T-NKG2D), is an autologous chimeric antigen receptor, or CAR, using NKG2D, an activating receptor of Natural Killer, or NK, cells transduced on T-lymphocytes, or T cells. NK cells are lymphocytes of the immune system that kill diseased cells. The receptors of the NK cells used in our therapies target the binding molecules, called ligands, that are expressed in cancer cells, but are absent or expressed at very low levels in normal cells. We believe our CAR-T-NKG2D approach has the potential to treat a broad range of both solid and hematologic tumors.

In December 2016, following the successful completion of a proof-of-concept clinical trial we conducted at the Dana-Farber Cancer Institute, in which we observed no treatment related safety concerns and we observed initial signs of clinical activity, we initiated a Phase 1 clinical trial, called THINK (THerapeutic Immunotherapy with NKR-2), to assess the safety and clinical activity of multiple administrations of CYAD-01 in seven refractory cancers, including both solid and hematologic cancers. As of December 31, 2017, we had treated 15 patients with CYAD-01 in the THINK trial, and we did not observe the same Grade 4 or above adverse event in two or more patients and no patient experienced a Grade 5 adverse event. No patient experienced an adjudicated Grade 4 or higher cytokine release syndrome, or CRS, adverse event or neurotoxic adverse event. In six of the 10 patients treated at the per-protocol intended dose we observed signs of clinical activity ranging from Stable Disease, or SD, to Complete Response, or CR. We plan to enroll up to 36 patients in the dose escalation part and up to 86 patients in the extension part of the THINK trial. Based on the promising interim results of the THINK trial, we plan to further evaluate CYAD-01 in a series of additional Phase 1 clinical trials in patients with acute myeloid leukemia, or AML, and colorectal cancer, or CRC.

In October 2017, we announced a world’s first with the complete response in a patient with refractory and relapsed AML, obtained without preconditioning chemotherapy or other treatments combined with CYAD-01. Importantly, clinical activity has been observed in all AML patients dosed in 2017 at the intended dose, with all patients seeing a reduction in their blast counts in the bone marrow and improvements in their hematological parameters.

Data collected in 2017 in the THINK trial confirmed the safety profile of CYAD-01 and validated activity of the NKG2D. In addition to the results in the liquid arm, data also showed promising results for CYAD-01 in solid tumors: Stabilization of the disease was observed in an ovarian patient and in colorectal patients demonstrating first sign of clinical activity in solid tumors.

At the end of 2017, we initiated the SHRINK trial, an open-label Phase 1 study evaluating the safety and clinical activity of multiple doses of CYAD-01, administered concurrently with the neoadjuvant FOLFOX treatment in patients with potentially resectable liver metastases from colorectal cancer. The trial includes a dose escalation and an extension stage.

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The dose escalation design of SHRINK will include three dose-levels of CYAD-01: 1x10⁸, 3x10⁸ and 1x10⁹ CYAD-01 per administration (adjusted only to body weight for patients below 65 kg). At each dose-level, patients will receive three successive administrations, two weeks apart, at the specified dose administered at a specific timing within the FOLFOX cycle. The dose escalation portion of the study will enroll 3 patients per dose level and the extension phase will enroll 21 additional patients. SHRINK is being conducted in oncology centers in Belgium.

Collaborations

On November 5, 2014, we acquired CorQuest Medical, Inc., a private U.S. company, or CorQuest, for a single cash payment of €1.5 million and a potential earn-out payment to the sellers if the intellectual property acquired from CorQuest is sold, in whole or in part, to a third party within ten years of November 5, 2014. The earn-out payment shall be 2.0% of the value of the cash and non-cash consideration from such sale, or Net Revenue, if the Net Revenue is €10.0 million or less, and 4.0% of the Net Revenue, if the Net Revenue is greater than €10.0 million.

On January 21, 2015, we purchased OnCyte, LLC, or OnCyte, a wholly-owned subsidiary of Celdara Medical, LLC, a privately-held U.S. biotechnology company for an upfront payment of $10.0 million, of which, $6.0 million was paid in cash and $4.0 million was paid in the form of 93,087 of our ordinary shares. A deferred payment of $5.0 million will be due upon the enrolment of the first patient of the second cohort of the NKR-T clinical trial. Additional contingent payments with an estimated fair value of $27.9 million are payable upon the attainment of various clinical and sales milestones. As a result of this transaction we acquired our NKR-T cell drug product candidates and related technology, including technology licensed from the Trustees of Dartmouth College.

In August 2017, we amended the agreements executed in January 2015 with Celdara Medical LLC and Dartmouth College following the acquisition of OnCyte, LLC and related to the CAR-T NK cell drug product candidates. Under the amended agreements Celyad is to receive an increased share of future revenues generated by these assets, including revenues from its sub-licensees. In return, Celyad paid Celdara Medical LLC and Dartmouth College an upfront payment of a total of $12.5 million (€10.6 million), respectively $10.5 million and $2.0 million, and issued to Celdara Medical LLC $12.5 million worth of Celyad’s ordinary shares at a share price of €32.35.

On May 17 2016, we acquired 100% of Biological Manufacturing Services SA, or BMS. BMS owns GMP laboratories and had rented its laboratories to us since 2009. Before this acquisition, BMS was considered as a related party to us.

In July 2016, we granted ONO Pharmaceutical Co. Ltd., or ONO, a leading Japanese immuno-oncology company, an exclusive license for the development and commercialization of our allogeneic CYAD-01 immunotherapy. The license agreement with ONO grants them the exclusive right to develop and commercialize our allogeneic CYAD-01 T-Cell immunotherapy in Japan, Korea and Taiwan. In exchange for receiving a license in these countries, ONO will pay us up to $311.5 million in development and commercial milestones, including an upfront payment of $12.5 million plus double digit royalties on net sales in ONO territories.

In May 2017, we signed a non-exclusive license agreement with Novartis regarding U.S. patents related to allogeneic CAR-T cells. The agreement includes Celyad’s intellectual property rights under U.S. Patent No. 9,181,527. This agreement is related to two undisclosed targets currently under development by Novartis. Under the terms of the agreement, Celyad received an upfront payment and is eligible to receive payments in aggregate amounts of up to $96 million. In addition, Celyad is eligible to receive royalties based on net sales of the licensed target associated products at percentages in the single digits. Celyad retains all rights to grant further licenses to third parties for the use of allogeneic CAR-T cells.

As of December 31, 2017, we have been funded through the following transactions:

• proceeds of €42.0 million from private financing rounds;

• proceeds of €26.5 million from an initial public offering of our ordinary shares on Euronext Brussels and Euronext Paris in July 2013, or the Euronext IPO;

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• proceeds of €25.0 million from a private financing by Medisun International Limited, or Medisun in June 2014;

• proceeds of €31.7 million from a private placement in March 2015;

• proceeds of €88.0 million from our global offering of 1,460,000 ordinary shares, consisting of an underwritten public offering of 1,168,000 ADSs and a concurrent European private placement of 292,000 ordinary shares, in June 2015.

• proceeds of €24.5 million from non-dilutive financing sources, such as government grants and recoverable cash advances, or RCAs; and

We have incurred net losses in each year since our inception. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administration expenses associated with our operations. For the years ended December 31, 2017, 2016 and 2015, we incurred a loss for the year of € 56.4 million, € 23.6 million and, €29.1 million respectively. As of December 31, 2017, we had an accumulated deficit of €180.4 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially in connection with our ongoing activities, as we:

• continue the development of our drug product candidates, including planned and future clinical trials;

• conduct additional research and development for drug product candidate discovery and development;

• seek regulatory approvals for our drug product candidates;

• prepare for the potential launch and commercialization of our drug product candidates, if approved;

• establish a sales and marketing infrastructure for the commercialization of our drug product candidates, if approved;

• in-license or acquire additional drug product candidates or technologies;

• build-out additional manufacturing capabilities; and

• hire additional personnel, including personnel to support our drug product development and commercialization efforts and operations as a U.S. public company.

We generate limited revenue from sales of C-Cath_ez, our proprietary catheter for injecting cells into the heart. We believe that C-Cath_ez revenue will remain immaterial in the future as we intend to sell C-Cath_ez to research laboratories and clinical-stage companies only.

We do not expect to generate material revenue from drug product sales unless and until we successfully complete development of, and obtain marketing approval for, one or more of our drug product candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital prior to commercialization of our lead product candidates. Until such time that we can generate substantial revenue from drug product sales, if ever, we expect to finance our operating activities through a combination of equity offerings, debt financings, government or other third-party funding, including government grants and RCAs, and collaborations and licensing arrangements. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs or commercialization efforts or grant to others rights to develop or market drug product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to cease operations, in part or in full.

Our financial statements for 2015, 2016 and 2017 have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

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Financial Operations Overview

A. Operating Results

Our operating income consist of revenues and other income.

Revenues

For the periods presented in this Annual Report, the revenues we generated were composed of:

• non-refundable upfront payments as a result of the Novartis (revenue 2017) and ONO (revenue 2016) agreements; and

• third-party sales of C-Cath_ez in 2015, 2016 and 2017. There are no recurring sales generated by this device, and we expect revenue from C-Cath_ez sales to remain immaterial compared to our operating expenses for the foreseeable future.

Licensing Revenues

In 2017, we received an upfront fee of $4.0 million associated to the license agreement signed with Novartis. The non-exclusive license agreement includes Celyad’s intellectual property rights under U.S. patents related to allogeneic CAR-T cells. This agreement is related to two undisclosed targets currently under development by Novartis. Under its terms, Celyad received an upfront payment and is eligible to receive payments in aggregate amounts of up to $96 million. In addition, Celyad is eligible to receive royalties based on net sales of the licensed target associated products at percentages in the single digits. Celyad retains all rights to grant further licenses to third parties for the use of allogeneic CAR-T cells. The revenue amount booked in 2017 correspond to the upfront payment received from Novartis. The 15% sub-license fee owed to Dartmouth College, the inventor of the CAR-T NKR platform in-licensed by Celyad in January 2015, is reported within Cost of Sales for the year 2017.

In 2016, we received an upfront payment associated to the License Agreement signed with ONO Pharmaceutical. The license agreement with ONO grants them the exclusive right to develop and commercialize our allogeneic CYAD-01 T-Cell immunotherapy in Japan, Korea and Taiwan. In exchange for receiving a license in these countries, ONO will pay Celyad up to $311.5 million in development and commercial milestones, including an upfront payment of $12.5 million plus double-digit royalties on net sales in ONO territories. The revenue amount booked in 2016 correspond to the upfront payment after deduction of the non-refundable Japanese withholding taxes and the 15% sub-license fee owed to Dartmouth College, the inventor of the CAR-T NKR platform in-licensed by Celyad in January 2015.

Cost of sales

Costs of sales are related to the cost of manufacturing C-Cath_ez. We expect the costs of sales related to sales of C-Cath_ez will remain immaterial compared to our operating expenses for the foreseeable future.

For the year 2017, costs of sales also include an amount of $0.6 million, which represents the above-mentioned 15% sub-license fee on the Novartis upfront fee, owed to Dartmouth College.

Research and Development expenses

Research and development expenses amounted to €22.9 million, €27.7 million and €22.8 million for the years ended December 31, 2017, 2016 and 2015, respectively, represented 41%, 74% and 76% of our total operating expenses. For the periods presented in this report, research and development expenses gathered all operating expenses of Celyad SA and its subsidiaries, or the Group, but the general and administrative expenses. It included all the costs related to our operations in the following departments; research and development, clinical, manufacturing, regulatory, quality and intellectual property.

With the exception of the C-Cath_ez development costs capitalized since May 2012, we expense all research and development costs as they are incurred. A total of €1.1 million development costs of C-Cath_ez have been capitalized since May 1, 2012, the month following our receipt of the CE mark for C-Cath_ez. We may review this policy in the future depending on the outcome of our current development programs.

We utilize our research and development staff and infrastructure resources across projects in our programs and many of our costs historically have not been specifically attributable to a single project. In addition, our research and development expense may vary substantially from period to period based on the timing and scope of our research and development activities, the timing of regulatory approvals or authorizations and the rate of commencement and enrollment of patients in clinical trials.

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Research and development activities are central to our business. We expect that our other research and development expenses will continue to grow in the future mostly with the development of drug product candidates from our CAR-T NKR cell program. The expected increase in research and development expenditures will mostly relate to higher personnel costs, outsourcing costs and additional preclinical and clinical studies.

Salaries represented the biggest cost by nature within our operations over the last three years. We at Celyad have the strategy to internalize all operations when they become material or critical to our operations. We subcontract all one-time projects, or tasks that cannot be taken in house for quality or regulatory purposes. The other important nature of costs in our operations are the preclinical studies, clinical studies, scale-up and automation of the production processes.

The costs associated to preclinical studies are laboratory supplies and the costs of our outsourced research and development studies and services.

The costs associated to clinical studies comprised the preparation, the conduct and the supervision of our clinical trials. We expect that these expenses will increase in the near future given the expected clinical trial activities associated with our CAR-T NKR cell drug product candidates. We cannot determine with certainty the duration and completion costs of our current or future clinical trials of our drug product candidates or if, when, or to what extent we will generate revenue from the commercialization and sale of any of our drug product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our drug product candidates. The duration, costs and timing of clinical trials and development of our drug product candidates will depend on a variety of factors, including:

• per patient clinical trial costs;

• the number of patients that participate in clinical trials;

• the drop-out or discontinuation rates of patients;

• the duration of patient follow-up;

• the scope, rate of progress and expense of our ongoing as well as any additional non-clinical studies, clinical trials and other research and development activities;

• clinical trial and early-stage results;

• the terms and timing of regulatory approvals;

• the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and

• the ability to market, commercialize and achieve market acceptance of CYAD-01 or any of our other product candidates.

A change in the outcome of any of these variables with respect to the development of CYAD-01 or any other drug product candidate that we are developing could mean a significant change in the costs and timing associated with the development of CYAD-01 or such other drug product candidate. For example, if FDA, European Medicines Agency, or EMA, or other regulatory authority were to require us to conduct additional preclinical studies and clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of our drug product candidates, or if we experience significant delays in enrollment in any clinical trials, we would be required to spend significant additional financial resources and time on the completion of the clinical development of the applicable drug product candidate.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We have not received regulatory approval from the FDA, EMA or any other regulatory authority to market any of our drug product candidates. The successful development of our drug product candidates is highly uncertain. Our drug product candidates are tested in numerous preclinical studies for safety, pharmacology and efficacy. We then conduct clinical trials for those drug product candidates that are determined to be the most promising. We fund these trials ourselves or through non-dilutive funding. As we obtain results from clinical trials, we may elect to discontinue or delay trials for some drug product candidates in order to focus resources on drug product candidates that we believe are more promising. Completion of clinical trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a drug product candidate. The cost of clinical trials for a particular drug product candidate may vary significantly.

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At this time we cannot reasonably estimate the time and costs necessary to complete the development of any of our drug product candidates or the period, if any, in which we will generate drug product revenue. There are numerous risks and uncertainties associated with drug product development, including:

• terms and timing of regulatory approvals and authorizations; and

• the number, the design and the size of the clinical trials required by the regulatory authorities to seek marketing approval.

For the periods presented in this report, the manufacturing expenses included the costs to manufacture our product candidates, namely CYAD-01 (as from the year 2016) and C-Cure (until the year 2016) and the costs associated to the process development of such product candidates, including the scale-up and the automation of such processes. These costs are mainly comprised of production raw material and supplies, maintenance and calibration charges of equipment and the rental of Good Manufacturing Practices laboratory facilities. Raw materials are the main component to the current cost of production of CYAD-01 and will remain as such in the future as they are closely associated to the production of clinical batches. Most of our raw material suppliers are large companies, and pursuant to our internal procedures, we are trying to have an alternative supplier for each critical material, to limit risk of disruption and price sensitivity.

We lease our production facility from a real estate company, through our wholly owned subsidiary Biological Manufacturing Services SA.

Manufacturing expenses are mostly driven by the number and the size of clinical trials that we conduct on our drug product candidates. We expect these expenses will remain significant in the near future and will increase as our clinical trials include a greater number of patients and we potentially commence commercialization of our drug product candidates, if approved.

General and administrative expenses

General and administrative expenses represented 17%, 26% and 24% of our total operating expenses for the years ended December 31, 2017, 2016 and 2015, respectively.

Our general and administrative expenses consist primarily of salaries, fees and other share-based compensation costs for personnel in executive, finance and accounting, people, communication and legal functions. It also includes costs related to professional fees for auditors and lawyers, consulting fees not related to research and development operations, and fees related to functions that are outsourced by us such as information technology, or IT. After having hired a Chief Legal Officer in 2016, general and administrative expenses are expected to remain on an increase trend in the near future with the expansion of our executive management team to include new personnel responsible for IT, sales and marketing, as well as with the additional responsibilities related to becoming a U.S. public company.

Amendments of the Celdara Medical and Dartmouth College agreements

In 2017, the Group recognized non-recurring expenses related to the amendment of the agreements with Celdara Medical LLC and Dartmouth College (totalling €24.3 million, out of which an amount of €10.6 million was settled in shares, and was thus a non-cash expense).

Write-off of C-Cure and Corquest assets and derecognition or related liabilities

In 2017, the Group also proceeded with the write-off of the C-Cure and Corquest assets and derecognition of related liabilities (for net expense amounts of €0.7 million and €1.2 million respectively).

Other operating income

During the periods presented in this Annual Report, our other operating income is primarily generated from (i) government grants received from the Regional government, or Walloon Region, in the form of RCAs and (ii) government grants received from the European Commission under the Seventh Framework Program, or FP7.

For the year 2017, we recognized for the first time a receivable on the amounts to collect from the Belgian federal government as research and development tax credit (reported as an operating income for an amount of €1.2 million). Collection of the research and development tax credits are expected as from 2019.

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Recoverable Cash Advances

RCAs support specific development programs and are typically granted by regional governmental entities, and in our case, the Walloon Region. All RCA contracts, in essence, consist of three phases, i.e., the “research phase”, the “decision phase” and the “exploitation phase”. During the research phase, we receive funds from the Walloon Region based on statements of expenses. In accordance with IAS 20.10A and IFRS Interpretations Committee’s, or IC’s, conclusion that contingently repayable cash received from a government to finance a research and development project is a financial liability under IAS 32, ‘Financial instruments; Presentation’, the RCAs are initially recognized as a financial liability at fair value, determined as per IFRS 9/IAS 39. The benefit (RCA grant component) consisting in the difference between the cash received (RCA proceeds) and the above-mentioned financial liability’s fair value (RCA liability component) is treated as a government grant in accordance with IAS 20.

The RCA grant component is recognized in profit or loss on a systematic basis over the periods in which the entity recognizes the underlying research and development expenses subsidized by the RCA. Subsequent measurement of the RCAs liability component (RCA financial liability) is performed at amortized cost using the cumulative catch-up approach, under which the carrying amount of the liability is adjusted to the present value of the future estimated cash flows, discounted at the liability’s original effective interest rate. The resulting adjustment is recognized within profit or loss.

At the end of the research phase, the Group should within a period of six months decide whether or not to exploit the results of the research phase (decision phase). The exploitation phase may have a duration of up to 10 years. In the event the Group decides to exploit the results under an RCA, the relevant RCA becomes contingently refundable, and the fair value of the RCA liability adjusted accordingly, if required. When the Group does not exploit (or ceases to exploit) the results under an RCA, it has to notify the Walloon Region of this decision. This decision is of the sole responsibility of the Group. The related liability is then discharged by the transfer of such results to the Walloon Region. Also, when the Group decides to renounce to its rights to patents which may result from the research, title to such patents will be transferred to the Walloon Region. In that case, the RCA liability is extinguished.

From inception through December 31, 2017, we have banked subsidies RCAs totaling €22.6 million. In 2018 and 2019, we will be required to make exploitation decisions on our remaining outstanding RCAs related to the CAR-T platform.

Other Government Grants

Since inception through December 31, 2017, we received grants totaling €2.5 million and we expect to continue to apply for grants from FP7 and Walloon Region authorities. These grants are used to partially finance early stage projects such as fundamental research, applied research and prototype design.

As of the date of this Annual Report, none of the grants received are subject to any conditions. As per our agreements with these governmental authorities, grants are paid upon our submission of a statement of expenses. We incur project expenses first and ask for partial reimbursement according to the terms of the agreements.

The government grants are recognized in profit or loss on a systematic basis over the periods in which we recognize as expenses the related costs for which the grants are intended to compensate.

Finance income

Finance income relates to interest income earned on bank accounts and from currency exchange rate differences. Our cash and cash equivalents have been deposited primarily in savings and deposit accounts with original maturities of three months or less. Savings and deposit accounts generate a modest amount of interest income. We expect to continue this investment philosophy.

Finance expenses

Finance expenses relate to interest payable on shareholder loans and finance leases, as well as interest on overdrafts and currency exchange rate differences. Due to the depreciation of the USD compared to EUR, the Group recognized an unrealized loss on foreign exchange differences of €4.3 million in 2017. In 2016, the unrealized gain on foreign exchange differences amounted to €0.8 million.

Consolidated Financial Data

The following is a summary of our consolidated financial data.

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Recently Issued Accounting Standards

For information regarding recently issued accounting standards, please see “Note 2— General information and statement of compliance” in our consolidated financial statements appended to this Annual Report.

Critical Accounting Policies

For information regarding our critical accounting policies, please see “Note 5—Critical accounting estimates and judgements” in our consolidated financial statements appended to this Annual Report. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. These items are considered further to be the accounting policies that are most critical to our results of operations, financial condition and cash flows.

Comparisons for the Years Ended December 31, 2017 and 2016

Revenues

(€‘000)	For the year ended December 31,
	2017		2016
Out-licensing revenue (non-refundable upfront payment)		3,505		8,440
C-Cathez sales		35		83
		3,540		8,523

Total revenues amounted to €3.5 million in 2017 and corresponded to the non-refundable upfront payment received from Novartis, as a result of the non-exclusive license agreement signed in June 2017. This upfront payment has been fully recognized upon receipt as there are no performance obligations nor subsequent deliverables associated to the payment. The revenues of 2016 corresponded to the payment received from ONO under the exclusive license agreement signed in July 2016. There was no milestone received from ONO in 2017. In 2017, the total revenue generated with C-Cath_ez amounted to €35,000 compared to €83,000 in 2016. There are no recurring sales generated by this device.

Cost of sales

(€‘000)	For the year ended December 31,
	2017			2016
In-licensing cost of sales		(515	)		(53	)
C-Cathez cost of sales		—
Total cost of sales		(515	)		(53	)

For the year 2017, costs of sales included an amount of €0.5 million, which represents the 15% sub-license fee owed to Dartmouth College on the above-mentioned Novartis upfront payment.

Research and development expenses

(€‘000)	For the year ended December 31
	2017		2016
Salaries		7,007		8,160
Share-based payments		862		—
Travel and living		359		577
Preclinical studies		1,995		4,650
Clinical studies		3,023		4,468
Raw materials and consumables		1,825		—
Delivery systems		430		964
Consulting fees		1,522		791
External collaborations		885		—
Intellectual property filing and maintenance fees		513		799
Scale-up and automation		1,892		4,164
Rent and utilities		371		939
Depreciation and amortization		1,488		1,345
Other costs		735		817
Total research and development expenses		22,908		27,675

The research and development expenses decreased by €4.7 million in 2017 compared to 2016, explained by the change in the mix of research and development performed, namely the cardiology business segment versus the immuno-oncology business segment.

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In 2017, the vast majority (€20.0 million) of the research and development expenses were dedicated to the development of the immune-oncology programs, namely our CAR-T platform. The research and development expenses associated to the cardiology programs (€2.9 million) related to the follow-up costs of CHART-1 only.

The variance with the prior year is mainly explained by the fact that in 2016 we were still incurring significant expenses in the cardiology segment, relating to our Phase 3 study for C-Cure.

The research and development expenses relating to the immuno-oncology segment (€20.0 million for the year 2017) increased by €5.1 million in comparison with 2016.

General and administrative expenses

(€‘000)	For the year ended December 31
	2017		2016
Employee expenses		2,630		2,486
Share-based payments		1,707		2,847
Rent		1,053		791
Communication and marketing		761		728
Consulting fees		2,227		2,029
Travel and living		211		450
Post-employment benefits		—		(24	)
Depreciation		229		173
Other		490		265
Total general and administrative expenses		9,310		9,744

General and administrative expenses decreased by €0.4 million compared to 2016. This variance primarily resulted from the valuation of the share-based payments, which relate to our warrant plans.

Net other operating income and expenses

(€‘000)	For the year ended December 31
	2017			2016
Grant income (RCAs)		824			2,704
Grant income (other)		56			124
Remeasurement of RCAs		396			2,154
Research and development tax credit		1,161			—
Change of fair value of contingent liability		193			—
Total other operating income		2,630			4,982
Change of fair value of contingent liability		—			(1,634	)
Other		(41	)		(8	)
Total other operating expenses		(41	)		(1,642	)
Total other operating income and expenses		2,590			3,340

Other operating income and expenses were primarily related to the non-dilutive funding received from the Walloon Region and the European FP7 funding programs. In 2017, the net amount of the other operating income and expenses decreased by €0.8 million. This variance resulted mainly from the change in the RCA fair value adjustment (non-cash entry) and from the decrease in RCA grant income.

For the year 2017, we recognized for the first time a receivable on the amounts to collect from the Belgian federal government as a research and development tax credit (reported as an operating income for an amount of €1.2 million).

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Non-recurring operating income and expenses

(€‘000)	For the year ended December 31,
	2017			2016
Amendment of Celdara Medical and Dartmouth College agreements		(24,341	)		—
C-Cure IP asset impairment expense		(6,045	)		—
C-Cure RCA reversal income		5,356			—
Corquest IP asset impairment expenses		(1,244	)		—
Write-off C-Cure and Corquest assets and derecognition of related liabilities		(1,932	)

In 2017, the Group recognized non-recurring expenses related to the amendment of the agreements with Celdara Medical LLC and Dartmouth College (totaling €24.3 million, out of which an amount of €10.6 million was equity-settled and thus a non-cash expense). The Group also proceeded with the write-off of the C-Cure and Corquest assets and liabilities (respectively for €0.7 million and €1.2 million). There were no non-recurring items reported on the income statement for 2016.

Operating loss

As a result of the foregoing, our operating loss increased by €27.3 million in 2017 as compared to 2016, totaling €52.9 million in 2017.

Financial income and financial expenses

(€‘000)	For the year ended December 31
	2017		2016
Interest finance leases		18		19
Interest on overdrafts and other finance costs		36		37
Interest on RCAs		90		53
Exchange differences		4,309		98
Finance expenses		4,454		207
Interest income bank account		927		1,413
Exchange differences and miscellaneous		6		791
Finance income		933		2,204

Financial expenses represent interest paid, bank charges and foreign exchange difference.

Due to the depreciation of the USD compared to EUR, the Group recognized an unrealized loss on foreign exchange differences of €4.3 million in 2017. In 2016, the unrealized gain on foreign exchange differences amounted to €0.8 million.

Interest income on short term deposits decreased significantly from 2016 to 2017, reflecting the decline of the interest rates on such deposits.

Income taxes

As we incurred losses in all the relevant periods, we had no taxable income and therefore incurred no corporate taxes.

Loss for the year

As a result of the foregoing, our loss for the year increased by €32.8 million from €23.6 million in 2016 to €56.4 million in 2017.

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Comparisons for the Years Ended December 31, 2016 and 2015

Revenues

(€‘000)	For the year ended December 31,
	2016		2015
Recognition of non-refundable upfront payment		8,440		—
C-Cathez Sales		83		3
		8,523		3

Total revenues increased by €8.5 million over 2016. In August 2016, the Group has received a non-refundable upfront payment as a result of the ONO agreement. This upfront payment has been fully recognized upon receipt as there are no performance obligations nor subsequent deliverables associated to the payment. The non-refundable upfront payment was rather received as a consideration for the sale of license to ONO. In 2016, the total revenue generated through sales of C-Cath_ez was € 0.1 million. Insignificant revenue was generated from sales of C-Cath_ez in 2015.

Cost of sales

(€‘000)	For the year ended December 31,
	2016			2015
C-Cathez cost of sales		(53	)		(1	)
Total cost of sales		(53	)		(1	)

In 2016, the total cost of sales associated with sales of C-Cath_ez amounted to €0.1 million.

Research and development expenses

(€‘000)	For the year ended December 31
	2016		2015
Salaries		8,160		5,785
Travel and living		577		168
Preclinical studies		4,650		2,398
Clinical studies		4,468		6,723
Delivery systems and medical devices		964		173
Consulting fees		791		1,842
Intellectual property filing and maintenance fees		799		763
Scale-up and automation		4,164		642
Rent and utilities		939		1,045
Depreciation and amortization		1,345		1,033
Other costs		817		2,196
Total research and development expenses		27,675		22,767

The research and development expenses increased by €4.9 million in 2016 compared to 2015.

In 2016, the majority of the research and development expenses were for the first time related to the development of the immune-oncology programs, namely CAR- T NKR. The research and development expenses associated to the cardio programs were the follow-up costs of CHART-1 and the preclinical testing of the Corquest platform, totaling €12.2 million.

The variance with 2015 is mainly explained by the following elements;

• additional staff was hired to support the projects within the research and development departments;

• additional preclinical studies on CAR-T NKR-T projects, mostly driven by expenses incurred on the allogeneic program;

• the automation of the CYAD-01 production process;

• the decrease of the costs of the CHART-1 trial; and

• the decrease of consultancy fees.

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Among these expenses, the preclinical development expenses of the NKR-T platform are expected to increase significantly in the future periods.

General and administrative expenses

(€‘000)	For the year ended December 31
	2016			2015
Employee expenses		2,486			2,761
Share-based payment		2,847			796
Rent		791			617
Communication and marketing		728			891
Consulting fees		2,029			1,511
Travel and living		450			509
Post-employment benefits		(24	)		(45	)
Depreciation		173			—
Other		265			190
Total general and administrative expenses		9,744			7,230

General and administrative expenses increased by €2.5 million compared to 2015. This increase primarily resulted from the valuation of the share based payment, mainly the warrants plan of November 2015. The new warrant plan issued in December 2016 will be effective in 2017, hence not included in the amount booked at year end 2016. Consulting fees also increased due to one off consultancy and strategic projects.

Operating income

(€‘000)	For the year ended December 31
	2016			2015
Recoverable cash advances (RCAs)		2,704			222
Subsidies		124			412
Change of fair value of RCAs		3,891			—
Reversal provision for reimbursement RCA		(1,737	)		—
Realized gain on contribution IP into joint venture		—			(312	)
Change of fair value of contingent liability		(1,634	)
Other		(8	)		—
Total operating income		3,340			322

Other operating income and expenses are primarily related to the non-dilutive funding received from the Walloon Region and the European FP7 funding programs. In 2016, the net amount of the other operating income and expenses increased by €3.0 million.

This variance resulted mainly from the additional proceeds received on RCAs and FP7 contracts and the non-cash entries posted on the RCAs were reflected at the fair value of such liabilities.

Operating loss

As a result of the foregoing, our operating loss decreased by €4.1 million in 2016 as compared to 2015, totaling €25.6 million in 2016.

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Financial income and financial expenses

(€‘000)	For the year ended December 31,
	2016		2015
Interest finance leases		19		10
Interest on RCAs		53		—
Other finance costs		37		90
Exchange differences		98		135
Finance expenses		207		236
Interest income bank account		1,413		352
Exchange differences		791		190
Finance income		2,204		542

Financial expenses represent interest paid, bank charges and foreign exchange difference.

Interest income on short term deposits increased significantly from 2016 to 2015, reflecting the increase of our average cash position over the periods, partially compensated by the decline of the interest rates on such deposits.

Income taxes

As we incurred losses in all of the relevant periods, we had no taxable income and therefore incurred no corporate taxes.

Loss for the year

As a result of the foregoing, our loss for the year decreased by €5.5 million from €29.1 million in 2015 to €23.6  million in 2016.

B. Liquidity and Capital Resources

We have financed our operations since inception through several private placements of equity securities, several contributions in kind, an initial public offering on Euronext Brussels and Paris, an initial U.S. public offering on Nasdaq and non-dilutive governmental support. Through December 31, 2017, the total gross proceeds of the placement of our securities amounted to €187 million (net proceeds of €172 million) and, the total non-dilutive funding amounted to €26.7 million. For information on our use of and policies regarding financial instruments, please see Note 3 and Note 21 included in our consolidated financial statements appended to this Annual Report.

The table hereunder summarizes our sources and uses of cash for the years ended December 31, 2017, 2016, and 2015.

(€‘000)	For the years ended December 31,
	2017			2016			2015
Cash used in operating activities		(44,441	)		(24,692	)		(27,303	)
Cash from/(used in) investing activities		17,613			(30,157	)		(10,691	)
Cash flows from financing activities		605			3,031			110,535
Net increase/(decrease) in cash and cash equivalents		(26,224	)		(51,818	)		72,542

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Comparison between 2017 and 2016

In 2017, the net cash used in our operations amounted to €44.4 million and increased by €24.8 million compared to 2016. This increase is explained by:

• the decrease in our net licensing revenue by €5.0 million, mostly offset by the decrease in our research and development expenses by €4.7 million;

• the non-recurring expenses for the year, for which the cash component amounted to €13.3 million (compensation relating to the amendment of the agreements with Celdara Medical LLC and Dartmouth College);

The cash used in investing activities varied significantly compared to 2016. The variance is explained by the use of our short-term deposits to finance part of our operations (in 2017, we withdrew a net amount of €23.6 million from our short-term deposits, while in 2016 we invested a net amount of €26.9 million into short term deposits) and by the payment of a clinical development milestones to Celdara Medical LLC of €5.3 million.

Our net cash flow from our financing activities decreased by €2.4 million from €3.0 million in 2016. In 2017, the proceeds from non-dilutive funding cancelled out their repayments, while in 2016 we earned net proceeds from non-dilutive funding of €2.3 million (gross proceeds of €3.1 million, offset by repayments of €0.8 million).

Comparison between 2016 and 2015

In 2016, the decrease of the net cash used in our operations (€2.6 million) is explained by the decrease of the CHART-1 costs, the increase of the CAR-T NKR development costs, the increase of the process automation costs and by the increase of the proceeds received from our license agreement.

The cash used in investing activities increased significantly over 2016 as a consequence of the acquisition of Biological Manufacturing Services SA for €1.6 million), the capital expenditures made mainly in our new corporate offices (€1.7 million) and the net amount invested in short term deposits (€26.9 million).

The acquisition of BMS was accounted for as an asset deal. The fair value of the assets acquired is concentrated in one identifiable asset, i.e. the GMP laboratories. The difference between the purchase price and the net assets of BMS at the date of acquisition is then allocated entirely to the Property, Plant and Equipment.

Our net cash flows provided from our financing activities decreased by €107.5 million in 2016 from €110.5 million in 2015. There was no capital increase performed in 2016. The net proceeds received from non-dilutive funding increased by €1.5 million) over 2016,

We have incurred net losses in each year since our inception. Substantially all of our net losses resulted from costs incurred in connection with our development programs and from general & administrative expenses associated with our operations.

We have financed our capital expenditures of 2016 with a bank loan and with financial leases which are recorded on the balance sheet at year end 2016 €1.5 million.

Cash and Funding Sources

Over the last three years, we obtained new financing mostly through the issuance of our shares. A summary of our funding activities is as follows:

(€‘000)	Total		Equity capital		Finance leases		Loans
2015		120,380		119,929		451		—
2016		1,165		0		371		794
2017		1,168		625		543		—
Total financing		122,713		120,554		1365		794

We refer to “Note 21—Financial instruments on balance sheet” included in our consolidated financial statements appended to this Annual Report for information related to the maturity profile of our leases and loans.

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In 2017, warrants were exercised for an equity capital proceeds amount of €0.6 million.

Further, most of our capital expenditures in 2017 related to laboratory and office equipment are financed with three-year maturity finance leases (€0.5 million), similar to years 2016 (€0.4 million) and 2015 (€0.5 million).

In 2016, we also contracted a bank loan to partially finance the leasehold improvements made in our new corporate offices.

In March 2015, we completed a €31.7 million capital increase via a private placement subscribed by qualified institutional investors in the United States and Europe at a price of €44.50 per share. In June 2015, we completed a €88.0 million global offering on Nasdaq and on Euronext Brussels and Euronext Paris at a price of €60.25 per share. Our capital was also increased in 2015 by way of exercise of warrants (equity capital funding of €0.2 million).

Amounts received from the Walloon Region, booked as advances repayable, correspond to funding received under several RCAs, dedicated to supporting specific development programs related to CAR-T platform, THINK clinical study and C-Cath_ez at the end of 2017.

The movements of the advances repayable recorded in 2017, 2016 and 2015 are summarized in the table below:

(€‘000)
Balance of January 1, 2015	11,555
+ liability recognition	1,392
-repayments	(529	)
+/- other transactions including change of fair value	(1,036	)
Balance at December 31, 2015	11,382
+ liability recognition	—
- repayments	(842	)
+/- other transactions including change of fair value	(2,102	)
Balance at December 31, 2016	8,438
+ liability recognition	—
- repayments	(1,233	)
+/- other transactions including change of fair value	(5,435	)
Balance at December 31, 2017	1,770

For the year 2017, we reversed an RCA liability amount of €5.4 million, relating to the decision of ceasing the exploitation of our product candidate C-Cure (Cardio business).

Capital Expenditures

We do not capitalize our research and development expenses until we receive marketing authorization for the applicable product candidate. At year-end 2017, all clinical, research and development expenditures related to the development of our CAR-T platform and C-Cure and are accounted for as operating expenses.

Our capital expenditures were €0.9 million, €1.8 million and €0.8 million for the years ended December 31, 2017, 2016 and 2015 respectively. In 2018, we anticipate new capital expenditures in our laboratories and manufacturing plant. We plan to finance most of these expenses through new finance leases.

We also completed the acquisitions of (i) OnCyte, LLC in January 2015, resulting in the recognition of a goodwill of €1.0 million and an in-process research and development of €38.3 million and (ii) Biological Manufacturing Services SA in May 2016 resulting in recognition of additional PPE for €1.3 million.

The non-current assets are detailed in the following table.

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(€‘000)			As of December 31,
	2017		2016		2015
Intangible assets		36,508		49,566		48,789
Property, plant and equipment		3,290		3,563		1,136
Other non-current assets		1,434		311		180
Total		41,232		53,440		50,105

The decrease observed in the caption intangible assets at year-end 2017 compared to year-end 2016 results of:

• an impairment of €7.2 million relating to Mayo Clinic (€6.0 million) and Corquest (€1.2 million) patents

• a currency translation adjustment of €4.8 million for USD depreciation towards EUR, on OnCyte underlying in-process research and development

Operating Capital Requirements

We believe that our existing cash and cash equivalents, and short-term investments will enable us to fund our operating expenses and capital expenditure requirements, based on the current scope of our activities and including expected cash inflows from our strategic collaborations, at least until the end of the first quarter of 2019. 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. In any event, we will require additional capital to pursue preclinical and clinical activities, obtain regulatory approval for, and to commercialize our drug product candidates.

Until we can generate a sufficient amount of revenue from our drug product candidates, if ever, we expect to finance our operating activities through a combination of equity offerings, debt financings, government, including RCAs and subsidies, or other third-party financings and collaborations. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our drug product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing shareholders, increased fixed payment obligations and these securities may have rights senior to those of our ordinary shares. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.

There are no legal or economic restrictions on the ability of our subsidiaries to transfer funds to Celyad SA in the form of cash dividends, loans or advances.

Our present and future funding requirements will depend on many factors, including, among other things:

• the size, progress, timing and completion of our clinical trials for any current or future drug product candidates, including CYAD-01;

• the number of potential new drug product candidates we identify and decide to develop;

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

• the time and costs involved in obtaining regulatory approval for drug products and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of these drug products; and

• the amount of revenue, if any, we may derive either directly or in the form of royalty payments from future potential collaboration agreements on our technology platforms.

For more information as to the risks associated with our future funding needs, see the section of this Annual Report titled “Item 3.D.—Risk Factors”.

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JOBS Act Exemptions

We qualify as an “emerging growth company” as defined in the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

• not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; and

• to the extent that we no longer qualify as a foreign private issuer, (1) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and (2) exemptions from the requirements of holding a non-binding advisory vote on executive compensation, including golden parachute compensation

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities; (3) the issuance, in any three-year period, by our company of more than $1.0 billion in non-convertible debt securities held by non-affiliates; and (4) December 31, 2020. We may choose to take advantage of some but not all of these exemptions. For example, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Given that we currently report and expect to continue to report under IFRS as issued by the IASB, we have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required by the IASB. We have taken advantage of reduced reporting requirements in this Annual Report. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities.

C. Research and Development, Patents and Licenses, Etc.

For a discussion of our research and development activities, see “Item 4.B.—Business Overview” and “Item 5.A—Operating Results.”

D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2017 to December 31, 2017 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. For a discussion of trends, see “Item 4.B.—Business Overview,” “Item 5.A.—Operating Results” and “Item 5.B.—Liquidity and Capital Resources.”

E. Off-Balance Sheet Arrangements

During the periods presented, we did not and do not currently have any off-balance sheet arrangements as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

During the periods presented, we had bank guarantees granted to the landlords of our Belgian and U.S. offices (€0.3 million). These bank guarantees will last until the termination of the respective lease agreements.

For other contingent liabilities, see “Item 5.F.—Tabular Disclosure of Contractual Obligations” below.

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F. Tabular Disclosure of Contractual Obligations

The following table discloses aggregate information about material contractual obligations and periods in which payments (principal only, interest amounts are not material and therefore not included) were due as of December 31, 2017. Future events could cause actual payments to differ from these estimates.

			Less than		One to three		Three to		More than
(€‘000)	Total		one year		years		five years		five years
As of December 31, 2017
Finance leases (1)		909		427		461		21		—
Bank loan (2)		536		209		326		—		—
Operating leases (3)		3,759		857		1,289		725		888
Pension obligations		204		—		—		—		204
Advances repayable (current and non-current) (4)		1,770		226		412		248		884
Total		7,178		226		412		248		1976

(1) We financed most of our office and laboratory equipment through finance leases.

(2) The bank loan was originated in 2016 with an initial term of three years and is related to the leasehold improvements made in our new corporate offices in Belgium.

(3) The operating leases corresponded mainly to the lease agreements related to our offices and laboratories in Belgium and in the United States.

(4) Advances repayable corresponded to the present value of the future repayments related to the recoverable cash advance agreements contracted with the Walloon Region.

G. Safe Harbor

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements.”

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

Board of Directors

As provided by Article 521 of the Belgian Company Code, we are managed by a Board of Directors acting as a collegiate body. The Board of Directors’ role is to pursue our long-term success by providing entrepreneurial leadership and enabling risks to be assessed and managed. The Board of Directors should decide on our values and strategy, its risk preference and key policies. The Board of Directors should ensure that the necessary leadership, financial and human resources are in place for us to meet its objectives.

We have opted for a one-tier governance structure. As provided by Article 522 of the Belgian Company Code, the Board of Directors is our ultimate decision-making body, except with respect to those areas that are reserved by law or by our articles of association to the Shareholders’ Meeting.

Our articles of association state that the number of directors, who may be natural persons or legal entities and who need not be shareholders, must be at least five. At least half of the members of the Board of Directors must be non-executive directors and at least three of them must be independent directors.

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A meeting of the Board of Directors is validly constituted if at least half of its members are present in person or represented at the meeting. If this quorum is not met, a new board meeting may be convened by any director to deliberate and decide on the matters on the agenda of the board meeting for which a quorum was not met, provided that at least two members are present. Meetings of the Board of Directors are convened by the Chairman of the Board or the Chief Financial Officer or the Chief Legal Officer, whenever our interest so requires. In principle, the Board of Directors will meet at least four times per year.

The Chairman of the Board of Directors shall have a casting vote on matters submitted to the Board of Directors in the event of a tied vote, save if the Board of Directors is composed of two members.

At the date of this Annual Report, the Board of Directors consists of eight members, one of which is an executive director (as a member of the Executive Management Team) and seven of which are non-executive directors, including four independent directors. In accordance with Art 96, §2 6° of the Belgian Company Code, or BCC, we aim for, in a reasonable timeframe, that one-third of the Board members are of different sex.

Name	Position	Age	Term [1]	Board Committee Membership
Michel Lussier	Chairman	61	2020	Member of the Nomination and Remuneration Committee
LSS Consulting SPRL represented by its permanent representative Christian Homsy	Executive Director	59	2020
Serge Goblet	Non-executive director	60	2020
Chris Buyse	Independent director	53	2020	Member of the Nomination and Remuneration Committee Member of the Audit Committee
Rudy Dekeyser	Independent director	56	2020	Member of the Nomination and Remuneration Committee Member of the Audit Committee
Debasish Roychowdhury	Independent director	57	2019	Member of the Audit Committee
Chris De Jonghe [1]	Non-executive director	45	2017	Member of the Audit Committee
Hanspeter Spek	Independent director	68	2018	Member of the Nomination and Remuneration Committee
TOLEFI SA represented by its permanent representative Serge Goblet	Non-executive director	—	2018

[1] Chris De Jonghe resigned with an effective date on May 5, 2017.

The business address for our board of directors and executive management team is Rue Edouard Belin 2, 1435 Mont-Saint-Guibert, Belgium.

The following paragraphs contain brief biographies of each of the directors, or in case of legal entities being director, their permanent representatives, with an indication of other relevant mandates as member of administrative, management or supervisory bodies in other companies during the previous five years.

Michel Lussier has served as Chairman of our board of directors since 2007 and is also a co-founder of the Company. Mr. Lussier was also the Chairman of the board of directors and co-founder of the Company’s predecessor entity, Cardio3 SA, until 2008. Mr. Lussier recently founded Medpole Ltd, the North American satellite of MedPole SA, a European incubator for medical technology start-up companies located in Belgium, and serves as the Chief Executive Officer for the group. In this capacity, he is a managing director of Fjord Ventures, a Laguna Hills, California based medical technology accelerator / incubator. Since May 2014, Mr. Lussier has served as the Chief Executive Officer of Metronom Health Inc, an early stage medical device company created by Fjord Ventures, developing a continuous glucose monitoring system. Prior to that, from 2002 to 2013, he worked for Volcano Corporation, where he served in a number of positions, most recently as President, Clinical and Scientific Affairs from 2012 to 2013, and prior to that from 2007 to 2012, Group

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President, Advanced Imaging Systems, Global Clinical & Scientific Affairs and General Management of Europe, Africa and the Middle East. Mr. Lussier obtained a Bachelor of Sciences degree in Electrical Engineering and Master’s degree in Biomedical Engineering at the University of Montreal. He also holds an MBA from INSEAD (European Institute of Business Administration), France. In addition to serving on our board of directors, he also serves on the boards of directors of several early stage medical devices companies.

Christian Homsy (permanent representative of LSS consulting SPRL), has served as a member of our board of directors since 2007 and has been Chief Executive Officer (CEO) of Celyad since its foundation. Christian Homsy obtained his Medical Doctorate at the University of Louvain and holds an MBA from the IMD in Lausanne (Switzerland). Christian gained his business experience in senior research and development, marketing, business development and sales positions at Guidant Corporation, a leading medical device company active in the treatment of cardiovascular disease. He was also founder of Guidant Institute for Therapy Development, a landmark facility for physician and health care professionals’ education that gained international recognition and praise. Before joining Celyad, Christian Homsy was General Manager of Medpole, a European incubator dedicated to initiating the European operations for start-up companies in the medical device or biotechnology fields. He also holds a director mandate in Medpole SA.

Serge Goblet (permanent representative of Tolefi SA) has served as a member of our board of directors since 2008. He holds a Master Degree in Business and Consular Sciences from ICHEC, Belgium and has many years of international experience as director in Belgian and foreign companies. He is the managing director of TOLEFI SA, a Belgian holding company and holds director mandates in subsidiaries of TOLEFI. Serge has two voting rights at our board of directors, one in his own name and one on behalf of TOLEFI, as a permanent representative.

Chris Buyse has served as a member of our board of directors since 2008. He brings more than 30 years of international financial expertise and experience in introducing best financial management practices. He is currently Managing Director of FUND+, a fund that invests in innovative Belgian Life Sciences companies, Between August 2006 and June 2014, Mr. Buyse served as the Chief Financial Officer and board member of ThromboGenics NV, a leading biotech company that is listed on NYSE Euronext Brussels. Before joining ThromboGenics, he was the Chief Financial Officer of the Belgian biotech company CropDesign, where he coordinated the acquisition by BASF in July 2006. Prior to joining CropDesign he was financial manager of WorldCom/MCI Belux, a European subsidiary of one of the world’s largest telecommunication companies and he was also the Chief Financial Officer and interim Chief Executive Officer of Keyware Technologies. Mr. Buyse holds a master degree in applied economic sciences from the University of Antwerp and an MBA from Vlerick School of Management in Gent. He currently serves, in his own name or as permanent representative of a management company, as member of the board of directors of the following publicly and privately held companies: Bone Therapeutics SA, Iteos SA, Bioxodes SA, Bio Incubator NV, Immo David NV, Pinnacle Investments SA, CreaBuild NV, Sofia BVBA, Pienter-Jan BVBA, Life Sciences Research Partners VZW, Inventiva SA, The Francqui Foundation and Keyware Technologies NV.

Rudy Dekeyser has served as a member of our board of directors since 2007. Since 2012 Rudy is managing partner of the LSP Health Economics Fund, a private equity fund investing in late stage European and North American health care companies. Prior to joining LSP, Rudy has been managing director of VIB (Flanders Institute for Biotechnology), where he was also responsible for the intellectual property portfolio, business development and new venture activities. He obtained a Ph.D. in molecular biology at the University Ghent. He holds non-executive director positions in Curetis AG, Sequana Medical AG and Remynd NV, and held non-executive director positions in Devgen NV, CropDesign NV, Ablynx NV, Actogenix NV, Pronota NV, Flandersbio VZW, Bioincubator Leuven NV and Multiplicom NV. He is a co-founder of ASTP (the European associations of technology transfer managers) and Chairman of EMBLEM (EMBL’s business arm). Rudy has been advisor to several seed and venture capital funds and to multiple regional and international committees on innovation.

Debasish Roychowdhury has served as a member of our board of directors since 2015. Debasish is a medical oncologist with over 15 years of comprehensive pharmaceutical industry experience and 14 years of patient care and academic research. In the pharmaceutical industry, Debasish held multiple positions of growing responsibility respectively at Eli Lilly, GSK and Sanofi, with direct therapeutic area experience mostly in oncology and hematology. Based in Boston, Massachusetts, Debasish is now using his extensive experience and global network to advise companies, organizations, and institutions in the biomedical field.

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Hanspeter Spek has served as a member of our board of directors since 2014. He started his career at Pfizer where, over more than 10 years and after a thorough comprehensive training in commercial general management, he held positions of increasing responsibility. Hanspeter then joined Sanofi as Marketing Director and rose through the organization to become the Executive Vice President International in 2000. When Sanofi and Aventis merged in 2004, he took on the responsibility of Executive Vice President Operations. In 2009, he was nominated President Global Operations. Hanspeter retired from Sanofi in mid-2013. He has since joined Advent International, Boston, as an Operating Partner for Healthcare and serves as Board Member of Genpact, New York.

Chris De Jonghe served as a member of our board of directors from 2013 until May 5, 2017, the effective date of her resignation. She is Head of Life Sciences & Care at PMV (ParticipatieMaatschappij Vlaanderen). She was first Licensing manager then Business development manager at VIB (Flanders’ Institute for Biotechnology), before joining PMV initially as Senior investment manager in January 2013. Since August 2013 she joined the Group Management Committee, responsible for daily management at PMV. She obtained a PhD in Biochemistry and a Bachelor degree in Laws at the University of Antwerp. She is member of the board of directors of Agrosavfe, Confo Therapeutics, Fast Forward Pharmaceuticals, MyCartis, ViroVet, Biotech Fund Flanders, LSP V, Vesalius Biocapital I & II and Flanders’Bio. She is a member of Flanders’Bio and IFB network.

The Executive Management Team

The Executive Management Team consists of the “Chief Executive Officer” (CEO, who is the chairman of the Executive Management team), the “Chief Financial Officer” (CFO), the “Chief Operating Officer”, the “Chief Legal Officer”, the “Vice President Business Development & IP”, the “Vice President Clinical Development and Medical Affairs”, the “Vice President Operations”, the “Vice President Research & Development”.

The Executive Management Team discusses and consults with the Board of Directors and advises the Board of Directors on our day-to-day management in accordance with our values, strategy, general policy and budget, as determined by the Board of Directors.

Each member of the Executive Management Team has been made individually responsible for certain aspects of our day-to-day management and our business (in the case of the CEO, by way of delegation by the Board of Directors; in the case of the other member of the Executive Management Team, by way of delegation by the CEO). The further tasks for which the Executive Management Team is responsible are described in greater detail in the terms of reference of the Executive Management Team as set out in our corporate governance charter.

The members of the Executive Management Team are appointed and may be dismissed by the Board of Directors at any time. The Board of Directors appoints them on the basis of the recommendations of the Nomination and Remuneration Committee, which shall also assist the Board of Directors on the remuneration policy of the members of the Executive Management Team, and their individual remunerations. The remuneration, duration and conditions of dismissal of Executive Management Team members will be governed by the agreement entered into between the Company and each member of the Executive Management Team in respect of their function within the Company.

In accordance with Schedule C, Section F, subsection 7 of the Corporate Governance Code, all agreements with members of the Executive Management Team entered into on or after July 1, 2009 must refer to the criteria to be taken into account when determining variable remuneration and will contain specific provisions relating to early termination. In principle, the Executive Management Team meets every month. Additional meetings may be convened at any time by the Chairman of the Executive Management Team or at the request of two of its members. The Executive Management Team will constitute a quorum when all members have been invited and the majority of the members are present or represented at the meeting. Absent members may grant a power of attorney to another member of the Executive Management Team. Members may attend the meeting physically or by telephone or video conference. The absent members must be notified of the discussions in their absence by the Chairman (or the Company Secretary, if the Executive Management Team has appointed a Company Secretary from among its members).

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The members of the Executive Management Team will provide the Board of Directors with information in a timely manner, if possible in writing, on all facts and developments concerning the Company which the Board of Directors may need in order to function as required and to properly carry out its duties. The CEO (or, in the event that the CEO is not able to attend the Board of Directors’ meeting, the CFO or, in the event that the CFO is not able to attend the Board of Directors’ meeting, another representative of the Executive Management Team) will report at every ordinary meeting of the Board of Directors on the material deliberations of the previous meeting(s) of the Executive Management Team.

The current members of the Executive Management Team are listed in the table below.

Name	Function	Age
LSS Consulting SPRL, represented by Christian Homsy	Chief Executive Officer	59
PaJe SPRL, represented by Patrick Jeanmart	Chief Financial Officer	45
KNCL SPRL, represented by Jean-Pierre Latere	Chief Operating Officer	42
NandaDevi SPRL, represented by Philippe Dechamps	Chief Legal Officer	47
Georges Rawadi [1]	Vice President Business Development	50
MC Consult SPRL, represented by Philippe Nobels	Global Head of Human Resources	51
ImXense SPRL, represented by Frederic Lehmann	Vice President Immuno-oncology	53
David Gilham	Vice President Research & Development	52

[1] Georges Rawadi resigned with an effective date of March 23, 2018.

The following paragraphs contain brief biographies of each of the members of the Executive Management Team or in case of legal entities being a member of the Executive Management Team or key manager, their permanent representatives.

Christian Homsy (representative of LSS Consulting SPRL), CEO. Reference is made to “—Board of Directors” above.

Patrick Jeanmart (representative of PaJe SPRL), has served as our Chief Financial Officer since September 2007. Prior to joining the Company, Mr. Jeanmart worked for IBA Group (Ion Beam Applications, Belgium) for six years where he held a number of senior financial management positions within the corporate organization and several IBA subsidiaries located in Belgium, Italy, UK and the U.S. Between January 2004 and 2007, he acted as Vice President of Finance of IBA Molecular. He also holds the position of Chief Financial Officer at Medpole SA and at Biological Manufacturing Services SA. Mr. Jeanmart obtained a Master in Economics from the University of Namur, Belgium.

Jean-Pierre Latere (representative of KNCL SPRL), has previously acted as Vice President of Regenerative Medicine and Medical Devices franchise. Since January 2017 he serves as Chief Operating Officer in charge of program management, manufacturing, quality, clinical operations and regulatory affairs. He leads the effort to further strengthen the organization as Celyad grows as a leader in immuno-oncology. He started his career as a Research Associate at the Michigan State University in the US. Following that assignment, he moved to the Johnson & Johnson group where he held various positions, from Scientist to Senior Scientist. He then joined the Company in 2008 as Project Manager Delivery System and left the company in 2012 in the position of Senior Director Business Development. Prior to joining the Company, Mr. Latere served as Beauty Care and Healthcare Market Global Leader at Dow Corning. Mr. Latere holds a PhD in Chemistry from the University of Liège, Belgium.

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Philippe Dechamps (representative of NandaDevi SPRL), has served as Chief Legal Officer since September 2016. Mr. Dechamps started his legal career as an associate in Brussels with the law firm Linklaters De Bandt from 1994 to 1998. He left private practice in 1998 and until 2003, he served as an in-house counsel at Solvay Group, the Belgian pharmaceutical and chemical company, to assist the company in its turnaround through several M&A operations in Europe, India and Far-East Asia. In 2003, he took over the position of Legal Director at Guidant, the U.S. company formerly active in the medical devices business before its acquisition by Boston Scientific and Abbott Laboratories in 2005. Within Abbott, Mr. Dechamps took over responsibility for the legal affairs of Abbott Vascular International outside of the United States. In 2008, Mr. Dechamps joined Delhaize Group taking responsibility for the legal and government affairs in Europe and Asia, before becoming Group General Counsel and Secretary to the Board of Directors in 2015. In this position, he piloted the legal strategy to merge Delhaize Group with Royal Ahold in July 2016. Mr. Dechamps earned law degrees from the Université Catholique de Louvain (UCL) and Vrije Universiteit Brussel (VUB), and a Masters of Law (LL.M) from Harvard University.

Georges Rawadi, has served as Vice President Business Development and Intellectual Property since March 2016 and prior to that he has service as Vice President Business Development since June 2014. Prior to joining our team, Dr. Rawadi served as Vice President Business Development with Cellectis. He previously held business development management positions at Galapagos, ProStrakan France and Sanofi-Aventis France, and conducted consultancy assignments in Business Development and Alliance Management. His work included all aspects and stages of business development, driving several projects from target identification and negotiation to closing deals. He holds a Ph.D. in Microbiology from the Pierre et Marie Curie University (France), and a Masters in Management and Strategy in the Health Industry from the ESSEC Business School. Georges has left the company on March 23, 2018.

Philippe Nobels (representative of MC Consult Sprl) has served as Global Head of Human Resources since October 2016. He started his career at Price Waterhouse (now PwC) as auditor in 1989. He also went in rotational assignment in Congo during 2 years on consulting missions for the World Bank. In 1995, he joined Fourcroy as plant controller. Then, he joined Dow Corning in 1997 where he held different positions in Finance and Human Resources. He led the human resources operations in Europe, became the human resources manager for Dow Corning in Belgium, and Human Resources Business Partner for the sales and marketing functions globally. As a member of the sales and marketing Leadership teams, he contributed to the company’s major transformation initiatives to increase organizational effectiveness, employees’ engagement & performance as well as Business results. Philippe hold a master degree in Economics from the University of Namur.

Frédéric Lehmann (representative of ImXense SPRL), has served as the Vice President Clinical Development & Medical Affairs since July 2016 and prior to that he has served as the Vice President Immuno-Oncology Since September 2015. Dr. Lehmann is a physician by training, specialized in hematology and oncology. Dr. Lehmann has extensive experience in oncology drug development spanning early to late phase, including clinical trial design, translational research, regulatory interactions, and clinical risk management. He started his academic career at the Ludwig Institute for Cancer Research in Brussels, followed by a position at the Institute Jules Bordet. He then moved to the European Organization for Research and Treatment of Cancer (EORTC) as Medical Advisor. Dr. Lehmann began his corporate career at GlaxoSmithKline, where he led the early worldwide clinical development program for our cancer vaccines and went on to lead the research and development incubator for cancer immunotherapeutics.

David Gilham, has served as Vice President Research and Development since September 2016. Prior to joining our team, Mr. Gilham was a Reader and Group Leader within the Manchester Cancer Research Centre at the University of Manchester, UK leading a research group of 15 scientists in the area of cellular immunotherapy. Mr. Gilham obtained his Ph.D. from the University of Dundee in 1998 in Molecular Pharmacology under the supervision of Professor Roland Wolf, OBE. After a short post-doctoral position at the University of Bristol, Mr. Gilham moved to the University of Manchester with Professor Robert Hawkins to establish translational research activity in the field of engineered cellular therapy. The group has carried out several clinical trials of CAR-T cells of which Mr. Gilham has been Lead scientific advisor and led several European framework programs bringing together researchers from all over Europe (ATTACK and ATTRACT programs). In 2010, along with Professor Hawkins and other colleagues, Mr. Gilham co-founded Cellular Therapeutics, a cell production company based in Manchester. He has published more than 60 peer reviewed articles and further book chapters and reviews. He has also sat on many review boards and charity grant committees and consulted for several biotechnology companies and pharmaceutical companies concerning immune cell therapies.

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Family Relationships

There are no family relationships among any of the members of our executive committee or directors.

B. Compensation

The aggregate compensation paid and benefits in kind granted by us to the current members of our executive management team and directors, including share-based compensation, for the year ended December 31, 2017, was €3.0 million. For the year ended December 31, 2017, approximately €14,000 of the amounts set aside or accrued to provide pension, retirement or similar benefits to our employees was attributable to members of our executive management team.

For a discussion of our employment arrangements with members of our executive management team and consulting arrangement with our directors, see the section of this Annual Report titled “Item 7.B.—Related Party Transactions—Agreements with Our Directors and Members of Our Executive Management Team.” For more information regarding warrant grants, see the section of this report titled “—Warrant Plans.”

Except the arrangements described in the section of this Annual Report titled “Certain relationships and related party transactions-Agreements with Our Directors and Members of our Executive Management Team,” there are no arrangements or understanding between us and any of our other executive officers or directors providing for benefits upon termination of their employment, other than as required by applicable law.

There is no agreements or contracts between the directors and the members of the Executive Management Team and the company or any of its subsidiaries providing for benefits for the directors upon termination of employment or services agreements in place that provide for benefits upon termination of employment.

Compensation of our Board of Directors

The remuneration of our directors and the grant of warrants to our directors are submitted by our board of directors (following advice from the Nomination and Remuneration Committee) for approval to the general shareholders’ meeting and are only implemented after such approval. The aggregate compensation paid and benefits in kind granted by us to our current directors, including share-based compensation, for the year ended December 31, 2017, was €387,250.

The procedure for establishing the remuneration policy and setting remuneration for members of our board of directors is determined by our board of directors on the basis of proposals from the Nomination and Remuneration Committee, taking into account relevant benchmarks from the biotechnology industry.

On November 5, 2015, the Extraordinary Shareholders Meeting approved a remuneration and compensation scheme for the chairman, the independent directors and non-executive directors. This scheme was applicable as from November 2015. The remuneration package was made up of a fixed annual fee of €40,000 for the chairman and €30,000 for the other independent directors. The fee was supplemented with a fixed annual fee of €10,000 for membership of each committee of the Board of Directors, to be increased by €5,000 in case the relevant director chairs the Nomination and Remuneration Committee or the Audit Committee.

On May 9, 2016, the Extraordinary Shareholders meeting approved a new remuneration and compensation scheme for the non-executive directors. The remuneration package is made up of fixed annual fee of €10,000 for non-executive directors, supplemented by a fixed annual fee of €10,000 for the Chairman. The annual fee is supplemented by a €5,000 fee for any non-executive directors covering the participation to the four ordinary board of directors’ meetings. Any participation to an extraordinary board of directors’ meetings gives right to a supplemental fee of €5,000. This remuneration package is also supplemented with a fixed annual fee of €15,000 for membership of each committee of the Board of Directors, to be increased by €5,000 in case the relevant director chairs the Nomination and Remuneration Committee or the Audit Committee. Finally, an extraordinary fee of €3,000 is granted to non-executive directors in case of appointment of such directors, on request of the CEO and with prior approval of the Board of directors, for specific missions requiring the presence of the concerned director. This scheme is applicable directly after the General Meeting of Shareholders of May 9, 2016. The remuneration granted to directors during year 2016 is the consequence of both applications of (i) remuneration and compensation scheme adopted in November 2015 and (ii) the new plan adopted in May 2016. Apart from the above remuneration for non-executive directors, all directors are entitled to company warrants and a reimbursement of out-of-pocket expenses actually incurred as a result of participation in meetings of the Board of Directors.

On the advice of the Nomination and Remuneration Committee, the board of directors may propose to the shareholders’ meeting to grant options or warrants in order to attract or retain non-executive directors with the most relevant skills, knowledge and expertise. Insofar as this grant of options or warrants comprises variable remuneration under Article 554 of the Belgian Company Code, this remuneration shall be submitted for approval to the next annual general shareholders meeting.

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The directors’ mandate may be terminated at any time without any form of compensation.

No loans or guarantees were given to members of the board of directors during the year ended December 31, 2017.

There are no employment or service agreements that provide for notice periods or indemnities between us and members of the board of directors who are not a member of the executive management team. In respect of the members of the board of directors who are members of the executive management team, reference is made to the section “—Compensation of Members of the Executive Management Team” below.

The following table sets forth the fees received by our non-executive directors for the performance of their mandate as a board member, during the year ended December 31, 2017:

Name	Fees  Earned (€)
Michel Lussier		86,000
Serge Goblet		36,000
Chris Buyse		71,000
Debasish Roychowdhury		62,250
Hanspeter Spek		51,000
Rudy Dekeyser		81,000
Tolefi SA, represented by its permanent representative, Serge Goblet		—
Chris De Jonghe		—
Total		387,250

LSS Consulting SPRL, represented by Christian Homsy does not receive any specific or additional remuneration for his service on our board of directors, as this is included in his total remuneration package in his capacity as Chief Executive Officer. For more information regarding LSS Consulting SPRL’s compensation, see the section of this Annual Report titled “—Compensation of Members of the Executive Management Team.”

The table below provides an overview as of December 31, 2017 of the warrants held by the non-executive directors.

	Warrant Awards
Name	Number of Ordinary Shares Underlying Warrants		Warrant Exercise Price in euros		Warrant Expiration Date
Michel Lussier		10,000		34.65	November 5, 2020
		10,000		31.34	June 29, 2022
Chris Buyse		10,000		34.65	November 5, 2020
		10,000		31.34	June 29, 2022
Rudy Dekeyser		10,000		34.65	November 5, 2020
		10,000		31.34	June 29, 2022
Hanspeter Spek		5,000		35.79	May 5, 2019
		10,000		34.65	November 5, 2020
		10,000		31.34	June 29, 2022
Debasish Roychowdhury		10,000		34.65	November 5, 2020
		10,000		31.34	June 29, 2022
Serge Goblet		10,000		31.34	June 29, 2022
Total		115,000

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Compensation of Members of the Executive Management Team

The compensation of the members of our executive management team is determined by our board of directors based on the recommendations by our Nomination and Remuneration Committee.

The remuneration of the members of our executive management team consists of different components:

• Fixed remuneration: a basic fixed fee designed to fit responsibilities, relevant experience and competences, in line with market rates for equivalent positions. The amount of fixed remuneration is evaluated and determined by the board of directors every year.

• Short term variable remuneration: members of the executive management team may be entitled to a yearly bonus, given the level of achievement of the criteria set out in the corporate objective for that year.

• Incentive plan: warrants have been granted and may be granted in the future, to the members of the executive management team. For a description of the main characteristics of our warrant plans, see the section of this Annual report titled “—Warrant Plans.”

• Other: Members of the executive management team with an employee contract with us entitle them to our pension, company car and payments for invalidity and healthcare cover and other fringe benefits of non-material value.

No loans, quasi-loans or other guarantees were granted to members of our executive management team during the year ended on December 31, 2017.

The following table sets forth information regarding compensation earned by LSS Consulting SPRL, represented by Christian Homsy, our Chief Executive Officer, during the year ended December 31, 2017.

	Compensation (in kEuros)
Fixed fee		426
Variable fee		51
Total		477

In 2017, Mr. Homsy was granted 40,000 warrants and exercised 112,000 warrants issued in May 2013.

The following table sets forth information concerning the aggregate compensation earned during the year ended December 31, 2017 by the other members of our executive management team, including the CEO.

	Compensation (in kEuros)
Fixed remuneration (gross)		426
Variable remuneration (short term)		69
Fixed fee		1,725
Variable fee		225
Pension/Life		14
Other benefits		201
Total		2,660

The table below provides an overview as of December 31, 2017 of the warrants held by the members of our executive management team.

	Warrant Awards
Name	Number of Ordinary Shares Underlying Warrants		Warrant Exercise Price in euros		Warrant Expiration Date
Christian Homsy [1]		40,000		34.65		November 5, 2020
		40,000		32.36		June 29, 2022

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	Warrant Awards
Name	Number of Ordinary Shares Underlying Warrants		Warrant Exercise Price in euros		Warrant Expiration Date
Patrick Jeanmart [2]		20,000		34.65		November 5, 2020
		20,000		32.36		June 29, 2022
George Rawadi		7,500		39.22		May 5, 2024
		10,000		34.65		November 5, 2025
		20,000		31.34		June 29, 2022
Frédéric Lehmann [3]		20,000		34.65		November 5, 2020
		20,000		32.36		June 29, 2022
Jean-Pierre Latere [4]		20,000		34.65		November 5, 2020
		3,000		32.36		June 29, 2022
Philippe Dechamps[5]		20,000		15.90		December 31, 2021
		20,000		32.36		June 29, 2022
David Gilham		10,000		15.90		November 5, 2025
		6,000		31.34		June 29, 2022

[1] Christian Homsy holds these warrants in person, whereby he is the representative of LSS Consulting SPRL, his management company, which has been appointed as Chief Executive Officer.

[2] Patrick Jeanmart holds these warrants in person, whereby he is the representative of PaJe SPRL, his management company, which has been appointed as Chief Financial Officer.

[3] Frederic Lehmann holds these warrants in person, whereby he is the representative of ImXense SPRL, his management company, which has been appointed as Vice President Clinical Development & Medical Affairs.

[4] Jean-Pierre Latere holds these warrants in person, whereby he is the representative of KNCL SPRL, his management company, which has been appointed as Chief Operating Officer.

[5] Philippe Dechamps holds these warrants in person, whereby he is the representative of NandaDevi SPRL, his management company, which has been appointed as Chief Legal Officer.

Limitations on Liability and Indemnification Matters

Under Belgian law, the directors of a company may be liable for damages to the company in case of improper performance of their duties. Our directors may be liable to our company and to third parties for infringement of our articles of association or Belgian company law. Under certain circumstances, directors may be criminally liable.

We maintain liability insurance for our directors and officers, including insurance against liability under the Securities Act.

Certain of our non-executive directors may, through their relationships with their employers or partnerships, be insured and/or indemnified against certain liabilities in their capacity as members of our board of directors.

In the underwriting agreement we entered into in connection with our June 2015 global offering, the underwriters agreed to indemnify, under certain conditions, us, the members of our board of directors and persons who control our company within the meaning of the Securities Act against certain liabilities, but only to the extent that such liabilities are caused by information relating to the underwriters furnished to us in writing expressly for use in our registration statement and certain other disclosure documents.

Warrant Plans

We have created various incentive plans under which warrants were granted to our employees, consultants or directors. This section provides an overview of the outstanding warrants as of December 31, 2017.

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Upon proposal of the board of directors, the extraordinary shareholders’ meeting approved the issuance of, in the aggregate, warrants giving right to subscribe to shares as follows:

• on September 26, 2008, (warrants giving right to 90,000 shares). Of these 90,000 warrants, 50,000 were offered and accepted. None are outstanding as of the date hereof;

• on May 5, 2010 (warrants giving right to 50,000 shares). Of these 50,000 warrants (15,000 warrants A, 5,000 warrants B and 30,000 warrants C), 12,710 warrants A were accepted, but none are outstanding as of the date hereof; 5,000 warrants B were accepted and none are outstanding as of the date hereof; and 21,700 warrants C were accepted and none are outstanding as of the date hereof;

• on October 29, 2010 (warrants giving right to 79,500 shares). Out of the 79,500 warrants offered, 61,050 warrants were accepted by the beneficiaries and 766 warrants are outstanding as of the date hereof;

• on January 31, 2013 (warrants giving right to 140,000 shares). Out of the 140,000 warrants, 120,000 were granted to certain members of the executive management team and a pool of 20,000 warrants was created. The warrants attributed to certain members of the executive management team were fully vested at December 31, 2013 and were all exercised in January 2014 and therefore converted into ordinary shares. The remaining 20,000 warrants were not granted and therefore lapsed;

• on May 6, 2013 (11 investor warrants are attached to each Class B Share subscribed in the capital increase in cash which was decided on the same date, with each investor warrant giving the right to subscribe to one ordinary share—as a result, these warrants give rights to a maximum of 2,433,618 ordinary shares, subject to the warrants being offered and accepted by the beneficiaries. On May 31, 2013, warrants giving rights to 2,409,176 ordinary shares were issued and accepted, all of which have been exercised as of the date hereof;

• on May 6, 2013 (warrants giving right to 266,241 ordinary shares). Out of the 266,241 warrants offered, 253,150 warrants were accepted by the beneficiaries and 7,000 warrants are outstanding as of the date hereof;

• on June 11, 2013 (overallotment warrant giving right to a maximum number of shares equal to 15% of the new shares issued in the context of the offering, i.e., 207,225 shares). The overallotment warrant was exercised on July 17, 2013;

• on May 5, 2014 (warrants giving right to 100,000 shares), a plan of 100,000 warrants was approved. Warrants were offered to new employees, non-employees and directors in several tranches. Out of the warrants offered, 94,400 warrants were accepted by the beneficiaries and 60,697 warrants are outstanding as of the date hereof;

• on November 5, 2015 (warrants giving right to 466,000 shares), a plan of 466,000 warrants was approved. Warrants were offered to new employees, non-employees and directors in several tranches. Out of the warrants offered, 353,550 warrants were accepted by the beneficiaries and 253,065 warrants are outstanding as of the date hereof;

• on December 12, 2016 (warrants giving right to 100,000 shares), the Board of Directors issued a new plan of 100,000 warrants. An equivalent number of warrants was cancelled from the remaining pool of warrants of the plan approved on November 5, 2015. Warrants were offered to new employees and non-employees in several tranches. Out of the warrants offered, 45,000 warrants were accepted by the beneficiaries and 45,000 warrants are outstanding as of the date hereof.

• on September 27, 2017, (warrants giving rights to 520,000 shares), a plan of 520,000 warrants was approved. Warrants were offered to new employees, non-employees and directors in several tranches. Out of the warrants offered, 308,050 warrants were accepted by the beneficiaries and 304,384 warrants are outstanding as of the date hereof.

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On December 31, 2017, there were 670,912 warrants outstanding which represented approximately 6.37% of the total number of all our then-issued and outstanding voting financial instruments.

Issue Date	Term	Number of Warrants Issued [1]		Number of Warrants Granted in number of shares [2]		Exercise Price (in Euros)		Number of Warrants No Longer Exercisable		Warrants exercised		Number of Warrants Outstanding		Exercise periods vested warrants [3]
September 26, 2008	From December 26, 2008 to December 31, 2014		90,000		50,000		22.44		32,501		17,499		—	January 1, 2012 – December 31, 2014
May 5, 2010	From May 5, 2010 to the day of the contribution in kind of Company’s debt under the Loan C Agreement		15,000		12,710		22.44		410		12,300		—	The day of the contribution in kind of Company’s debt under the Loan C Agreement
May 5, 2010	From May 5, 2010 to May 5, 2016		5,000		5,000		35.36		5,000		—		—	May 5, 2013 – May 5, 2016
May 5, 2010	From May 5, 2010 to December 31, 2016		30,000		21,700		22.44		19,035		2,665		—	January 1, 2012 – December 31, 2016
October 29, 2010	From October 29, 2010 to October 28, 2020		79,500		61,050		35.36		53,418		6,866		766	January 1, 2014 – October 28, 2020
January 31, 2013	From January 31, 2013 to January 31, 2023		140,000		120,000		4.52		—		120,000		—	From January 1, 2014 to January 31, 2023
May 6, 2013	From May 6, 2013 to June 4, 2013		2,409,176		2,409,176		0.01		—		2,409,176		—	From May 6, 2013 to June 4, 2013
May 6, 2013	From May 6, 2013 to May 6, 2023		266,241		253,150		2.64		21,050		225,100		7,000	From January 1, 2017 to May 6, 2023 May 2018 for non-employees and to May 6, 2023 for employees
May 5, 2014	From May 16, 2014 to May 15, 2024		100,000		94,400		From 33.49 to 45.05		33,703		—		60,697	From January 1, 2018 to May 15, 2019 for non- employees and to May 15, 2024 for employees
November 5, 2015	From November 5, 2015 to November 4, 2025		466,000		353,550		From 15.90 to 34.65		100,485		—		253,065	From January 1, 2019 to November 4, 2020 for non-employees and to November 4, 2025 for employees
December 12, 2016	From December 9, 2016 to December 31, 2021		100,000		45,000		From 17.60 to 36.81		—		—		45,000	From January 1, 2020 to December 31, 2021
May 5, 2017	From July 20, 2017 to July 31, 2022		520,000		308,050		From 31.34 to 48.89		3,666		—		304,384	From January 1, 2021 to July 31, 2022

[1] Issued under the condition precedent of the Warrant effectively being offered and accepted.

[2] The numbers reflect the number of shares for which the holder of Warrants can subscribe upon exercise of all relevant Warrants.

[3] The Warrants (i) can only be exercised by the holder of Warrants if they have effectively vested, and (ii) can only be exercised during the exercise periods as set out in the respective issue and exercise conditions.

Apart from the warrants and warrant plans, we do not currently have other stock options, options to purchase securities, convertible securities or other rights to subscribe for or purchase securities outstanding.

C. Board Practices

Our board of directors can set up specialized committees to analyze specific issues and advise the board of directors on those issues.

The committees are advisory bodies only and the decision-making remains within the collegial responsibility of the board of directors. The board of directors determines the terms of service of each committee with respect to the organization, procedures, policies and activities of the committee.

Our board of directors has set up and appointed an Audit Committee and a Nomination and Remuneration Committee. The composition and function of all of our committees will comply with all applicable requirements of the Belgian Company Code, the Belgian Corporate Governance Code, the Exchange Act, the applicable rules of the NASDAQ Stock Market and SEC rules and regulations.

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Audit Committee

Our board of directors has established an audit committee. Our Audit Committee consists of three members: Chris Buyse, Rudy Dekeyser and Debasish Roychowdhury.

Our board of directors has determined that all members of the Audit Committee are independent under Rule 10A-3 of the Exchange Act and the applicable rules of the NASDAQ Stock Market and that Chris Buyse qualifies as an “Audit Committee financial expert” as defined under the Exchange Act.

The role of our Audit Committee is to ensure the effectiveness of our internal control and risk management systems, the internal audit (if any) and its effectiveness and the statutory audit of the annual and consolidated accounts, and to review and monitor the independence of the external auditor, in particular regarding the provision of additional services to the company. The Audit Committee reports regularly to our board of directors on the exercise of its functions. It informs our board of directors about all areas in which action or improvement is necessary in its opinion and produces recommendations concerning the necessary steps that need to be taken. The audit review and the reporting on that review cover us and our subsidiaries as a whole. The members of the Audit Committee are entitled to receive all information which they need for the performance of their function, from our board of directors, executive management team and employees. Every member of the Audit Committee shall exercise this right in consultation with the chairman of the Audit Committee.

Our Audit Committee’s duties and responsibilities to carry out its purposes include, among others: our financial reporting, internal controls and risk management, and our internal and external audit process. These tasks are further described in the Audit Committee charter as set out in our corporate governance charter and in Article 526bis of the Belgian Company Code.

The Audit Committee holds a minimum of four meetings a year.

Nomination and Remuneration Committee

Our Nomination and Remuneration Committee consists of four members: Michel Lussier (Chairman), Chris Buyse, Rudy Dekeyser and Hanspeter Spek.

Our board of directors has determined that all members of the Nomination and Remuneration Committee are independent under the applicable rules of the NASDAQ Stock Market.

The role of the Nomination and Remuneration Committee is to assist the board of directors in all matters:

• relating to the selection and recommendation of qualified candidates for membership of the board of directors;

• relating to the nomination of the CEO;

• relating to the nomination of the members of the executive management team, other than the CEO, upon proposal by the CEO;

• relating to the remuneration of independent directors;

• relating to the remuneration of the CEO;

• relating to the remuneration of the members of the executive management team, other than the CEO, upon proposal by the CEO; and

• on which the board of directors or the chairman of the board of directors requests the Nomination and Remuneration Committee’s advice.

Additionally, with regard to matters relating to remuneration, except for those areas that are reserved by law to the board of directors, the nomination and remuneration committee will at least have the following tasks:

• preparing the remuneration report (which is to be included in the board of director’s corporate governance statement); and

• explaining its remuneration report at the annual shareholders’ meeting.

The committee’s tasks are further described in the Nomination and Remuneration Committee charter as set out in our corporate governance charter and Article 526quater of the Belgian Company Code.

For information on the dates of expiration for our board of directors’ terms in office, see the section of this Annual Report titled “Item 6.A.—Directors and Senior Management.” For information with our contracts with our board of directors, see the section of this Annual Report titled “Item 7.B.—Related Party Transactions—Agreements with Our Directors and Members of Our Executive Management Team.”

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D. Employees

As of December 31, 2017, we employed 70 full-time employees, seven part-time employees and 10 senior managers under management services agreements. We have never had a work stoppage, and none of our employees is represented by a labor organization or under any collective-bargaining arrangements. We consider our employee relations to be good.

A split of our employees and consultants by main department and geography for the years ended December 31, 2017, 2016 and 2015 was as follows:

	At December 31,
	2017		2016		2015
By function:
Clinical & Regulatory, IP, Marketing		16		15		11
Research & Development		29		29		19
Manufacturing /Quality		26		31		42
General Administration		16		13		16
Total		87		88		88
By Geography:
Belgium		83		83		85
United States		4		5		3
Total		87		88		88

E. Share Ownership

For information regarding the share ownership of our directors and executive officers and arrangements for involving our employees in our capital, see “Item 6.B—Compensation” and “Item 7.A—Major Shareholders.”

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

The committee’s tasks are further described in the Nomination and Remuneration Committee charter as set out in our corporate governance charter and Article 526quater of the Belgian Company Code.

A. MAJOR SHAREHOLDERS

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 30, 2018 for:

• each person who is known by us to own beneficially more than 5% of our outstanding ordinary shares;

• each member of our board of directors;

• each member of our executive management team; and

• all members of our board of directors and executive management team as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares that can be acquired within 60 days of March 30, 2018. The percentage ownership information shown in the table is based upon 9,872,344 ordinary shares outstanding as of March 30, 2018.

Except as otherwise indicated, all of the shares reflected in the table are ordinary shares and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.

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In computing the number of ordinary shares beneficially owned by a person and the percentage ownership of that person, we deemed outstanding ordinary shares subject to warrants held by that person that are immediately exercisable. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. The information in the table below is based on information known to us or ascertained by us from public filings made by the shareholders. Except as otherwise indicated in the table below, addresses of the directors, members of the executive management team and named beneficial owners are in care of Rue Edouard Belin 2, 1435 Mont-Saint-Guibert, Belgium.

NAME OF BENEFICIAL OWNER	SHARES BENEFICIALLY OWNED
5% Shareholders	Number	Percentage
TOLEFI SA, represented by Serge Goblet	2,295,701		23.25	%
Directors and Members of the Executive Management Team
Michel Lussier [1]	153,000		1.55	%
Serge Goblet	63,303		0.64	%
Hanspeter Speck	—		—
Rudy Dekeyser	—		—
Chris Buyse	—		—
Debasish Roychowdhury	—		—
Christian Homsy[2]	125,000		1.27	%
Patrick Jeanmart	62,000		0.63	%
Philippe Dechamps	—		—
Philippe Nobels	—		—
David Gilham	—		—
Frederic Lehman	—		—
Jean-Pierre Latere	—		—
All directors and members of the executive management team as a group.	2,699,004		27.34	%

[1] Of which 145,000 are ordinary shares and 8,000 are ADSs.

[2] Of which 122,000 are ordinary shares and 3,000 are ADSs.

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Each of our shareholders is entitled to one vote per ordinary share. None of the holders of our shares have different voting rights from other holders of shares. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

As of February 28, 2018, assuming that all of our ordinary shares represented by ADSs are held by residents of the United States, we estimate that approximately 5.11% of our outstanding ordinary shares were held in the United States by one registered holder of record. The actual number of holders is greater than these numbers of record holders, and includes beneficial owners whose ADSs are held in street name by brokers and other nominees. This number of holders of record also does not include holders whose shares may be held in trust by other entities.

Change in Ownership of Major Shareholders

On March 5, 2015, Tolefi SA crossed the 30% ownership threshold downwards following our private placement and capital increase on March 2, 2015.

On August 3, 2016, Medisun International Limited crossed the 5% ownership threshold downwards following its sale of shares.

On February 17, 2017, Tolefi SA crossed the 25% ownership threshold downwards following the capital increase resulting from the exercise of outstanding warrants.

B. Related Party Transactions

Since January 1, 2017, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our outstanding voting securities and their affiliates, which we refer to as our related parties.

As of December 31, 2017, there were no outstanding loans, nor guarantees made by us or our subsidiaries to or for the benefit of any related party.

Transactions with Our Principal Shareholders

We have not engaged into any transactions with our principal shareholders.

Agreements with Our Directors and Members of our Executive Management Team

Employment Arrangements

We have entered into employment agreements with the below members of our executive management team:

Georges Rawadi

On April 2, 2014, we entered into an employment agreement with Mr. Rawadi, our Vice President Business Development, with an effective date as of June 2, 2014. Mr. Rawadi resigned with effective date on March 23, 2018. Pursuant to this agreement, Mr. Rawadi was entitled to an annual base salary, and was also eligible to receive a bonus capped at 50% of his annual compensation, determined in full discretion by the board of directors on the basis of the Mr. Rawadi’s performance and our overall performance. Mr. Rawadi was also eligible to receive warrants. The employment agreement with Mr Rawadi was terminated on March 23, 2018.

David Gilham

On September 12, 2016, we entered into an employment agreement with Mr. David Gilham, our Vice President research and development, with an effective date as of September 12, 2016. Pursuant to this agreement, Mr. Gilham is entitled to an annual base salary and is also eligible to receive a bonus capped at 30% of his annual compensation, determined in full discretion by the board of directors on the basis of the Mr. Gilham performance and our overall performance. Mr. Gilham is also eligible to receive warrants.

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Management Services Arrangements

We have entered into management services agreements with the below members of our senior leadership team.

Christian Homsy

On January 23, 2014, we contracted with LSS Consulting SPRL, permanently represented by Mr. Homsy. Under this agreement, LSS Consulting SPRL is entitled to an annual base fee. LSS Consulting SPRL is also eligible to receive warrants and a bonus capped at 40% of his annual base fee, determined in full discretion by the board of directors on the basis of the LSS Consulting SPRL’s performance and our overall performance.

Patrick Jeanmart

On January 7, 2008, we entered into a management services agreement with PaJe SPRL, represented by Patrick Jeanmart, our Chief Financial Officer. Under this agreement, PaJe SPRL is entitled to an annual base fee. PaJe SPRL is also eligible for a bonus capped at 30% of his annual base fee, determined in full discretion by the board of directors on the basis of PaJe SPRL’s performance and our overall performance.

Jean-Pierre Latere

On December 7, 2015, we entered into a management services agreement with KNCL SPRL, represented by Jean-Pierre Latere, our Chief Operating Officer. Under this agreement, KNCL SPRL is entitled to an annual base fee. KNCL SPRL is also eligible for a bonus capped at 30% of his annual base fee, determined in full discretion by the board of directors on the basis of KNCL SPRL’s performance and our overall performance.

Philippe Dechamps

On May 20, 2016, we entered into a management services agreement with NandaDevi SPRL, represented by Philippe Dechamps, our Chief Legal Officer. Under this agreement, NandaDevi SPRL is entitled to an annual base fee. NandaDevi SPRL is also eligible for a bonus capped at 30% of his annual base fee, determined in full discretion by the board of directors on the basis of NandaDevi SPRL’s performance and our overall performance.

Philippe Nobels

On January 17, 2017, we entered into a management services agreement with MC Consult SPRL, represented by Philippe Nobels, our Global Head of Human Ressources. Under this agreement, MC Consult SPRL is entitled to an annual base fee. NandaDevi SPRL is also eligible for a bonus capped at 30% of his annual base fee, determined in full discretion by the board of directors on the basis of MC Consult SPRL’s performance and our overall performance.

Director and Executive Management Team Compensation

See “Item 6.B.—Compensation” for information regarding compensation of directors and members of our executive management team.

Warrants

Since our inception, we have granted warrants to certain of our directors and members of our executive management team. See “Item 6.B.—Compensation” for information regarding warrants issued to members of our executive management team and directors.

Indemnification Agreements

In connection with our global offering in June 2015, we entered into indemnification agreements with each of our directors and members of our executive management team. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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Transactions with Related Companies

Medisun

Cardio3 BioSciences Asia Ltd was a joint venture created in July 2014 with Medisun International, a financial partner and shareholder of the Group. The joint venture aimed to initiate the clinical development of C-Cure and further commercialize C-Cure in Greater China. Until August 2015, the Group owned 40% of the shares of Cardio3 BioSciences Asia Ltd. The Group had no commitments relating to its joint venture and there are no contingent liabilities relating to the Group’s interest in the joint venture.

Pursuant the terms of the new license agreement executed in August 2015, Celyad SA sold all of its shares on Cardio3 BioSciences Asia to Medisun for €1. Cardio3 BioSciences Asia was deconsolidated from the Group financial statements as of June 30, 2015.

Related Party Transactions Policy

Article 524 of the Belgian Company Code provides for a special procedure that applies to intragroup or related party transactions with affiliates. The procedure applies to decisions or transactions between us and our affiliates that are not one of our subsidiaries. Prior to any such decision or transaction, our board of directors must appoint a special committee consisting of three independent directors, assisted by one or more independent experts. This committee must assess the business advantages and disadvantages of the decision or transaction, quantify its financial consequences and determine whether the decision or transaction causes a disadvantage to us that is manifestly illegitimate in view of our policy. If the committee determines that the decision or transaction is not illegitimate but will prejudice us, it must analyze the advantages and disadvantages of such decision or transaction and set out such considerations as part of its advice. Our board of directors must then make a decision, taking into account the opinion of the committee. Any deviation from the committee’s advice must be justified. Directors who have a conflict of interest are not entitled to participate in the deliberation and vote. The committee’s advice and the decision of the board of directors must be notified to our statutory auditor, who must render a separate opinion. The conclusion of the committee, an excerpt from the minutes of the board of directors and the opinion by the statutory auditor must be included in our annual report. This procedure does not apply to decisions or transactions in the ordinary course of business under customary market conditions and security documents, or to transactions or decisions with a value of less than 1% of our net assets as shown in our consolidated annual accounts.

In addition to this, our corporate governance charter provides for guidelines for transactions between us and our directors or members of the executive management team. According to such guidelines:

• A member of our board of directors or executive management team will in any event be considered to have a conflict of interests if:

• he/she has a personal financial interest in a company with which we intend to enter into a transaction;

• he/she, his/her spouse, registered partner or other life companion, foster child or relative by blood or marriage up to the second degree is a member of the executive management of or board of a company with which we intend to enter into a transaction;

• he/she is a member of the board or executive management of, or holds similar office with, a company with which we intend to enter into a transaction;

• under applicable law, including the rules of any stock market on which our shares may be listed, such conflict of interests exists or is deemed to exist.

Each member of the board of directors or each member of the executive management team must immediately report any potential conflict of interests to the chairman and to the other members of the board of directors or of the executive management team, as the case may be. The members concerned must provide the chairman and the other members of the board of directors or of executive management team, as the case may be, with all information relevant to the conflict, including information relating to the persons with whom he has a family law relationship (his/her spouse, registered partner or other life companion, foster child or relative by blood or marriage up to the second degree) to the extent relevant for the assessment of the existence of a conflict of interests. The chairman of the board of directors or of the executive management team will determine whether a reported (potential) conflict of interests qualifies as a conflict of interests.

If this is the case, a member of the board of directors or of the executive management team, as the case may be, must not participate in the discussions or decision-taking process of the board of directors or of the executive management team, as the case may be, on a subject or transaction in relation to which he has a conflict of interests with us. This transaction, if approved, must be concluded on term customary in the sector concerned and be approved, in the case of a decision by the executive management team, by the board of directors. Without prejudice to the foregoing, each member of the board of directors who is faced, directly or

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indirectly, with a financial interest that conflicts with a decision or transaction within the competence of the board of directors, within the meaning of Article 523, or Article 524ter of the Belgian Company Code, as the case may be, must inform the other members of the board of directors thereof prior to the deliberations. The declaration, as well as the justification, must be included in the minutes of the relevant meeting of the board of directors. The relevant member of the board of directors must inform the statutory auditor of his conflict of interests. With a view to publication in the annual report, the board of directors must set out in its minutes the nature of the decision or transaction and the justification thereof, including the financial consequences of the decision or transaction for us. In the case of a conflict of interests within the executive management team, a copy of the minutes of the executive management team must be submitted to the board of directors at its next meeting. The chairman must procure that all these transactions involving conflicts of interests will be referred to in the annual report, with a declaration that the provisions in our corporate governance charter have been complied with.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

Consolidated Financial Statements

Our consolidated financial statements are appended at the end of this Annual Report, starting at page F-1, and incorporated herein by reference.

Dividend Policy

We have never declared or paid any cash dividends on our ordinary shares. We do not anticipate paying cash dividends on our equity securities in the foreseeable future and intend to retain all available funds and any future earnings for use in the operation and expansion of our business. All of the ordinary shares, including in the form of the ADSs, offered by this report will have the same dividend rights as all of our other outstanding ordinary shares. In general, distributions of dividends proposed by our board of directors require the approval of our shareholders at a meeting of shareholders with a simple majority vote, although our board of directors may declare interim dividends without shareholder approval, subject to the terms and conditions of the Belgian Company Code.

Pursuant to Belgian law, the calculation of amounts available for distribution to shareholders, as dividends or otherwise, must be determined on the basis of our non-consolidated statutory financial accounts prepared under Belgian GAAP, and not on the basis of IFRS consolidated accounts. In addition, under the Belgian Company Code, we may declare or pay dividends only if, following the declaration and issuance of the dividends, the amount of our net assets on the date of the closing of the last financial year according to our statutory annual accounts (i.e., the amount of the assets as shown in the balance sheet, decreased with provisions and liabilities, all as prepared in accordance with Belgian accounting rules), decreased with the non-amortized costs of incorporation and expansion and the non-amortized costs for research and development, does not fall below the amount of the paid-up capital (or, if higher, the called capital), increased with the amount of non-distributable reserves. Finally, prior to distributing dividends, we must allocate at least 5% of our annual net profits (under our non-consolidated statutory accounts prepared in accordance with Belgian accounting rules) to a legal reserve, until the reserve amounts to 10% of our share capital.

For information regarding the Belgian withholding tax applicable to dividends and related U.S. reimbursement procedures, see “Item 10.E.—Taxation—Belgian Tax Consequences.”

Legal Proceedings

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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B. Significant Changes

In March 2018, we dissolved and wound up the affairs of our wholly owned subsidiary OnCyte, LLC, or OnCyte, pursuant to the Delaware Limited Liability Company Act. As a result of the dissolution of OnCyte, all the assets and liabilities of OnCyte, including the contingent consideration payable and our license agreement with Dartmouth College, were fully distributed to and assumed by Celyad SA. Celyad SA will continue to carry out the business and obligations of OnCyte, including under our license agreement with Dartmouth College.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

The ADS have been listed on NASDAQ under the symbol “CYAD” since June 19, 2015. Prior to that date, there was no public trading market for ADSs. Our ordinary shares have been trading on Euronext Brussels and Euronext Paris under the symbol “CYAD” since July 5, 2013. Prior to that date, there was no public trading market for ADSs or our ordinary shares. The following tables set forth for the periods indicated the reported high and low sale prices per ADS in U.S. dollars and per ordinary share on Euronext Brussels in euros.

Euronext Brussels:

Period	High		Low
Annual
2013	€	32.80	€	12.43
2014	€	54.86	€	24.67
2015	€	70.95	€	30.50
2016	€	52.89	€	14.82
2017	€	56.48	€	17.24
Quarterly
First Quarter 2016	€	47.55	€	29.51
Second Quarter 2016	€	52.89	€	21.80
Third Quarter 2016	€	20.58	€	14.82
Fourth Quarter 2016	€	20.00	€	14.82
First Quarter 2017	€	24.80	€	17.24
Second Quarter 2017	€	44.17	€	24.21
Third Quarter 2017	€	48.64	€	26.76
Fourth Quarter 2017	€	56.48	€	31.00
First Quarter 2018	€	39.94	€	28.16
Month Ended
September 2017	€	48.64		37.01
October 2017	€	56.48		47.51
November 2017	€	50.80	€	33.62
December 2017	€	36.48	€	31.00
January 2018	€	39.94	€	34.00
February 2018	€	38.12	€	31.00
March 2018	€	32.90	€	28.16

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Nasdaq:

Period	High		Low
Annual:
2015 (beginning June 19)	$	67.94	$	33.84
2016	$	58.66	$	16.69
2017	$	64.75	$	18.00
Quarterly:
First Quarter 2016	$	54.58	$	33.46
Second Quarter 2016	$	58.66	$	24.98
Third Quarter 2016	$	27.05	$	20.12
Fourth Quarter 2016	$	24.00	$	16.69
First Quarter 2017	$	26.96	$	18.00
Second Quarter 2017	$	48.93	$	26.71
Third Quarter 2017	$	57.30	$	31.99
Fourth Quarter 2017	$	64.75	$	35.13
First Quarter 2018	$	48.20	$	34.00
Month Ended:
September 2017	$	57.30	$	45.88
October 2017	$	64.75	$	56.83
November 2017	$	59.05	$	40.28
December 2017	$	45.87	$	35.13
January 2018	$	48.20	$	41.11
February 2018	$	45.54	$	39.40
March 2018	$	40.24	$	34.00

On March 29, 2018, the last reported sale price of the ADSs on Nasdaq was $35.00 per ADS, and the last reported sale price of the ordinary shares on Euronext Brussels was €28.26 per share.

B. Plan of Distribution

Not applicable.

C. Markets

The ADSs have been listed on the Nasdaq under the symbol “CYAD” since June 19, 2015 and the ordinary shares have been listed on the Euronext Brussels and Euronext Paris under the symbol “CYAD” since July 5, 2013.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

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ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The information set forth in our Registration Statement on Form F-3 (File No. 333-220285), as amended, originally filed with the SEC on August 31, 2017 and declared effective by the SEC on October 6, 2017, under the headings “Description of Share Capital” and “Description of Securities” is incorporated herein by reference.

C. Material Contracts

We entered into an underwriting agreement with UBS Securities LLC, as representatives of the underwriters, in June 2015, with respect to the ADSs and ordinary shares sold in our global offering. We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of such liabilities. For additional information on our material contracts, please see the sections of this Annual Report titled “Item 4.B.—Business Overview—Licensing and Collaboration Agreements” and “Item 7—Major Shareholders and Related Party Transactions.”

D. Exchange Controls

Exchange Controls and Limitations Affecting Shareholders

There are no Belgian exchange control regulations that impose limitations on our ability to make, or the amount of, cash payments to residents of the United States.

We are in principle under an obligation to report to the National Bank of Belgium certain cross-border payments, transfers of funds, investments and other transactions in accordance with applicable balance-of-payments statistical reporting obligations. Where a cross-border transaction is carried out by a Belgian credit institution on our behalf, the credit institution will in certain circumstances be responsible for the reporting obligations.

E. Taxation

Material Income Tax Considerations

The information presented under the caption “Certain Material U.S. Federal Income Tax Considerations to U.S. Holders” below is a discussion of certain material U.S. federal income tax considerations to a U.S. holder (as defined below) of investing in ADSs. The information presented under the caption “Belgian Tax Consequences” is a discussion of the material Belgian tax consequences of investing in ADSs.

You should consult your tax advisor regarding the applicable tax consequences to you of investing in ADSs under the laws of the United States (federal, state and local), Belgium, and any other applicable foreign jurisdiction.

Certain Material U.S. Federal Income Tax Considerations to U.S. Holders

The following is a summary of certain material U.S. federal income tax considerations relating to the acquisition, ownership and disposition of ADSs by a U.S. holder (as defined below). This summary addresses only the U.S. federal income tax considerations for U.S. holders that are initial purchasers of the ADSs pursuant to the offering and that will hold such ADSs as capital assets for U.S. federal income tax purposes. This summary does not address all U.S. federal income tax matters that may be relevant to a particular U.S. holder. This summary does not address tax considerations applicable to a holder of ADSs that may be subject to special tax rules including, without limitation, the following:

• banks, financial institutions or insurance companies;

• brokers, dealers or traders in securities, currencies, commodities, or notional principal contracts;

• tax-exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as defined in Section 408 or 408A of the Code (as defined below), respectively;

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• real estate investment trusts, regulated investment companies or grantor trusts;

• persons that hold the ADSs as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for U.S. federal income tax purposes;

• partnerships (including entities and arrangements classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or persons that will hold the ADSs through such an entity;

• certain former citizens or long-term residents of the United States;

• persons required under Section 451(b) of the Code to conform the timing of income accruals with respect to the ADSs to their financial statements;

• holders that own directly, indirectly, or through attribution 10% or more of the value of the ADSs and shares; and

• holders that have a “functional currency” for U.S. federal income tax purposes other than the U.S. dollar.

Further, this summary does not address the U.S. federal estate, gift, or alternative minimum tax considerations, or any U.S. state, local, or non-U.S. tax considerations of the acquisition, ownership and disposition of the ADSs.

This description is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code; existing, proposed and temporary U.S. Treasury Regulations promulgated thereunder, administrative and judicial interpretations thereof; and the income tax treaty between Belgium and the United States in each case as of and available as of the date hereof. All the foregoing is subject to change, which change could apply retroactively, and to differing interpretations, all of which could affect the tax considerations described below. There can be no assurances that the U.S. Internal Revenue Service, or IRS, will not take a contrary or different position concerning the tax consequences of the acquisition, ownership and disposition of the ADSs or that such a position would not be sustained. Holders should consult their own tax advisors concerning the U.S. federal, state, local and non-U.S. tax consequences of owning, and disposing of the ADSs in their particular circumstances.

For the purposes of this summary, a “U.S. holder” is a beneficial owner of ADSs that is (or is treated as), for U.S. federal income tax purposes:

• an individual who is a citizen or resident of the United States;

• a corporation, or other entity that is treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

• an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

• a trust, if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust or has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person.

If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds ADSs, the U.S. federal income tax consequences relating to an investment in the ADSs will depend in part upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor regarding the U.S. federal income tax considerations of owning and disposing of the ADSs in its particular circumstances.

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In general, a U.S. holder who owns ADSs will be treated as the beneficial owner of the underlying shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will generally be recognized if a U.S. holder exchanges ADSs for the underlying shares represented by those ADSs.

The U.S. Treasury has expressed concern that parties to whom ADSs are released before shares are delivered to the depositary (“pre-release”), or intermediaries in the chain of ownership between holders and the issuer of the security underlying the ADSs, may be taking actions that are inconsistent with the claiming of foreign tax credits by holders of ADSs. These actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate holders. Accordingly, the creditability of Belgian taxes, and the availability of the reduced tax rate for dividends received by certain non- corporate U.S. holders, each described below, could be affected by actions taken by such parties or intermediaries.

As indicated below, this discussion is subject to U.S. federal income tax rules applicable to a “passive foreign investment company,” or a PFIC.

Persons considering an investment in the ADSs should consult their own tax advisors as to the particular tax consequences applicable to them relating to the acquisition, ownership and disposition of the ADSs, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.

Distributions. Although we do not currently plan to pay dividends, and subject to the discussion under “—Passive Foreign Investment Company Considerations” below, the gross amount of any distribution (before reduction for any amounts withheld in respect of Belgian withholding tax) actually or constructively received by a U.S. holder with respect to ADSs will be taxable to the U.S. holder as a dividend to the extent of the U.S. holder’s pro rata share of our current and accumulated earnings and profits as determined under U.S. federal income tax principles. Distributions in excess of earnings and profits will be non-taxable to the U.S. holder to the extent of, and will be applied against and reduce, the U.S. holder’s adjusted tax basis in the ADSs. Distributions in excess of earnings and profits and such adjusted tax basis will generally be taxable to the U.S. holder as either long-term or short-term capital gain depending upon whether the U.S. holder has held the ADSs for more than one year as of the time such distribution is received. However, since we do not calculate our earnings and profits under U.S. federal income tax principles, it is expected that any distribution will be reported as a dividend, even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. Non-corporate U.S. holders may qualify for the preferential rates of taxation with respect to dividends on ADSs applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year) applicable to qualified dividend income (as discussed below) if we are a “qualified foreign corporation” and certain other requirements (discussed below) are met. A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on ADSs which are readily tradable on an established securities market in the United States. The ADSs are listed on the Nasdaq Global Market, or NASDAQ, which is an established securities market in the United States, and we expect the ADSs to be readily tradable on NASDAQ. However, there can be no assurance that the ADSs will be considered readily tradable on an established securities market in the United States in later years. We are incorporated under the laws of Belgium, and we believe that we qualify as a resident of Belgium for purposes of, and are eligible for the benefits of, The Convention between the Government of the United States of America and the Government of the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed on November 27, 2006 (the U.S.-Belgium Tax Treaty), although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-Belgium Tax Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange-of-information program. Therefore, subject to the discussion under “—Passive Foreign Investment Company Considerations” below, such dividends will generally be “qualified dividend income” in the hands of individual U.S. holders, provided that a holding period requirement (more than 60 days of ownership, without protection from the risk of loss, during the 121-day period beginning 60 days before the ex-dividend date) and certain other requirements are met. Dividends received by a corporate U.S. holder will not be eligible for the dividends-received deduction generally allowed to corporate U.S. holders.

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A U.S. holder generally may claim the amount of any Belgian withholding tax as either a deduction from gross income or a credit against U.S. federal income tax liability. However, the foreign tax credit is subject to numerous complex limitations that must be determined and applied on an individual basis. Generally, the credit cannot exceed the proportionate share of a U.S. holder’s U.S. federal income tax liability that such U.S. holder’s “foreign source” taxable income bears to such U.S. holder’s worldwide taxable income. In applying this limitation, a U.S. holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” In addition, this limitation is calculated separately with respect to specific categories of income. Furthermore, Belgian income taxes that are withheld in excess of the rate applicable under the U.S.-Belgium Tax Treaty or that are refundable under Belgian law will not be eligible for credit against a U.S. holder’s federal income tax liability. Each U.S. holder should consult its own tax advisors regarding the foreign tax credit rules.

In general, the amount of a distribution paid to a U.S. holder in a foreign currency will be the dollar value of the foreign currency calculated by reference to the spot exchange rate on the day the U.S. holder receives the distribution, regardless of whether the foreign currency is converted into U.S. dollars at that time.

The U.S. holder will take a tax basis in the foreign currency equal to their U.S. dollar equivalent on such date. The conversion of the foreign currency into U.S. dollars at a later date will give rise to foreign currency exchange gain or loss equal to the difference between their U.S. dollar equivalent at such later time and their tax basis. Any foreign currency gain or loss a U.S. holder recognizes on a subsequent conversion of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If a distribution received in a foreign currency is converted into U.S. dollars on the day they are received, a U.S. holder should not be required to recognize foreign currency gain or loss in respect of the distribution. For foreign credit limitation purposes, distributions paid on ADSs that are treated as dividends will generally be foreign source income and will generally constitute passive category income.

Sale, Exchange or Other Taxable Disposition of the ADSs. A U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes upon the sale, exchange or other taxable disposition of ADSs in an amount equal to the difference between the U.S. dollar value of the amount realized from such sale or exchange and the U.S. holder’s tax basis for those ADSs. Subject to the discussion under “—Passive Foreign Investment Company Considerations” below, this gain or loss will generally be a capital gain or loss. The adjusted tax basis in the ADSs generally will be equal to the cost of such ADSs. Capital gain from the sale, exchange or other taxable disposition of ADSs of a non-corporate U.S. holder is generally eligible for a preferential rate of taxation applicable to capital gains, if the non-corporate U.S. holder’s holding period determined at the time of such sale, exchange or other taxable disposition for such ADSs exceeds one year (i.e., such gain is long-term taxable gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations. Any such gain or loss that a U.S. holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.

Medicare Tax. Certain U.S. holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income,” which may include all or a portion of their dividend income and net gains from the disposition of ADSs. Each U.S. holder that is an individual, estate or trust is urged to consult its tax advisors regarding the applicability of the Medicare tax to its income and gains in respect of its investment in the ADSs.

Passive Foreign Investment Company Considerations. If we are a PFIC for any taxable year when a U.S. holder owns our ADSs, the U.S. holder would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis.

A corporation organized outside the United States generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying certain look-through rules with respect to the income and assets of its subsidiaries, either: (i) at least 75% of its gross income is “passive income” or (ii) at least 50% of the average quarterly value of its total gross assets (which, assuming we are not a controlled foreign corporation for the year being tested, would be measured by the fair market value of our assets, and for which purpose the total value of our assets may be determined in part by reference to the market value of the ADSs and our ordinary shares, which is subject to change) is attributable to assets that produce “passive income” or are held for the production of “passive income.”

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Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of cash, including the funds raised in offerings of the ADSs. If a non-U.S. corporation owns directly or indirectly at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s income. If we are a PFIC for any year with respect to which a U.S. holder owns the ADSs, we will continue to be treated as a PFIC with respect to such U.S. holder in all succeeding years during which the U.S. holder owns the ADSs, regardless of whether we continue to meet the tests described above.

Whether we are a PFIC for any taxable year will depend on the composition of our income and the projected composition and estimated fair market values of our assets in each year, and because this is a factual determination made annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC for any taxable year. The market value of our assets may be determined in large part by reference to the market price of the ADSs and our ordinary shares, which is likely to fluctuate after the offering. Based on the foregoing, with respect to the current taxable year, we do not anticipate that we will be a PFIC based upon the expected value of our assets, including any goodwill, and the expected composition of our income and assets, however, as previously mentioned, we cannot provide any assurances regarding our PFIC status for the current, prior or future taxable years.

If we are a PFIC for any taxable year, then unless you make one of the elections described below, a special tax regime will apply to both (a) any “excess distribution” by us to you (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distribution received by you in the shorter of the three preceding years or your holding period for the ADSs) and (b) any gain realized on the sale or other disposition of the ADSs. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax as if (a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. holder’s regular ordinary income rate for the current year and would not be subject to the interest charge discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years. In addition, dividend distributions made to you will not qualify for the lower rates of taxation applicable to long-term capital gains discussed above under “—Distributions.”

Certain elections exist that would result in an alternative treatment (such as mark-to-market treatment) of the ADSs. If a U.S. holder makes the mark-to- market election, the U.S. holder generally will recognize as ordinary income any excess of the fair market value of the ADSs at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. holder makes the election, the U.S. holder’s tax basis in the ADSs will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition of ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). The mark-to- market election is available only if we are a PFIC and the ADSs are “regularly traded” on a “qualified exchange.” The ADSs will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of the ADSs are traded on a qualified exchange on at least 15 days during each calendar quarter (subject to the rule that trades that have as one of their principal purposes the meeting of the trading requirement as disregarded). NASDAQ is a qualified exchange for this purpose and, consequently, if the ADSs are regularly traded, the mark- to-market election will be available to a U.S. holder.

We do not currently intend to provide the information necessary for U.S. holders to make qualified electing fund elections if we are treated as a PFIC for any taxable year.

If we are determined to be a PFIC for any taxable year included in the holding period a U.S. holder, such holder may be subject to adverse tax consequences. U.S. holders should consult their tax advisors to determine whether any of these elections, or other elections for current or past taxable years, may be available and if so, what the consequences of the alternative treatments would be in their particular circumstances.

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If we are determined to be a PFIC, the general tax treatment for U.S. holders described in this section would apply to indirect distributions and gains deemed to be recognized by U.S. holders in respect of any of our subsidiaries that also may be determined to be PFICs.

If a U.S. holder owns ADSs during any taxable year in which we are a PFIC, the U.S. holder generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with respect to the company, generally with the U.S. holder’s federal income tax return for that year. If our company were a PFIC for a given taxable year, then you should consult your tax advisor concerning your annual filing requirements.

The U.S. federal income tax rules relating to PFICs are complex. Prospective U.S. investors are urged to consult their own tax advisors with respect to the acquisition, ownership and disposition of the ADSs, the consequences to them of an investment in a PFIC, any elections available with respect to the ADSs and the IRS information reporting obligations with respect to the acquisition, ownership and disposition of the ADSs.

Backup Withholding and Information Reporting. U.S. holders generally will be subject to information reporting requirements with respect to dividends on ADSs and on the proceeds from the sale, exchange or disposition of ADSs that are paid within the United States or through U.S.-related financial intermediaries, unless the U.S. holder is an “exempt recipient.” In addition, U.S. holders may be subject to backup withholding on such payments, unless the U.S. holder provides a correct taxpayer identification number and a duly executed IRS Form W-9 or otherwise establishes an exemption. Backup withholding is not an additional tax, and the amount of any backup withholding will be allowed as a credit against a U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

Foreign Asset Reporting. Certain U.S. holders who are individuals and certain entities controlled by individuals may be required to report information relating to an interest in the ADSs, subject to certain exceptions (including an exception for shares held in accounts maintained by U.S. financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their federal income tax return. U.S. holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their acquisition, ownership and disposition of the ADSs.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN ADSS IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.

Belgian Tax Consequences

The following paragraphs are a summary of material Belgian tax consequences of the ownership of ADSs by an investor. The summary is based on laws, treaties and regulatory interpretations in effect in Belgium on the date of this Annual Report, all of which are subject to change, including changes that could have retroactive effect.

The summary only discusses Belgian tax aspects which are relevant to U.S. holders of ADSs (Holders). This summary does not address Belgian tax aspects which are relevant to persons who are fiscally resident in Belgium or who avail of a permanent establishment or a fixed base in Belgium to which the ADSs are effectively connected.

This summary does not purport to be a description of all of the tax consequences of the ownership of ADSs, and does not take into account the specific circumstances of any particular investor, some of which may be subject to special rules, or the tax laws of any country other than Belgium. This summary does not describe the tax treatment of investors that are subject to special rules, such as banks, insurance companies, collective investment undertakings, dealers in securities or currencies, persons that hold, or will hold, ADSs

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in a position in a straddle, share-repurchase transaction, conversion transactions, synthetic security or other integrated financial transactions. Investors should consult their own advisors regarding the tax consequences of an investment in ADSs in the light of their particular circumstances, including the effect of any state, local or other national laws.

In addition to the assumptions mentioned above, it is also assumed in this discussion that for purposes of the domestic Belgian tax legislation, the owners of ADSs will be treated as the owners of the ordinary shares represented by such ADSs. However, the assumption has not been confirmed by or verified with the Belgian Tax Authorities.

Dividend Withholding Tax

As a general rule, a withholding tax of 30% is levied on the gross amount of dividends paid on the ordinary shares represented by the ADSs, subject to such relief as may be available under applicable domestic or tax treaty provisions.

Dividends subject to the dividend withholding tax include all benefits attributed to the ordinary shares represented by the ADSs, irrespective of their form, as well as reimbursements of statutory share capital by us, except reimbursements of fiscal capital made in accordance with the Belgian Companies Code. In principle, fiscal capital includes paid-up statutory share capital, and subject to certain conditions, the paid-up issue premiums and the amounts subscribed to at the time of the issue of profit sharing certificates. For financial years starting on or after January 1, 2018, any reduction of fiscal capital is deemed to be paid out on a pro rata basis of the fiscal capital and certain reserves (in the following order: the taxed reserves incorporated in the statutory capital, the taxed reserves not incorporated in the statutory capital and the tax-exempt reserves incorporated in the statutory capital). Only the part of the capital reduction that is deemed to be paid out of the fiscal capital will, for Belgian withholding tax purposes, not be considered as a dividend distribution provided such repayment is carried out in accordance with the relevant provisions of company law.

In case of a redemption by us of our own shares represented by ADSs, the redemption distribution (after deduction of the portion of fiscal capital represented by the redeemed shares) will be treated as a dividend which in principle is subject to the withholding tax of 30%, subject to such relief as may be available under applicable domestic or tax treaty provisions. In case of a liquidation of our company, any amounts distributed in excess of the fiscal capital will also be treated as a dividend, and will in principle be subject to a 30% withholding tax, subject to such relief as may be available under applicable domestic or tax treaty provisions.

For non-residents the dividend withholding tax, if any, will be the only tax on dividends in Belgium, unless the non-resident avails of a fixed base in Belgium or a Belgian permanent establishment to which the ADSs are effectively connected.

Relief of Belgian Dividend Withholding Tax

Under the U.S.-Belgium Tax Treaty, under which we are entitled to benefits accorded to residents of Belgium, there is a reduced Belgian withholding tax rate of 15% on dividends paid by us to a U.S. resident which beneficially owns the dividends and is entitled to claim the benefits of the U.S.-Belgium Tax Treaty under the limitation of benefits article included in the U.S.-Belgium Tax Treaty (Qualifying Holders).

If such Qualifying Holder is a company that owns directly at least 10% of our voting stock, the Belgian withholding tax rate is further reduced to 5%. No withholding tax is however applicable if the Qualifying Holder, is either of the following:

• a company that is a resident of the United States that has owned directly ADSs representing at least 10% of our capital for a twelve-month period ending on the date the dividend is declared, or

• a pension fund that is a resident of the United States, provided that such dividends are not derived from the carrying on of a business by the pension fund or through an associated enterprise.

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Under the normal procedure, we or our paying agent must withhold the full Belgian withholding tax, without taking into account the reduced U.S.-Belgium Tax Treaty rate. Qualifying Holders may then make a claim for reimbursement for amounts withheld in excess of the rate defined by the U.S.-Belgium Tax Treaty. The reimbursement form (Form 276 Div-Aut.) can be obtained as follows:

• by letter from the Bureau Central de Taxation Bruxelles-Etranger, Boulevard du Jardin Botanique 50 boîte 3429, 1000 Brussels, Belgium;

• by fax at +32 (0) 257/968 42;

• via e-mail at ctk.db.brussel.buitenland@minfin.fed.be; or at

• http://financien.belgium.be/nl/ondernemingen/vennootschapsbelasting/voorheffingen/roerende_voorheffing/formulieren.

The reimbursement form is to be sent to the Bureau Central de Taxation Bruxelles-Etranger, Boulevard du Jardin Botanique 50 boîte 3429, 1000 Brussels, Belgium as soon as possible and in each case within a term of five years starting from the first of January of the year the withholding tax was withheld.

Qualifying Holders may also, subject to certain conditions, obtain the reduced U.S.-Belgium Tax Treaty rate at source. Qualifying Holders should deliver a duly completed Form 276 Div-Aut. no later than ten days after the date on which the dividend has been paid or attributed (whichever comes first).

Additionally, pursuant to Belgian domestic tax law, dividends distributed to corporate Holders that qualify as a parent company will be exempt from Belgian withholding tax provided that the ADSs held by the Holder, upon payment or attribution of the dividends, amount to at least 10% of our share capital and are held or will be held during an uninterrupted period of at least one year, and provided the anti-abuse provision does not apply. A Holder qualifies as a parent company if it has a legal form similar to the ones listed in the annex to the EU Parent-Subsidiary Directive of 23 July 1990 (90/435/EC), if it is considered to be a tax resident according to the laws of the United States of America and the U.S.-Belgium Tax Treaty, and if it is subject to a tax similar to the Belgian corporate income tax without benefiting from a tax regime that derogates from the ordinary tax regime.

In order to benefit from this exemption, the Holder must provide us or its paying agent with a certificate confirming its qualifying status and the fact that it satisfies the required conditions. If the Holder holds the ADSs for less than one year, at the time the dividends are paid on or attributed to the shares represented by the ADSs, we must deduct the withholding tax but we do not need to transfer it to the Belgian Treasury provided that the Holder certifies its qualifying status, the date from which the Holder has held the ADSs, and the Holder’s commitment to hold the shares for an uninterrupted period of at least one year. The Holder must also inform us or its paying agent when the one-year period has expired or if its shareholding drops below 10% of our share capital before the end of the one-year holding period. Upon satisfying the one-year shareholding requirement, the deducted dividend withholding tax will be paid to the Holder.

Dividends paid or attributable to a corporate Holder will under certain conditions be subject to a reduced 1.6995% withholding tax (5% of 33.99%), provided that the Holder has a legal form similar to the ones listed in in Annex I, Part A to Council Directive 2011/96/EU of November 30, 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, as amended by the Council Directive of July 8, 2014 (2014/86/EU) and holds a share participation in our share capital, upon payment or attribution of the dividends, of less than 10% but with an acquisition value of at least EUR 2,500,000 and has held this share participation in full legal ownership during an uninterrupted period of at least one year.

The reduced 1.6995% withholding tax is only applied to the extent that the Belgian withholding tax cannot be credited nor reimbursed at the level of the qualifying, dividend receiving, Holder. The Holder must provide us or its paying agent with a certificate confirming its qualifying status and the fact that it meets the required conditions.

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As of assessment year 2019, linked to a taxable period starting at the earliest on January 1, 2018, the reduced 1.6995% withholding tax has been replaced by a full withholding tax exemption. Not all conditions to benefit from the withholding tax exemption are mentioned in the text, e.g., the non-resident company should be subject to corporate income tax or a similar tax without benefiting from a tax regime that derogates from the ordinary tax regime.

Withholding tax is also not applicable, pursuant to Belgian domestic tax law, on dividends paid to a U.S. pension fund which satisfies the following conditions:

(i) to be an entity with a separate legal personality with fiscal residence in the United States and without a permanent establishment or fixed base in Belgium,

(ii) whose corporate purpose consists solely in managing and investing funds collected in order to pay legal or complementary pensions,

(iii) whose activity is limited to the investment of funds collected in the exercise of its statutory mission, without any profit making aim and without operating a business in Belgium,

(iv) which is exempt from income tax in the United States, and

(v) provided that it (save in certain particular cases as described in Belgian law) is not contractually obligated to redistribute the dividends to any ultimate beneficiary of such dividends for whom it would manage the shares or ADSs, nor obligated to pay a manufactured dividend with respect to the shares or ADSs under a securities borrowing transaction. The exemption will only apply if the U.S. pension fund provides an affidavit confirming that it is the full legal owner or usufruct holder of the shares or ADSs and that the above conditions are satisfied. The organization must then forward that affidavit to us or our paying agent.

Non-resident individuals may be eligible for an exemption of the first tranche of dividend income up to the amount of €640 for the 2018 taxable year for dividends paid or attributed as of January 1, 2018. Prospective Holders are encouraged to consult their own tax advisors to determine whether they qualify for an exemption or a reduction of the withholding tax rate upon payment of dividends and, if so, the procedural requirements for obtaining such an exemption or a reduction upon the payment of dividends or making claims for reimbursement.

Capital Gains and Losses

Pursuant to the U.S.-Belgium Tax Treaty, capital gains and/or losses realized by a Qualifying Holder from the sale, exchange or other disposition of ADSs are exempt from tax in Belgium.

Capital gains realized on ADSs by a corporate Holder who is not a Qualifying Holder are generally not subject to taxation in Belgium unless such Holder is acting through a Belgian permanent establishment or a fixed place in Belgium to which the ADSs are effectively connected (in which case a 33.99%, 25.75%, 0.412% or 0% tax on the capital gain may apply, depending on the particular circumstances, taking into account that different rates may apply if the establishment qualifies as a small enterprise). Recent legislative measures have changed the aforementioned capital gains tax rates. As of assessment year 2019, linked to a taxable period starting at the earliest on January 1, 2018, the 0.412% rate has been replaced with a full exemption. As of assessment year 2021, linked to a taxable period starting at the earliest on January 1, 2020, the 25.75% rate will be abolished and replaced with the ordinary corporate income tax rate of 25%. As of assessment year 2019, linked to a taxable period starting at the earliest on January 1, 2018, the 33.99% rate will be reduced to 29.58% and, as of assessment year 2021, linked to a taxable period starting at the earliest on January 1, 2020, the rate will be further reduced to 25%. Capital losses are generally not tax deductible.

Private individual Holders who are not Qualifying Holders and who are holding ADSs as a private investment will, as a rule, not be subject to tax in Belgium on any capital gains arising out of a disposal of ADSs. Losses will, as a rule, not be tax deductible.

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However, if the gain realized by such individual Holders on ADSs is deemed to be realized outside the scope of the normal management of such individual’s private estate and the capital gain is obtained or received in Belgium, the gain will be subject to a final tax of 30.28%.

Moreover, capital gains realized by such individual Holders on the disposal of ADSs for consideration, outside the exercise of a professional activity, to a non-resident corporation (or a body constituted in a similar legal form), to a foreign state (or one of its political subdivisions or local authorities) or to a non-resident legal entity that is established outside the European Economic Area, are in principle taxable at a rate of 16.5% if, at any time during the five years preceding the realization event, such individual Holders own or have owned directly or indirectly, alone or with his/her spouse or with certain other relatives, a substantial shareholding in us (that is, a shareholding of more than 25% of our shares).

Capital gains realized by a Holder upon the redemption of ADSs or upon our liquidation will generally be taxable as a dividend. See “—Dividend Withholding Tax” above.

Estate and Gift Tax

There is no Belgium estate tax on the transfer of ADSs on the death of a Belgian non-resident. Donations of ADSs made in Belgium may or may not be subject to gift tax depending on the modalities under which the donation is carried out.

Belgian Tax on Stock Exchange Transactions

A stock market tax is normally levied on the purchase and the sale and on any other acquisition and transfer for consideration in Belgium of ADSs through a professional intermediary established in Belgium on the secondary market, so-called “secondary market transactions.” The tax is due from the transferor and the transferee separately. The applicable rate amounts to 0.35% with a cap of €1600 per transaction and per party. Such tax is also due for transactions the order for which is directly or indirectly given by an individual with habitual abode in Belgium, or by a legal entity on account of its Belgian seat or establishment, to an intermediary established outside Belgium. In such case, this individual or legal entity should declare and pay the tax on stock exchange transactions due, unless if he can prove that it was already paid.

Belgian non-residents who purchase or otherwise acquire or transfer, for consideration, ADSs in Belgium for their own account through a professional intermediary may be exempt from the stock market tax if they deliver a sworn affidavit to the intermediary in Belgium confirming their non-resident status, unless they would be considered to have their habitual abode (for individuals) or their seat or establishment (for legal entities) in Belgium. Intermediaries located or established outside of Belgium may appoint a Stock Exchange Tax Representative in Belgium, subject to certain conditions and formalities.

In addition to the above, no stock market tax is payable by: (i) professional intermediaries described in Article 2, 9 and 10 of the Law of August 2, 2002 acting for their own account, (ii) insurance companies described in Article 2, §1 of the Law of July 9, 1975 acting for their own account, (iii) professional retirement institutions referred to in Article 2, §1 of the Law of October 27, 2006 relating to the control of professional retirement institutions acting for their own account, (iv) collective investment institutions acting for their own account, (v) the aforementioned non-residents acting for their own account (upon delivery of a certificate of non-residency in Belgium), or (vi) regulated real estate companies acting for their own account.

No stock market tax will thus be due by Holders on the subscription, purchase or sale of ADSs, if the Holders are acting for their own account. In order to benefit from this exemption, the Holders must file with the professional intermediary in Belgium a sworn affidavit evidencing that they are non-residents for Belgian tax purposes.

Proposed Financial Transactions Tax

The European Commission has published a proposal for a Directive for a common financial transactions tax, or FTT, in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia, or collectively, the Participating Member States. However, Estonia has since stated that it will not participate, and it is unclear whether Belgium will participate.

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The proposed FTT has a very broad scope and could, if introduced in its current form, apply to certain dealings in ADS’s in certain circumstances. Under current proposals, the FTT could apply in certain circumstances to persons both within and outside of the Participating Member States. Generally, it would apply to certain dealings in ADSs where at least one party is a financial institution, and at least one party is established in a Participating Member State.

A financial institution may be, or be deemed to be, ‘‘established’’ in a Participating Member State in a broad range of circumstances, including by transacting with a person established in a Participating Member State.

The proposal currently stipulates that once the FTT enters into force, the participating Member States shall not maintain or introduce taxes on financial transactions other than the FTT (or VAT as provided in the Council Directive 2006/112/EC on the common system of value added tax). For Belgium, the tax on stock exchange transactions should thus be abolished once the FTT enters into force. The proposal is still subject to negotiation between the participating Member States and therefore may be changed at any time.

Prospective investors are advised to seek their own professional advice in relation to the FTT.

Prospective Tax on Securities Accounts

Belgium also applies a prospective tax on securities accounts of 0.15% on the average value of certain qualifying financial instruments held in one or more securities accounts during a reference period of 12 consecutive months. Prospective Holders are encouraged to consult their own tax advisors to determine the applicability and extent of such tax with respect to their ADSs.

F. Dividends and Paying Agents

Not applicable

G. Statement by Experts

Not applicable

H. Documents on Display

We are subject to the information reporting requirements of the Exchange Act applicable to foreign private issuers and under those requirements will file reports with the SEC. Those reports may be inspected without charge at the locations described below. As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. Nevertheless, we will file with the SEC an Annual Report on Form 20-F containing financial statements that have been examined and reported on, with and opinion expressed by an independent registered public accounting firm.

We maintain a corporate website at www.celyad.com. We intend to post our Annual Report on our website promptly following it being filed with the SEC. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report. We have included our website address in this Annual Report solely as an inactive textual reference.

You may also review a copy of this Annual Report, including exhibits and any schedule filed herewith, and obtain copies of such materials at prescribed rates, at the SEC’s Public Reference Room in Room 1580, 100 F Street, NE, Washington, D.C. 20549-0102. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as Celyad, that file electronically with the SEC.

With respect to references made in this Annual Report to any contract or other document of Celyad, such references are not necessarily complete and you should refer to the exhibits attached or incorporated by reference to this Annual Report for copies of the actual contract or document.

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I. Subsidiary Information

Not applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. Our overall risk management program focuses on preservation of capital given the unpredictability of financial markets. For additional information on general risk factors, please see the section of this Annual Report titled “Item 3.D—Risk Factors.”

Interest rate risk

Our interest rate risk is very limited as the Group has only a limited amount of finance leases and outstanding bank loans. So far, because of the materiality of the exposure, the Group did not enter into any interest hedging arrangements.

Credit risk

We have a limited amount of trade receivables due to the fact that sales to third parties are not significant, and thus our credit risk arises mainly from cash and cash equivalents and deposits with banks and financial institutions. The Group only works with international reputable commercial banks and financial institutions.

Foreign Exchange Risk

We are exposed to foreign exchange risk as certain short-term deposits, collaborations or supply agreements of raw materials are denominated in USD. Moreover we have also investments in foreign operations, whose net assets are exposed to foreign currency translation risk (USD). So far, because of the materiality of the exposure, we did not enter into any currency hedging arrangements. No sensitivity has been performed on the foreign exchange risk as up till now we still consider this risk as immaterial.

We are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD. Our functional currency is the Euro, but we have several of our product suppliers and clinical vendors invoicing US in USD or in other currencies. In addition, we plan to convert a substantial portion of the proceeds from the global offering to Euros.

We have not established any formal practice to manage the foreign exchange risk against our functional currency. As of December 31, 2017, we had no trade receivables denominated in USD and had trade payables denominated in USD of $0.3 million.

Foreign exchange rate movements had no material effect on our results for the years ended December 31, 2016 and 2015. For the year ended December 31 2017, we recorded an unrealized foreign exchange loss of arising mainly from our cash and short-term deposits denominated in USD. Because of our growing activities in the United States, the foreign exchange risk may increase in the future.

In 2017, the percentage of our total costs expressed in USD represented 27.4% or $9.0 million. In the same period of 2016 and 2015, it was respectively 29% or $11.5 million and 17% or $7.5 million. In 2018 and beyond, we expect the part of the USD expressed costs will increase due to the establishing of the US team & offices as well as the large part of CAR-T NKG2D clinical studies to be initiated in the United States.

Liquidity Risk

Based on our current operating plans, we believe that the anticipated net proceeds of the global offering, together with our existing cash and cash equivalents and short-term investments and the expected cash inflows from our strategic collaborations, will be sufficient to fund our operations at least until the end of the first quarter of 2019.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities

Not applicable

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B. Warrants and Rights

Not applicable

C. Other Securities

Not applicable

D. American Depositary Shares

Citibank, N.A. is the depositary for our American Depositary Shares. Citibank’s depositary offices are located at 388 Greenwich Street, New York, New York 10013. American Depositary Shares are frequently referred to as “ADSs” and represent ownership interests in securities that are on deposit with the depositary. ADSs may be represented by certificates that are commonly known as “American Depositary Receipts” or “ADRs.” The depositary typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian is Citibank Europe plc, located at EGSP 186, 1 North Wall Quay, Dublin 1 Ireland.

We have appointed Citibank as depositary pursuant to a deposit agreement. A copy of the deposit agreement is on file with the SEC under cover of a Registration Statement on Form F-6 (File No. 333-204724).

Fees and Charges

Pursuant to the terms of the deposit agreement, the holders of ADSs will be required to pay the following fees:

Service	Fees
•   Issuance of ADSs upon deposit of shares (excluding issuances as a result of distributions of shares)	Up to U.S. 5¢ per ADS issued
•   Cancellation of ADSs	Up to U.S. 5¢ per ADS canceled
•   Distribution of cash dividends or other cash distributions (i.e., sale of rights and other entitlements)	Up to U.S. 5¢ per ADS held
•   Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs	Up to U.S. 5¢ per ADS held
•   Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares)	Up to U.S. 5¢ per ADS held
•   ADS Services	Up to U.S. 5¢ per ADS held on the applicable record date(s) established by the depositary

As an ADS holder you will also be responsible to pay certain charges such as:

• taxes (including applicable interest and penalties) and other governmental charges;

• the registration fees as may from time to time be in effect for the registration of ordinary shares on the share register and applicable to transfers of ordinary shares to or from the name of the custodian, the depositary or any nominees upon the making of deposits and withdrawals, respectively;

• certain cable, telex and facsimile transmission and delivery expenses;

• the expenses and charges incurred by the depositary in the conversion of foreign currency;

• the fees and expenses incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to ordinary shares, ADSs and ADRs; and

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• the fees and expenses incurred by the depositary, the custodian, or any nominee in connection with the servicing or delivery of deposited property.

ADS fees and charges payable upon (i) deposit of ordinary shares against issuance of ADSs and (ii) surrender of ADSs for cancellation and withdrawal of ordinary shares are charged to the person to whom the ADSs are delivered (in the case of ADS issuances) and to the person who delivers the ADSs for cancellation (in the case of ADS cancellations). In the case of ADSs issued by the depositary into DTC or presented to the depositary via DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions made through DTC, and may be charged to the DTC participant(s) receiving the ADSs or the DTC participant(s) surrendering the ADSs for cancellation, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account(s) of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC participant(s) as in effect at the time. ADS fees and charges in respect of distributions and the ADS service fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash and (ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged to the DTC participants in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees and charges to the beneficial owners for whom they hold ADSs.

In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder. Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of such changes. The depositary may reimburse us for certain expenses incurred by us in respect of the ADR program, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary agree from time to time.

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PART II

The deposit agreement and the ADSs will be interpreted in accordance with the laws of the State of New York. The rights of holders of ordinary shares (including ordinary shares represented by ADSs) are governed by the laws of Belgium.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Global Offering

In June 2015, we raised gross proceeds of €88.0 million in our global offering of 1,460,000 ordinary shares, consisting of an underwritten public offering of 1,168,000 ordinary shares represented by ADSs and a concurrent European private placement of 292,000 ordinary shares, at a price of $68.56 per ADS and €60.25 per ordinary share.

The net offering proceeds to us, after deducting underwriting discounts and commissions and offering expenses, were approximately €77 million. The offering commenced on June 15, 2015 and did not terminate before all of the securities registered in the registration statement were sold. The effective date of the registration statement, File No. 333-204251, for our global offering was June 18, 2015. UBS Investment Bank and Piper Jaffray & Co. acted as joint book-running managers, and Petercam SA, Bryan, Garnier & Co., LifeSci Capital LLC and Lake Street Capital Markets LLC acted as co-managers for the global offering.

As at December 31, 2017, all of the net proceeds from our global offering were used. The net proceeds from our global offering were used for research and development and general corporate purposes. None of the net proceeds of our global offering were paid directly or indirectly to any director, officer, general partner of ours or to their associates, persons owning 10% or more of any class of our equity securities, or to any of our affiliates.

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ITEM 15. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as such term is defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives.

Our chief executive officer (principal executive officer) and chief financial officer (principal financial officer) have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2017. Based on that evaluation, our chief executive officer (principal executive officer) and chief financial officer (principal financial officer) concluded that our disclosure controls and procedures were not effective as of December 31, 2017 at the reasonable assurance level due to the fact that material weaknesses described below under “Management’s Annual Report on Internal Control over Financial Reporting” continued to exist at December 31, 2017, as discussed below.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our chief executive officer (principal executive officer) and chief financial officer (principal financial officer), we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 based on the guidelines established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis

In connection with the audit of our consolidated financial statements for the year ended December 31, 2017, our management and independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. We have a limited number of personnel in our finance department. The limited number of personnel does not (i) enable effective and proper segregation of duties, (ii) allow for appropriate monitoring of financial reporting matters and internal control over financial reporting, and (iii) allow an effective application and tracking of our current policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions. As a result, a number of adjustments to our consolidated financial statements were identified and made during the course of our audit. The material weaknesses identified related to a lack of segregation of duties in our accounting and reporting functions and our lack of a sufficient number of personnel with an appropriate level of knowledge and experience in the application of IFRS.

As a consequence of this, our management determined there was a lack of an overall, formalized framework and common policies and procedures for financial consolidation and reporting, all of which are either not designed and in place or not operating effectively. As a result, a number of adjustments to our consolidated financial statements were identified and made during the course of the audit. These corrections had no impact on our consolidated income statements, the computations of our basic and diluted earnings per share, our consolidated statements of comprehensive income, our consolidated statements of changes in equity or our consolidated cash flow statements at and for the years ended December 31, 2016 and 2015.

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As a result of the material weaknesses described above, we have concluded our internal control over financial reporting was not effective at December 31, 2017.

Notwithstanding this material weakness and management’s assessment that internal control over financial reporting was ineffective as of December 31, 2017, our management, including our chief executive officer (principal executive officer) and chief financial officer (principal financial officer), believes that the consolidated financial statements contained in this Annual Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with IFRS.

Management’s Plan for Remediation

With the oversight of senior management and our audit committee, we continue to evaluate our internal control over financial reporting and have taken several remedial actions to address the material weakness that has been identified:

• Hiring of a senior Group Financial controller who has significant external reporting expertise, experience with establishing appropriate financial reporting policies, and experience in supporting, designing and implementing effective internal controls over financial reporting ;

• Hiring of a Head of Human Resources which has large experience in supporting, designing and implementing effective internal controls over people and payroll processes. Since 2017, our Head of HR has been dedicated to the performance or review of some of the company’s payroll key controls;

• Implementation of a new accounting software, which allows improved accounting controls as well as enhanced financial reporting and financial control for management accounts purposes; and

• Increased focus on Entity-Level Controls (enhancement, design, and implementation of company’s pervasive policies like Code of Ethics, Whistle Blowing or Compliance procedures driven by Legal department).

• Enhancement of segregation of duties and delegation of authorities over treasury and payroll processes. In particular, in January 2018, we have moved to a new payroll external services provider and to a new payroll software environment, which allows improved traceable access and edits to the payroll master file.

In 2018, we plan to design, draft and implement an overall, formalized framework and common policies and procedures for financial consolidation and reporting, with the objective of having such policies and procedures effective by mid-year 2018.

Attestation Report of the Registered Public Accounting Firm

Because we qualify as an emerging growth company under the JOBS Act, this Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as required by Section 404(b) of the Sarbanes Oxley Act of 2002.

Changes in Internal Control Over Financial Reporting

The changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially improved our internal control over financial reporting were discussed above (hiring of a Group Financial Controller and Chief Human Resources Officer, implementation of a new accounting system).

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will provide absolute assurance that all appropriate information will, in fact, be communicated to management to allow timely decisions to be made or prevent all error and fraud. A control system, no matter how well conceived and

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operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Additionally, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected or that our control system will operate effectively under all circumstances. Moreover, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Audit Committee

Our board of directors has determined that Chris Buyse is an Audit Committee financial expert as defined by SEC rules and has the requisite financial sophistication under the applicable rules and regulations of the Nasdaq Stock Market. Chris Buyse is independent as such term is defined in Rule 10A-3 under the Exchange Act and under the listing standards of the Nasdaq Stock Market.

ITEM 16B. CODE OF ETHICS

We have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, that is applicable to all of our employees, executive officers and directors. The Code of Conduct is available on our website at www.celyad.com. The Audit Committee of our board of directors will be responsible for overseeing the Code of Conduct and will be required to approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

BDO Réviseurs d’Entreprises Soc. Civ. SCRL, or BDO, has been our Auditor since May 5, 2017 as decided by shareholders at the Annual General Assembly. PwC Réviseurs d’Entreprises sccrl served as our auditor from May 5, 2014 until May 5, 2017. Hereunder the fees billed by our Auditors for the last three years:

	Year Ended December 31,
	2017		2016		2015
	(euro in thousands)
Audit fees		129		127		139
Audit-related fees		—		10		519
Tax fees		—		—
Other fees		12		4		19
Total		141		141		677

“Audit Fees” are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC. In 2015, “Audit Fees” also include fees billed for assurance and related services regarding our global offering.

“Audit-Related Fees” are the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit and are not reported under Audit Fees.

“Tax Fees” are the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning related services.

“Other Fees” are any additional amounts billed for products and services provided by the principal accountant.

129

Audit and Non-Audit Services Pre-Approval Policy

The Audit Committee has responsibility for, among other things, appointing, setting compensation of and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has adopted a policy governing the pre-approval of all audit and permitted non-audit services performed by our independent registered public accounting firm to ensure that the provision of such services does not impair the independent registered public accounting firm’s independence from us and our management. Unless a type of service to be provided by our independent registered public accounting firm has received general pre-approval from the Audit Committee, it requires specific pre-approval by the Audit Committee. The payment for any proposed services in excess of pre-approved cost levels requires specific pre-approval by the Audit Committee.

Pursuant to its pre-approval policy, the Audit Committee may delegate its authority to pre-approve services to the chairperson of the Audit Committee. The decisions of the chairperson to grant pre-approvals must be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee may not delegate its responsibilities to pre-approve services to the management.

BDO has served as our independent registered public accounting firm since May 2017. Audit fees with respect to 2017 amounted to €129,440. Audit fees are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that BDO generally provides, such as consents, comfort letters, reports in accordance with Belgian Company Law and assistance with and review of documents filed with the SEC.

There were no audit-related fees or tax fees paid to BDO with respect to 2017. Other fees with respect to 2017 amounted to €11,650. In accordance with Regulation S-X, Rule 2-01, paragraph (c)(7)(i), no fees for professional services were approved pursuant to any waivers of the pre-approval requirement.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

For information regarding our change of independent auditors, see the section titled “Change in Registrant’s Certifying Accountant” in our Registration Statement on Form F-3 (File No. 333-220285) filed with the SEC on September 29, 2017 and declared effective by the SEC on October 6, 2017.

ITEM 16G. CORPORATE GOVERNANCE

Along with our articles of association, we adopted a corporate governance charter in accordance with the recommendations set out in the Belgian Corporate Governance Code issued on March 12, 2009 by the Belgian Corporate Governance Committee. The Belgian Corporate Governance Code is based on a “comply or explain” system: Belgian listed companies are expected to follow the Belgian Corporate Governance Code, but can deviate from specific provisions and guidelines (though not the principles) provided they disclose the justification for such deviations.

Our board of directors complies with the Belgian Corporate Governance Code, but believes that certain deviations from its provisions are justified in view of our particular situation.

These deviations include the grant of options or warrants to non-executive directors. In this way, we have additional possibilities to attract or retain competent non-executive directors and to offer them an attractive additional remuneration without the consequence that this additional remuneration weighs on our financial results. Furthermore, the grant of warrants is a commonly used method in the sector in which we operate. Without this possibility, we would be subject to a considerable disadvantage compared to competitors who do offer warrants to their non-executive directors. Our board of directors is of the opinion that the grant of options or warrants has no negative impact on the functioning of the non-executive directors.

Our board of directors reviews its corporate governance charter from time to time and makes such changes as it deems necessary and appropriate. Additionally, our board of directors adopted written terms of reference for each of the executive management team, the Audit Committee and the Nomination and Remuneration Committee, which are part of the corporate governance charter.

130

Differences between Our Corporate Governance Practices and the Listing Rules of the NASDAQ Stock Market

The listing rules of the NASDAQ Stock Market include certain accommodations in the corporate governance requirements that allow foreign private issuers, to follow “home country” corporate governance practices in lieu of the otherwise applicable corporate governance standards of the NASDAQ Stock Market. The application of such exceptions requires that we disclose each noncompliance with the NASDAQ Stock Market listing rules that we do not follow and describe the Belgian corporate governance practices we do follow in lieu of the relevant NASDAQ Stock Market corporate governance standard.

We intend to continue to follow Belgian corporate governance practices in lieu of the corporate governance requirements of the NASDAQ Stock Market in respect of the following:

• Quorum at Shareholder Meetings. NASDAQ Stock Market Listing Rule 5620(c) requires that for any meeting of shareholders, the quorum must be no less than 33.33% of the outstanding ordinary shares. There is no general quorum requirement under Belgian law for ordinary meetings of shareholders, except in relation to decisions regarding certain matters.’

• Compensation Committee. NASDAQ Stock Market Listing Rule 5605(d)(2) requires that compensation of officers must be determined by, or recommended to, the board of directors for determination, either by a majority of the independent directors, or a compensation committee comprised solely of independent directors. NASDAQ Stock Market Listing Rule 5605(e) requires that director nominees be selected, or recommended for selection, either by a majority of the independent directors or a nominations committee comprised solely of independent directors. Under Belgian law, we are not subject to any such requirements. In particular, we are not required by Belgian law to set up any compensation or nominations committees within our board of directors, and are therefore not subject to any Belgian legal requirements as to the composition of such committees either. However, our articles of association provide that our board of directors may form committees from among its members. Our board of directors has set up and appointed a Nomination and Remuneration Committee. Pursuant article 526quater of the Belgian Company Code, only a majority of the members of the committee must qualify as independent as defined under article 526ter of the Belgian Company Code. Our Nomination and Remuneration Committee is currently comprised of four directors, all of whom are independent in accordance with article 526ter of the Belgian Company Code and the NASDAQ rules.

• Independent Director Majority on Board/Meetings. NASDAQ Stock Market Listing Rules 5605(b)(1) and (2) require that a majority of the board of directors must be comprised of independent directors and that independent directors must have regularly scheduled meetings at which only independent directors are present. We are not required under Belgian law to have more than two independent directors on our board of directors. However, our articles of association provide that our board of directors must be comprised of at least three directors, of which, pursuant to our corporate governance charter, at least three directors must be independent directors under Belgian law. We do not intend to require our independent directors to meet separately from the full board of directors on a regular basis or at all although the board of directors is supportive of its independent members voluntarily arranging to meet separately from the other members of our board of directors when and if they wish to do so.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

131

PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

See pages F-1 through F-47 of this Annual Report.

ITEM 19. EXHIBITS

The Exhibits listed in the Exhibit Index at the end of this Annual Report are filed as Exhibits to this Annual Report.

132

Index to Consolidated Financial Statements

	Page
Annual Financial Statements for the Years Ended December 31, 2017, 2016 and 2015:
Reports of Independent Registered Public Accounting Firms		F-2
Consolidated Statements of Financial Position as of December  31, 2017 and 2016		F-4
Consolidated Statements of Income (Loss) for the Years Ended December  31, 2017, 2016 and 2015		F-5
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2017, 2016 and 2015		F-6
Consolidated Statements of Cash Flows for the Years Ended December  31, 2017, 2016 and 2015		F-7
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2015, 2016 and 2017		F-8
Notes to the Consolidated Financial Statements		F-9

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors of Celyad SA

Mont-Saint-Guibert, Belgium

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of financial position of Celyad SA (the “Company”) and subsidiaries as of December 31, 2017, the related consolidated statement of income (loss), comprehensive income (loss), changes in equity, and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2017 and the results of their operations and their cash flows for the year ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

BDO Réviseurs d’Entreprises Soc. Civ. SCRL

Represented by Bert Kegels

/s/ Bert Kegels

We have served as the Company’s auditor since 2017.

Zaventem, Belgium

April 6, 2018

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and shareholders of Celyad SA

In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of income (loss), comprehensive income (loss), changes in shareholder’s equity and of cash flows present fairly, in all material respects, the financial position of Celyad SA and its subsidiaries at 31 December 2016, and the results of their operations and their cash flows for each of the two years in the period ended 31 December 2016 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Liège, Belgium

April 4, 2017

PwC Reviseurs d’Entreprises sccrl

Represented by

/s/ Patrick Mortroux

F-3

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(€‘000)			As at December 31
	Notes		2017			2016
NON-CURRENT ASSETS				41,232			53,440
Intangible assets		7		36,508			49,566
Property, Plant and Equipment		8		3,290			3,563
Other non-current assets		9		1,434			311
CURRENT ASSETS				36,394			85,367
Trade and Other Receivables		11		233			1,359
Other current assets		11		2,255			1,420
Short-term investments		12		10,653			34,230
Cash and cash equivalents		13		23,253			48,357
TOTAL ASSETS				77,626			138,806
EQUITY				47,535			90,885
Share Capital		15		34,337			32,571
Share premium				170,297			158,010
Other reserves		18		23,322			24,329
Accumulated deficit				(180,421	)		(124,026	)
NON-CURRENT LIABILITIES				22,146			36,646
Bank loans				326			536
Finance leases				482			381
Advances repayable		19		1,544			7,330
Contingent consideration and other financial liabilities		22		19,583			28,179
Post employment benefits				204			204
Other non-current liabilities				7			16
CURRENT LIABILITIES				7,945			11,275
Bank loans				209			207
Finance leases				427			354
Advances repayable		19		226			1,108
Trade payables		21		4,800			8,098
Other current liabilities		21		2,282			1,508
TOTAL EQUITY AND LIABILITIES				77,626			138,806

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

F-4

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(€‘000)			For the year ended December 31
	Notes		2017			2016			2015
Revenues		24		3,540			8,523			3
Cost of sales				(515	)		(53	)		(2	)
Gross profit				3,025			8,471			1
Research and Development expenses		25		(22,908	)		(27,675	)		(22,766	)
General and administrative expenses		25		(9,310	)		(9,744	)		(7,230	)
Net other operating income		24		2,590			3,340			322
Amendment of Celdara Medical and Dartmouth College agreements		25		(24,341	)		—			—
Write-off C-Cure and Corquest assets and derecognition of related liabilities		25		(1,932	)		—			—
Operating Loss				(52,876	)		(25,609	)		(29,672	)
Financial income		27		933			2,204			542
Financial expenses		27		(4,454	)		(207	)		(236	)
Share of Loss of investment accounted for using the equity method				—			—			252
Loss before taxes				(56,396	)		(23,612	)		(29,114	)
Income taxes		28		1			6			—
Loss for the year [1]				(56,395	)		(23,606	)		(29,114	)
Weighted average number of shares outstanding				9,627,601			9,313,603			8,481,583
Basic and diluted loss per share (in €)				(5.86	)		(2.53	)		(3.43	)

^[1]  For 2017, 2016 and 2015, the Group does not have any non-controlling interests and the losses for the year are fully attributable to owners of the parent.

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

F-5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(LOSS)

(€‘000)	For the year ended December 31
	2017			2016			2015
Loss for the year		(56,395	)		(23,606	)		(29,114	)
Other comprehensive income/(loss)
Items that will not be reclassified to profit and loss		—			(107	)		16
Remeasurements of post employment benefit obligations, net of tax		—			(107	)		16
Items that may be subsequently reclassified to profit or loss		(769	)		277			485
Currency translation differences		(769	)		277			485
Other comprehensive income / (loss) for the year, net of tax		(769	)		170			501
Total comprehensive loss for the year		(57,164	)		(23,436	)		(28,613	)
Total Comprehensive loss for the year attributable to Equity Holders		(57,164	)		(23,436	)		(28,613	)

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

F-6

CONSOLIDATED STATEMENTS OF CASH FLOWS

(€‘000)	For the year ended December 31
	Notes		2017			2016			2015
Cash Flow from operating activities
Loss for the year				(56,395	)		(23,606	)		(29,114	)
Non-cash adjustments
Intangibles—Amortisation & Impairment		7		8,038			756			760
PP&E—Depreciation		8		966			760			273
Non-Cash expense for amendment of Celdara Medical and Dartmouth College agreements		25		10,620
Post-Employment Benefit				—			(24	)		(45	)
Deconsolidation of. CELYAD Asia Ltd.				—			—			60
Change in fair value of Contingent consideration and other financial liabilities		24		(193	)		1,633			—
Remeasurement of RCAs		25		(5,356	)		(2,154	)		(84	)
RCAs and Grants income				(1,376	)		(3,003	)		(1,647	)
Currency Translation Adjustment				—			(144	)		(21	)
Non-cash employee benefits expense – share based payments		16		2,569			2,847			795
Change in working capital
Trade receivables, other receivables, other non-current assets				(832	)		(1,018	)		633
Trade payables, other payable and accruals				(2,482	)		(740	)		1,066
Net cash used in operations				(44,441	)		(24,692	)		(27,282	)
Cash Flow from investing activities
Acquisitions of Property, Plant & Equipment		8		(851	)		(1,687	)		(811	)
Acquisitions of Intangible assets		7		(7	)		(95	)		(27	)
Disposals of fixed assets				—			78			—
Contingent consideration pay out		22		(5,107	)		—			—
Acquisition of short term investments		12		(10,749	)		(34,230	)		(5,000	)
Proceeds from short term investments		12		34,326			7,338			333
Acquisition of OnCyte LLC				—			—			(5,186	)
Acquisition of BMS SA				—			(1,560	)		—
Net cash (used in)/from investing activities				17,613			(30,157	)		(10,691	)
Cash Flow from financing activities
Proceeds from finance leases and bank borrowings		23		543			1,165			451
Repayments of finance leases and bank borrowings		23		(576	)		(399	)		(188	)
Proceeds from issuance of shares and exercise of warrants		15		625			—			109,154
Proceeds from RCAs & other grants		19		1,376			3,107			1,647
Repayment of advances		19		(1,364	)		(842	)		(529	)
Net cash (used in)/from financing activities				605			3,031			110,535
Net cash and cash equivalents at beginning of the period				48,357			100,174			27,633
Change in Cash and cash equivalents				(26,224	)		(51,818	)		72,542
Effects of exchange rate changes on cash and cash equivalents				1,120			—			—
Net cash and cash equivalents at the end of the period				23,253			48,357			100,175

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

F-7

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(€‘000)	Share capital (Note 15)		Share premium (Note 15)			Other reserves (Note 18)			Accumulated deficit			Total Equity
Balance as of 1st January 2015		24,615		53,302			19,982			(71,215	)		26,684
Capital increase in cash		7,607		112,104									119,711
Capital increase (Acquisition of OnCyte)		326		3,126									3,452
Exercise of warrants		23		196									219
Share-based payments				59			736						795
Transaction costs associated with capital increases				(10,776	)								(10,776	)
Total transactions with owners, recognized directly in equity		7,956		104,709			736			0			113,401
Loss for the year										(29,114	)		(29,114	)
Currency Translation differences							487						487
Remeasurements of defined benefit obligation										16			16
Total comprehensive gain/(loss) for the year							487			(29,098	)		(28,611	)
Balance as of December 31, 2015		32,571		158,010			21,205			(100,313	)		111,473
Share-based payments							2,848						2,848
Total transactions with owners, recognized directly in equity		—		—			2,848			—			2,848
Loss for the year										(23,606	)		(23,606	)
Currency Translation differences							277						277
Remeasurements of defined benefit obligation										(107	)		(107	)
Total comprehensive gain/(loss) for the year		—		—			277			(23,713	)		(23,436	)
Balance as of December 31, 2016		32,571		158,010			24,330			(124,026	)		90,885
Capital increase resulting from Celdara and Dartmouth College agreements amendment		1,141		9,479									10,620
Exercise of warrants		625											625
Share-based payments				2,808			(239	)					2,569
Total transactions with owners, recognized directly in equity		1,766		12,287			(239	)					13,814
Loss for the year										(56,395	)		(56,395	)
Currency Translation differences							(769	)					(769	)
Total comprehensive gain/(loss) for the year		—		—			(769	)		(56,395	)		(57,164	)
Balance as of December 31, 2017		34,337		170,297			23,322			(180,421	)		47,535

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

F-8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1: The Company

Celyad SA (“the Company”) and its subsidiaries (together, “the Group”) is a clinical-stage biopharmaceutical company focused on the development of specialized CAR-T cell-based therapies. Celyad utilizes its expertise in cell engineering to target cancer. Celyad’s Natural Killer Receptor based T-Cell (CAR-T NKR) platform has the potential to treat a broad range of solid and hematologic tumors.

Celyad SA was incorporated on July 24, 2007 under the name “Cardio3 BioSciences”. Celyad is a limited liability company (“Société Anonyme”) governed by Belgian law with its registered office at Axis Parc, Rue Edouard Belin 12, B-1435 Mont-Saint-Guibert, Belgium (company number 0891.118.115). The Company’s ordinary shares are listed on Euronext Brussels and Euronext Paris regulated markets and the Company’s ADS are listed on the NASDAQ Global Market under the ticker symbol CYAD.

The group has four fully owned subsidiaries of which Biological Manufacturing Services SA is located in Belgium, and Celyad Inc., CorQuest Medical, Inc.; and OnCyte, LLC in the United Sates.

These consolidated financial statements of Celyad for the three years ended December 31, 2017 include Celyad SA and its subsidiaries. These statements were approved by the Board of Directors on April 5, 2018.

Note 2: General information and Statement of Compliance

The significant accounting policies used for preparing the consolidated financial statements are explained here below.

Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for :

• Financial instruments – Fair value through profit or loss

• Contingent consideration and other financial liabilities

• Post-employment benefits liability

The policies have been consistently applied to all the years presented, unless otherwise stated. The consolidated financial statements are presented in euro and all values are presented in thousands (€000) except when otherwise indicated. Amounts have been rounded off to the nearest thousand and in certain cases, this may result in minor discrepancies in the totals and sub-totals disclosed in the financial tables.

Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively, IFRSs) as issued by the International Accounting Standards Board (IASB) and are also prepared in accordance with IFRS as adopted by the European Union.

The preparation of the consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, are areas where assumptions and estimates are significant to the financial statements. They are disclosed in Note 5.

Changes to accounting standards and interpretations

There were no new standards or interpretations effective for the first time for periods beginning on or after 1 January 2017 that had a significant effect on the Group’s financial statements, although an amendment to IAS 7 ‘Statement of Cash Flows’ has resulted in a reconciliation of liabilities from financing activities disclosed for the first time in Note 21.

The Group elected not to early adopt the following new Standards, Interpretations and Amendments, which have been issued by the IASB and/or the IFRIC, but which are not yet effective as per December 31, 2017 and/or net yet adopted by the European Union as per December 31, 2017:

F-9

• IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018) is the standard issued as part of a wider project to replace IAS 39. IFRS 9 introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held; defines a new expected-loss impairment model that will require more timely recognition of expected credit losses; and introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new hedge accounting model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities. IFRS 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value.

• Regarding the classification and measurement of financial assets, the impact is limited since the Group does not hold equity or debt investments.

• Likewise, the impact in the Group of the new guidance on impairment of financial assets is very limited considering the nature of financial assets held and specifically the current low amount of trade receivables.

• The Group does not currently apply hedge accounting.

• There are no substantial changes to the measurement of financial liabilities under the new guidance.

Considering all the above and the characteristics of the financial instruments held by the Company, management has analysed the potential implications of the adoption of this standard and has concluded that it will not significantly affect its future consolidated financial statements.

• IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018). The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.

For the years presented, the most significant revenue sources of the Company were the license agreements with Novartis and ONO Pharmaceuticals. Management has analyzed the contracts using the guidance under the new standard and has concluded that the adoption of IFRS 15 will not materially impact the consolidated financial statements to be issued in 2018. In this respect, the licensing revenue relating to Novartis and ONO agreements which will be reported for the years 2017 and 2016, has been concluded by management as follows:

• in accordance with ‘Licensing’ Application Guidance set forth in IFRS 15—Appendix B, para. B52 until B63: it shall not be subject to any recognition restatement, as both license agreements concluded by the company to date qualify as ‘right-to-use’ licenses ;

• in order to comply with the ‘Principal vs. Agent’ guidance set forth in IFRS 15 Appendix B, para. B34 until B38: it shall be grossed up for an amount of €1.5 million for the financial year ending 31 December 2016, with the same counterpart in ‘cost of licensing’ (expense).

IFRS 15 implementation shall thus have no impact on the gross margin previously reported under IAS 18, it shall have a limited presentation impact for the year 2016 only, as summarized in the table below:

€‘000	2017			Restatement		2017			2016			Restatement			2016
	IFRS 15					IAS 18			IFRS 15						IAS 18
Licensing revenue		3,540			0		3,540			9,929			1,489			8,440
Cost of licensing		(515	)		0		(515	)		(1,489	)		(1,489	)		0
Net Revenue from licensing		3,025			0		3,025			8,440			0			8,440

• IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019) replaces the existing lease accounting requirements and, in particular, represents a significant change in the accounting and reporting of leases that were previously classified as ‘operating leases’ under IAS 17, with more assets and liabilities to be reported on the balance sheet and a different recognition of lease costs.

F-10

The Group has identified its lease contracts, and is currently in the process of capturing the relevant data needed under the new standard, in order to analyze the impact of adopting IFRS 16. The Company had total contractual obligations for operating leases of €3.8 million as at 31 December 2017 (€3.4 million as at 31 December 2016). The Company has not yet decided on the transition approach to be used.

Other Standards, Interpretations and Amendments to Standards: a number of other amendments to standards are effective for annual periods beginning after 1 January 2017, and have not been listed above because of either their non-applicability to or their immateriality to the Group’s consolidated financial statements.

Going concern

The Group is pursuing a strategy to develop therapies to treat unmet medical needs in oncology. Management has prepared detailed budgets and cash flow forecasts for the years 2018 and 2019. These forecasts reflect the strategy of the Group and include significant expenses and cash outflows in relation to the development of selected research programs and products candidates.

Based on its current scope of activities, the Group estimates its cash and cash equivalents and short term investments as of 31 December 2017 is sufficient to cover its cash requirements at least until the end of the first quarter of 2019. After due consideration of the above, the Board of Directors determined that management has an appropriate basis to conclude on the continuity of the Group’s business over the next 12 months from balance sheet date, and hence it is appropriate to prepare the financial statements on a going concern basis.

Note 3: Accounting Principles

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date control ceases.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

Business Combinations

The Group applies the acquisition method to account for business combinations.

The consideration transferred for the acquisition of a subsidiary is measured at the aggregate of the fair values of the assets transferred, the liabilities incurred or assumed and the equity interests issued by the Group at the date of the acquisition. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Acquisition-related costs are expensed as incurred.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in profit or loss, in accordance with IAS 39 if applicable. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Euros, which is the Group’s presentation currency.

Transactions and balances

Foreign currency transactions (mainly USD) are translated into the functional currency using the applicable exchange rate on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.

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Foreign currency exchange gains and losses arising from settling foreign currency transactions and from the retranslation of monetary assets and liabilities denominated in foreign currencies at the reporting date are recognized in the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as of the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

Group companies

The results and financial position of all group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• Income and expenses for each income statement are translated at average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• All resulting translation differences are recognized in other comprehensive income.

Revenue

So far, the revenue generated by the Group relate to either the sale of licenses or the sale of medical devices.

Licensing revenue

Celyad enters into license and/or collaboration agreements with third-party biopharmaceutical partners. Revenue under these arrangements may include non-refundable upfront payments, product development milestone payments, commercial milestone payments and/or sales-based royalties payments.

Upfront payments

Licence fees representing non-refundable payments received at the time of signature of licence agreements are recognized as revenue upon signature of the licence agreements when the Company has no significant future performance obligations and collectability of the fees is assured.

Milestone payments

Milestone payments represent amounts received from our customers or collaborators, the receipt of which is dependent upon the achievement of certain scientific, regulatory, or commercial milestones. We recognize milestone payments when the triggering event has occurred, there are no further contingencies or services to be provided with respect to that event, and the co-contracting party has no right to require refund of payment. The triggering event may be scientific results achieved by us or another party to the arrangement, regulatory approvals, or the marketing of products developed under the arrangement.

Royalty revenue

Royalty revenues arise from our contractual entitlement to receive a percentage of product sales achieved by co-contracting parties. As we have no products approved for sale, we have not received any royalty revenue to date. Royalty revenues, if earned, will be recognized on an accrual basis in accordance with the terms of the collaboration agreement when sales can be determined reliably and there is reasonable assurance that the receivables from outstanding royalties will be collected.

Sales of goods (medical devices)

Sales of medical devices are recognized when Celyad has transferred to the buyer the significant risks and rewards incidental to the ownership of the goods. Sales of medical devices generated by the Group until 2017 are associated with C-Cath_ez, its proprietary catheter.

Government Grants (Other operating income)

The Group’s current other operating income is generated from (i) government grants received from the European Commission under the Seventh Framework Program (“FP7”) and (ii) government grants received from the Regional government (“Walloon Region” or “Region”) in the form of recoverable cash advances (RCAs).

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Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Once a government grant is recognized, any related contingent liability (or contingent asset) is treated in accordance with IAS 37.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate.

Recoverable cash advances (RCAs)

As explained above, the Group receives grants from the Regional government in the form of recoverable cash advances (RCAs).

RCAs are dedicated to support specific development programs. All RCA contracts, in essence, consist of three phases, i.e., the “research phase”, the “decision phase” and the “exploitation phase”. During the research phase, the Group receives funds from the Region based on statements of expenses. In accordance with IAS 20.10A and IFRS Interpretations Committee (IC)’s conclusion that contingently repayable cash received from a government to finance a research and development (R&D) project is a financial liability under IAS 32, ‘Financial instruments; Presentation’, the RCAs are initially recognised as a financial liability at fair value, determined as per IFRS 9/IAS 39.

The benefit (RCA grant component) consisting in the difference between the cash received (RCA proceeds) and the above-mentioned financial liability’s fair value (RCA liability component) is treated as a government grant in accordance with IAS 20.

The RCA grant component is recognized in profit or loss on a systematic basis over the periods in which the entity recognizes the underlying R&D expenses subsidized by the RCA.

The RCAs liability component (RCA financial liability) is subsequently measured at amortized cost using the cumulative catch-up approach under which the carrying amount of the liability is adjusted to the present value of the future estimated cash flows, discounted at the liability’s original effective interest rate. The resulting adjustment is recognized within profit or loss.

At the end of the research phase, the Group should within a period of six months decide whether or not to exploit the results of the research phase (decision phase). The exploitation phase may have a duration of up to 10 years. In the event the Group decides to exploit the results under an RCA, the relevant RCA becomes contingently refundable, and the fair value of the RCA liability adjusted accordingly, if required.

When the Group does not exploit (or ceases to exploit) the results under an RCA, it has to notify the Region of this decision. This decision is of the sole responsibility of the Group. The related liability is then discharged by the transfer of such results to the Region. Also, when the Group decides to renounce to its rights to patents which may result from the research, title to such patents will be transferred to the Region. In that case, the RCA liability is extinguished.

R&D Tax credits

Since 2013, the Company had applied for R&D tax credit, a tax incentive measure for European SME’s set-up by the Belgian federal government. When capitalizing its R&D expenses under tax reporting framework, the Company may either i) get a reduction of its taxable income (at current income tax rate applicable, ie. 33.99% in Celyad’s case) ; or ii) if no sufficient taxable income available, get a cash settlement of the tax incentive stand-alone, calculated on the amounts capitalized. Such settlement occurs at the earliest 5 financial years after the tax credit application filed by the Company.

Considering that R&D tax credits are ultimately paid by the public authorities, the related benefit is treated as a government grant under IAS 20 and booked into other operating income, in order to match the R&D expenses subsidized by the grant. See Note 23.

Other government grants

The Group has received and will continue to apply for grants from European (FP₇) and Regional authorities. These grants are dedicated to partially finance early stage projects such as fundamental research, applied research, prototype design, etc.

To date, all grants received are not associated to any conditions. As per contract, grants are paid upon submission by the Group of statement of expenses. The Company incurs project expenses first and asks for partial refunding according to the terms of the contracts.

These government grants are recognized in profit or loss on a systematic basis over the periods in which the entity recognizes the underlying R&D expenses subsidized.

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Intangible assets

The following categories of intangible assets apply to the current Group operations

Separately acquired intangible assets

Intangible assets acquired from third parties are recognised at cost, if and only if it is probable that future economic benefits associated with the asset will flow to the Group, and that the cost can be measured reliably. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. The useful life of intangible assets is assessed as finite, except for Goodwill and IPRD assets (discussed below). They are amortised over the expected useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.

Patents, Licences and Trademarks

Licences for the use of intellectual property are granted for a period corresponding to the intellectual property of the assets licensed. Amortisation is calculated on a straight-line basis over this useful life.

Patents and licences are amortized over the period corresponding to the IP protection and are assessed for impairment whenever there is an indication these assets may be impaired. Indication of impairment is related to the value of the patent demonstrated by the preclinical and clinical results of the technology.

Software

Software only concerns acquired computer software licences. Software is capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three to five years on a straight-line basis.

Intangible assets acquired in a business combination

Goodwill

A goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. Goodwill is measured as a residual at the acquisition date, as the excess of the fair value of the consideration transferred and the assets and liabilities recognised (in accordance with IFRS 3).

Goodwill has an indefinite useful life and is not amortized but tested for impairment at least annually or more frequently whenever events or changes in circumstances indicate that goodwill may be impaired, as set forth in IAS 36 (Impairment of Assets).

Goodwill arising from business combinations is allocated to cash generating units, which are expected to receive future economic benefits from synergies that are most likely to arise from the acquisition. These cash generating units form the basis of any future assessment of impairment of the carrying value of the acquired goodwill.

In process research and development costs

The In-process research and development costs (“IPRD”) acquired as part of a business combination are capitalized as an indefinite-lived intangible asset until project has been completed or abandoned. In a business combination, IPRD is measured at fair value at the date of acquisition. Subsequent to initial recognition, it is reported at cost and is subject to annual impairment testing until the date the projects are available for use. At this moment, the IPRD will be amortized over its remaining useful economic life.

Subsequent R&D expenditure can be capitalized as part of the IPRD only to the extent that IPRD is in development stage, i.e. when such expenditure meets the recognition criteria of IAS 38. In line with biotech industry practice, Celyad determines that ‘development stage’ under IAS 38 is reached when the product candidate gets regulatory approval (upon Phase III completion). Therefore, any R&D expenditure incurred between the acquisition date and the development stage should be treated as part of research phase and expensed periodically in the income statement.

Internally generated intangible assets

Except qualifying development expenditure (discussed below), internally generated intangible assets are not capitalised. Expenditure is reflected in the income statement in the year in which the expenditure is incurred.

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Research and development costs

Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:

a) the technical feasibility of completing the intangible asset so that it will be available for use or sale.

b) its intention to complete the intangible asset and use or sell it.

c) its ability to use or sell the intangible asset.

d) how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.

e) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

f) its ability to measure reliably the expenditure attributable to the intangible asset during its development.

For the industry in which the Group operates, the life science industry, criteria a) and d) tend to be the most difficult to achieve. Experience shows that in the Biotechnology sector technical feasibility of completing the project is met when such project completes successfully Phase III of its development. For medical devices this is usually met at the moment of CE marking.

Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.

Amortisation of the asset begins when development has been completed and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in Research & Development expenses. During the period of development, the asset is tested for impairment annually, or earlier when an impairment indicator occurs. As of balance sheet date, only the development costs of C-Cath_ez have been capitalized and amortized over a period of 17 years which corresponds to the period over which the intellectual property is protected.

Property, plant and equipment

Plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Repair and maintenance costs are recognised in the income statement as incurred.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

• Land and buildings: 15 to 20 years

• Plant and equipment: 5 to 15 years

• Laboratory equipment: 3 to 5 years

• Office furniture: 3 to 10 years

• Leasehold improvements: 3 to 10 years (based on duration of office building lease)

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if applicable.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement.

Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

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The Group has performed sale and leaseback transactions. If the sale and leaseback transaction results in a finance lease, any excess of sales proceeds over the carrying amount is deferred and amortised over the lease term. If the transaction results in an operating lease and the transaction occurred at fair value, any profit or loss is recognised immediately.

Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating units (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used based on the discounted cash-flow model. For intangible assets under development (like IPRD), only the fair value less costs to sell reference is allowed in the impairment testing process.

Where the carrying amount of an asset or CGU exceeds its recoverable amount, an impairment loss is immediately recognized as an expense and the asset carrying value is written down to its recoverable amount.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. An impairment loss recognised on goodwill is however not reversed in a subsequent period.

As of balance sheet date, the Group has four cash-generating units which consist of the development and commercialization activities on its the following products, C-Cure, C-Cath_ez, Heart-Xs and CAR-T. Indicators of impairment used by the Group are the preclinical and clinical results obtained with the technology.

Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less. Cash and cash equivalents are carried in the balance sheet at nominal value.

Financial assets

Classification

The Group classifies its financial assets in the following category: loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise “cash and cash equivalents”, “short-term deposits”, “trade and other receivables” and ”Deposits”.

Initial recognition and measurement

All financial assets are recognised initially at fair value plus directly attributable transaction costs.

Subsequent measurement

After initial measurement, loans and receivables are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement.

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Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows.

The present value of the estimated future cash flows is discounted at the financial assets’ original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the income statement.

Financial liabilities

Classification

The Group’s financial liabilities include contingent consideration trade and other payables, bank overdrafts and loans and borrowings and other financial liabilities payable assumed in the context of acquisitions. The Group classifies its financial liabilities in the following category: financial liabilities measured at amortised cost using the effective interest method.

Initial recognition and measurement

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Contingent consideration

The contingent consideration is recognized and measured at fair value at the acquisition date. After initial recognition, contingent consideration arrangements that are classified as liabilities are re-measured at fair value with changes in fair value recognized in the income statement in accordance with IFRS 3 and IAS 39. Therefore, contingent payments will not be eligible for capitalization but will simply reduce the contingent consideration liability.

Details regarding the valuation of the contingent consideration are disclosed in Note 21.

Recoverable Cash advances

Recoverable cash advances granted by the Walloon Region are subsequently measured at amortized cost using the cumulative catch-up approach, as described above.

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Trade payables and other payables

After initial recognition, trade payables and other payables are measured at amortised cost using the effective interest method.

Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance expense in the income statement.

Derecognition

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

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Employee benefits

Post-employment plan

The Group operates a pension plan which requires defined contributions (DC) to be funded by the Group externally at an third-party insurance company. Under Belgian law, an employer must guarantee a minimum rate of return on the company’s contributions. Therefore, any pension plan (including DC plans) organized in Belgium is treated as defined benefit plans under IAS 19.

At balance sheet date, the minimum rates of return guaranteed by the Group are as follows, in accordance with the law of 18 December 2015:

• 1.75% for the employer’s contributions paid as from 1 January 2016 (variable rate based on Governemental bond OLO rates, with a minimum of 1.75% and a maximum of 3.75%);

• 3.25% (fixed rate) for the employer’s contributions paid until 31 December 2015

The cost of providing benefits is determined using the projected unit credit (PUC) method, with actuarial valuations being carried out at the end of each annual reporting period, with the assistance of an independent actuarial firm.

The liability recognized in the balance sheet in respect of the pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.

The current service cost of the defined benefit plan, recognized in the income statement as part of the operating costs, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements.

Past-service costs are recognized immediately in the income statement.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in the operating costs in the income statement.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to other comprehensive income in the period in which they arise.

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Short term benefits

Short-term employee benefits are those expected to be settled wholly before twelve months after the end of the annual reporting period during which employee services are rendered, but do not include termination benefits such as wages, salaries, profit-sharing and bonuses and non-monetary benefits paid to current employees.

The undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in an accounting period is recognised in that period. The expected cost of short-term compensated absences is recognised as the employees render service that increases their entitlement or, in the case of non-accumulating absences, when the absences occur, and includes any additional amounts an entity expects to pay as a result of unused entitlements at the end of the period.

Share-based payments

Certain employees, managers and members of the Board of Directors of the Group receive remuneration, as compensation for services rendered, in the form of share-based payments which are “equity-settled”.

Measurement

The cost of equity-settled share-based payments is measured by reference to the fair value at the date on which they are granted. The fair value is determined by using an appropriate pricing model, further details are given in the Note 16.

Recognition

The cost of equity-settled share-based payments is recorded as an expense, together with a corresponding increase in equity, over the period in which the service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.

The estimate of warrants to vest is revised at each reporting date. The change in estimates will be recorded as an expense with a corresponding correction in equity.

The expense or credit for a period accounted for in the income statement represents the movement in cumulative expense recognised as of the beginning and end of that period.

Modification

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award were met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

The incremental fair value granted is the difference between the fair value of the modified equity instrument and the original equity instrument, both estimated as at the date of the modification. If the modification occurs during the vesting period, the incremental fair value granted is included in the measurement of the amount recognized for services received over the period from the modification date until the date when the modified equity instruments vest, in addition to the amount based on the grant date fair value of the original equity instruments, which is recognized over the remainder of the original vesting period. If the modification occurs after vesting date, the incremental fair value granted is recognized immediately, or over the vesting period if the employee is required to complete an additional period of service before becoming unconditionally entitled to those modified equity instruments.

Cancellation

An equity-settled award can be forfeited with the departure of a beneficiary before the end of the vesting period, or cancelled and replaced by a new equity settled award. When an equity-settled award is forfeited, the previously recognised expenses is offset and credited in the income statement. When an equity-settled award is cancelled, the previously recognised expenses is offset and credited in the income statement However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Income taxes

Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

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Deferred tax liabilities are recognised for all taxable temporary differences, except:

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses (except if the deferred tax asset arises from the initial recognition of an asset or liability in a transaction other than a business combination and that, at the time of the transaction affects neither accounting nor taxable profit or loss), to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is not probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to income taxes levied by the same taxation authority or either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Earnings (loss) per share

The basic net profit/(loss) per share is calculated based on the weighted average number of shares outstanding during the period.

The diluted net profit/(loss) per share is calculated based on the weighted average number of shares outstanding including the dilutive effect of potentially dilutive ordinary shares such as warrants and convertible debts. Potentially dilutive ordinary shares should be included in diluted earnings (loss) per share when and only when their conversion to ordinary shares would decrease the net profit per share (or increase net loss per share).

Note 4. Risk Management

Financial risk factors

Interest rate risk

The interest rate risk is very limited as the Group has only a limited amount of finance leases and outstanding bank loans. So far, because of the materiality of the exposure, the Group did not enter into any interest hedging arrangements.

Credit risk

Seen the limited amount of trade receivables due to the fact that sales to third parties are not significant, credit risk arises mainly from cash and cash equivalents and deposits with banks and financial institutions. The Group only works with international reputable commercial banks and financial institutions.

Foreign exchange risk

The Group is exposed to foreign exchange risk as certain collaborations or supply agreements of raw materials are denominated in USD. Moreover, the Group has also investments in foreign operations, whose net assets are exposed to foreign currency translation risk (USD). So far, the Group did not enter into any currency hedging arrangements.

End of 2017, the foreign exchange risk exposure lied on the cash and short-term deposits denominated in USD.

EUR/USD	+2%	+1%	-1%	-2%
Unrealized foreign (loss) gain	-€660k	-€330k	+€330k	+€660k

A depreciation of 1% on the USD versus EUR would translate into an unrealized foreign exchange loss of €330k for the Group.

Liquidity risk

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.

F-20

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposit and finance leases.

The Group is exposed to liabilities and contingent liabilities as a result of the RCAs it has received from the Walloon Government, as we are required to make exploitation decisions.

We refer to Note 21 for an analysis of the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Capital management

The Group’s objectives when managing capital are to safeguard Celyad’ ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an adequate structure to limit to costs of capital.

Note 5. Critical accounting estimates and judgments

The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period.

Estimates and judgements 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. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

In the process of applying the Group’s accounting policies, management has made judgments and has used estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Going Concern

When assessing going concern, the company’s Board of directors considers mainly the following factors:

• the treasury available at balance sheet date

• the cash burn projected in accordance with approved budget for next 12-month period as from the date of the balance sheet

Recoverable Cash Advances received from the Walloon Region

As explained in note 3, accounting for RCAs requires initial recognition of the fair value of the loan received to determine the benefit of the below-market rate of interest shall be measured as the difference between the initial carrying value of the loan and the proceeds received. Loans granted to entities in their early stages of operations, for which there is significant uncertainty about whether any income will ultimately be generated and for which any income which will be generated will not arise until a number of years in the future, normally have high interest rates. Judgment is required to determine a rate which may apply to a loan granted on an open market basis.

In accordance with the RCA agreements, the following two components are assessed when calculating estimated future cash flows:

• 30% of the initial RCA, which is repayable when the company exploits the outcome of the research financed; and

• a remaining amount, which is repayable based on a royalty percentage of future sales milestones.

After initial recognition, RCA liabilities are measured at amortized cost using the cumulative catch up method requiring management to regularly revise its estimates of payments and to adjust the carrying amount of the financial liability to reflect actual and revised estimated cash flows.

Measurement and impairment of non-financial assets

With the exception of goodwill and certain intangible assets for which an annual impairment test is required, the Group is required to conduct impairment tests where there is an indication of impairment of an asset. Measuring the fair value of non-financial assets requires judgement and estimates by management. These estimates could change substantially over time as new facts emerge or new strategies are taken by the Group. Further details are contained in Note 7.

F-21

Business combinations

In respect of acquired businesses by the Group, significant judgement is made to determine whether these acquisitions are to be considered as an asset deal or as a business combination. Determining whether a particular set of assets and activities is a business should be based on whether the integrated set is capable of being conducted and managed as a business by a market participant. Moreover, managerial judgement is particularly involved in the recognition and fair value measurement of the acquired assets, liabilities, contingent liabilities and contingent consideration. In making this assessment management considers the underlying economic substance of the items concerned in addition to the contractual terms.

Contingent consideration provisions

The Group records a liability for the estimated fair value of contingent consideration arising from business combinations. The estimated amounts are the expected payments, determined by considering the possible scenarios of forecast sales and other performance criteria, the amount to be paid under each scenario, and the probability of each scenario, which is then discounted to a net present value. The estimates could change substantially over time as new facts emerge and each scenario develops.

Deferred Tax Assets

Deferred tax assets for unused tax losses are recognized to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Further details are contained in Note 27.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 16.

Note 6. Operating segment information

The chief operating decision-maker (“CODM”), who is responsible for allocating resources and assessing performance of the Group, has been identified as the Board of Directors that makes strategic decisions. Since 2015, the group is reporting two operating segments, respectively the cardiology segment, regrouping the Cardiopoiesis platform, the Corquest platform and C-Cath_ez, and the immuno-oncology segment regrouping all assets developed based on the platform acquired from OnCyte, LLC.

Although the Group is currently active in Europe and in the US, no geographical financial information is currently available given the fact that the core operations are currently still in a study phase. No disaggregated information on product level or geographical level or any other level is currently existing and hence also not considered by the Board for assessing performance or allocating resources.

CODM is not reviewing assets by segments, hence no segment information per assets is disclosed. As per 31 December 2017, all of the Group non-current assets are located in Belgium, except (i) the goodwill and IPRD of OnCyte also located in the US and (ii) the leasehold improvements made in the offices of Celyad Inc. located in Boston, Massachusetts, USA.

In 2015, the management and the CODM have determined that as from 2015, there are two operating segments, respectively the cardiology segment, regrouping the Cardiopoiesis platform, the Corquest platform and C-Cath_ez, and the immuno-oncology segment regrouping all assets developed based on the platform acquired from OnCyte, LLC.

Although the Group is currently active in Europe and in the US, no geographical financial information is currently available given the fact that the core operations are currently still in a study phase. No disaggregated information on product level or geographical level or any other level is currently existing and hence also not considered by the Board for assessing performance or allocating resources.

CODM is not reviewing assets by segments, hence no segment information per assets is disclosed. As per 31 December 2016, all of the Group non-current assets are located in Belgium, except (i) the Corquest intellectual property, valued at €1,5 million which is located in the US, (ii) the goodwill and IPRD of OnCyte also located in the US and (iii) the leasehold improvements made in the offices of Celyad Inc. located in Boston, Massachusetts, USA.

During 2015, marginal revenues were generated from external customers. All revenues generated relate to sales of C-Cath_ez to a limited number of customers located in the US.

F-22

€‘000	For the year ended December 31, 2015
	Cardiology			Immuno- oncology			Corporate			Group Total
Revenue		3									3
Cost of Sales		(1	)								(1	)
Gross Profit		2			—			—			2
Research & Development expenses		(20,634	)		(2,132	)					(22,766	)
General & Administrative expenses		—			—			(7,230	)		(7,230	)
Other operating Income & Charges		218			104						322
Operating Profit (Loss)		(20,414	)		(2,028	)		(7,230	)		(29,672	)
Net Financial Charges		—			—			306			306
Share of Loss of investments accounted for using the equity method		—			—			252			252
Profit (Loss) before taxes		(20,414	)		(2,028	)		(6,672	)		(29,114	)
Income Taxes		—			—			—			—
Profit (Loss) for the year 2015		(20,414	)		(2,028	)		(6,672	))		(29.114	)

In August 2016, the Group has received a non-refundable upfront payment as a result of the ONO agreement. This upfront payment has been fully recognised upon receipt as there are no performance obligations nor subsequent deliverables associated to the payment. The non-refundable upfront payment was rather received as a consideration for the sale of licence to ONO. In 2016, the total revenue generated through sales of C-Cath_ez was € 0.1 million.

€‘000	For the year ended December 31, 2016
	Cardiology			Immuno- oncology			Corporate			Group Total
Revenue		84			8,440						8,523
Cost of Sales		(53	)								(53	)
Gross Profit		31			8,440			—			8,471
Research & Development expenses		(12,704	)		(14,971	)					(27,675	)
General & Administrative expenses		—			—			(9,744	)		(9,744	)
Other operating Income & Charges		1,540			1,800						3,340
Operating Profit (Loss)		(11,133	)		(4,731	)		(9,744	)		(25,609	)
Net Financial Charges		—			—			1,997			1,997
Profit (Loss) before taxes		(11,133	)		(4,731	)		(7,747	)		(23,612	)
Income Taxes		—			—			6			6
Profit (Loss) for the year 2016		(11,133	)		(4,731	)		(7,742	)		(23,606	)

In 2017, there were some important one-time non-recurrent items impacting significantly the consolidated income statement. The Board decided to isolate these non-recurrent items in the presentation of the consolidated income statement.

€‘000	For the year ended December 31, 2017
	Cardiology			Immuno- oncology			Corporate			Group Total
Revenues		35			3,505						3,540
Cost of Sales					(515	)					(515	)
Gross Profit		35			2,990			—			3,025
Research & Development expenses		(2,881	)		(20,027	)		—			(22,908	)
General & Administrative expenses		—			—			(9,310	)		(9,310	)
Other operating Income & Charges		1,070			151			1,370			2,590
Non-recurring operating (expenses)/income		(1,932	)		—			(24,341	)		(26,273	)
Operating Profit (Loss)—EBIT		(3,708	)		(16,886	)		(32,281	)		(52,876	)
Net Financial Charges		—			—			(3,518	)		(3,518	)
Profit (Loss) before taxes		(3,708	)		(16,886	)		(35,799	)		(56,396	)
Income Taxes		—			—			1			1
Profit (Loss) for the year 2017		(3,708	)		(16,886	)		(35,798	)		(56,395	)

F-23

Note 7: Intangible assets

The change in intangible assets is broken down as follows, per class of assets:

(€‘000)	Goodwill			In-process research and development			Development costs			Patents, licences, trademarks			Software			Total
Cost:
At January 1st 2016		1,003			38,254			1,084			13,337			107			53,785
Additions		—			—			—			—			95			95
Currency translation adjustments		37			1,401			—			—			—			1,438
Divestiture		—			—			—			—			—			—
At December 31, 2016		1,040			39,655			1,084			13,337			203			55,318
Additions		—			—			—			—						—
Currency translation adjustments		(126	)		(4,801	)		—			—			3			(4,924	)
Divestiture		—			—			—			—			(93	)		(93	)
At December 31, 2017		914			34,854			1,084			13,337			111			50,301
Accumulated amortisation
At January 1st 2016								(212	)		(4,698	)		(85	)		(4,995	)
Amortisation charge		—			—			(66	)		(675	)		(15	)		(756	)
At December, 31 2016		—			—			(279	)		(5,373	)		(100	)		(5,752	)
Amortisation charge		—			—			(66	)		(675	)		(7	)		(748	)
Divestiture		—			—			—			—			(3	)		(3	)
Impairment (non-recurring loss)		—			—			—			(7,289	)					(7,289	)
At December 31, 2017		—			—			(345	)		(13,337	)		(110	)		(13,792	)
Net book value
Cost		1,040			39,655			1,084			13,337			203			55,318
Accumulated amortisation		—			—			(279	)		(5,373	)		(100	)		(5,752	)
At December 31, 2016		1,040			39,655			805			7,964			103			49,566
Cost		914			34,854			1,084			13,337			111			50,300
Accumulated amortisation		—			—			(345	)		(13,337	)		(110	)		(13,792	)
At December 31, 2017		914			34,854			739			—			1			36,508

The capitalised development costs relate to the development of C-Cath_ez. Since May 2012 and the CE marking of C-Cath_ez, the development costs of C-Cath_ez are capitalized and amortized over the estimate residual intellectual property protection as of the CE marking (14 and 15 years respectively in 2015 and 2014). No other development costs have been capitalised up till now. All C-Cure and CYAD-01 related development costs have been assessed as not being eligible for capitalisation and have therefore been recognised in the income statement as research and development expenses. Software is amortized over a period of 3 to 5 years.

Goodwill, In-process R&D, Patents, Licenses and Trademarks relate to the following items:

• Goodwill and In-process research and development resulted from the purchase price allocation exercise performed for the acquisition of OnCyte, LLC in 2015. As of balance sheet date, Goodwill and In-Process Research and Development are not amortized but tested for impairment.

F-24

• A licence, granted in August 2007 by Mayo Clinic (for an amount of €9.5 million) upon the Group’s inception and an extension to the licensed field of use, granted on 29 October 2010 for a total amount of €2.3 million. The licence and its extension were amortised straight line over a period of 20 years, in accordance with the license term. A €6.0 million impairment loss has been recognised on the remaining net book value for the year ended 31 December 2017.

• Patents acquired upon the acquisition of CorQuest Medical, Inc. in November 2014. The fair value of these intellectual rights was then determined to be €1.5 million. These patents were amortized over 18 years, corresponding to the remaining intellectual property protection filed for the first patent application in 2012. A €1.2 million impairment loss has been recognized on the remaining net book value for the year ended 31 December 2017.

Impairment testing

Impairment testing is detailed below.

OnCyte, LLC goodwill and IPRD impairment test

Goodwill and In-process research and development (IPRD) exclusively relate to the acquisition of OnCyte, LLC which was acquired in 2015. Management performs annual impairment test on goodwill and on ‘indefinite lived asset’ that are not amortized in accordance with the accounting policies stated in Note 3. The impairment test has been performed at the level the immune-oncology segment corresponding to the CGU to which the goodwill and the IPRD belong. The recoverable amount has been calculated based on a fair value less costs to sell model, which require the use of assumptions. The calculations use cash flow projections based on 12-year period business plan based on probability of success of the CYAD-01 product candidate as well as extrapolations of projected cash flows resulting from the future expected sales associated with CYAD-01 and license revenue from our allogeneic platform. CGU recoverable value, determined accordingly, exceeds its carrying amount. Accordingly, no impairment loss was recognized neither on goodwill nor on the IPRD intangible assets at balance sheet date.

Management’s key assumptions about projected cash flows when determining fair value less costs to sell are as follows:

• Discount rate (WACC) : 14.5%, in line with industry standard for biotechnological companies and WACC used by Equity Research companies following the Group

• Sales revenue growth in the Terminal Value a decline of 15% of the estimated product revenue has been considered in the Terminal Value (for infinite extrapolation purposes)

• Probabilities of Success (PoS) based on Clinical Development Success Rates observed for the period 2006-2015 determined by independent business intelligence consulting companies for hematologic and solid oncological diseases. Probability of our product candidates getting on the market were used as follows:

PoS	Phase I to II			Phase II to III			Phase III to NDA/BLA			NDA/BLA to Approval			Cumulative PoS
Hem		62	%		29	%		53	%		86	%		8.1	%
Solid		64	%		23	%		34	%		80	%		4	%

The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. The following table presents the sensitivity analyses of the recoverable amount of the CGU associated to OnCyte, LLC:

Sensitivity analysis		Discount rate (WACC)
Terminal Revenue Growth rate	Impact on model value	14.5%	15.25%	16.0%
	-25%	-21%	-30%	-38%
	-20%	-18%	-28%	-37%
	-15%	Model Reference	-25%	-34%

Even at the lower terminal revenue growth and higher discount rate, the recoverable value of the CGU exceeded its carrying amount at balance sheet date.

F-25

C-Cure and Corquest impairment test

Pursuant to the strategic decision of the Board to focus all the efforts of the Group on the development of the immuno-oncology platform and the lack of strategic business development opportunities identified for the C-Cure (Mayo Licenses) and Heart-Xs assets (Corquest patents), intangible assets related to C-Cure and Heart-Xs have been fully impaired (and associated liabilities derecognized – see Note 23) as of 31 December 2017, resulting in the recognition of non-recurring expenses of respectively €0.7 million and €1.2 million. The recoverable amount of these CGU is assessed to be zero, which explained a 100% impairment expense as at December 31, 2017.

Note 8: Property, plant and equipment

(€‘000)	Equipment			Furniture			Leasehold			Total
Cost:
At January 1st, 2016		2,375			150			915			3,440
Additions		610			315			2,066			2,990
Acquisition of BMS SA		1,065									1,065
Disposals		(51	)					(34	)		(85	)
At December 31, 2016		3,999			465			2,947			7,410
Additions		823						129			952
Disposals		(281	)		(9	)		(9	)		(299	)
Currency translation adjustments		(3	)		(11	)		(8	)		(23	)
At December 31, 2017		4,537			445			3,059			8,041
Accumulated depreciation:
At January 1st 2016		(1,589	)		(150	)		(565	)		(2,304	)
Depreciation charge		(380	)		(33	)		(347	)		(760	)
Acquisition of BMS SA		(790	)		—			—			(790	)
Disposals		7			—			—			7
At December 31, 2016		(2,752	)		(184	)		(912	)		(3,847	)
Depreciation charge		(424	)		(56	)		(486	)		(966	)
Disposals		50			9			2			61
Currency translation adjustments		1			1						2
At December 31, 2017		(3,126	)		(229	)		(1,395	)		(4,750	)
Net book value
Cost		3,999			465			2,947			7,410
Accumulated depreciation		(2,752	)		(184	)		(912	)		(3,847	)
At December 31, 2016		1,246			281			2,035			3,563
Cost		4,537			445			3,059			8,041
Accumulated depreciation		(3,126	)		(229	)		(1,395	)		(4,750	)
At December 31, 2017		1,412			215			1,664			3,290

Property, Plant and Equipment is mainly composed of office furniture, leasehold improvements, and laboratory equipment.

The prior year’s acquisition of BMS was accounted for as an asset deal. The fair value of the assets acquired is concentrated in one identifiable asset, i.e. the GMP laboratories. The difference between the purchase price and the net assets of BMS at the date of acquisition is then allocated entirely to the Property, Plant and Equipment.

Finance leases

Lease contracts considered as finance lease relate to some contracts with financial institutions and relate to laboratory and office equipment. All finance leases have a maturity of three years. A key common feature is that they include a bargain option to purchase the leased asset at the end of the three-year-lease term.

The total of future minimum lease payments at the end of the reporting period, and their present value reported on the balance sheet, are similar amounts.

F-26

Note 9: Other non-current assets

(€‘000)	As of December 31,
	2017		2016
Deposits		273		311
R&D Tax credit receivable		1,161
Total		1,434		311

The non-current financial assets are composed of security deposits paid to the lessors of the building leased by the Group and to the Social Security administration. In 2017, the Company recognized also for the first time a receivable on the amounts to collect from the federal government as R&D tax credit (€1.2 million). The R&D tax credit receivable was previously considered subject to high uncertainty. The management estimate was updated at year-end 2017 based on the expected cash inflows as from the year 2020.

Note 10 : Inventories and Work in Progress

Not applicable

Note 11: Trade, Other Receivables and Other current assets

(€‘000)	As of December 31,
	2017		2016
Trade receivable		64		54
Advance deposits		152		663
Other receivables		17		643
Total Trade and Other receivables		233		1,359
Prepaid expenses		744		615
VAT receivable		391		393
Other receivables		1,120		413
Total Other current assets		2,255		1,420

Impairment of receivables is assessed on an individual basis at the end of each accounting year.

At balance sheet dates presented, no receivable was overdue. There were no carrying amounts for trade and other receivables denominated in foreign currencies and no impairments were recorded.

At 31 December 2017, income tax receivables include an open balance for two fiscal years (2017 and 2016), while only one (2016) at 31 December 2016. As of 31 December 2016, other trade receivables mainly relate to credit notes to be received from suppliers and advance deposits made to the THINK trial clinical vendors.

Note 12: Short term investments

(€‘000)	As of December 31,
	2017		2016
Short term investments		10,653		34,230
Total		10,653		34,230

Amounts recorded as short-term investments in the current assets correspond to short term deposits with fixed interest rates. Short-term deposits are made for variable periods (from 1 to 12 months) depending on the short-term cash requirements of the Group. Interest is calculated at the respective short-term deposit rates.

F-27

Note 13: Cash and cash equivalents

(€‘000)	As of December 31,
	2017		2016
Cash at bank and on hand		23,253		48,357
Total		23,253		48,357

Cash at banks earn interest at floating rates based on daily bank deposit rates.

The credit quality of cash and cash equivalents and short-term deposit balances may be categorised between A-2 and A+ based on Standard and Poor’s rating at 31 December 2017.

Note 14: Investment in Subsidiaries

The consolidation scope of Celyad Group is as follows, for both current and comparative years presented in these year-end financial statements:

Name	Country of Incorporation and Place of Business	Nature of Business		Proportion of ordinary shares directly held by parent (%)			Proportion of ordinary shares held by the group (%)			Proportion of ordinary shares held by non-controlling interests (%)
Celyad Inc.	USA		Biopharma		100	%		100	%		0	%
OnCyte, LLC	USA		Biopharma		100	%		100	%		0	%
CorQuest Medical, Inc.	USA		Medical Device		100	%		100	%		0	%
Biological Manufacturing Services SA	Belgium		GMP laboratories		100	%		100	%		0	%

Biologicial Manufacturing Services SA (BMS) was acquired in May 2016. BMS owns GMP laboratories. BMS rent its laboratories to Celyad SA since 2009 and until April 30, 2016. Until the acquisition, BMS was considered as a related party to Celyad.

Cardio3 Inc was incorporated in 2011 to support clinical and regulatory activities of the Group in the US. Cardio3 Inc was renamed in Celyad Inc. in 2015. The growth of the activities of Celyad Inc. is associated to the development of the US clinical and regulatory activities of the Group in the US. Celyad Inc. shows a net loss for the year ended December 31, 2017 and December 31, 2016 of respectively $1,975K and $2,634K.

CorQuest Medical, Inc. was acquired on 5 November 2014. CorQuest Medical, Inc. is developing Heart XS, a new access route to the left atrium.

OnCyte, LLC was acquired on January 21, 2015. OnCyte, LLC is the company holding the CAR T-Cell portfolio of clinical-stage immuno-oncology assets, as disclosed in our previous annual reports. OnCyte LLC has been liquidated in March 2018.

Note 15: Share Capital

The number of shares issued is expressed in units.

	As of December 31,
	2017		2016		2015
Total number of issued and outstanding shares		9,867,844		9,313,603		9,313,603
Total share capital (€‘000)		34,337		32,571		32,571

As of December 31, 2017, the share capital amounts to €34,337k represented by 9,867,844 fully authorized and subscribed and paid-up shares with a nominal value of €3.48 per share. This number does not include warrants issued by the Company and granted to certain directors, employees and non-employees of the Company.

History of the capital of the Company

The Company has been incorporated on July 24, 2007 with a share capital of €62,500 by the issuance of 409,375 class A shares. On August 31, 2007, the Company has issued 261,732 class A shares to Mayo Clinic by way of a contribution in kind of the upfront fee that was due upon execution of the Mayo Licence for a total amount of €9,500,000.

Round B Investors have participated in a capital increase of the Company by way of a contribution in kind of a convertible loan (€2,387,049) and a contribution in cash (€4,849,624 of which €1,949,624 uncalled) on December 23, 2008; 204,652 class B shares have been issued at the occasion of that capital increase. Since then, the capital is divided in 875,759 shares, of which 671,107 are class A shares and 204,652 are class B shares.

F-28

On October 29, 2010, the Company closed its third financing round resulting in a capital increase totalling €12,100,809. The capital increase can be detailed as follows:

• capital increase in cash by certain existing investors for a total amount of €2,609,320.48 by the issuance of 73,793 class B shares at a price of €35.36 per share;

• capital increase in cash by certain existing investors for a total amount of €471,240 by the issuance of 21,000 class B shares at a price of €22.44 per share;

• capital increase in cash by certain new investors for a total amount of €399,921.60 by the issuance of 9,048 class B shares at a price of €44.20 per share;

• exercise of 12,300 warrants (“Warrants A”) granted to the Round C investors with total proceeds of €276,012 and issuance of 12,300 class B shares. The exercise price was €22.44 per Warrant A;

• contribution in kind by means of conversion of the loan C for a total amount of €3,255,524.48 (accrued interest included) by the issuance of 92,068 class B shares at a conversion price of €35.36 per share;

• contribution in kind by means of conversion of the loan D for a total amount of €2,018,879.20 (accrued interest included) by the issuance of 57,095 class B shares at a conversion price of €35.36 per share. The loan D is a convertible loan granted by certain investors to the Company on 14 October 2010 for a nominal amount of €2,010,000.

• contribution in kind of a payable towards Mayo Foundation for Medical Education and Research for a total amount of €3,069,911 by the issuance of 69,455 class B shares at a price of €44.20 per share. The payable towards Mayo Clinic was related to (i) research undertaken by Mayo Clinic in the years 2009 and 2010, (ii) delivery of certain materials, (iii) expansion of the Mayo Clinical Technology Licence Contract by way the Second Amendment dated October 18, 2010.

On May 5, 2011, pursuant the decision of the Extraordinary General Meeting, the capital was reduced by an amount of €18,925,474 equivalent to the outstanding net loss as of 31 December 2010.

On 31 May 2013, the Company closed its fourth financing round, the ‘Round D financing’. The convertible loans E, F, G and H previously recorded as financial debt were converted in shares which led to an increase in equity for a total amount of €28,645k of which € 5,026k is accounted for as capital and € 6,988k as share premium. The remainder (€ 16,613k) is accounted for as other reserves. Furthermore, a contribution in cash by existing shareholders of the Company led to an increase in share capital and issue premium by an amount of €7,000k.

At the Extraordinary Shareholders Meeting of June 11, 2013 all existing classes of shares of the Company have been converted into ordinary shares. Preferred shares have been converted at a 1 for 1 ratio and subsequently.

On July 5, 2013, the Company completed its Initial Public Offering. The Company issued 1,381,500 new shares at €16.65 per shares, corresponding to a total of €23,002k.

On July 15, 2013, the over-allotment option was fully exercised for a total amount of €3,450k corresponding to 207,225 new shares. The total IPO proceeds amounted to €26,452k and the capital and the share premium of the Company increased accordingly. The costs relating to the capital increases performed in 2013 amounted to €2.8 million and are presented in deduction of share premium.

On June 11, 2013, the Extraordinary General Shareholders’ Meeting of Celyad SA authorized the Board of Directors to increase the share capital of the Company, in one or several times, and under certain conditions set forth in extenso in the articles of association. This authorization is valid for a period of five years starting on July 26, 2013 and until July 26, 2018. The Board of Directors may increase the share capital of the Company within the framework of the authorized capital for an amount of up to €21,413k.

Over the course of 2014, the capital of the Company was increased in June 2014 by way of a capital increase of €25,000k represented by 568,180 new shares fully subscribed by Medisun International Limited.

In 2014, the capital of the Company was also increased by way of exercise of Company warrants. Over four different exercise periods, 139,415 warrants were exercised resulting in the issuance of 139,415 new shares. The capital and the share premium of the Company were therefore increased respectively by €488k and €500k.

In January 2015, the shares of OnCyte, LLC were contributed to the capital of the Company, resulting in a capital increase of €3,452k and the issuance of 93,087 new shares.

In 2015, the Company conducted two fund raising. A private placement was closed in March resulting in a capital increase of €31,745k represented by 713,380 new shares. The Company also completed an IPO on Nasdaq in June, resulting in a capital increase of €87,965k represented by 1,460,000 new shares.

Also in 2015, the capital of the Company was also increased by way of exercise of Company warrants. Over three different exercise periods, 6,749 warrants were exercised resulting in the issuance of 6,749 new shares. The capital and the share premium of the Company were therefore increased respectively by €23k and €196k.

F-29

Over 2017 the capital of the Company was also increased by way of exercise of Company warrants. Over four different exercise periods, 225,966 warrants were exercised resulting in the issuance of 225,966 new shares. The capital of the Company was therefore increased by €625k.

In August 2017, pursuant to the amendment of the agreements with Celdara Medical LLC and Dartmouth College, the CAR-T technology inventors, the capital of the Company was increased by way of contribution in kind of a liability owed to Celdara Medical LLC. 328,275 new shares were issued at a price of €32.35 (being Celyad share’s average market price for the 30 days preceding the transaction) and the capital and the share premium of the Company were therefore increased respectively by €1,141k and €9,479k

without this had an impact on the cash and cash equivalents, explaining why such transaction is not disclosed in the consolidated statement of cashflows.

As of December 31, 2017 all shares issued have been fully paid.

The following share issuances occurred since the incorporation of the Company:

Category	Transaction date	Description	# of shares		Par value (in €)
Class A shares	24 July 2007	Company incorporation		409,375		0.15
Class A shares	31 August 2007	Contribution in kind (upfront fee Mayo Licence)		261,732		36.30
Class B shares	23 December 2008	Capital increase (Round B)		137,150		35.36
Class B shares	23 December 2008	Contribution in kind (Loan B)		67,502		35.36
Class B shares	28 October 2010	Contribution in cash		21,000		22.44
Class B shares	28 October 2010	Contribution in kind (Loan C)		92,068		35.36
Class B shares	28 October 2010	Contribution in kind (Loan D)		57,095		35.36
Class B shares	28 October 2010	Contribution in cash		73,793		35.36
Class B shares	28 October 2010	Exercise of warrants		12,300		22.44
Class B shares	28 October 2010	Contribution in kind (Mayo receivable)		69,455		44.20
Class B shares	28 October 2010	Contribution in cash		9,048		44.20
Class B shares	31 May 2013	Contribution in kind (Loan E)		118,365		38,39
Class B shares	31 May 2013	Contribution in kind (Loan F)		56,936		38,39
Class B shares	31 May 2013	Contribution in kind (Loan G)		654,301		4,52
Class B shares	31 May 2013	Contribution in kind (Loan H)		75,755		30,71
Class B shares	31 May 2013	Contribution in cash		219,016		31,96
Class B shares	4 June 2013	Conversion of warrants		2,409,176		0,01
Ordinary shares	11 June 2013	Conversion of Class A and Class B shares in ordinary shares		4,744,067		—
Ordinary shares	5 July 2013	Initial Public Offering		1,381,500		16.65
Ordinary shares	15 July 2013	Exercise of over-allotment option		207,225		16.65
Ordinary shares	31 January 2014	Exercise of warrants issued in September 2008		5,966		22.44
Ordinary shares	31 January 2014	Exercise of warrants issued in May 2010		333		22.44
Ordinary shares	31 January 2014	Exercise of warrants issued in January 2013		120,000		4.52
Ordinary shares	30 April 2014	Exercise of warrants issued in September 2008		2,366		22.44
Ordinary shares	16 June 2014	Capital increase		284,090		44.00
Ordinary shares	30 June 2014	Capital increase		284,090		44.00
Ordinary shares	4 August 2014	Exercise of warrants issued in September 2008		5,000		22.44
Ordinary shares	4 August 2014	Exercise of warrants issued in October 2010		750		35.36
Ordinary shares	3 November 2014	Exercise of warrants issued in September 2008		5,000		22.44
Ordinary shares	21 January 2015	Contribution in kind (Celdara Medical LLC)		93,087		37.08
Ordinary shares	7 February 2015	Exercise of warrant issued in May 2010		333		22.44
Ordinary shares	3 March 2015	Capital increase		713,380		44.50
Ordinary shares	11 May 2015	Exercise of warrant issued in May 2010		500		22.44
Ordinary shares	24 June 2015	Capital increase		1,460,000		60.25
Ordinary shares	4 August 2015	Exercise of warrant issued in May 2010		666		22.44
Ordinary shares	4 August 2015	Exercise of warrant issued in October 2010		5,250		35.36
Ordinary shares	1 February 2017	Exercise of warrant issued in May 2013		207,250		2.64
Ordinary shares	2 May 2017	Exercise of warrant issued in May 2013		4,900		2.64
Ordinary shares	1 August 2017	Exercise of warrant issued in May 2013		7,950		2.64
Ordinary shares	23 August 2017	Contribution in kind (Celdara Medical LLC)		328,275		32.35
Ordinary shares	9 November 2017	Exercise of warrant issued in May 2013		5,000		2.64
Ordinary shares	9 November 2017	Exercise of warrant issued in October 2010		866		35.36

F-30

(€000)
Date	Nature of the transactions	Share Capital		Share premium		Number of shares		Nominal value
	Balance as of January 1, 2016		32,571		158,010		9,313,603		205,233
	Balance as of December 31, 2016		32,571		158,010		9,313,603		205,233
	Issue of shares related to exercise of warrants		625		—		225,966		625
	Capital increase resulting from Celdara and Dartmouth College agreements amendment		1,141		9,479		328,275		10,620
	Balance as of December 31, 2017		34,337		167,489		9,867,844		216,478

The total number of shares issued and outstanding as of December 31, 2017 totals 9,867,844 and are ordinary common shares.

Note 16: Share-based payments

The Company operates an equity-based compensation plan, whereby warrants are granted to directors, management and selected employees and non-employees. The warrants are accounted for as equity-settled share-based payment plans since the Company has no legal or constructive obligation to repurchase or settle the warrants in cash.

Each warrant gives the beneficiaries the right to subscribe to one common share of the Company. The warrants are granted for free and have an exercise price equal to the fair market price of the underlying shares at the date of the grant, as determined by the Board of Directors of the Company.

Movements in the number of warrants outstanding and their related weighted average exercise prices are as follows:

			2017				2016
	Weighted average exercise price (in €)		Number of warrants		Weighted average exercise price (in €)		Number of warrants
Outstanding as of January 1st,		20.92		571,444		11.61		319,330
Granted		30.37		367,100		33.10		343,550
Forfeited		28.50		31,817		34.20		91,436
Exercised		2.77		225,966		—		—
Expired		22.44		5,799		—		—
At December 31,		31.76		674,962		20.92		571,444

There were 225,966 warrants exercised in 2017, of which 866 warrants issued in October 2010 and 225,100 warrants issued in May 2013.

Warrants outstanding at the end of the year have the following expiry date and exercise price:

Warrant plan issuance date	Vesting date	Expiry date	Number of warrants outstanding as of 31 December, 2017		Number of warrants outstanding as of 31 December, 2016		Exercise price per share
05 May 2010 (warrants B)	05 May 2010	05 May 2016		—		5,000		35.36
05 May 2010 (warrants C)	05 May 2013	05 May 2016		—		799		22.44
29 Oct 2010	29 Oct 2013	31 Oct 2020		766		1,632		35.36
06 May 2013	06 May 2016	06 May 2023		7,000		232,100		2.64
05 May 2014	05 May 2017	05 May 2024		60,697		62,864		36.66
05 November 2015	05 November 2018	05 Nov 2025		253,065		269,049		32.86
08 December 2016	08 December 2019	08 Dec 2021		45,000		—
29 June 2017	29 June 2020	31 July 2022		308,434		—
				674,962		571,444

Warrants issued on October 29, 2010

At the Extraordinary Shareholders Meeting of October 29, 2010, a plan of 79,500 warrants was approved. Warrants were offered to Company’s employees, non-employees and directors. Out of the 79,500 warrants offered, 61,050 warrants were accepted by the beneficiaries and 766 warrants are outstanding on the date hereof.

F-31

The 61,050 warrants were vested in equal tranches over a period of three years. The warrants become 100% vested after the third anniversary the issuance. The warrants that are vested can only be exercised at the end of the third calendar year following the issuance date, thus starting on January 1^st, 2014. The exercise price amounts to €35.36. Warrants not exercised within 10 years after issue become null and void.

Warrants issued on May 6, 2013

At the Extraordinary Shareholders Meeting of May 6, 2013, a plan of 266,241 warrants was approved. Warrants were offered to Company’s employees and management team. Out of the 266,241 warrants offered, 253,150 warrants were accepted by the beneficiaries and 7,000 warrants are outstanding on the date hereof.

The 253,150 warrants were vested in equal tranches over a period of three years. The warrants become 100% vested after the third anniversary the issuance. The warrants that are vested can only be exercised at the end of the third calendar year following the issuance date, thus starting on January 1^st, 2017. The exercise price amounts to €2.64. Warrants not exercised within 10 years after issue become null and void.

Warrants issued on May 5, 2014

At the Extraordinary Shareholders Meeting of May 5, 2014, a plan of 100,000 warrants was approved. Warrants were offered to Company’s new comers (employees, non-employees and directors) in five different tranches. Out of the warrants offered, 94,400 warrants were accepted by the beneficiaries and 60,697 warrants are outstanding on the date hereof.

The 100,000 warrants were vested in equal tranches over a period of three years. The warrants become 100% vested after the third anniversary the issuance. The warrants that are vested can only be exercised at the end of the third calendar year following the issuance date, thus starting on 1^st of January 2018. The exercise price of the different tranches ranges from €33.49 to €45.05. Warrants not exercised within 10 years after issue become null and void.

Warrants issued on November 5, 2015

At the Extraordinary Shareholders Meeting of November 5, 2015, a plan of 466,000 warrants was approved. Warrants were offered to Company’s new comers (employees, non-employees and directors) in five different tranches. Out of the warrants offered, 343,550 warrants were accepted by the beneficiaries and 253,065 warrants are outstanding on the date hereof.

These warrants vest in equal tranches over a period of three years. The warrants become 100% vested after the third anniversary of issuance. The warrants that are vested can only be exercised as from the end of the third calendar year following the issuance date, thus starting on 1^st of January 2019. The exercise price of the different tranches ranges from €15.90 to €34.65. Warrants not exercised within 10 years after issue become null and void.

Warrants issued on December 8, 2016

On December 8, 2016, the Board of Directors issued a new plan of 100,000 warrants. An equivalent number of warrants were cancelled from the remaining pool of warrants of the plan of 5 November 2015. Warrants were offered to Company’s new comers (employees and non-employees) in two different tranches. Out of the warrants offered, 45,000 warrants were accepted by the beneficiaries and 45,000 warrants are outstanding on the date hereof.

These warrants will be vested in equal tranches over a period of three years. The warrants become 100% vested after the third anniversary of issuance. The warrants that are vested can only be exercised as from the end of the third calendar year following the issuance date, thus starting on 1^st of January 2020. The exercise price of the different tranches ranges from €17.60 to €36.81. Warrants not exercised within 5 years after issue become null and void.

Warrants issued on June 29, 2017

At the Extraordinary Shareholders Meeting of June 29, 2017, a plan of 520,000 warrants was approved. Warrants were offered in different tranches to beneficiaries (employees, non-employees and directors). Out of the warrants offered, 312,100 warrants were accepted by the beneficiaries and 308,434 warrants are outstanding on the date hereof.

These warrants will be vested in equal tranches over a period of three years. The warrants become 100% vested after the third anniversary of issuance. The warrants that are vested can only be exercised as from the end of the third calendar year following the issuance date, thus starting on 1^st of January 2021. The exercise price of the different tranches ranges from €31.34 to €47.22. Warrants not exercised within 5 years after issue become null and void.

F-32

The fair value of the warrants has been determined at grant date based on the Black-Scholes formula. The variables, used in this model, are:

	Warrants issued on
	29 October 2010			31 January 2013			6 May 2013			5 May 2014			5 November 2015
Number of warrants issued		79,500			140,000			266,241			100,000			466,000
Number of warrants granted		61,050			120,000			253,150			94,400			343,550
Number of warrants not fully vested as of 31 December 2017		—			—			—			29,799			263,065
Average exercise price (in €)		35.36			4.52			2.64			35.79			32.63
Expected share value volatility		35.60	%		35.60	%		39.55	%		67.73	%		60.53	%
Risk-free interest rate		3.21	%		2.30	%		2.06	%		1.09	%		0.26	%
Average fair value (in €)		9.00			2.22			12.44			26.16			21.13
Weighted average remaining contractual life		3.78			6.09			6.35			7.35			8.62

	Warrants issued on
	December 2016			June 2017
Number of warrants issued		100,000			520,000
Number of warrants granted		45,000			312,100
Number of warrants not fully vested as of 31 December 2017		35,000			308,434
Average exercise price (in €)		24.39			31.53
Expected share value volatility		61.03	%		60.27	%
Risk-free interest rate		-0.40	%		-0.23	%
Average fair value (in €)		12.25			15.67
Weighted average remaining contractual life		3.84			4.50

The total net expense recognised in the income statement for the outstanding warrants totals € 2,569k for 2017 (2016: € 2,847k).

Note 17: Post-employment Benefits

(€‘000)	As of December 31,
	2017		2016
Pension obligations		204		204
Total		204		204

The Group operates a pension plan which requires contributions to be made by the Group to an insurance company. The pension plan is a defined contribution plan. However, because of the Belgian legislation applicable to 2nd pillar pension plans (so-called “Law Vandenbroucke”), all Belgian defined contribution plans have to be accounted for under IFRS as defined benefit plans because of the minimum guaranteed returns on these plans.

At the end of each year, Celyad is measuring and accounting for the potential impact of defined benefit accounting for these pension plans with a minimum fixed guaranteed return.

The contributions to the plan are determined as a percentage of the yearly salary. There are no employee contributions. The benefit also includes a death in service benefit.

The amounts recognised in the balance sheet are determined as follows:

	As of December 31,
(€‘000)	2017			2016
Present value of funded obligations		1,705			1,509
Fair value of plan assets		(1,500	)		(1,305	)
Deficit of funded plans		204			204
Total deficit of defined benefit pension plans		204			204
Liability in the balance sheet		204			204

The movement in the defined benefit liability over the year is as follows:

(€‘000)	Present value of obligation			Fair value of plan assets			Total
As of 1st of January 2016		1,212			1,089			121
Current service cost		192						192
Interest expense/(income)		33			29			4
		1,437			1,118			319
Remeasurements
- Return on plan assets, excluding amounts included in interest expense/(income)					1			1
- Actuarial (Gain)/loss due to change in actuarial assumptions		77						77
- Actuarial (Gain)/loss due to experience		29						29
		106			1			107
Employer contributions:					221			(221	)
Benefits Paid		(33	)		(33	)		—
At December 31, 2016		1,509			1,305			204
As of 1st of January 2017		1,509			1,305			204
Current service cost		201						201
Interest expense/(income)		32			26			6
		1,742			1,331			411
Remeasurements
- return on plan assets, excluding amounts included in interest expense/(income)					5			(5	)
- (Gain)/loss from change in actuarial assumptions		—						—
- Experience (gains)/losses		5			—			5
		5			5			—
Employer contributions:					206			(206	)
Benefits Paid		(30	)		(30	)		(1	)
At December 31, 2017		1,704			1,499			204

The income statement charge included in operating profit for post-employment benefits amount to:

(€‘000)	2017			2016
Current service cost		201			192
Interest expense on DBO		32			33
Expected return on plan assets		(26	)		(28	)
Net periodic pension cost		207			197

The re-measurements included in other comprehensive loss amount to:

(€‘000)	2017			2016
Effect of changes in actuarial assumptions		—			77
Effect of experience adjustments		5			28
(Gain)/Loss on assets for the year		(5	)		1
Remeasurement of post-employment benefit obligations		—			106

Plan assets relate all to qualifying insurance policies. The significant actuarial assumptions as per 31 December 2017 were as follows:

Demographic assumptions (for both current and comparative years presented in these year-end financial statements):

• Mortality tables: mortality rates-5 year for the men and 5 year for the women

• Withdrawal rate: 5% each year

• Retirement age: 65 years

F-33

Economic assumptions:

• Yearly inflation rate: 1,75%

• Yearly salary raise: 1,5% (above inflation)

• Yearly discount rate: 1.90%

If the discount rate would decrease/increase with 0,5%, the defined benefit obligation would increase respectively decrease with 5% and 6%.

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position.

Through its defined benefit pension plan, the Group is exposed to a number of risks, the most significant of which are detailed below:

• Changes in discount rate: a decrease in discount rate will increase plan liabilities;

• Inflation risk: the pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the plan’s assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit.

The investment positions are managed by the insurance company within an asset-liability matching framework that has been developed to achieve long-term investments that are in line with the obligations under the pension schemes.

Expected contributions to pension plans for the year ending December 31, 2018 are k€198.

Note 18: Other reserves

(€‘000 )	Share based payment reserve			Convertible loan		Translation			Total
Balance as of January 1st 2015		3,362			16,631		(10	)		19,983
Vested share-based payments		736								736
Currency Translation differences subsidiaries							485			485
Balance as of December 31, 2015		4,098			16,631		475			21,205
Vested share-based payments		2,847								2,847
Currency Translation differences subsidiaries							277			277
Balance as of December 31, 2016		6,946			16,631		752			24,329
Vested share-based payments		(239	)							(239	)
Currency Translation differences subsidiaries							(769	)		(769	)
Balance as of December 31, 2017		6,707			16,631		(16	)		23,322

Note 19: Advances repayable

(€‘000)	2017		2016
Total Non-Current portion as of 1st of January		7,330		10,484
Total Non-Current portion as of December 31,		1,544		7,330
Total Current portion as of 1st of January		1,108		898
Total Current potion as of December 31,		226		1,108

The Group receives government support in the form of recoverable cash advances from the Walloon Region in order to compensate the research and development costs incurred by the Group. Refer to Note 3.

At balance sheet date, the Company has been granted total recoverable cash advances amounting to €26.7 million. Out of this total amount : i) €22.6 million have been received to date ; ii) out of the active contracts, an amount of €2.6 million should be received in 2018 or later depending on the progress of the different programs partially funded by the Region ; and iii) an amount of €1.5 million refer to contracts for which the exploitation has been abandoned (and thus will not be received).

F-34

For further details, reference is made to the table below which shows (i) the year for which amounts under those agreements have been received and initially recognised on the balance sheet for the financial liability and deferred grant income components and (ii) a description of the specific characteristics of those recoverable cash advances including repayment schedule and information on other outstanding advances. In 2018 and 2019, we will be required to make exploitation decisions on our remaining outstanding RCAs related to the CAR-T platform.

(in €‘000)					Amounts received for the years ended December 31,								Amounts to be received				As of December 31,2017
Id	Project		Contractual amount		Prior years		2016		2017		Cumulated cashed in		2018 and beyond		Status		Amount reimbursed (cumulative)
5160		C-Cure		2,920		2,920		—				2,920		—		Abandoned		0
5731		C-Cure		3,400		3,400		—				3,400		—		Abandoned		0
5914		C-Cure		700		687		—				687		—		Abandoned		180
5915		C-Cathez		910		910		—				910		—		Exploitation		390
5951		Industrialization		1,470		866		—				866		—		Abandoned		0
6003		C-Cure		1,729		1,715		—				1,715		—		Abandoned		0
6230		C-Cure		1,084		1,084		—				1,084		—		Abandoned		0
6363		C-Cure		1,140		1,126		—				1,126		—		Abandoned		1,536
6548		Industrialization		660		541		—				541		—		Abandoned		0
6633		C-Cathez		1,020		1,020		—				1,020		—		Exploitation		153
6646		Proteins		1,200		450		—				450		—		Abandoned		450
7027		C-Cathez		2,500		2,232		268				2,500		—		Exploitation		150
7246		C-Cure		2,467		1,480		740		247		2,467		—		Abandoned		0
7502		CAR-T Cell		2,000		—		1,800		200		2,000		—		Research		0
7685		THINK		3,496		—		—		873		873		2,623		Research		0
Total				26,696		18,431		2,808		1,320		22,559		2,623				2,859

Regarding active contracts (in exploitation status):

The contract 5915 has the following specific characteristics:

• funding by the Region covers from 45% to 70% of the budgeted project costs;

• certain activities have to be performed within the Region;

• in case of an outlicensing agreement or a sale to a third party, Celyad will have to pay 10% of the price received (excl. of VAT) to the Region;

• sales-independent reimbursements, sales-dependent reimbursements, and amounts due in case of an outlicensing agreement or a sale to a third party, are, in the aggregate, capped at 100% of the principal amount paid out by the Region;

• sales-dependent reimbursements payable in any given year can be set-off against sales-independent reimbursements already paid out during that year;

• the amount of sales-independent reimbursement and sales-dependant reimbursement may possibly be adapted in case of an outlicensing agreement, a sale to a third party or industrial use of a prototype or pilot installation, when obtaining the consent of the Walloon Region to proceed thereto.

The other contracts have the following specific characteristics:

• funding by the Region covers from 45 to 70% of the budgeted project costs;

• certain activities have to be performed within the European Union;

• sales-independent reimbursements represent in the aggregate 30% of the principal amount;

• sales-dependent reimbursements range between 50% and 200% (including accrued interest) of the principal amount of the RCA depending on the actual outcome of the project compared to the outcome projected at the time of grant of the RCA (below or above projections);

• interests (at Euribor 1 year (as applicable on the first day of the month in which the decision to grant the relevant RCA was made + 100 basis points) accrue as of the 1st day of the exploitation phase;

• the amount of sales-independent reimbursement and sales-dependant reimbursement may possibly be adapted in case of an outlicensing agreement, a sale to a third party or industrial use of a prototype or pilot installation, when obtaining the consent of the Region to proceed thereto.

• sales-independent reimbursements and sales-dependent reimbursements are, in the aggregate (including the accrued interests), capped at 200% of the principal amount paid out by the Region;

• in case of bankruptcy, the research results obtained by the Company under those contracts are expressed to be assumed by the Region by operation of law.

F-35

The table below summarizes, in addition to the specific characteristics described above, certain terms and conditions for the recoverable cash advances:

Contract number	Research phase		Percentage of total project costs			Turnover- dependent reimbursement			Turnover-independent reimbursement	Interest rate accrual	Amounts due in case of licensing (per year) resp. Sale
(€‘000)
5160		01/05/05-30/04/08		70	%		0.18	%	Consolidated with 6363	N/A	N/A
5731		01/05/08-31/10/09		70	%		0.18	%	Consolidated with 6363	N/A	N/A
5914		01/09/08-30/06/11		70	%		5.00	%	€30k in 2012 and €70k each year after	N/A	10% with a minimum of 100/Y
5915		01/08/08-30/04/11		70	%		5.00	%	€40k in 2012 and €70k each year after	N/A	10% with a minimum of 100/Y
5951		01/09/08-31/12/14		70	%		5.00	%	€100k in 2014 and €150k each year after	N/A	10% with a minimum of 200/Y
6003		01/01/09-30/09/11		60	%		0.18	%	Consolidated with 6363	N/A	N/A
6230		01/01/10-31/03/12		60	%		0.18	%	Consolidated with 6363	N/A	N/A
6363		01/03/10-30/06/12		60	%		0.18	%	From €103k to €514k starting in 2013 until 30% of advance is reached	Starting on 01/01/13	N/A
6548		01/01/11-31/03/13		60	%		0.01	%	From €15k to €29k starting in 2014 until 30% of advance is reached	Starting on 01/10/13	N/A
6633		01/05/11-30/11/12		60	%		0.27	%	From €10k to €51k starting in 2013 until 30% of advance is reached	Starting on 01/06/13	N/A
6646		01/05/11-30/06/15		60	%		0.01	%	From €12k to €60k starting in 2015 until 30% of advance is reached	Starting on 01/01/16	N/A
7027		01/11/12-31/10/14		50	%		0.33	%	From €25k to €125k starting in 2015 until 30% of advance is reached	Starting on 01/01/15	N/A
7246		01/01/14-31/12/16		50	%		0,05	%	From €30k to €148k starting in 2017 until 30% of advance is reached.	Starting in 2017	N/A
7502		01/12/15-30/11/18		45	%		0.19	%	From €20k to €50k starting in 2019 until 30% is reached.	Starting 2019	N/A
7685		1/01/2017-31/12/2019		45	%		0.33	%	From €35k to €70k starting in 2019 until 30% is reached.	Starting 2020	N/A

Note 20: Due dates of the Financial Liabilities

The following table discloses aggregate information about material contractual obligations and periods in which payments were due as of December 31, 2017 and 2016. Future events could cause actual payments to differ from these estimates.

(€‘000)	Total		Less than one year		One to three years		Three to five years		More than five years
As of December 31, 2017
Finance leases		909		427		461		21		0
Bank loan		536		209		326		0		0
Operating leases		3,759		857		1,289		725		888
Pension obligations		204		0		0		0		204
Advances repayable (current and non-current)		1,770		226		412		248		884
Total		7,178		1,719		2,488		994		1,976

(€‘000)	Total		Less than one year		One to three years		Three to five years		More than five years
As of December 31, 2016
Finance leases		735		354		315		66		—
Bank loan		743		207		417		118		—
Operating leases		3,377		456		945		733		1,244
Pension obligations		204								204
Advances repayable (current and non-current)		8,438		1,108		1,812		1,598		3,920
Total		13,497		2,125		3,489		2,515		5,368

F-36

Note 21: Trade payables and other current liabilities

(€‘000)	As of December 31,
	2017		2016
Total trade payables		4,800		8,098
Other current liabilities
Social security		306		294
Payroll accruals and taxes		947		1,206
Other current liabilities		1,029		8
Total other current liabilities		2,282		1,508

Trade payables (composed of supplier’s invoices and accruals for supplier’s invoices not yet received at closing) are non-interest bearing and are normally settled on a 45-day terms.

Other current liabilities are non-interest bearing and have an average term of six months. Fair value equals approximately the carrying amount of the trade payables and other current liabilities.

The Other current liabilities include the short-term debts to employees and social welfare and tax agencies.

No discounting was performed to the extent that the amounts do not present payments terms longer than one year at the end of each fiscal year presented.

Note 22: Financial instruments on balance sheet

Financial instruments not reported at fair value on balance sheet

The carrying and fair values of financial instruments that are not carried at fair value in the financial statements was as follows at December 31, for current and comparative year-ends:

	As of December 31, 2017
(€‘000)	Loans and receivables		Fair value
Assets as per balance sheet
Deposits		273		273
Trade and other receivables		2,905		2,905
Other current assets		744		744
Short-term investments		10,653		10,653
Cash and cash equivalents		23,253		23,253
Total		37,828		37,828

For the above-mentioned financial assets, the carrying amount as per December 31, 2017 is a reasonable approximation of their fair value.

	As of December 31, 2017
(€‘000)	Financial liabilities at amortised cost		Fair value
Liabilities as per balance sheet
Bank loans		536		536
Finance lease liabilities		909		909
RCAs liability		1,770		1,770
Trade payables and other current liabilities		7,083		7,083
Total		10,298		10,298

For the above-mentioned financial liabilities, the carrying amount as per December 31, 2017 is a reasonable approximation of their fair value.

	As of December 31, 2016
(€‘000)	Loans and receivables		Fair value
Assets as per balance sheet
Deposits		311		311
Trade and other receivables		1,359		1,359
Other current assets		1,420		1,420
Short term investment		34,230		34,230
Cash and cash equivalents		48,357		48,357
Total		85,677		85,677

For the above-mentioned financial assets, the carrying amount as per December 31, 2016 is a reasonable approximation of their fair value.

	As of December 31, 2016
(€‘000)	Financial liabilities at amortized cost		Fair value
Liabilities as per balance sheet
Bank loans		742		742
Finance lease liabilities		735		735
RCAs liability		8,438		8,438
Trade payables and other current liabilities		9,606		9,606
Total		19,521		19,521

For the above-mentioned financial liabilities, the carrying amount as per December 31, 2016 is a reasonable approximation of their fair value.

Financial instruments reported at fair value on balance sheet

Contingent consideration and other financial liabilities are reported at fair value in the statement of financial position using Level 3 fair value measurements for which the Group developed unobservable inputs:

(€‘000)	As of December 31, 2017
	Level I		Level II		Level III		Total
Assets
		—		—		—		—
Total Assets		—		—		—		—
Liabilities
Contingent consideration and other financial liabilities		—		—		19,583		19,583
Total Liabilities		—		—		19,583		19,583

The change in their balances is detailed as follows:

CONTINGENT CONSIDERATION AND OTHER FINANCIAL LIABILITIES ROLL FORWARD

(€’000)	For the year ended
EUR	2017			2016
Opening balance contingent consideration at January 1st		28,179			25,529
Milestone payment		(5,341	)
Fair value adjustment		(4,225	)		1,633
Currency Translation Adjustment		(3,064	)		1,017
Closing balance contingent consideration at December 31,		15,549			28,179
Other financial liabilities		4,034			—
Closing balance contingent consideration and other financial liabilities at December 31		19,583			28,179

The decrease of the contingent consideration and other financial liabilities at balance sheet date is due to a milestone payment to Celdara Medical LLC and to the USD foreign exchange effect (USD depreciation against EUR compared to prior year-end). Note that as from 2017 this capture also includes an amount of €4.0 million relating to development, non-sales and sales milestones to Dartmouth College.

F-37

The contingent consideration captures the commitments disclosed under Note 28. It does not include any amount for contingent consideration payable relating to any sub-licensing agreements entered into or to be entered into by Celyad for the reasons that:

✓ any contingent consideration payable would be due only when Celyad earns revenue from such sub-licensing agreements, and in an amount representing a fraction of that revenue; and

✓ the development of the underlying product candidates by the sub-licensees is not under Celyad’s control, making a reliable estimate of any future liability impossible.

Contingent consideration sensitivity analysis

A sensitivity analysis has been performed on the key assumptions driving the fair value of the contingent consideration. The main drivers are i) the discount rate (WACC), ii) the sales long-term growth rate in the terminal value and iii) the probabilities of success for our product candidates to get commercialized.

	Discount rate (WACC)
	10.5%			12.5%			14.5%		16.5%			18.5%
Cont. consideration (MUSD)		34.5			28.3			23.5		19.8			16.8
Impact (%)		+47	%		+20	%		—		-16	%		-29	%
	Sales long-term growth rate in the terminal value
	-25%			-20%			-15%		-10%			-5%
Cont. consideration (MUSD)		21.9			22.5			23.5		24.3			26.0
Impact (%)		-7	%		-4	%		—		+4	%		+11	%

To determine the contingent consideration, we used the same probabilities of success than for impairment testing purposes (see Note 7):

PoS	Phase I to II			Phase II to III			Phase III to NDA/BLA			NDA/BLA to Approval			Cumulative PoS
Hem		62	%		29	%		53	%		86	%		8.1	%
Solid		64	%		23	%		34	%		80	%		4	%

In order to assess the sensitivity to this driver, we apply here an incremental probability factor to the bottom-line cumulative PoS disclosed below:

	Probabilities of Success
	-20%			-10%			PoS model		+10%			+20%
Cont. consideration (MUSD)		18.8			21.2			23.5		25.8			28.1
Impact (%)		-20	%		-10	%		—		+10	%		+20	%

Note 23: Changes in liabilities arising from financial activities

The change in bank loans balances is detailed as follows:

BANK LOANS FINANCIAL LIABILITY ROLL FORWARD

(€‘000)	For the year ended
EUR	2017			2016
Opening balance at January 1st,		742			40
New bank loans		—			794
Repayments		(207	)		(92	)
Closing balance at December 31,		536			742

F-38

The change in finance lease liability balances is detailed as follows:

FINANCE LEASES FINANCIAL LIABILITY ROLL FORWARD
(€‘000)	For the year ended
EUR	2017			2016
Opening balance at January 1st,		735			826
New finance leases		543			220
Repayments		(369	)		(311	)
Closing balance at December 31,		909			735

The change in recoverable cash advance liability balances is detailed as follows:

RECOVERABLE CASH ADVANCE LIABILITY ROLL FORWARD
(€‘000)	For the year ended
EUR	2017			2016
Opening balance at January 1st,		8,438			11,382
Repayments		(1,233	)		(842	)
Remeasurement		(80	)		(2,102	)
Derecognition of liability (non-recurring gain)		(5,356	)
Closing balance at December 31,		1,770			8,438

The decrease of the recoverable cash advances liability at balance sheet date is due to the repayments of contractual turnover independent lump sums to the Walloon Region (relating to C-Cure and C-CATH_ez agreements). As a consequence of Celyad’s notification (in December 2017) to the Walloon Region not to exploit anymore C-Cure IP assets, the RCA are no longer repayable by the Group. The associated liability has been derecognized with the related gain being reported in the 2017 income statement. See Note 22.

Note 24: Revenues and Net Other Operating Income

(€‘000)	For the year ended December 31,
	2017		2016		2015
Recognition of non-refundable upfront payment		3,505		8,440		—
C-Cathez sales		35		83		3
Other		—		—		—
Total Revenues		3,540		8,523		3

In May 2017, the Group received a non-refundable upfront payment as a result of the Novartis agreement. This upfront payment has been fully recognised upon receipt as there are no performance obligations nor subsequent deliverables associated to the payment.

The amount recorded in 2016 corresponds to the upfront payment received as a consideration for the sale of a license to ONO.

(€‘000)	For the year ended December 31,
	2017			2016			2015
Grant income (RCAs)		824			2,704			578
Grant income (other)		56			124			412
Remeasurement of RCAs		396			2,154			1,036
R&D Tax credit		1,161			—			—
Change in fair value Contingent consideration and other financial liabilities		193			—			—
Other		—			—			(312	)
Total Other Operating Income		2,630			4,982			1,714
Change in fair value Contingent consideration and other financial liabilities		—			(1,634	)		—
Remeasurement of RCAs		—			—			(1,392	)
Other		(41	)		(8	)		—
Total Other Operating Expenses		(41	)		(1,642	)		(1,392	)
Net Other Operating Income		2,590			3,340			322

F-39

Other operating income are mainly related to government grants received. For the government grants received in the form of RCAs we refer to Note 19 for more information. In 2017, the Company recognized also for the first time a receivable on the amounts to collect from the federal government as R&D tax credit (€1.2 million). See Note 9.

Note 25: Operating Expenses

The operating expenses are made of the next three components:

• Research & development expenses

• General and administrative expenses

• Non-recurring operating income and expenses

Research and development expenses

(€‘000)	For the year ended December 31,
	2017		2016		2015
Salaries		7,007		8,160		5,785
Share-based payments		862		—		—
Travel and living		359		577		168
Preclinical studies		1,995		4,650		2,398
Clinical studies		3,023		4,468		6,723
Raw materials & consumables		1,825		—		—
Delivery systems		430		964		173
Consulting fees		1,522		791		1,842
External collaborations		885		—		—
IP filing and maintenance fees		513		799		763
Scale-up & automation		1,892		4,164		642
Rent and utilities		371		939		1,045
Depreciation and amortization		1,488		1,345		1,033
Other costs		735		817		2,196
Total Research and Development expenses		22,908		27,675		22,767

Until year end 2016, the share-based payments were recorded as general and administrative expenses. Since 2017, the proportion of the share-based payments related to the R&D employees are presented as research and development expenses.

General and administrative expenses

(€‘000)	For the year ended December 31,
	2017		2016			2015
Employee expenses		2,630		2,486			2,761
Share-based payments		1,707		2,847			796
Rent		1,053		791			617
Communication & Marketing		761		728			891
Consulting fees		2,227		2,029			1,511
Travel & Living		211		450			509
Post employment benefits		—		(24	)		(45	)
Depreciation		229		173			—
Other		490		265			190
Total General and administration		9,310		9,744			7,230

F-40

Until year end 2016, the share-based payments were recorded as general and administrative expenses. Since 2017, the proportion of the share-based payments related to the R&D employees are presented as research and development expenses.

Amendments of Celdara Medical and Dartmouth College agreements and write-off of C-Cure and Corquest assets and liabilities

(€‘000)	For the year ended December 31,
	2017			2016		2015
Amendments of Celdara Medical and Dartmouth College agreements		(24,341	)		—		—
C-Cure IP asset impairment expense		(6,045	)		—		—
C-Cure RCA reversal income		5,356			—		—
Corquest IP asset impairment expenses		(1,244	)		—		—
Write-off C-Cure and Corquest assets and derecognition of related liabilities		(1,932	)		—		—

In 2017, the Group recognized non-recurring expenses related to the amendment of the agreements with Celdara Medical LLC and Dartmouth College (totalling €24.3 million, out of which an amount of €10.6 million was settled in shares, and thus a non-cash expense). The Group also proceeded with the write-off of the C-Cure and Corquest assets and derecognition of related liabilities (for net expense amounts of €0.7 million and €1.2 million respectively). There were no non-recurring items reported in the income statement of 2016 and 2015.

Note 26: Employee Benefit Expenses

As of December 31, 2017, we employed 70 full-time employees, seven part-time employees and 10 senior managers under management services agreement. A split of our employees and consultants by main department and geography for the years ended December 31, 2017, 2016 and 2015 was as follows:

	At December 31,
	2017		2016		2015
By function:
Clinical & Regulatory, IP, Marketing		16		15		11
Research & Development		29		29		19
Manufacturing /Quality		26		31		42
General Administration		16		13		16
Total		87		88		88
By Geography:
Belgium		83		83		85
United States		4		5		3
Total		87		88		88

(€‘000)	For the year ended December 31,
	2017		2016		2015
Salaries, wages and bonuses		5,461		5,994		5,181
Executive Management team compensation		2,563		2,900		1,843
Share-based payments		2,569		2,847		796
Social security		1,277		1,362		1,280
Post employment benefits		220		215		202
Hospitalisation insurance		118		151		40
Total Employee Benefit Expenses		12,207		13,469		9,342

F-41

Note 27: Financial Income and Expenses

In 2017, a significant unrealized loss on exchange differences was recognized following the appreciation of the EUR against USD

(€’000)	For the year ended December 31,
	2017		2016		2015
Interest finance leases		18		19		10
Interest on overdrafts and other finance costs		36		37		90
Interest on RCAs		90		53		—
Exchange Differences		4,309		98		135
Finance expenses		4,453		207		236
Interest income bank account		927		1,413		352
Exchange Differences and others		6		791		190
Finance income		934		2,204		542

Note 28: Income Tax

The Group reports income taxes in the income statement as detailed below:

(€‘000)	For the year ended December 31,
	2017		2016		2015
Current tax (expense) / income		1		6		—
Deferred tax (expense) / income		—		—		—
Total income tax (expense) / income in profit or loss		1		6		—

The Group has a history of losses, except for its tax entity Biological Manufacturing Services, which is eligible to a minor tax credit.

Note 29: Deferred taxes

The following table shows the reconciliation between the effective and theoretical tax income at the nominal Belgian income tax rate of 33.99% (excluding additional contributions):

(€‘000)	For the year ended December 31,
	2017			2016			2015
Loss before tax		(56,396	)		(23,612	)		(29,114	)
Nominal tax rate		33.99	%		33.99	%		33.99	%
Tax income at nominal tax rate		18,220			8,026			9,896
Disallowed expenses		(221	)		—			—
Cost of capital increases		—			—			3,663
Share-based payment expense		(873	)		(968	)		(498	)
Deferred Tax assets not recognised		(17,126	)		(7,058	)		(13,061	)
Effective income tax (expense) / income		1			6			—
Effective tax rate		0	%		0	%		0	%

As having not yet reached the commercialization step, the Group accumulates tax losses that are carried forward indefinitely for offset against future taxable profits of the Group. Significant uncertainty exists however surrounding the Group’s ability to realise taxable profits in a foreseeable future. Therefore, the Group has not recognised any deferred tax income in its income statement.

F-42

Unrecognized deferred tax assets and liabilities are detailed below by nature of temporary differences for the current year:

(€‘000)	For the year ended
	2017
	Assets			Liabilities			Net
Intangibles assets		(14	)		(3,960	)		(3,974	)
Tangible assets		—			(215	)		(215	)
Recoverable cash advances liability		349			—			349
Contingent consideration liability		4,471			—			4,471
Employee Benefits liability		51			—			51
Other temporary difference		5			—			5
Tax-losses carried forward		48,152			—			48,152
		—			—			—
Unrecognised Gross Deferred Tax assets/(liabilities)		53,014			(4,174	)		48,839
Netting by tax entity		(3,960	)		3,960			—
Unrecognised Net Deferred Tax assets/(liabilities)		49,054			(215	)		48,839

Unrecognized deferred tax assets and liabilities are detailed below by nature of temporary differences for the previous years:

(€‘000)	For the year ended
	2016
	Assets		Liabilities			Net
Intangibles assets		14,704		—			14,704
Tangible assets		—		(379	)		(379	)
Recoverable cash advances liability		2,322		—			2,322
Contingent consideration and other financial liabilities		—		—			—
Employee Benefits liability		69		—			69
Other temporary difference		—		—			—
Tax-losses carried forward		22,654		—			22,654
Unrecognised Gross Deferred Tax assets/(liabilities)		39,749		(379	)		39,370
Netting by tax entity		464		(464	)		—
Unrecognised Net Deferred Tax assets/(liabilities)		40,214		(844	)		39,370

(€‘000)	For the year ended
	2015
	Assets			Liabilities		Net
Intangibles assets		11,676			—		11,676
Tangible assets		—			—		—
Recoverable cash advances liability		3,433			—		3,433
Contingent consideration liability		41			—		41
Employee Benefits liability		—			—		—
Other temporary difference		(21	)		—		(21	)
Tax-losses carried forward		21,707			—		21,707
Unrecognised Gross Deferred Tax assets/(liabilities)		36,836			—		36,836
Netting by tax entity		2,450			—		2,450
Unrecognised Net Deferred Tax assets/(liabilities)		39,286			—		39,286

The Group’s main deductible temporary difference relates to tax losses carried forward, which have indefinite term under both BE and US tax regimes applicable to our local subsidiaries. In addition, the Group can benefit from additional tax benefits (like notional interest deduction in Belgium) which can be carry-forwarded until the fiscal year 2019.

The remaining temporary differences refer to differences between IFRS accounting policies and local tax valuation rules.

The Group has not recognised any deferred tax asset on its balance sheet, for the same reason as explained above (uncertainty relating to taxable profits in a foreseeable future).

F-43

The change in the Group’s unrecognised deferred tax asset balance is detailed below:

UNRECOGNISED DEFERRED TAX ASSET BALANCE ROLL FORWARD

(€‘000)	For the year ended
EUR	2017			2016			2015
Opening balance at January 1st,		39,370			39,286			26,169
Temporary difference creation or reversal		(15,580	)		(6,844	)		6,537
Change in Tax-losses carried forward		44,011			6,775			6,580
Foreign exchange rate effect		(113	)		154			—
Change in BE tax rate applicable (34% > 25%)		(14,896	)		—			—
Change in US tax rate applicable (35% > 23%)		(3,953	)		—			—
Closing balance at December 31,		48,839			39,370			39,286

The increases relate to the additional losses reported year on year.

Note 30: Commitments

Obligations under the terms of ordinary rental agreements

The company has signed a few agreements concerning financial leases with ING and ES Finance concerning technical equipment. The breakdown per year is available in Note 20.

The company has signed a few operational leases for building, technical labs and cars with BMS, Rentys, KBC. The breakdown per maturity is available in Note 20.

Obligations under the Terms of Other Agreements

Mayo Foundation for Medical Education and Research

Based on the terms of the second amendment of the license agreement dated October 18, 2010, the Company is committed to the following payments:

Undirected research grants

The Company will fund research in the Field at Mayo Clinic of $1,000,000 per year for four years beginning in or after 2015, as soon as the Company has had both a first commercial sale of a Licensed Product and a positive cash flow from operations in the previous financial year. The Company will have an exclusive right of first negotiation to acquire an exclusive license to inventions that are the direct result of work carried out under these grants. In case the Company exercises its option to negotiate, but no agreement is reached within a certain period, then Mayo Clinic during the following nine-month period cannot enter into a licence with a third party.

Royalties

The Company will pay a 2% royalty (on net commercial sales by itself or its sub-licensees) to Mayo Clinic, for all of the products that absent the Mayo License would infringe a valid claim of a Licensed Patent (each, a “Licensed Product”), during a royalty period (on a Licensed Product-by-Licensed Product basis) beginning on the date of first commercial sale of such Licensed Product and ending on the earlier of: (i) 15 years from first commercial sale; (ii) the date on which such Licensed Product is no longer covered by a valid claim of a Licensed Patent in the territories in which it is sold; (iii) or termination of the Mayo License.

Currently no liability has been accounted for by the Group for these variable payments to Mayo Foundation.

CorQuest Medical, Inc.

Based on the terms of the Share Purchase Agreement dated 5 November 2014, former shareholders of CorQuest Medical, Inc. will be entitled to an earn-out payment based on the net revenues generated by the Company, which revenues should be generated from the selling or divesting, in all or in part, of Proprietary Intellectual Property Rights of the Company to a third party.

As from the 5 November 2014 date until the tenth anniversary of the Agreement, former shareholders of CorQuest Medical, Inc. are entitled to:

• an Earn-Out royalty of 2% if Net Revenue are below or equal to 10 million euro

• or an Earn-Out royalty of 4% if Net Revenue are higher than 10 million euro

OnCyte LLC-Celdara Milestones

Based on the terms of the Share Purchase Agreement dated 21 January 2015, Celdara Medical LLC, former owner of OnCyte LLC, will be entitled to development and regulatory milestones, sales milestones and royalties based on the net sales generated by the Company.

F-44

On the lead program CAR-T NKG2D, Celdara Medical will be entitled to the following development and regulatory milestones;

• $5 million when the first patient of the second cohort of the Phase I trial is enrolled¹

• $6 million when dosing the first patient of a Phase II trial

• $9 million when dosing the first patient of a Phase III trial

• $11 million when filing of the first regulatory approval of CAR-T NKG2D

• $14 million when CAR-T NKG2D is approved for commercialization in the US

On the other preclinical products

• $1.5 million when a filing of an IND to the FDA

• $4 million when dosing the first patient of a Phase II trial

• $6 million when dosing the first patient of a Phase III trial

• $10 million when filing of the first regulatory approval of CAR-T NKG2D

• $15 million when CAR-T NKG2D is approved for commercialization in the US

Sales milestones will also be due to Celdara Medical and are dependent of cumulative net sales of products developed out of the OnCyte platform:

• $15 million when first time cumulative worldwide net sales equal to or exceed $250 million

• $25 million when first time cumulative worldwide net sales equal to or exceed $500 million

• $40 million when first time cumulative worldwide net sales equal to or exceed $1 billion

Company will make annual royalty payments to Celdara Medical on net sales of each product sold by the Company, its affiliates and sublicensees at the applicable rate set forth below:

• 5% of the net sales if cumulative worldwide annual net sales are less or equal to $250 million

• 6% of the net sales if cumulative worldwide annual net sales are greater than $250 million and less or equal to $500 million

• 7% of the net sales if cumulative worldwide annual net sales are greater than $500 million and less or equal to $1 billion

• 8% of the net sales if cumulative worldwide annual net sales are greater than $1 billion

On all sublicensing revenues received, the Company will pay percentages ranging from 23% to 5% depending on the stage of development of the product sublicensed. On top of the amounts and percentages due to Celdara Medical LLC, the Company will owe to Dartmouth College an additional 2% royalties on its direct net sales.

In accordance with IFRS 3, some of these contingencies are recognized on balance sheet at year-end. See note 21.

Note 31: Relationships with Third-Parties

Remuneration of key management

Key management consists of the members of the Executive Management Team and the entities controlled by any of them.

	As of December 31,
	2017		2016		2015
Number of EMT members		8		8		6
(€‘000)	For the years ended December 31,
	2017		2016		2015
Short term employee benefits[1]		666		816		309
Post employee benefits		14		35		6
Share-based compensation		1,123		1,790		561
Other employment costs[2]		30		22		4
Management fees		1,950		2,055		1,299
Total benefits		3,783		4,718		2,179

[1] Includes salaries, social security, bonuses, and lunch vouchers

[2] Such as Company cars

¹  Paid as of December 31, 2016

F-45

	As of December 31,
	2017			2016			2015
Number of warrants granted		179,000			180,000			5,000
Number of warrants lapsed		(15,225	)		(56,500	)		10,000
Cumulative outstanding warrants		306,500			310,725			187,225
Exercised warrants		168,000			—			—
Outstanding payables (in ‘000€)		461			687			537

Transactions with non-executive directors

	For the year ended December 31,
(€‘000)	2017		2016		2015
Share-based compensation		485		697		51
Management fees		387		363		89
Total benefits		872		1,060		140

	As of December 31,
	2017			2016		2015
Number of warrants granted		60,000			50,000		—
Number of warrants lapsed		(2,904	)		—		—
Number of exercised warrants		—			—		5,000
Cumulative outstanding warrants		115,000			57,904		7,904
Outstanding payables (in ‘000€)		194			148		80
Shares owned		2,512,004			2,869,685		3,443,065

Transactions with shareholders

	For the years ended December 31,
(€‘000)	2017		2016		2015
Rent(1)		—		99		299
Patent costs(2)		—		—		93
Other		—		—		—
Total		—		99		392

[1] Relate to lease paid to Biological Manufacturing Services, company controlled by Tolefi SA until April 30, 2016

[2] Relate to Mayo License depreciation

[3] Relate to directed research grant paid to Mayo Clinic under License Agreement

	As of December 31,
(€‘000)	2017		2016		2015
Outstanding payables		—		—		39

Note 32: Loss per share

The loss per share is calculated by dividing loss for the year by the weighted average number of ordinary shares outstanding during the period. As the Group is incurring net losses, outstanding warrants have an anti-dilutive effect. As such, there is no difference between the basic and the diluted earnings per share. In case the warrants would be included in the calculation of the loss per share, this would decrease the loss per share.

(€‘000)	As of December 31,
	2017			2016			2015
Loss of the year attributable to Equity Holders		(56,395	)		(23,606	)		(29,114	)
Weighted average number of shares outstanding		9,627,601			9,313,603			8,481,583
Earnings per share (non-fully diluted)		(5.86	)		(2.53	)		(3.43	)
Outstanding warrants		674,962			571,444			319,330

F-46

Note 33: Events after the close of the fiscal Year

In March 2018, we dissolved and wound up the affairs of our wholly owned subsidiary OnCyte, LLC, or OnCyte, pursuant to the Delaware Limited Liability Company Act. As a result of the dissolution of OnCyte, all the assets and liabilities of OnCyte, including the contingent consideration payable and our license agreement with Dartmouth College, were fully distributed to and assumed by Celyad SA. Celyad SA will continue to carry out the business and obligations of OnCyte, including under our license agreement with Dartmouth College.

F-47

EXHIBIT INDEX

		Incorporated by Reference
Exhibit	Description	Schedule/ Form		File Number		Exhibit		File Date
1.1#	Articles of Association (English translation)
2.1	Form of Deposit Agreement		F-1/A		333-204251		4.1		6-15-2015
2.2	Form of American Depositary Receipt (included in Exhibit 2.1)		F-1/A		333-204251		4.2		6-15-2015
4.1	Non-Commercial Lease Agreement, dated October  31, 2007, between Immobilière Belin 12 SA and the registrant, as amended (English translation)		F-1		333-204251		10.1		5-18-2015
4.2†	Services Agreement, dated January 7, 2008, between the registrant and Patrick Jeanmart SPRL (English translation)		F-1		333-204251		10.3		5-18-2015
4.3†	Open-Ended Employment Contract, dated April 2, 2014, between the registrant and George Rawadi (English translation)		F-1		333-204251		10.4		5-18-2015
4.4†	Employment Contract, effective September 12, 2016 between the registrant and David Gilham		20-F		001-37452		4.4		4-4-2017
4.5†	Open Ended Employment Contract, effective December 1, 2014 between the registrant and Dieter Hauwaerts (English Translation)		20-F		001-37452		4.5		4-4-2017
4.6†	Management Services Agreement, dated February 22, 2008, between the registrant and Christian Homsy		F-1		333-204251		10.6		5-18-2015
4.7†	Services Agreement, effective September 1, 2016 between the registrant and NandaDevi SPRL, represented by Philippe Dechamps		20-F		001-37452		4.7		4-4-2017

4.8†	Services Agreement, dated December 7, 2015 between the registrant and KNLC SPRL, represented by Jean-Pierre Latere Dwan’Isa	20-F	001-37452	4.8	4-4-2017
4.9†	Services Agreement, dated August 4, 2015 between the registrant and ImXense SPRL, represented by Frederic Lehmann	20-F	001-37452	4.9	4-4-2017
4.10	Exclusive License Agreement, dated April 30, 2010, between the Trustees of Dartmouth College and Celdara Medical, LLC, as amended	F-1	333-204251	10.9	5-18-2015
4.11	Exclusive License Agreement, dated June 27, 2014, between the Trustees of Dartmouth College and Celdara Medical, LLC, as amended	F-1	333-204251	10.10	5-18-2015
4.12**	Stock Purchase Agreement, by and among the registrant and Celdara Medical, LLC, dated as of January 5, 2015	F-1/A	333-204251	10.12	5-29-2015
4.13**	Asset Purchase Agreement, by and among OnCyte, LLC, Celdara Medical, LLC and the registrant, dated January 21, 2015	F-1/A	333-204251	10.13	5-29-2015
4.14**	Share Purchase Agreement, by and between the registrant and Didier de Canniere and Serge Elkiner, dated as of October 31, 2014	F-1	333-204251	10.14	5-18-2015
4.15	Agreement for the Provision of Services for Production of Cardiac Cells between Biological Manufacturing Services and the registrant, dated April 11, 2011 (English translation)	F-1	333-204251	10.15	5-18-2015
4.16	License and Collaboration Agreement between the registrant and ONO Pharmaceuticals Co., Ltd., dated July 11, 2016.	20-F	001-37452	4.17	4-4-2017
4.17†	Warrant Plans (English translation)	F-1	333-204251	10.16	5-18-2015
4.18†	Warrant Plan 2016 (English translation)	20-F	001-37452	4.19	4-4-2017

4.19##	First Amendment to Asset Purchase Agreement, dated as of August  3, 2017, by and among the registrant; Celdara Medical, LLC; and OnCyte, LLC	6-K	001-37452	10.1	8-31-2017
4.20	Subscription Agreement, dated as of August 3, 2017, by and between the registrant and Celdara Medical, LLC	6-K	001-37452	10.2	8-31-2017
4.21##	Fourth Amendment to Exclusive License Agreement, dated as of August  2, 2017, by and between OnCyte, LLC and Trustees of Dartmouth College	6-K	001-37452	10.3	8-31-2017
4.22†	Warrant Plan 2015 (English translation)	S-8	333-220737	99.2	9-29-2017
4.23†	Warrant Plan 2017 (English translation)	S-8	333-220737	99.3	9-29-2017
4.24#	Non-Commercial Lease Agreement, dated October 15, 2015, between Immobilière Belin 2 SA and the registrant (English translation)
4.25#	First Amendment to Non-Commercial Lease Agreement dated October 31, 2007, by and between Immobilière Belin 12 SA and the registrant, dated as of November 22, 2017 (English translation)
8.1#	List of subsidiaries of the registrant
12.1#	Certification by the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2#	Certification by the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*	Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2*	Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1#	Consent of PricewaterhouseCoopers Réviserus d’Entreprises sccrl
15.2#	Consent of BDO Réviseurs d’Entreprises Soc. Civ. SCRL, independent registered public accounting firm
16.1	Letter from PricewaterhouseCoopers Réviseurs d’Entreprises sccrl, dated August  30, 2017, regarding change in the registrant’s certifying accountant	F-3	333-220285	16.1	8-31-2017
101.INS#	XBRL Instance Document
101.SCH#	XBRL Taxonomy Extension Schema Document
101.CAL#	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF#	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB#	XBRL Taxonomy Extension Label Linkbase Document
101.PRE#	XBRL Taxonomy Extension Presentation Linkbase Document

# Filed herewith

* Furnished herewith

† Indicates a management contract or compensatory plan, contract or arrangement

** Certain exhibits and schedules to these agreements have been omitted from the registration statement pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish copies of any of the exhibits and schedules to the Securities and Exchange Commission upon request.

## Confidential treatment has been granted by the U.S. Securities and Exchange Commission as to certain portions of this exhibit omitted and filed separately.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	Celyad S.A.
Date: April 6, 2018	/s/ Christian Homsy
	By: Title:	Christian Homsy Chief Executive Officer (Principal Executive Officer)