CELYAD S.A. (ifrs-full:DisclosureOfFinancialInstrumentsExplanatory)

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 1^st		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.

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	%

CELYAD S.A. | CIK:0001637890 |

ifrs-full:DisclosureOfFinancialInstrumentsExplanatory