INNL Innocoll Holdings - Ordinary Shares (MM)

As filed with the U.S. Securities and Exchange Commission on April 23, 2015

Registration No. 333-203362​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 3
TO
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

INNOCOLL AG

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Innocoll AG
Unit 9, Block D
Monksland Business Park
Monksland, Athlone
Ireland
+353 (0) 90 6486834

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Anthony P. Zook
Cottage 9, West Chester Pike
Newtown Square, PA 19073
(610) 405-2347

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

(1)

American Depositary Shares, or ADSs, issuable upon deposit of the ordinary shares registered hereby, are registered under a separate Registration Statement on Form F-6 (File No. 333-197480). Each ADS represents 1/13.25 of an ordinary share.

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(2)

Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended (the “Securities Act”). In accordance with Rule 457(c) of the Securities Act, the proposed maximum offering price per share is the average of the high and low selling price of the ADSs on April 22, 2015, as reported on the NASDAQ Global Market.

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(3)

The Registrant initially registered securities based upon an expected proposed maximum aggregate offering price of  $19,215,195 and in connection therewith paid a registration fee of  $2,232.81 and is paying the additional fee of  $928.42 in connection herewith in this Amendment No. 1 to the Registration Statement.

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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or other jurisdiction where offers or sales are not permitted.

SUBJECT TO COMPLETION, DATED APRIL 23, 2015

3,321,669 American Depositary Shares

Representing 250,692 Ordinary Shares

$      per American Depositary Share

This investment involves risk. See “Risk Factors” beginning on page 15.

(1)

In addition to the underwriting discounts payable by us, we have agreed to reimburse the underwriters for certain expenses in connection with this offering. See the section captioned “Underwriting” in this prospectus for additional information.

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(2)

The underwriters will not receive any underwriting discount or commission with respect to ADSs sold by the employee selling shareholders.

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One of our existing shareholders and certain members of our management and supervisory boards, have indicated an interest in purchasing up to approximately $4.8 million of our ADSs at the offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters could determine to sell more, fewer or no ADSs to the above investors, and such investors could determine to purchase more, fewer or no ADSs in this offering.

The underwriters expect to deliver ADSs to purchasers against payment on or about            , 2015.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Piper Jaffray

The date of this prospectus is            , 2015.

TABLE OF CONTENTS

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Special Note Regarding Forward-Looking Statements.”

All references in this prospectus to “U.S. dollars” or “$” are to the legal currency of the United States and all references to “€” or “euro” are to the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the treaty establishing the European Community, as

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amended. Solely for the convenience of the reader, unless otherwise indicated, all amounts in U.S. dollars have been converted from euros to U.S. dollars at an exchange rate of  $1.2141 per euro, the official exchange rate quoted as of December 31, 2014 by the European Central Bank. Such U.S. dollar amounts are not necessarily indicative of the amounts of U.S. dollars that could actually have been purchased upon exchange of euros at the dates indicated.

Our registered trademarks, XaraColl®, Cogenzia®, CollaGUARD®, our localized drug delivery technologies trademarked as CollaRx®, CollaFilm®, CollaPress™ and LiquiColl™, the Innocoll logo and other trademarks or service marks of Innocoll appearing in this prospectus are our property. This prospectus contains additional trade names, trademarks and service marks of other companies. Solely for convenience, trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and tradenames.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our consolidated financial statements and related notes, and the risk factors beginning on page 15, before deciding whether to purchase our ADSs. Unless the context otherwise requires, the terms “we,” “us,” “our,” “Innocoll” and the “Company” refer to Innocoll AG, a German stock corporation, and its direct and indirect subsidiaries Innocoll, Inc., a Virginia corporation, Innocoll Pharmaceuticals Ltd., an Irish private limited company, Innocoll Technologies Ltd., an Irish private limited company, and Syntacoll GmbH, a German limited liability company and a wholly-owned subsidiary of Innocoll Pharmaceuticals Ltd. On July 3, 2014, we transformed from Innocoll GmbH to Innocoll AG, which was required under German law in order to offer and sell our securities in a public offering. Because we have the same legal identity, operations and business after the transformation as we had before, the historical financial information for Innocoll AG is identical to the historical information previously reported for Innocoll GmbH.

Overview

Our Company

We are a global, commercial stage specialty pharmaceutical company with late stage development programs targeting areas of significant unmet medical need. We utilize our proprietary collagen-based technology platform to develop our biodegradable and fully bioresorbable products and product candidates which can be broken down by the body without the need for surgical removal. Using our proprietary processes at our manufacturing facility, we derive and purify bovine and equine collagen and then utilize our technology platform to incorporate the purified collagen into our topical and implantable products. These products combine proven therapeutics, including small molecules and biologics, with highly customized drug release profiles, localized drug delivery and superior handling properties.

Our lead product candidates are XaraColl® for the treatment of post-operative pain and Cogenzia® for the treatment of diabetic foot infections, or DFIs. We initiated Phase 3 efficacy trials for Cogenzia in both the United States and Europe in the first quarter of 2015 and we expect that data from those studies will be available in the middle of 2016. We recently received topline data from our pivotal pharmacokinetic study in which we tested both a 200 mg and a 300 mg dose versus standard bupivacaine infiltration which supports the selection of a 300 mg dose of XaraColl to be tested in our planned Phase 3 efficacy trials. We plan to initiate these trials in the third quarter of 2015, once we obtain feedback from the United States Federal Drug Administration, or FDA, on the results of the pharmacokinetic study. We expect that data from those Phase 3 efficacy trials for XaraColl will be available in early 2016. CollaGUARD, which prevents post-surgical adhesions, has been approved in 49 countries in Europe, Asia, the Middle East and Latin America and we will commence the pivotal trial which we expect will be required for approval in the United States in 2016. In 2014, we generated €4.5 million of sales from four marketed products: CollaGUARD, which utilizes our CollaFilm® technology, a transparent, bioresorbable collagen film for the prevention of post-operative adhesions in multiple surgical applications, including digestive, colorectal, gynecological and urological surgeries; Collatamp Gentamicin Surgical Implant, or CollatampG, which utilizes our CollaRx® sponge technology indicated for the treatment or prevention of post-operative infection; Septocoll®, a bioresorbable, dual-action collagen sponge, indicated for the treatment or prevention of post-operative infection, which we manufacture and supply to Biomet Orthopedics Switzerland GmbH, or Biomet; and RegenePro, a bioresorbable collagen sponge for dental applications which we manufacture and supply to Biomet 3i. We have strategic partnerships in place with large international healthcare companies, such as Takeda, EUSA Pharma and Biomet, which market certain of our approved products in Asia, Australia, Canada, Europe, Latin America, the Middle East, and the United States. Our corporate headquarters are located in Athlone, Ireland.

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Our Product Candidates

XaraColl

Our first lead product candidate, XaraColl, is an implantable, bioresorbable collagen sponge that we designed to provide sustained post-operative pain relief, or analgesia, through controlled delivery of bupivacaine hydrochloride, or bupivacaine, at the surgical site. Bupivacaine is a local anesthetic drug which impairs the generation and conduction of nerve impulses by blocking the flow of sodium ions. The worldwide post-operative pain market was estimated to be $5.9 billion in 2010. The current standard of care for the treatment of post-operative pain relies heavily on the use of opioids supplemented by other classes of pain medications, the combination of which is known as multi-modal pain therapy. However, 75% of patients receiving standard treatments still report inadequate post-operative pain relief and 79% of patients report adverse events from these medications. Opioid-related adverse events, such as nausea, constipation and respiratory depression, which are potentially severe, may require additional medications or treatments and prolong a patient’s hospital stay, thereby increasing overall treatment costs significantly. Additionally, opioids are highly addictive and induce drug resistance and tolerance. Given the negative side effects and costs associated with opioid use in particular, there is increasing focus from hospitals, payors and regulators on treatments that reduce opioid use in the treatment of post-operative pain. We believe XaraColl can address these concerns and, if approved, could be well positioned to become a cornerstone component of effective multi-modal treatment of post-operative pain.

We designed XaraColl to:

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provide an initial rapid burst of bupivacaine followed by slower, sustained release that delivers effective analgesia over a 48 to 72 hour period, the crucial timeframe that impacts a patient’s quality and duration of recovery;

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provide safe and effective pain relief as part of multi-modal therapy;

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reduce opioid use and related adverse events;

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target both the incisional and deep visceral pain components associated with moderate and major surgery;

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reduce patient costs, including those associated with length of hospital stay;

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be used in both open and laparoscopic surgery; and

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be easily positioned at different layers within the surgical wound.

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XaraColl has been studied in one Phase 1 and four completed Phase 2 clinical trials enrolling approximately 184 patients, including 103 patients in two Phase 2 trials in hernia repair at doses of 100 mg and 200 mg of bupivacaine. Results from both trials demonstrated that XaraColl reduces both pain intensity and opioid consumption with the 200 mg dose resulting in an overall greater combined effect at 48 hours. XaraColl-treated patients in the 100 mg dose trial experienced significantly less pain through 24 hours, 48 hours and 72 hours. In our subsequent 200 mg dose trial, XaraColl demonstrated a statistically significant reduction in opioid consumption through 24 and 48 hours, and demonstrated a statistical trend in reduction in pain intensity through 24 hours. When we apply the Silverman method, a validated statistical analysis that integrates the patient’s pain intensity with opioid consumption, to these results, the 100 mg dose trial demonstrated a statistically significant reduction at 24 hours and the 200 mg dose trial demonstrated a statistically significant reduction at both 24 and 48 hours as well as a statistical trend through 72 hours. These results are indicative of a clear dose-related response. The primary endpoint in our two planned Phase 3 trials will use this integrated Silverman method assessment of pain and opioid consumption, as agreed to with the FDA in our end-of-Phase 2 meeting. We conducted a Phase 3 pivotal pharmacokinetic study in which we tested both a 200 mg and a 300 mg dose versus standard bupivacaine infiltration. We recently received topline data from this study which supports the selection of a 300 mg dose of XaraColl to be tested in our planned Phase 3 efficacy studies. Pending FDA review of the data from this pharmacokinetic study, we plan to run both studies in parallel, focusing only on the 300 mg dose. Based on our Phase 2 data, which demonstrated a strong dose

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response from 100 mg to 200 mg doses, and if a further dose response is observed in Phase 3, we believe statistical significance using the integrated endpoint of opioid consumption and pain scores may be achieved at 72 hours for the 300 mg dose. This outcome may lead to an indication for XaraColl that may include both effective pain relief and a reduction in opioid consumption through 72 hours, resulting in a competitive advantage over currently available treatments. We plan to approach the FDA to gain its approval to the change in our study protocol and, subject to this approval, plan to commence testing XaraColl in the third quarter of 2015, with pivotal data anticipated in early 2016. We expect to file a new drug application, or an NDA, for XaraColl in 2016.

We intend to build commercial capabilities in the U.S. to effectively support our brands, including XaraColl, in the U.S. We will, however, continue to evaluate the benefits of select partnerships or co-promotion alternatives if we believe it is in the best interest of shareholders, and the success of our brands, now or into the future.

Cogenzia

Our second lead product candidate, Cogenzia, is a topically applied, bioresorbable collagen sponge for the treatment of DFIs. Cogenzia is designed to release a high dose of gentamicin directly at the site of DFIs. There is a significant unmet medical need for more effective treatments of DFIs. Patients suffering from DFIs face a high rate of treatment failure, leading to hospitalization, and potentially limb amputation, which has a five-year mortality rate as high as 80%. Of the approximately 27 million patients globally who suffered a diabetic foot ulcer in 2014, 58%, or approximately 15.7 million, developed a DFI. DFIs are currently treated with systemic antibiotic therapy. However, peripheral vascular disease, or PVD, a frequent comorbidity of diabetes, leads to reduced blood flow to the extremities thereby rendering systemic antibiotic therapy less effective in this patient population. Published data demonstrate that systemic antibiotics have a treatment failure rate of approximately 30% to 50%. Patients with a DFI face hospitalization risk that is more than 55 times higher and risk of amputation more than 150 times higher than diabetic patients with uninfected foot ulcers. The direct cost of an amputation associated with the diabetic foot is estimated to be between $30,000 and $60,000. In addition, major amputation is associated with mortality rates as high as 40% within one year and 80% within five years. We believe Cogenzia, when used in combination with standard systemic antibiotic therapy, addresses this significant unmet need and could provide substantially higher infection cure rates than obtained from systemic therapy alone. Cogenzia acts by delivering a high dose of gentamicin directly to the wound site at a concentration that achieves broad eradication of both Gram positive and Gram negative bacteria, including methicillin-resistant Staphylococcus aureus, or MRSA, all of which may be present in DFIs. Delivering gentamicin topically avoids the toxicity side effects associated with systemic dosing and enables the drug to be used in higher concentrations, thus, maximizing its effectiveness across a broader range of bacteria.

We believe that effective local antibiotic therapy with Cogenzia, which is designed to be administered in conjunction with systemic antibiotic therapy, can be shown to:

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be the first topical therapy approved for treatment of all types of DFIs, including mild, moderate and severe infections;

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significantly increase the infection cure rate over those currently achieved by standard systemic therapy, thereby reducing the risk of wound progression and amputation;

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deliver a higher dose of gentamicin directly to the infection site than can be safely administered systemically, which may result in the reduction of bacteria;

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allow for a safe administration of high dosages of gentamicin, without the side effects associated with systemic delivery;

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enhance the spectrum of activity due to synergistic effects with systemic antibiotic therapy;

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minimize the risk of resistance due to the high drug concentration delivered directly to the infection site; and

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become recognized as the best-in-class standard for effective treatment of DFIs.

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Cogenzia has been studied in a multicenter, randomized, placebo-controlled Phase 2 trial involving 56 patients with moderately infected DFIs. Cogenzia, administered in conjunction with systemic antibiotic therapy, achieved a 100% clinical cure rate compared to 70% cure rate for patients who received systemic antibiotic therapy alone, which was a statistically significant difference. In addition, Cogenzia achieved baseline pathogen eradication of 100% of all microbes present at the wound site for all patients treated and a reduced time to pathogen eradication (both statistically significant) when compared to systemic therapy alone. This is a critically important outcome, because, if approved, these results provide practitioners with a comfort level that treatment with Cogenzia results in wounds that not only appear to be free of infection, but actually have achieved complete eradication of the pathogens. Treatment with systemic antibiotic therapy alone frequently results in wounds that appear to have achieved a clinical cure of infection, but still carry residual pathogens, often leading to rapid reinfection. Since a diabetic foot ulcer cannot heal in the presence of pathogens, treatment with Cogenzia has the potential to provide practitioners with a more effective wound healing platform. We have confirmed the regulatory path for Cogenzia with the FDA under a special protocol assessment, or SPA, which we re-affirmed in the fourth quarter of 2014. An SPA is a process which allows us to agree with the FDA in writing on the design, endpoints and size of our planned clinical trials in advance, thereby providing greater regulatory certainty. Our protocols for these trials have also been accepted by the European Medicines Agency, or EMA, under the Scientific Advice procedure. We initiated these trials in the first quarter of 2015 with pivotal data expected in the middle of 2016. We expect to submit an NDA in 2016 and we will also seek approval from the EMA for Cogenzia at that time. We also intend to seek designation of Cogenzia as a Qualified Infectious Disease Product, or QIDP. This designation is a key provision of the Generating Antibiotic Incentives Now Act, or GAIN Act, approved by Congress in 2012 to increase the incentives for drug manufacturers to produce new antibiotics for serious and hard-to-treat bacterial and fungal infections. Given the limitations of current treatments for DFIs, we believe Cogenzia could qualify for the designation. QIDP designation for a drug adds an additional five years of market exclusivity, which means that the company that brings the drug into commercial use is protected from generic competitors for that period. For Cogenzia, that could mean eight years of data exclusivity in the United States. QIDP designation also provides access to priority review of marketing applications and eligibility for Fast Track designation by the FDA. In addition, we plan to further expand the market opportunity for Cogenzia by conducting additional Phase 2 trials for the prevention of DFIs as well as for the treatment of infected, or at risk of infection, wounds such as venous ulcers, burns and bed sores, among others. Expansion of the market opportunity for Cogenzia into the prevention of DFIs would widen the potential use of the product to cover the entire diabetic foot ulcer patient population.

We maintain full rights to Cogenzia in the United States and Europe and, upon obtaining marketing approval, intend to commercialize the product in the United States, and potentially in Europe, using our own specialized sales and marketing organization focused on high volume wound treatment centers and podiatrists. Cogenzia has been approved recently in Argentina, Australia, Canada, Jordan, Mexico, Russia and Saudi Arabia and we expect approvals in additional countries, over the next 12 months. We plan to enter into partnerships to market and distribute Cogenzia in countries where we do not intend to establish our own sales force. We have filed five patent applications for Cogenzia in Australia, Canada, Europe, Japan and the United States, all of which are currently in the examination phase. If and when our patents are issued, we expect patent protection for Cogenzia in the United States and Europe to expire at the earliest in 2031.

CollaGUARD

CollaGUARD is our transparent, bioresorbable collagen film for the prevention of post-operative adhesions in multiple surgical applications, including digestive, colorectal, gynecological and urological surgeries. Post-operative adhesions are bands of scar tissue that abnormally bind together two surfaces and can develop naturally as part of the healing process. CollaGUARD is regulated as a Class III device in the United States and we expect it will require a single pivotal clinical trial for pre-market approval, or PMA, by the FDA. A Class III medical device in the FDA’s classification system for medical devices, is a

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device that is purported or represented to be for a use in supporting or sustaining human life, that is for a use which is of substantial importance in preventing impairment of human health, or that presents a potential unreasonable risk of illness or injury and is not substantially equivalent to a previously cleared marketed device and therefore requires proof of its safety and effectiveness, including through clinical trials. CollaGUARD has already been approved in 49 countries in Asia, Europe, Latin America and the Middle East. The global market for anti-adhesion products was estimated at approximately $1.7 billion in 2012, and is projected to grow to $2.8 billion by 2018. We believe that CollaGUARD’s unique combination of features for optimal handling, ease-of-use, hemostatic properties, which causes the stoppage of bleeding, and anti-adhesion performance sets it apart from its competitors, as CollaGUARD:

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can be used in both open and laparoscopic procedures;

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is highly robust and can withstand suturing or stapling if required during a procedure;

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is transparent which allows for constant visibility of the surgical field;

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is highly stable at room temperature and has a four year shelf life; and

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is fully biodegradable and is designed to be safely and completely resorbed over approximately three to five weeks post implantation.

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In the fourth quarter of 2014 we commenced a pilot efficacy study for CollaGUARD, run in the Netherlands, in patients undergoing intrauterine adhesiolysis via operative hysteroscopy. In the first quarter of 2015, we initiated a second pilot study in patients undergoing gynecological lapascopic adhesiolysis. We anticipate that data from these pilot studies will help us to finalize the design of the U.S. pivotal study protocol. We plan to hold a pre-submission meeting with the FDA to agree on the clinical plan for the pivotal trial which we expect will be required for approval in the United States. The pre-submission meeting, which is encouraged by the FDA, allows us to explain CollaGUARD and our proposed trial protocols to the FDA review team informally, prior to submission of the full Investigational Device Exemptions, or IDE, application.

We are preparing for a launch of CollaGUARD in many of its currently approved countries through our established distribution partners, such as Takeda, which launched and distributed CollaGUARD in Russia in 2014 and received approval in the first quarter of 2015 for the product in Belarus, Ukraine and Kazakhstan.

Our current late-stage product candidate pipeline is summarized in the table below:

 

*Subject to positive pivotal results in U.S. in early 2016.

**Approved in Russia, Canada, Saudi Arabia, Jordan, Mexico, Australia, and Argentina; filed for approval in India.

***Takeda for Canada, Mexico, Russian Federation, Belarus, Ukraine, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Azerbaijan, Armenia, Georgia and Mongolia; Pioneer for The People’s Republic of China (including Hong Kong, Macau and Taiwan), Vietnam, Cambodia, Malaysia, Singapore, Indonesia, Brunei Darussalam, Laos and Myanmar; and other smaller partners for various territories.

****Approved in 49 countries within Europe, Asia and emerging markets.

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Our Collagen-Based Technology Platform

All of our products and product candidates are based on our proprietary collagen-based technology platform, which includes CollaRx®, a lyophilized sponge, a collagen matrix prepared by freeze-drying of dispersed purified collagen, which is the basis of our XaraColl and Cogenzia products, and CollaFilm®, a film cast membrane, a compact, thin and transparent film prepared by convective drying of dispersed purified collagen, which is the basis of CollaGUARD. We utilize highly purified, biocompatible, biodegradable and fully bioresorbable type-1 bovine and equine collagen. Type 1 collagen is the primary fibril-forming collagen in bone, dermis, tendons and ligaments and is the most abundant protein in the human body. Our collagen plays an integral role in the repair and replacement of both soft and hard tissue by providing an extracellular scaffold, stimulating certain growth factors and promoting tissue healing. Our proprietary processes and technologies also enable us to finely control the texture, consistency, drug elution dynamics, resorption time and other physical characteristics of the finished product. These characteristics provide us with the ability to tailor our products’ characteristics for superior performance and to provide clinically meaningful advantages over competing products. Our technologies have been fully scaled up and in some cases commercialized and our manufacturing processes are well controlled and cost efficient.

Manufacturing and Intellectual Property

Our wholly-owned subsidiary, Syntacoll GmbH, located in Saal, Germany, is our commercial-scale manufacturing division, which exclusively produces both clinical and commercial supply for all our products on a global basis. We believe our ability to manufacture our products allows us to control more effectively the quality and cost of manufacturing, which will enable us to achieve higher operating margins. Our manufacturing processes are fully integrated and reliable and we have a highly trained manufacturing staff with a long history of producing collagen-based products. In our 30 years of producing collagen-based products, we have never experienced any material quality issues or recalls.

We have developed significant know-how regarding our manufacturing processes and protect our products, product candidates and technology through trade secrets and patents. We protect XaraColl through various patents and patent applications, including a U.S. patent entitled “A drug delivery device for providing local analgesia, local anesthesia or nerve blockade” which was issued in October 2011 for which we recently submitted a petition to reissue the U.S. patent, mainly for the purposes of submitting prior art references identified in the corresponding European application (see “Business—Patents and Patent Applications”). For Cogenzia, we have filed five patent applications in the United States, Europe, Canada, Australia and Japan, all of which are currently in the examination phase. These patent applications are intended to generally protect the use of our combination of Cogenzia with certain classes of systemic antibiotics for the purpose of generating improved DFI cure rates. If and when our patents are issued, we expect patent protection for Cogenzia in the United States and Europe to expire at the earliest in 2031. We submitted a family of patent applications aimed at protecting CollaGUARD on an international basis, including the United States, which is currently in the examination phase. If issued, these patents are expected to expire in 2033 or later in the United States.

Our Strategy

Our goal is to be a leading, fully integrated, specialty pharmaceutical company focused on the development, commercialization and manufacture of pharmaceutical and medical products based on our proprietary collagen-based technology platform. The key elements of our strategy are to:

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Develop XaraColl for treatment of post-operative pain.   We recently received topline data from our pivotal pharmacokinetic study in which we tested both a 200 mg and a 300 mg dose versus standard bupivacaine infiltration which supports the selection of a 300 mg dose of XaraColl to be tested in our planned Phase 3 efficacy studies. Pending FDA review of the data from the pharmacokinetic trial and subject to protocol approval, we plan to initiate our two Phase 3 efficacy studies, focusing only on the 300 mg dose, in the third quarter of 2015. We expect pivotal data from these trials in early 2016.

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Develop Cogenzia for the treatment of DFIs.   We initiated Phase 3 trials in patients with moderate to severe DFIs in both the United States and Europe in the first quarter of 2015, as agreed to with the FDA under an SPA, the design of which has also been accepted by the EMA, with pivotal data expected in the middle of 2016. We also plan to further pursue developing Cogenzia for the prevention of DFIs as well as the prevention and treatment of infections in wounds, such as venous ulcers, burns and bed sores.

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Develop CollaGUARD for prevention of post-surgical adhesions.   CollaGUARD, already approved in Europe and other parts of the world, is regulated by the FDA as a Class III device. After data from our pilot studies which we commenced in 2014 and 2015 is available, we plan to hold our pre-submission meeting with the FDA to agree on protocols for a pivotal study for CollaGUARD. We expect that PMA approval, if obtained, will enable promotion of CollaGUARD for broad surgical application in the United States.

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Enter into and leverage strategic partnerships for the development and commercialization of our products and product candidates.   We intend to build commercial capabilities in the U.S. to effectively support our brands in the U.S. We will, however, continue to evaluate the benefits of select partnerships or co-promotion alternatives if we believe it is in the best interest of shareholders, and the success of our brands, now or into the future. We have entered, and intend to enter, into additional strategic partnerships for the development and commercialization of XaraColl and Cogenzia outside of the United States and Europe, CollaGUARD in numerous additional countries, and certain of our other marketed products with partners in various countries around the world. We believe that selectively partnering with healthcare companies who are well positioned to commercialize our products in specific markets will allow us to optimize our ability to obtain a greater return from our portfolio of products and product candidates.

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Establish our own sales and marketing capabilities to commercialize Cogenzia in the United States and potentially in Europe.   Upon approval of Cogenzia in the United States for the treatment of DFIs, we intend to establish our own specialized sales and marketing organization focused on high volume wound treatment centers and podiatrists. This sales force will also market Cogenzia for other indications, if approved.

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Manufacture all of our products and product candidates, including, XaraColl, Cogenzia and CollaGUARD.   We plan to manufacture exclusively all clinical and commercial global supply of our products and product candidates in our facility in Saal, Germany. This facility is currently approved for the manufacture of all of our approved products in Europe, Canada, Australia, the Middle East and elsewhere outside of the United States. We believe we currently have adequate production capability to support our current production needs and planned clinical trials for XaraColl and Cogenzia. We also expect the expansion of our production facility by the second half of 2016 to increase capacity significantly. We believe our ability to manufacture our products ourselves allows us to control more effectively the quality and cost of manufacturing, which in turn will enable us to achieve higher operating margins, providing us and our partners with a marketing advantage.

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Risk Factors

Our business is subject to a number of risks you should be aware of before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include the following:

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We have a history of losses and anticipate that we will continue to incur losses in the future and may never achieve or sustain profitability.

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

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Our business depends substantially on the success of certain of our lead product candidates, XaraColl and Cogenzia, which are still in development. If we are unable to successfully develop and subsequently commercialize XaraColl and Cogenzia, or experience significant delays in doing so, our business will be materially harmed.

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Clinical drug development is expensive and involves uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results. If our Phase 3 clinical trials for XaraColl or Cogenzia are unsuccessful, or significantly delayed, we could be required to abandon development and our business will be materially harmed.

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The results of clinical trials may not support our product candidate claims. Certain of our completed Phase 2 clinical trials failed to meet their primary endpoints and involved small patient populations.

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We have not obtained regulatory approval for any of our late-stage product candidates in the United States, so we cannot yet generate any revenues from the sales of these products in the United States.

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If we fail to manufacture XaraColl, Cogenzia, CollaGUARD or our other marketed products and product candidates in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current Good Manufacturing Practice regulations, or cGMP, enforced by the FDA, or other applicable manufacturing regulations, we may face delays in the commercialization of our products, breach obligations to our licensing partners or be unable to meet market demand, and lose potential revenues.

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

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

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

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Corporate History and Information

The legal predecessor of our company, Innocoll Holdings, Inc., was incorporated in Delaware under the name Innocoll, Inc. in December 1997 and renamed Innocoll Holdings, Inc. in May 2004. In July 2013, we re-domiciled Innocoll Holdings, Inc. from the United States to Germany pursuant to a contribution in-kind and share-for-share exchange into the newly formed Innocoll GmbH, a German limited liability company.

Pursuant to a notarial deed entered into between the shareholders of Innocoll Holdings, Inc. and Innocoll GmbH in July 2013, the holders of ordinary shares, preferred shares and warrants to purchase ordinary shares of Innocoll Holdings contributed their shares and warrants by way of a contribution in kind to Innocoll GmbH in exchange for ordinary shares, preferred shares and options to purchase ordinary shares of Innocoll GmbH and as a result thereof, Innocoll Holdings, Inc. became Innocoll GmbH’s wholly-owned subsidiary. Innocoll Holdings, Inc. was subsequently liquidated and its assets consisting of subsidiary companies Innocoll Pharmaceuticals Ltd., Innocoll Technologies Ltd., both Irish companies, and Innocoll, Inc., a Virginia corporation, were distributed to Innocoll GmbH.

Pursuant to a notarial deed entered into on June 16, 2014, all shareholders of Innocoll GmbH agreed to amend and restate its articles of association and cancel and terminate all preference, redemption and cumulative dividend rights of the preferred shares (other than with respect to the series E shares regarding certain anti-dilution rights) in exchange for ordinary shares of Innocoll GmbH. On July 3, 2014, in connection with our initial public offering, Innocoll GmbH transformed into a German stock corporation

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(Aktiengesellschaft or AG) in accordance with the provisions of the German Reorganization Act (Umwandlungsgesetz), and all shares of Innocoll GmbH became ordinary shares of Innocoll AG. Innocoll AG is registered in the commercial register of Regensburg, Germany under the number HRB 14298.

On July 30, 2014, we sold 6,500,000 ADSs representing 490,567 ordinary shares in our initial public offering at a price of  $9.00 per ADS, thereby raising $54.4 million after deducting underwriting discounts and commissions. On August 20, 2014, the underwriters in our initial public offering partially exercised their over-allotment option to purchase an additional 186,984 ADSs, representing 14,112 Ordinary Shares, at a public offering price of  $9.00 per ADS. The sale of the over-allotment option by our ADSs occurred on September 12, 2014, at which we raised additional net proceeds of approximately $1.57 million, after deducting underwriting discounts and commissions. The ADSs we sold in the initial public offering represented new shares issued in a capital increase resolved by our shareholders for the purpose of the initial public offering on July 18, 2014.

We are managed and controlled in Ireland and became an Irish tax resident as of January 1, 2014. Our principal executive offices are located at Unit 9, Block D, Monksland Business Park, Monksland, Athlone, Ireland, and our telephone number is +353 (0) 90 648 6834. Our website address is www.innocollinc.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase our ADSs. Our agent for service of process in the United States is Anthony P. Zook, Cottage 9, 3813 West Chester Pike, Newtown Square, PA 19073.

XaraColl®, Cogenzia®, CollaGUARD®, our localized drug delivery technologies trademarked as CollaRx®, CollaFilm®, CollaPress™ and LiquiColl™, the Innocoll logo and other trademarks or service marks of Innocoll appearing in this prospectus are our property. This prospectus contains additional trade names, trademarks and service marks of other companies.

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenues for our fiscal year ended December 31, 2014, we qualify as an “emerging growth company” as defined in Section 2(a) of the U.S. Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act, or the JOBS Act, which was enacted in April 2012. An emerging growth company may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to:

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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;

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being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;

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reduced disclosure obligations regarding executive compensation; and

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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements.

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We may choose to take advantage of some or all of the available exemptions and have taken advantage of some of these exemptions in this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold shares. We do not know if some investors will find our ADSs less attractive as a result of our utilization of these or other exemptions. The result may be a less active trading market for our ADSs and increased volatility in the price of our ADSs.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with

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new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We currently prepare our financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, which do not have separate provisions for publicly traded and private companies. However, in the event we convert to generally accepted accounting principles in the United States, or U.S. GAAP, while we are still an emerging growth company, we may be able to take advantage of the benefits of this extended transition period.

We will remain an emerging growth company until the earliest of  (a) the last day of our fiscal year during which we had total annual gross revenues of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of ADSs in our initial public offering; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided to emerging growth companies in the JOBS Act.

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THE OFFERING

1,999,690 ADSs

1,321,979 ADSs

10,331,502 ADSs, not including 1,011,709 of our ordinary shares that have not yet been converted into ADSs.

1,791,445 ordinary shares

Each ADS represents 1/13.25 of an ordinary share.

The depositary will hold the ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement. You may cancel your ADSs and withdraw the underlying ordinary shares. The depositary will charge you fees for, among other acts, any cancellation. In certain limited instances described in the deposit agreement, we may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the terms of the deposit agreement then in effect.

To better understand the terms of the ADSs, you should carefully read “Description of American Depositary Shares” in this prospectus. You should also read the deposit agreement, which is an exhibit to the Registration Statement that includes this prospectus.

Citibank, N.A.

Citigroup Global Markets Deutschland AG

We expect to receive total estimated net proceeds from this offering of approximately $14.5 million, after deducting ADS issuance fees, the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering for general corporate purposes and the development of our products. See “Use of Proceeds” in this prospectus.

We will not receive any proceeds from the sale of ADSs offered by the selling shareholders.

Neither we nor our predecessor entity, Innocoll GmbH, have ever declared any cash dividends on our ordinary shares, and we have no present intention of declaring or paying any dividends in the foreseeable future.

You should carefully read the information set forth under “Risk Factors” beginning on page 15 of this prospectus and the other information set forth in this prospectus before deciding to invest in the ADSs.

INNL

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One of our existing shareholders and certain members of our management and supervisory boards, have indicated an interest in purchasing up to approximately $4.8 million of our ADSs at the offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters could determine to sell more, fewer or no ADSs to the above investors, and such investors could determine to purchase more, fewer or no ADSs in this offering.

Information Included in this Prospectus

Unless otherwise indicated, all information in this prospectus, including information relating to the number of ordinary shares outstanding:

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is based on 1,568,155 ordinary shares outstanding as of December 31, 2014, which includes, 64,884 ordinary shares awarded under our 2014 Restricted Share Plan that are subject to repurchase and 58,953 ordinary shares accounted for as of December 31, 2014 but issued in February 2015, to former holders of our ordinary and series E preferred shares;

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gives effect to the issuance of 72,370 ordinary shares to be issued out of our Authorized Capital II to holders of phantom shares (which we opted to settle in shares) prior to the closing of this offering, 35,736 of which are being sold by the selling shareholders to the underwriters and which, as represented by 473,502 ADSs, will form part of this offering;

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excludes 205,199 ordinary shares authorized and issuable upon the exercise of options outstanding and exercisable as of December 31, 2014;

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excludes 24,784 ordinary shares reserved for options that have been awarded to members of our management board, management and employees pursuant to our 2014 Management Option Agreements, as of December 31, 2014;

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excludes 37,761 restricted ordinary shares awarded to our Chief Executive Officer, Anthony Zook, pursuant to a restricted share award agreement entered into upon his appointment on December 8, 2014, the issue of which is subject to shareholder approval;

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excludes up to 150,920 ordinary shares to be issued out of our Contingent Capital reserved for stock options for members of our management board and employees, pursuant to our Stock Option Plan, of which 39,244 ordinary shares have been promised but not yet granted to James Tursi, our new Chief Medical Officer and to other members of management and employees pursuant to our Stock Option Plan; and

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excludes up to 150,920 additional ordinary shares our management board is entitled to issue out of our Authorized Capital III with the consent of our supervisory board which ordinary shares, as represented by 1,999,690 ADSs, will form part of this offering.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables set forth a summary of the consolidated historical financial data as of, and for the periods ended on, the dates indicated for Innocoll AG. We have derived the consolidated statement of comprehensive income data for the years ended December 31, 2014, 2013 and 2012 and the consolidated statement of financial position data as of December 31, 2014, 2013 and 2012, from our audited consolidated financial statements included elsewhere in this prospectus and which have been prepared in accordance with IFRS as issued by the IASB and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our historical results for any prior period are not necessarily indicative of our future results. You should read this information in conjunction with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and related notes, each included elsewhere in this prospectus. Amounts presented in U.S. dollars are not audited and have been converted from euros to U.S. dollars solely for the convenience of the reader at an exchange rate of $1.2141 per euro, the exchange rate on December 31, 2014.

The consolidated financial data have been prepared in accordance with IFRS, unless otherwise noted.

(1)

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(1)

Gives effect to the issuance, prior to the closing of this offering, of 72,370 ordinary shares out of our Authorized Capital II to holders of phantom shares.

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(2)

Gives effect to the transactions described in footnote (1) and gives further effect to our issuance and sale of 1,999,690 ADSs in this offering at an assumed public offering price of  $8.16 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

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(3)

Each $1.00 increase (decrease) from $8.16 per ADS, the last reported sale price for our ADSs on the NASDAQ Global Market on April 22, 2015, would increase (decrease) the pro forma as adjusted amount of each of total shareholders’ equity (deficit) and total capitalization by approximately $1.9 million, assuming no change to the number of ADSs offered as set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 100,000 ADSs offered by us at the public offering price per ADS, would increase (decrease) the pro forma as adjusted amount of each of cash, cash equivalents and short-term investments, total shareholders’ equity (deficit) and total capitalization by approximately $0.8 million, assuming the public offering price remains the same. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

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RISK FACTORS

Investing in our ADSs involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our ADSs. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our ADSs could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to Our Financial Position and Capital Requirements

We have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain profitability.

We have incurred operating losses in each year since inception because our research and development and general and administrative expenses exceeded our revenue. Our operating loss for the years ended December 31, 2012, 2013 and 2014 was €5.8 million, €6.9 million and €16.1 million, respectively. As of December 31, 2014, we had an accumulated deficit of  €106.7 million and our current assets exceeded our current liabilities by €40.2 million.

Our ability to become profitable depends on our ability to develop and commercialize our lead product candidates, XaraColl and Cogenzia. Our lead product candidates, are not yet approved for commercial sale in the United States or Europe and we do not know when, or if, we will generate significant revenues from their sale in the future. Cogenzia has been approved in seven countries outside of the United States and Europe but has not been commercialized yet in any of these countries. Our third late-stage product candidate, CollaGUARD, is approved for commercial sale in 49 countries, but not yet approved for commercial sale in the United States and we do not know when, or if, we will generate significant revenue from its sale in the United States in the future. We do not anticipate generating revenue from sales of XaraColl for at least the next several years and we will never generate revenue from XaraColl if we do not obtain regulatory approval. While we have products approved or commercialized and available for sale in certain markets, including CollatampG, RegenePro and Septocoll, our revenues to date from these products have been limited.

Even if we do generate product sales, we may never achieve or sustain profitability. We anticipate that our operating losses will substantially increase over the next several years as we execute our plan to expand our research, development and commercialization activities, including the clinical development and planned commercialization of our product candidates, and incur the additional costs of operating as a public company. In addition, if we obtain regulatory approval of our product candidates, we may incur significant sales and marketing expenses. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if ever.

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

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts to continue the clinical development of our product candidates, including our planned Phase 3 clinical trials. If our product candidates are approved, we will require significant additional funds in order to launch and commercialize such product candidates in the United States and potentially in the European Union, or EU. We will also need to spend substantial amounts to significantly expand our manufacturing infrastructure. Finally, we had trade and other payables of  €5.1 million and deferred income of  €1.8 million (representing products to be delivered for which payment has already been received) as of December 31, 2014.

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We believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months. We expect that our existing cash resources will allow us to advance the development of XaraColl, Cogenzia and CollaGUARD; fund research and development and clinical trials for additional product candidates in our pipeline; and expand our manufacturing infrastructure. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We will require additional capital for the further development and commercialization of our product candidates. Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

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the initiation, progress, timing, costs and results of clinical trials for our product candidates, particularly XaraColl and Cogenzia;

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the clinical development plans we establish for these product candidates;

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the number and characteristics of product candidates that we develop and seek regulatory approval for;

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the outcome, timing and cost of regulatory approvals by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect;

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the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

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the effects of competing technological and market developments;

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the cost and timing of completion of commercial-scale manufacturing activities; and

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the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.

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We cannot be certain that additional funding will be available on acceptable terms, or 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 our product candidates or other research and development initiatives. We also could be required to seek collaborators for our product candidates at an earlier stage than would otherwise 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 product candidates in markets in which we would otherwise seek to pursue development or commercialization ourselves.

Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our ADSs to decline.

Our existing and any future indebtedness could adversely affect our ability to operate our business.

Innocoll AG and our wholly-owned subsidiary, Innocoll Pharmaceuticals Limited, or Innocoll Pharmaceuticals, entered into a Finance Contract with the European Investment Bank, or EIB, in March 2015 whereby the EIB has committed to lend to Innocoll Pharmaceuticals up to €25 million. No amounts were outstanding under this EIB loan as of the date of this prospectus, however, we are entitled to draw €15 million of the loan commitment at any time up to June 2016 and an additional €10 million when certain conditions are met. We do not intend to use the net proceeds of this offering to prepay any obligations under the EIB loan. We could in the future incur additional debt obligations beyond our borrowings from the EIB. The EIB loan, our existing loan obligations, together with other similar obligations that we may incur in the future, could have significant adverse consequences, including:

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requiring us to dedicate a portion of our cash resources to the payment of interest and principal, reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes;

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increasing our vulnerability to adverse changes in general economic, industry and market conditions;

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subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing;

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limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

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placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

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Once we draw on the EIB loan, we may not have sufficient funds, and may be unable to arrange for additional financing, to pay the amounts due under our existing loan obligations. Failure to make payments or comply with other covenants under our existing debt could result in an event of default and acceleration of amounts due. Under our agreement with the EIB the occurrence of an event that would reasonably be expected to have a material adverse effect on our business, operations, assets or condition is an event of default. If an event of default occurs and the lender accelerates the amounts due, we may not be able to make accelerated payments, and the lender could seek to enforce security interests in the collateral securing such indebtedness, such as the shares in and assets of Innocoll Pharmaceuticals Limited, which include substantially all of our assets. In addition, the covenants under our existing debt, and the pledge of our assets as collateral, could limit our ability to obtain additional debt financing.

Risks Related to the Clinical Development and Regulatory Approval of Our Product Candidates

Our business depends substantially on the success of certain of our lead product candidates, XaraColl and Cogenzia, which are still in development. If we are unable to successfully develop and subsequently commercialize XaraColl and Cogenzia, or experience significant delays in doing so, our business will be materially harmed.

We have invested a significant portion of our efforts and financial resources in the development of XaraColl and Cogenzia, our two lead product candidates, which have not yet been approved for commercial sale in the United States or in Europe. There remains a significant risk that we will fail to successfully develop either XaraColl or Cogenzia, or both. We initiated our Phase 3 efficacy trials for Cogenzia in the first quarter of 2015. We recently received topline data from our pivotal pharmacokinetic study in which we tested both a 200 mg and a 300 mg dose versus standard bupivacaine infiltration and pending the FDA’s review of the results of this study, we expect to commence our Phase 3 efficacy trials for XaraColl in the third quarter of 2015. We do not expect to have final pivotal data from our XaraColl Phase 3 trials and from our Cogenzia Phase 3 trials available until early and the middle of 2016, respectively. Even if we ultimately obtain statistically significant, positive results from our Phase 3 clinical trials, we do not expect to submit applications for marketing approval for XaraColl and Cogenzia until 2016. The success of our product candidates will depend on several factors, including:

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successful completion of clinical trials;

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receipt of regulatory approvals from applicable regulatory authorities;

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maintaining regulatory compliance for our manufacturing facility;

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manufacturing sufficient quantities in acceptable quality;

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achieving meaningful commercial sales of our product candidates, if and when approved;

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obtaining reimbursement from third-party payors for product candidates, if and when approved;

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sourcing sufficient quantities of raw materials used to manufacture our products;

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successfully competing with other products;

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continued acceptable safety and effectiveness profiles for our product candidates following regulatory approval, if and when received;

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•

obtaining and maintaining patent and trade secret protection and regulatory exclusivity; and

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protecting our intellectual property rights.

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If we do not achieve one or more of these factors in a timely manner, or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business and we may not be able to earn sufficient revenues and cash flows to continue our operations.

Our ability to generate future revenues depends heavily on our success in:

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developing and securing U.S. and/or foreign regulatory approvals for our product candidates;

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manufacturing commercial quantities of our product candidates at acceptable costs;

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commercializing our product candidates, assuming we receive regulatory approval;

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achieving broad market acceptance of our product candidates in the medical community and with third-party payors and patients; and

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pursuing clinical development of our product candidates for additional indications.

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Clinical drug development is expensive and involves uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results. If our Phase 3 clinical trials for XaraColl or Cogenzia are unsuccessful, or significantly delayed, we could be required to abandon development and our business will be materially harmed.

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. The results of our Phase 2 clinical trials for XaraColl and Cogenzia may not be predictive of the results of our planned Phase 3 clinical trials. Adverse events may occur or other risks may be discovered in Phase 3 clinical trials that will cause us to suspend or terminate our clinical trials. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in or adherence to trial protocols, differences in the size and type of patient populations and the dropout rates among clinical trial participants. Our future clinical trial results, therefore, may not demonstrate efficacy and safety sufficient to obtain regulatory approval for our product candidates.

Flaws in the design of a clinical trial may not become apparent until the clinical trial is well under way. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support regulatory approval. In addition, clinical trials often reveal that it is not practical or feasible to continue development efforts.

We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to participants. Further, regulatory agencies, institutional review boards or data safety monitoring boards may at any time order the temporary or permanent discontinuation of our clinical trials or request that we cease using certain investigators in the clinical trials if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to participants.

If the results of our clinical trials for our current product candidates or clinical trials for any future product candidates do not achieve their primary efficacy endpoints or raise unexpected safety issues, the prospects for approval of our product candidates will be materially adversely affected. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have failed to achieve similar results in later clinical trials, or have ultimately failed to obtain regulatory approval of their product candidates. Many products that initially showed promise in

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clinical trials or earlier stage testing have later been found to cause undesirable or unexpected adverse effects that have prevented their further development. Our upcoming trials for our primary product candidates, XaraColl and Cogenzia, may not produce the results that we expect.

In addition, we may experience numerous unforeseen events that could cause our clinical trials to be delayed, suspended or terminated, or which could delay or prevent our ability to receive regulatory approval or commercialize our product candidates, including:

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delay or failure in reaching agreement with the FDA or comparable foreign regulatory authorities on trial designs that we are able to execute;

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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

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clinical trials of our product candidates may produce negative, inconclusive or inconsistent results, and we may decide, or regulators may require us, to conduct additional clinical trials or implement a clinical hold;

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we may elect or be required to suspend or terminate clinical trials of our product candidates, including based on a finding that the participants are being exposed to unacceptable health risks;

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regulators or institutional review boards may not authorize us or our investigators to commence or continue a clinical trial, or conduct or continue a clinical trial at a prospective trial site;

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our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

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we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;

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the cost of clinical trials of our product candidates may be greater than we anticipate;

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changes in government regulation or administrative actions;

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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and

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our product candidates may have undesirable adverse effects or other unexpected characteristics.

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Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of subjects to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, ability to obtain and maintain patient consents, risk that enrolled subjects will drop out before completion, competing clinical trials and clinicians’ and patients’ perceptions of the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.

If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be materially harmed, and our ability to generate product revenues from any of these product candidates, if any, will cease or be delayed. In addition, any termination of, or delays in completing, our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to a delay in the commencement or completion of or early termination of, clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

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The results of clinical trials may not support our product candidate claims. Certain of our completed Phase 2 clinical trials failed to meet their primary endpoints and involved small patient populations.

Even if our clinical trials are completed as planned, we cannot be certain that the results will support our product candidate claims or that the FDA or government authorities in other countries will agree with our conclusions regarding such results. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful and the results of later clinical trials often do not replicate the results of prior clinical trials and preclinical testing.

In addition, we were unable to achieve certain primary efficacy endpoints in connection with the Phase 2 clinical studies for our two lead product candidates, XaraColl and Cogenzia. For example, in our two Phase 2 trials for XaraColl, which enrolled 53 and 50 patients, respectively, our primary endpoints were reduction of pain, based on patients’ summed pain intensity, or SPI, scores and the total consumption of opioid analgesia, respectively. Over the first 24 hours post operation, XaraColl-treated patients experienced significantly less pain in study 1 with a XaraColl dose of 100 mg (44% reduction; p = 0.001) but showed merely a trend towards significance for pain reduction in study 2 with a XaraColl dose of 200 mg (22% reduction; p = 0.080). Over the same time period, patients in the XaraColl group took significantly less opioid medication in study 2 (44% reduction; p = 0.004) but the results did not show a statistically significant reduction in opioid use in study 1 (25% reduction; p = 0.123). Following meetings with the FDA, we plan to integrate these endpoints in our planned Phase 3 trials using a well-validated statistical analysis known as the Silverman method for XaraColl however, we may fail to reach these endpoints and demonstrate efficacy for XaraColl.

However, in our Phase 2 trial for Cogenzia involving 56 patients, Cogenzia (50 mg) was applied daily for up to four weeks in combination with systemic antibiotic therapy for the treatment of moderately-infected diabetic foot ulcers with the control group receiving systemic therapy alone. The primary efficacy endpoint was the percentage of patients with a clinical outcome of  “clinical cure” on a study visit on day 7 of treatment. Efficacy versus the control group was not achieved. However, based on the modified intent-to-treat population, 100% of the patients who received Cogenzia and who completed the trial achieved a clinical cure two weeks after completion of treatment (test-of-cure date), compared to just 70% of patients who received systemic antibiotic therapy alone, which was a statistically significant difference (p = 0.024). Although we have selected a clinical cure measured 10−14 days after the last dose of treatment has been administered as our primary endpoint for our planned Phase 3 trials for Cogenzia, we may fail to reach these endpoints and demonstrate efficacy for Cogenzia.

In addition, our completed clinical trials involved a small patient population. Because of the small sample size, the results of these clinical trials may not be indicative of future results in a larger and more diverse patient population. The clinical trial process may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. This failure could cause us to abandon a product candidate and may delay development of other product candidates. Any delay in, or termination of, our clinical trials will delay the filing of our NDAs with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues.

If our drug product candidates, such as XaraColl and Cogenzia, receive regulatory approval, we will be subject to ongoing regulatory requirements and we may face future development, manufacturing and regulatory difficulties.

Our drug product candidates, such as XaraColl and Cogenzia, if approved, will be subject to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping, submission of safety and other post-market approval information, importation and exportation. In addition, approved products, manufacturers and manufacturers’ facilities are required to comply with extensive FDA and EMA requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to cGMP requirements.

Accordingly, we will be required to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control. We will also be required to report certain

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adverse reactions and production problems, if any, to the FDA and EMA and other similar agencies and to comply with certain requirements concerning advertising and promotion for our potential products.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, it may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If our potential products fail to comply with applicable regulatory requirements, a regulatory agency may, among other actions:

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issue warning letters or untitled letters;

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require product recalls;

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mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;

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require us or our potential future collaborators to enter into a consent decree or permanent injunction;

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impose other administrative or judicial civil or criminal actions, including monetary or other penalties, or pursue criminal prosecution;

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withdraw regulatory approval;

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refuse to approve pending applications or supplements to approved applications filed by us or by our potential future collaborators;

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impose restrictions on operations, including costly new manufacturing requirements; or

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seize or detain products.

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Risks Related to Our Business and Strategy

If we fail to manufacture XaraColl, Cogenzia, CollaGUARD or our other marketed products and product candidates in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current cGMP or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of our products, breach obligations to our licensing partners or be unable to meet market demand, and lose potential revenues.

The manufacture of our products based on our collagen-based technology platform, including XaraColl and Cogenzia, requires significant expertise and capital investment. Currently, we are manufacturing all commercial and clinical supply for all of our marketed products and product candidates in our sole facility in Saal, Germany without the benefit of any redundant or backup facilities. We would need to spend substantial amounts to significantly expand our manufacturing infrastructure in order to satisfy any increases in future demand and we would require substantial additional capital to finance this expansion. If we are not able to raise sufficient capital, we will not be able to achieve our expansion plans for our facility and we will be unable to meet currently forecasted market demand for all our current and late-stage pipeline product candidates, once commercialized and our profitability could suffer. Also, substantially all of our inventory of raw material and finished goods is held at this location. We take precautions to safeguard our facility, including acquiring insurance, employing back-up generators, adopting health and safety protocols and utilizing off-site storage of computer data. However, vandalism, terrorism or a natural or other disaster, such as a fire or flood, could damage or destroy our manufacturing equipment or our inventory of raw material or finished goods, cause substantial delays in our operations, result in the loss of key information, and cause us to incur additional expenses. Our insurance may not cover our losses in any particular case. In addition, regardless of the level of insurance coverage, damage to our facilities may have a material adverse effect on our business, financial condition and operating results. Also, our management has limited experience commercializing products on a large scale, whereas many of our competitors have substantially greater financial, technical and other resources, such as a larger staff and experienced manufacturing organizations.

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We must comply with federal, state and foreign regulations, including FDA regulations governing cGMP enforced by the FDA through its facilities inspection program and by similar regulatory authorities in other jurisdictions where we do business. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. For our medical device products, we are required to comply with the FDA’s Quality System Regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our medical device products.

Our facility has not yet been inspected by the FDA for cGMP compliance. If we do not successfully achieve cGMP compliance for our facility in a timely manner, commercialization of our products could be prohibited or significantly delayed. Even after cGMP compliance has been achieved, the FDA or similar foreign regulatory authorities at any time may implement new standards, or change their interpretation and enforcement of existing standards for manufacture, packaging, testing of or other activities related to our products. For our marketed medical device products, the FDA audits compliance with the QSR through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may conduct inspections or audits at any time. Similar audit rights exist in Europe and other foreign jurisdictions. Any failure to comply with applicable cGMP, QSR and other regulations may result in fines and civil penalties, suspension of production, product seizure or recall, imposition of a consent decree, or withdrawal of product approval, and would limit the availability of our product. Any manufacturing defect or error discovered after products have been produced and distributed also could result in significant consequences, including adverse health consequences, injury or death to patients, costly recall procedures, re-stocking costs, damage to our reputation and potential for product liability claims. If we are required to find a new manufacturer or supplier, the process would likely require prior FDA and/or equivalent foreign regulatory authority approval, and would be very time consuming. An inability to continue manufacturing adequate supplies of our products at our facility in Saal, Germany, could result in a disruption in the supply of our products. We have licensed the commercial rights in specified foreign territories to market and sell our products. Under those licenses, we have obligations to manufacture commercial product for our commercial partners. If we are unable to fill the orders placed with us by our commercial partners in a timely manner, we may potentially lose revenue and be in breach of our licensing obligations under agreements with them.

We have not obtained regulatory approval for any of our late-stage product candidates in the United States, so we cannot yet generate any revenues from the sales of these products in the United States.

Our late-stage product candidates, XaraColl, Cogenzia and CollaGUARD, have not yet been approved for commercial sale in the United States. We cannot commercialize product candidates in the United States without first obtaining regulatory approval from the FDA to market each product. We recently commenced our efficacy trials for Cogenzia in the first quarter of 2015 and plan to advance XaraColl to Phase 3 efficacy trials in the United States in the third quarter of 2015. We commenced a pilot efficacy study for CollaGUARD in the fourth quarter of 2014 and initiated a second study in the first quarter of 2015. We plan to hold our pre-submission meeting with the FDA to discuss a pivotal trial for CollaGUARD in the United States in late 2015.

Before obtaining regulatory approvals for the commercial sale of any product candidate for a target indication, we must demonstrate in non-clinical, or preclinical, studies and clinical trials, and, with respect to approval in the United States, to the satisfaction of the FDA, that the product candidate is safe and effective for use under the labeled conditions for use and that the manufacturing facilities, processes and controls are adequate. In the United States, we have not submitted an NDA for either XaraColl or Cogenzia. An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety and effectiveness for each desired indication. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the product and its components, and draft labeling. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. If we submit an NDA to the FDA, the FDA must decide whether to accept or reject the submission for filing. We cannot be certain that any of our submissions will be accepted for filing and review by the FDA, or that the FDA will approve the application if it accepts it.

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Even though we have an SPA with the FDA for Cogenzia, the contents of which were fully reaffirmed with the FDA in the fourth quarter of 2014, this SPA is subject to change by the FDA even after we commenced our Phase 3 trials if the FDA determines that a substantial issue essential to determining the safety and effectiveness of the drug was identified after the trial began. Similarly, advice given by the EMA relating to the registrational trial for Cogenzia under the Scientific Advice procedure is only given in the light of the current scientific knowledge, based on the documentation provided by us. The Scientific Advice procedure is designed to avoid major objections regarding the design of the clinical trials being raised during evaluation of the marketing-authorization application but is not legally binding on the EMA.

Regulatory authorities outside of the United States, such as in Europe and in emerging markets, also have requirements for approval of products for commercial sale with which we must comply prior to marketing in those areas. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our product candidates. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could require additional non-clinical studies or clinical trials, which could be costly and time consuming. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval, and potentially may include additional risks.

The process to develop, obtain regulatory approval for, and commercialize product candidates is long, complex and costly both inside and outside of the United States, and approval is not guaranteed. Even if we successfully obtain approval from the regulatory authorities for our product candidates, any approval might significantly limit the approved indications for use, or require that precautions, contraindications or warnings be included on the product labeling that limit its commercialization, or limit its commercialization through a Risk Evaluation and Mitigation Strategy, or REMS, that restricts who may prescribe or dispense the product or imposes other significant limits to assure safe use, or require expensive and time-consuming post-approval clinical studies or surveillance as conditions of approval. Following any approval for commercial sale of our product candidates, certain changes to the product, such as changes in manufacturing processes and additional labeling claims, will be subject to additional regulatory review and approval. In addition, regulatory approval for any of our product candidates may be withdrawn. If we are unable to obtain regulatory approval for our product candidates in one or more jurisdictions, or if any approval we do obtain contains significant limitations, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed. Furthermore, we may not be able to obtain sufficient funding or generate sufficient revenue and cash flows to continue the development of any other product candidate in the future.

If we fail to develop and commercialize additional product candidates, we may be unable to grow our business.

If we decide to pursue the development and commercialization of any additional product candidates, we may be required to invest significant resources to acquire or in-license the rights to such product candidates or to conduct product discovery activities. In addition, any other product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, extensive clinical trials and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to the risk of failure that is inherent in therapeutic product development, including the possibility that the product candidate will not be shown to be sufficiently safe and/or effective for approval by regulatory authorities. In addition, we cannot assure you that we will be able to acquire, discover or develop any additional product candidates, or that any additional product candidates we may develop will be approved, manufactured or produced economically, successfully commercialized, or widely accepted in the marketplace or be more effective than other commercially available alternatives. Research programs to identify new product candidates require substantial technical, financial and human resources whether or not we ultimately identify any candidates. If we are unable to develop or commercialize additional product candidates, our business and prospects will suffer.

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We have engaged in only limited sales of our products to date, 80% of which are to one customer.

While we are a global, commercial stage, specialty pharmaceutical company, with late-stage development programs targeting areas of significant unmet medical needs, we have engaged in only limited sales of our products to date with approximately 80% of our sales being generated by one customer in the year ended December 31, 2014. Our products may never gain significant acceptance in the marketplace and, therefore, never generate substantial revenue or profits for the company. We must establish a market for our products and build that market through marketing campaigns to increase awareness of, and consumer confidence in, our products. If we are unable to expand our current customer base and obtain market acceptance of our products, our operations could be disrupted and our business may be materially adversely affected. Even if we achieve profitability, we may not be able to sustain or increase profitability.

We face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail to compete effectively.

The pharmaceutical and medical device industry is characterized by intense competition and rapid innovation. Although we believe that we hold a leading position in our understanding of collagen-based therapeutic products, our competitors may be able to develop other products that are able to achieve similar or better results. Our potential competitors include established and emerging pharmaceutical and biotechnology companies and universities and other research institutions. 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 and well-established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated in our competitors. 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 our product candidates. We believe the key competitive factors that will affect the development and commercial success of our product candidates are efficacy, safety and tolerability profile, reliability, price and reimbursement.

We anticipate that XaraColl will compete in the United States with currently marketed bupivacaine and opioid analgesics such as morphine, as well as elastomeric bag/catheter devices intended to provide bupivacaine over several days, which have been marketed by I-FLOW Corporation (owned by Halyard Health) since 2004; and Pacira Pharmaceutical’s Exparel, a liposomal injection of bupivacaine, indicated for single-dose infiltration into the surgical site to produce postsurgical analgesia. While there are currently no topically applied antibiotics approved for the treatment of DFIs that we anticipate would compete directly with Cogenzia, DFIs are currently treated with systemic antibiotics and physicians may choose not to use Cogenzia in conjunction with these products. Once approved in the United States, CollaGUARD will compete with a number of well-accepted adhesion barriers marketed in the United States and elsewhere by well-established companies, including Sanofi’s Seprafilm®, Baxter’s Adept®, Ethicon’s Interceed® and Mast Biosurgery’s Surgiwrap®.

The financial performance of our medical device products, such as CollaGUARD, may be adversely affected by medical device tax provisions in the healthcare reform laws in the United States.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, imposes, among other things, an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States beginning with tax year 2013. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be up to $20 billion over the next decade. We do not believe that CollaGUARD is currently subject to this tax based on the retail

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exemption under applicable Treasury Regulations. However, the availability of this exemption is subject to interpretation by the IRS, and the IRS may disagree with our analysis. In addition, future products that we manufacture, produce or import may be subject to this tax. The financial impact this tax may have on our business is unclear and there can be no assurance that our business will not be materially adversely affected by it.

If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and our products could be subject to restrictions or withdrawal from the market.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate revenues from our product sales, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.

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

Even if we obtain regulatory approval for any of our product candidates that we may develop or acquire in the future, the product may not gain market acceptance among hospitals, physicians, health care payors, patients and others in the medical community. Market acceptance of any of our product candidates for which we receive approval depends on a number of factors, including:

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the clinical indications for which they are approved;

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the product labeling, including warnings, precautions, side effects, and contraindications that the FDA approves;

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the potential and perceived advantages of our product candidates over alternative products;

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relative convenience and ease of administration;

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the effectiveness of our sales and marketing efforts;

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acceptance by major operators of hospitals, physicians and patients of the product candidate as a safe and effective treatment;

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the prevalence and severity of any side effects;

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

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any REMS that the FDA might require for our drug product candidates;

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

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the cost of treatment in relation to alternative products; and

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the availability of adequate reimbursement and pricing by third-party payors and government authorities.

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If our product candidates are approved but fail to achieve market acceptance among physicians, patients, payors, or others in the medical community, we will not be able to generate significant revenues, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

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If our product candidates are approved, and with respect to our already approved products, we may be subject to healthcare laws, regulation and enforcement. Our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.

Although we currently do not have any of our lead products on the market in the United States and several other key jurisdictions, if our lead-product candidates are approved, once we begin commercializing our product candidates, we may be subject to additional healthcare regulation and enforcement by the U.S. federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. In certain jurisdictions outside of the United States where we currently market certain of our products, we are already subject to such regulation and enforcement. Such laws include, without limitation, state and federal anti-kickback, false claims, privacy, security, “sunshine,” and trade regulation and advertising laws and regulations. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, but not limited to, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

A recall of our drug or medical device products, or the discovery of serious safety issues with our drug or medical device products, could have a significant negative impact on us.

The FDA and other relevant regulatory agencies have the authority to require or request the recall of commercialized products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Manufacturers may, under their own initiative, recall a product. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our reputation, financial condition and operating results, which could impair our ability to produce our products in a cost-effective and timely manner.

Further, under the FDA’s medical device reporting, or MDR, regulations, we are required to report to the FDA any event which reasonably suggests that our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction of the same or similar device marketed by us were to recur, would likely cause or contribute to death or serious injury. The FDA also requires reporting of serious, life-threatening, unexpected and other adverse drug experiences and the submission of periodic safety reports and other information. Product malfunctions or other adverse event reports may result in a voluntary or involuntary product recall and other adverse actions, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition and operating results. Similar reporting requirements exist in Europe and other jurisdictions.

Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

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Our medical device products, such as CollaGUARD, are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state and foreign governmental agencies. The regulations are very complex and are subject to rapid change and varying interpretations. Regulatory restrictions or changes could limit our ability to carry on or expand our operations or result in higher than anticipated costs or lower than anticipated sales. The FDA and other United States or foreign governmental agencies regulate numerous elements of our business, including:

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product design and development;

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pre-clinical and clinical testing and trials;

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product safety;

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establishment registration and product listing;

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labeling and storage;

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pre-market clearance or approval;

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advertising and promotion;

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marketing, manufacturing, sales and distribution;

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adverse event reporting;

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servicing and post-market surveillance; and

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recalls and field safety corrective actions.

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Before we can market or sell a new regulated product or a significant modification to an existing product in the United States, we must obtain either marketing clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FDCA, or approval of a PMA application from the FDA, unless an exemption from premarket clearance and approval applies. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data are sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based on extensive clinical data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or certain implantable devices. Products that are approved through a PMA application generally need FDA approval before they can be modified. Similarly, some modifications made to products cleared through a 510(k) premarket notification submission may require a new 510(k) submission, including possibly with clinical data. Before we can offer our device products to any of the 31 nations within the EU and the European Free Trade Association, we must first satisfy the requirements for CE Mark clearance, a conformity mark that signifies a product has met all criteria of the relevant EU directives, especially in the areas of safety and performance. The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time-consuming, and we may not be able to obtain these clearances or approvals on a timely basis, or at all for our proposed products. We obtained CE Mark clearance for CollaGUARD in October 2011.

The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

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our inability to demonstrate that our products are safe and effective for their intended uses;

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the data from our clinical trials may not be sufficient to support clearance or approval; and

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the manufacturing process or facilities we use may not meet applicable requirements.

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In addition, the FDA and other regulatory authorities may change their respective clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently cleared or approved products on a timely basis.

Any delay in, or failure to receive or maintain, clearance or approval for our products under development could prevent us from generating revenue from these products or achieving profitability. Additionally, the FDA and comparable foreign regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny of us, could dissuade some customers from using our products and adversely affect our reputation and the perceived safety and efficacy of our products.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators. Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, financial condition and operating results.

Furthermore, we may evaluate international expansion opportunities in the future for our medical device products. As we expand our operations outside of the United States and Europe, we are, and will become, subject to various additional regulatory and legal requirements under the applicable laws and regulations of the international markets we enter. These additional regulatory requirements may involve significant costs and expenditures and, if we are not able comply with any such requirements, our international expansion and business could be significantly harmed.

Modifications to our medical device products, such as CollaGUARD in Europe, may require reclassifications, new CE marking processes or may require us to cease marketing or recall the modified products until new CE marking is obtained.

A modification to our medical devices such as CollaGUARD, which is approved for sale in Europe, could lead to a reclassification of the medical device and could result in further requirements (including additional clinical trials) to maintain the product’s CE marking. If we fail to comply with such further requirements we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may be unable to successfully implement our business strategy.

Our ability to compete in the highly competitive pharmaceuticals industry depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, scientific, medical and operations personnel, including Anthony P. Zook, Chairperson of our management board and Chief Executive Officer; Michael Myers, Ph.D., member of our management board and Head of Portfolio Operations; James Tursi, our Chief Medical Officer, Denise Carter, Executive Vice President, Business Development and Corporate Affairs; James Croke, Executive Vice President, Engineering and Technology Development; Alexandra Dietrich, Ph.D., Managing Director, Syntacoll GmbH; Gordon Dunn, member of our management board and Chief Financial Officer; and David Prior, Ph.D., Executive Vice President, Clinical, Regulatory and Scientific Affairs. The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations.

Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice or no notice. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or

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without notice. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical personnel.

Many of the other biotechnology and pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They may also provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than what we can offer. If we are unable to continue to attract and retain high quality personnel, our ability to advance the development of our product candidates, obtain regulatory approval and commercialize our product candidates will be limited.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices in the United States and in jurisdictions outside of the United States where we conduct our business. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of business conduct and ethics and are training our employees to abide by it, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

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

As of December 31, 2014, we, together with our subsidiaries, had 96 total employees, 83 of whom are full-time. As our development and commercialization plans and strategies develop, and as we continue operating as a public company, we expect to need additional managerial, operational, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of management, including:

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

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

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

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Our future financial performance and our ability to commercialize our 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

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substantial amount of time to managing these growth activities. To date, we have used the services of outside vendors to perform tasks including clinical trial management, statistics and analysis and regulatory affairs. Our growth strategy may also entail expanding our group of contractors or consultants to implement these tasks going forward. Because we rely on numerous consultants, effectively outsourcing many key functions of our business, we will need to be able to effectively manage these consultants to ensure that they successfully carry out their contractual obligations and meet expected deadlines. However, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all. 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 product candidates that we develop and, accordingly, may not achieve our research, development and commercialization goals.

Certain of our employees and patents are subject to foreign laws.

A majority of our employees work in Germany and are subject to German employment law. Ideas, developments, discoveries and inventions made by such employees and consultants are subject to the provisions of the German Act on Employees’ Inventions (Gesetz über Arbeitnehmererfindungen), which regulates the ownership of, and compensation for, inventions made by employees. We face the risk that disputes can occur between us and our employees or ex-employees pertaining to alleged non-adherence to the provisions of this act that may be costly to defend and take up our management’s time and efforts whether we prevail or fail in such dispute. In addition, under the German Act on Employees’ Inventions, certain employees retained rights to patents they invented or co-invented prior to 2009. Although most of these employees have subsequently assigned their interest in these patents to us, to the extent permitted by law, there is a risk that the compensation we provided to them may be deemed to be insufficient and we may be required under German law to increase the compensation due to such employees for the use of the patents. In those cases where employees have not assigned their interests to us, we may need to pay compensation for the use of those patents. If we are required to pay additional compensation or face other disputes under the German Act on Employees’ Inventions, our results of operations could be adversely affected.

We believe that our success depends, in part, upon our ability to protect our intellectual property throughout the world. However, the laws of some foreign countries, including Germany and Ireland, may not be as comprehensive as those of the United States and may not be sufficient to protect our proprietary rights abroad. In addition, we generally do not pursue patent protection outside the United States and certain other key jurisdictions because of cost and confidentiality concerns. Accordingly, our international competitors could obtain foreign patent protection for, and market overseas, products and technologies for which we are seeking patent protection in the United States.

A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.

We, or our licensing partners, plan to seek regulatory approval for our product candidates outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:

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differing regulatory requirements in foreign countries;

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the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally;

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unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

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economic weakness, including inflation, or political instability in particular foreign economies and markets;

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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

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foreign taxes, including withholding of payroll taxes;

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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

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difficulties staffing and managing foreign operations;

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workforce uncertainty in countries where labor unrest is more common than in the United States;

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potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;

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challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

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business interruptions resulting from geo-political actions, including war and terrorism.

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These and other risks associated with our, or our licensing partners’ international operations may materially adversely affect our ability to attain or maintain profitable operations.

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

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, or, in some jurisdictions such as Germany, statutory health insurances, decide which products they will cover and the amount of reimbursement. 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:

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a covered benefit under its health plan;

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safe, effective and medically necessary;

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appropriate for the specific patient;

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cost-effective; and

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neither experimental nor investigational.

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Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement of our future products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

We are approved to market certain of our products in selected foreign jurisdictions and further intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions for our product candidates, we

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will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval for a product candidate. In addition, market acceptance and sales of our product candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our product candidates and may be affected by existing and future health care reform measures.

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, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 revised the payment methodology for many products under Medicare in the United States, which has resulted in lower rates of reimbursement. In 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, was enacted. This expansion in the government’s role in the U.S. healthcare industry may further lower rates of reimbursement for pharmaceutical products.

Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act 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 2012 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 up to 2% per fiscal year. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. On March 1, 2013, the President signed an executive order implementing sequestration, and on April 1, 2013, the 2% Medicare payment reductions went into effect. The ATRA also, 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.

In Europe, the European Commission has submitted a Proposal for a Regulation of the European Parliament and the Council on medical devices, amending Directive 2001/83/EC, Regulation (EC) No 178/2002 and Regulation (EC) No 1223/2009, to replace, inter alia, Directive 93/42/EEC and to amend regulations regarding medical devices in the European Union, which could result in changes in the regulatory requirements for medical devices in Europe.

There have been, and likely will continue to be, legislative and regulatory proposals at the 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 governments, 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:

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the demand for our product candidates, if we obtain regulatory approvals;

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

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our ability to generate revenues and achieve or maintain profitability; and

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the level of taxes that we are required to pay.

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

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 clinical research organizations, or CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and

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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.

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

We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize our product candidates or our already commercialized products on a larger scale. For example, we may be sued if our product candidates allegedly 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; and a breach of warranties. Claims could also be asserted under state consumer protection acts. In Europe and Germany, medical products and medical devices may, under certain circumstances, be subject to no-fault liability (verschuldensunabhängige Haftung). If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

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costs to defend litigation and other proceedings;

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a diversion of management’s time and our resources;

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decreased demand for our product candidates;

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injury to our reputation;

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withdrawal of clinical trial participants;

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initiation of investigations by regulators;

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

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loss of revenue;

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substantial monetary awards to trial participants or patients;

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exhaustion of any available insurance and our capital resources;

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the inability to commercialize our product candidates; and

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a decline in our share price.

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Our inability to obtain and retain 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. We currently do not carry product liability insurance covering our clinical trials. If we determine that it is necessary to procure product liability coverage due to the commercial launch of our lead product candidates after approval, we may be unable to obtain such coverage on acceptable terms, or at all. Until we obtain product liability insurance, we will have to pay any amounts awarded by a court or negotiated in a settlement, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

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Our business could be adversely affected by animal rights activists.

Our business activities have involved animal testing, including preclinical testing for XaraColl, Cogenzia and CollaGUARD. Animal testing has been the subject of controversy and adverse publicity. Some organizations and individuals have attempted to stop animal testing by pressing for legislation and regulation in these areas. To the extent that the activities of such groups are successful, our business could be adversely affected.

Our international operations pose currency risks, which may adversely affect our operating results and net income.

Our operating results may be affected by volatility in currency exchange rates and our ability to effectively manage our currency transaction risks. In general, we conduct our business, earn revenues and incur costs in the local currency of the countries in which we operate. In 2014, 98% of our revenues were generated and approximately 80% of our costs were incurred in euros. Although currency exchange rate fluctuations have not had an impact on our operations to date, as we execute our strategy to expand internationally, our exposure to currency risks will increase. We do not manage our foreign currency exposure in a manner that would eliminate the effects of changes in foreign exchange rates. Therefore, changes in exchange rates between these foreign currencies and the euro will affect our revenues, cost of goods sold, and operating margins, and could result in exchange losses in any given reporting period.

We incur currency transaction risks whenever we enter into either a purchase or a sale transaction using a different currency from the currency in which we report revenues. In such cases we may suffer an exchange loss because we do not currently engage in currency swaps or other currency hedging strategies to address this risk.

Given the volatility of exchange rates, we can give no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.

Failure to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines, criminal penalties and an adverse effect on our business.

We operate in a number of countries throughout the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws. We are subject, however, to the risk that our officers, directors, employees, agents and collaborators may take action determined to be in violation of such anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010 and the European Union Anti-Corruption Act, as well as trade sanctions administered by the Office of Foreign Assets Control and the U.S. Department of Commerce. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties or curtailment of operations in certain jurisdictions, and might adversely affect our results of operations. In addition, actual or alleged violations could damage our reputation and ability to do business.

Global economic, political and social conditions have adversely impacted our sales and may continue to do so.

The uncertain direction and relative strength of the global economy, difficulties in the financial services sector and credit markets, continuing geopolitical uncertainties and other macroeconomic factors all affect spending behavior of potential end-users of our products. The prospects for economic growth in Europe, the United States and other countries remain uncertain and may cause end-users to further delay or reduce technology purchases. In particular, a substantial portion of our sales are made to customers in countries in Europe, which is experiencing a significant economic crisis. If global economic conditions remain volatile for a prolonged period or if European economies experience further disruptions, our results of operations could be adversely affected. The global financial crisis affecting the banking system

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and financial markets has resulted in a tightening of credit markets, lower levels of liquidity in many financial markets and extreme volatility in fixed income, credit, currency and equity markets. These conditions may make it more difficult for our end-users to obtain financing.

Risks Related to Our Dependence on Third Parties

We rely on third parties to conduct 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 product candidates and our business could be substantially harmed.

We have engaged third-party CROs in connection with our planned Phase 3 clinical trials for our product candidates and will continue to engage such CROs in the future. We will rely heavily on these parties for execution of our clinical trials, and we will control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with applicable protocol, legal and regulatory requirements, and scientific standards, and our reliance on our CROs does not relieve us of our regulatory responsibilities. We and our CROs will be required to comply with current Good Clinical Practices, or cGCP requirements, which are a collection of regulations enforced by the FDA or comparable foreign regulatory authorities for product candidates in clinical development in order to protect the health, safety and welfare of patients and assume the integrity of clinical data. cGCP are also intended to protect the health, safety and welfare of study subjects through requirements such as informed consent. Regulatory authorities enforce these cGCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these CROs fail to comply with applicable cGCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the cGCP regulations. In addition, for drugs, our clinical trials must be conducted with products produced under current Good Manufacturing Practice, or cGMP, regulations and will require a large number of test subjects. For our devices, clinical trials must use product manufactured in compliance with design controls under the QSR. Our failure or any failure by our CROs to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, we may be implicated if any of our CROs violate federal or state fraud and abuse or false claims laws and regulations, or healthcare privacy and security laws.

The CROs will not be employed directly by us and, except for remedies available to us under our agreements with such CROs, we cannot control whether they devote sufficient time and resources to our ongoing preclinical, clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other product development activities, which could affect their performance on our behalf. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced 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 other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Switching or adding CROs involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines. Although we plan to 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, prospects, financial condition and results of operations.

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We rely on third parties for the supply of specified raw materials and equipment.

We rely on third parties for the timely supply of specified raw materials and equipment for the manufacture of our collagen-based products. Although we actively manage these third-party relationships to provide continuity and quality, some events which are beyond our control could result in the complete or partial failure of these goods and services. Any such failure could have a material adverse effect on our financial condition and operations.

If we are unable to establish effective marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may be unable to generate revenues from this product candidate.

In order to commercialize our products, we must build our marketing, sales and distribution capabilities. The establishment, development and training of our sales force and related compliance plans to market our products is expensive and time consuming and can potentially delay the commercial launch of our products. In the event we are not successful in developing our marketing and sales infrastructure, we may not be able to successfully commercialize our products, which would limit our ability to generate product revenues.

We currently license the commercialization rights for some of our marketed products outside of the United States, which exposes us to additional risks of conducting business in international markets.

The non-U.S. markets are an important component of existing commercialization strategy for our existing marketed products as well as part of our growth strategy for Cogenzia and CollaGUARD. We have entered into commercial supply agreements for our three main commercialized products pursuant to which we exclusively supply and our partners exclusively purchase the products from us in their respective territories outside of the United States or worldwide, as described in greater detail under “Business—Commercial Partners and Agreements.” For CollaGUARD, we have entered into supply agreements with 18 partners covering 58 countries, the most significant of which are with Takeda Pharmaceutical Company Limited, or Takeda, for 15 countries including Canada, Mexico and countries in the Commonwealth of Independent States, or CIS, where distribution of the product is subject to obtaining local marketing approvals, and Pioneer Pharma Co. Ltd., or Pioneer, for nine Asian countries, including China and its territories. For CollatampG, we have entered into an exclusive supply agreement with EUSA Pharma for all territories outside of the United States and for Septocoll, we have entered into an agreement with Biomet Orthopedics for global supply of the product. We are also manufacturing RegenePro, a bioresorbable collagen sponge for dental applications, which we supply to Biomet 3i, LLC, or Biomet 3i. Our agreements require us to timely supply products that meet the agreed quality standards and require our customers to purchase products from us, in some cases in specified minimum quantities. If we fail to maintain these agreements and agreements with other partners or to enter into new distribution arrangements with selling parties, or if these parties are not successful, our revenue-generating growth potential will be adversely affected. Moreover, international business relationships subject us to additional risks that may materially adversely affect our ability to attain or sustain profitable operations, including:

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efforts to enter into distribution or licensing arrangements with third parties in connection with our international sales, marketing and distribution efforts may increase our expenses or divert our management’s attention from the development of product candidates;

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changes in a specific country’s or region’s political and cultural climate or economic condition;

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differing requirements for regulatory approvals and marketing internationally;

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difficulty of effective enforcement of contractual provisions in local jurisdictions;

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potentially reduced protection for intellectual property rights;

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potential third-party patent rights in countries outside of the United States;

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unexpected changes in tariffs, trade barriers and regulatory requirements;

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economic weakness, including inflation, or political instability, particularly in non-U.S. economies and markets, including several countries in Europe;

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compliance with tax, employment, immigration and labor laws for employees traveling abroad;

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the effects of applicable foreign tax structures and potentially adverse tax consequences;

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foreign currency fluctuations, which could result in increased operating expenses and reduced revenue and other obligations incidental to doing business in another country;

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workforce uncertainty in countries where labor unrest is more common than in the United States;

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the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally;

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failure of our employees and contracted third parties to comply with Office of Foreign Asset Control rules and regulations and the Foreign Corrupt Practices Act;

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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

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business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires.

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These and other risks may materially adversely affect our ability to attain or sustain revenue from international markets.

We may form or seek strategic alliances in the future and we may not realize the benefits of such alliances.

We may form or seek strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future products that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing shareholders or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. If we license products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture and vice versa. We cannot be certain that, following a strategic transaction or license, we will achieve the revenues or specific net income that justifies such transaction. Any delays in entering into new strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results of operations.

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Risks Related to Our Intellectual Property

If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our market.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market.

In addition, the patent applications that we own or that we may license may fail to result in issued patents 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 around our claims. If the breadth or strength of protection provided by the issued patents and patent applications we hold with respect to our product candidates is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced. Since 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 product candidates. Furthermore, for 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 United States Patent and Trademark Office, or U.S. PTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For applications containing a claim not entitled to priority before March 16, 2013, there is greater level of uncertainty in the patent law with the passage of the America Invents Act (2012) which brings into effect significant changes to the U.S. patent laws that are yet untried and untested, and which introduces new procedures for challenging pending patent applications and issued patents. A primary change under this reform is creating a “first to file” system in the U.S. This will require us to be cognizant going forward of the time from invention to filing of a patent application.

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, 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. Although we require all of our employees to assign their inventions to us to the extent permitted by law, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not 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, 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.

Because we have filed a petition for reissuance of our U.S. XaraColl patent, we will be unable to enforce it unless and until the U.S. patent is reissued.

We recently submitted a petition to reissue the U.S. patent directed to XaraColl, mainly for the purposes of submitting prior art references identified in the corresponding European application. We did not submit these prior art references to the U.S. Patent and Trademark Office during the prosecution of the U.S. patent. In addition, this reissue process will allow us to pursue additional claims, e.g., claims within

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the scope of the originally issued claims but more tailored to our currently proposed XaraColl product. Although we do not believe these prior art references should have any substantial impact on the originally issued claims, especially with respect to the coverage of the proposed XaraColl products, there can be no assurance that any or all of the originally issued claims will be reissued. It is also uncertain whether any or all of the additional claims we have included in the petition will be granted. We anticipate the conclusion of the reissue process before we launch XaraColl in the United States, and if the reissued claims are substantially the same as the originally issued claims, there will be no intervening rights by others during the reissue period. We will be unable to enforce the XaraColl U.S. patent unless and until the U.S. patent is reissued.

There can be no assurance that a patent will reissue from the petition, or that any such patent will be enforceable and will not be challenged, invalidated or circumvented. Nevertheless, we will continue to rely upon our proprietary know-how, techniques, expertise and the decades of collective experience of our team relating to the development and manufacturing of collagen matrix products, as well as the rigorous regulatory barriers applicable to the development, manufacture, distribution and marketing of potential competing products. See “Business—Patents and Patent Applications” for further information.

Third-party claims of intellectual property infringement 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 and reexamination proceedings before the United States Patent and Trademark Office, or USPTO, or oppositions and other comparable proceedings in foreign jurisdictions. Recently, following U.S. patent reform, new procedures including inter partes review and post grant review have been implemented. As stated above, this reform is untried and untested and will bring uncertainty to the possibility of challenge to our patents in the future. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents of which we are currently unaware with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop and commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, 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, or at all, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business.

Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a

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substantial diversion of employee resources from our business. 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. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly.

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

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, 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 proceedings could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our 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. 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.

Interference proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome 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 or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.

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 ADSs.

Obtaining and maintaining our patent protection depends on compliance with various procedures, document submission requests, fee payments and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance 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. While 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

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include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

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.

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

Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive. 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 where enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so 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 and other intellectual property protection, particularly those relating to biopharmaceuticals, 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. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Our trade secrets are difficult to protect.

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property.

Our success depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our partners, licensors and contractors. Because we operate in a highly competitive technical field of drug development, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality agreements with our corporate partners, employees, consultants, sponsored researchers and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third parties all confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. Our agreements also provide that any inventions made based solely upon our technology are our exclusive property, and we enter into assignment agreements that are recorded in patent, trademark and copyright offices around the world to perfect our rights.

These confidentiality and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to prevent use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could

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be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.

Risks Related to Ownership of our ADSs

There has been limited trading volume for our ADSs.

Even though our ADSs have been listed on the NASDAQ Global Market, there has been limited liquidity in the market for our ADSs, which could make it more difficult for holders to sell our ADSs. We do not intend to list our ordinary shares on a trading market and, therefore, do not expect that a trading market will develop for our ordinary shares not represented by our ADSs.

There can be no assurance that an active trading market for our ADSs will be sustained.

In addition, the stock market generally has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. Broad market and industry factors may negatively affect the market price of our ADSs, regardless of our actual operating performance. The market price and liquidity of the market for our ADSs that will prevail in the market may be higher or lower than the price you pay and may be significantly affected by numerous factors, some of which are beyond our control.

The price of our ADSs may be volatile, and you could lose all or part of your investment.

The trading price of our ADSs is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:

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adverse results or delays in clinical trials;

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actual or anticipated variations in our operating results and our financial position;

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our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public and the publication of research reports about us or our industry;

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adverse regulatory decisions or changes in laws or regulations;

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introduction of new products or services offered by us or our competitors;

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our inability to obtain adequate product supply;

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our inability to establish collaborations, if needed;

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our failure to commercialize our product candidates;

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departures of key scientific or management personnel;

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our ability to successfully manage our growth and enter new markets;

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

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significant lawsuits, including patent or shareholder litigation; and

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other events or factors, many of which are beyond our control.

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In addition, the stock market in general, and the NASDAQ Global Market and pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our ADSs, regardless of our actual operating

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performance. If the market price of our ADSs does not exceed your purchase price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.

Our principal shareholders and management own a significant percentage of our ordinary shares and will be able to exert significant control over matters subject to shareholder approval.

As of the date of this prospectus, our executive officers, directors, supervisory board and management board members, 5% shareholders and their affiliates owned approximately 69.9% of our voting shares. Therefore, these shareholders, as a group, will have the ability to influence us through their ownership position. These shareholders may be able to determine, or significantly influence, all matters requiring shareholder approval. For example, these shareholders may be able to control elections of members of our supervisory board, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our shares that you may feel are in your best interest as one of our shareholders. Our supervisory board members and management board members and their affiliates beneficially own approximately 12.5% of the outstanding ordinary shares as of the date of this prospectus, after giving effect to the exercise of all outstanding options to purchase ordinary shares. See “Principal and Selling Shareholders.” One of our existing shareholders and certain members of our management and supervisory boards have indicated an interest in purchasing up to approximately $4.8 million of our ADSs at the offering price.

We have broad discretion to determine how to use the funds raised in this offering and may use them in ways that may not enhance our operating results or the price of the ADSs.

Our management will have broad discretion over the use of proceeds from this offering, and we could spend the proceeds from this offering in ways the holders of our ADSs may not agree with or that do not yield a favorable return, if any. We intend to use the net proceeds of this offering for the purposes described in the “Use of Proceeds” section of this prospectus. However, our use of these proceeds may differ substantially from our current plans. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. If we do not invest or apply the proceeds of this offering in ways that enhance our business, we may fail to achieve expected financial results, which could cause the price of our ADSs to decline.

We are an emerging growth company, and we cannot be certain that the reduced reporting requirements applicable to emerging growth companies will make our ADSs less attractive to investors.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of 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 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company until the earliest of December 31, 2019, such time the market value of our ordinary shares held by non-affiliates exceeds $700.0 million as of any June 30 and if we have total annual gross revenue of  $1.0 billion or more during any fiscal year, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, we would

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cease to be an emerging growth company immediately. We cannot predict if investors will find our ADSs less attractive because we may rely on these exemptions. If some investors find our ADSs less attractive as a result, there may be a less active trading market for our ADSs and our share price may be more volatile.

Under the JOBS Act, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We currently prepare our financial statements in accordance with IFRS, as issued by the International Accounting Standards Board, or IASB, which do not have separate provisions for publicly traded and private companies. However, in the event we convert to U.S. GAAP while we are still an emerging growth company, we may be able to take advantage of the benefits of this extended transition period.

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 our ADSs appreciates.

We have no present intention to pay dividends on our ordinary shares in the foreseeable future. Any recommendation by our supervisory and management boards to pay dividends will depend on many factors, including our financial condition, results of operations, legal requirements and other factors. In addition, if, as expected, we draw down debt under the our EIB loan, we will be subject to covenants limiting or restricting our ability to take specific actions, such as declaring dividends. Accordingly, if the price of our ADSs declines in the foreseeable future, 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.

As a new investor, you will experience substantial dilution as a result of this offering.

The public offering price per ADS will be substantially higher than the net tangible book value per ADS prior to this offering. Consequently, if you purchase ADSs in this offering at an assumed public offering price of  $8.16 (the closing trading price of our ADSs on the NASDAQ Global Market on April 22, 2015), you will incur immediate dilution of  $5.74 per ADS. For further information regarding the dilution resulting from this offering, please see the section entitled “Dilution” in this prospectus. This dilution is due in large part to the fact that our earlier investors paid substantially less than the assumed public offering price when they purchased their ordinary shares.

Raising additional capital may cause additional dilution of the percentage ownership of our shareholders, restrict our operations, require us to relinquish rights to our technologies, products or product candidates and could cause our share price to fall.

We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell ordinary shares, ADSs, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell ordinary shares, ADSs, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing shareholders, and new investors could gain rights, preferences and privileges senior to the holders of our ordinary shares or ADSs, including ADSs sold by our selling shareholders in this offering. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, products or product candidates, or grant licenses on terms unfavorable to us.

We have created two authorized capitals totaling up to 302,353 ordinary shares, which we expect to use to cover issuances of shares pursuant to our 2014 Option Agreement (as defined in “Certain Transactions—2014 Option Agreement”), our 2014 Management Option Agreements (See “Certain Transactions—2014 Management Option Agreements”) and phantom share awards granted to certain employees, board members and consultants. On April 16, 2015, our management board passed a resolution to settle all of our outstanding phantom shares in 72,370 ordinary shares issued out of our

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Authorized Capital II, 35,736 of which are being sold by the selling shareholders to the underwriters and which, as represented by 473,502 ADSs, will form part of this offering. In addition, we have created a third authorized capital of up to 452,248 ordinary shares, which authorized capital can be used for purposes a variety of such as further equity offerings and as acquisition currency. Our management board, with the approval of our supervisory board, can increase our capital by these amounts without additional shareholder approvals and exclude subscription rights of our shareholders in connection therewith (see “Description of Share Capital—Authorized Capital”). In the course of this transaction, we intend to issue up to 150,920 new ordinary shares from the Authorized Capital III, which will consequently decrease to €301,328. In addition, we created a contingent capital of up to 150,920 ordinary shares to be used exclusively upon exercise of stock options granted pursuant to our Stock Option Plan (See “Management—Equity-based Plans—Stock Option Plan”). If beneficiaries exercise their options or additional shares get issued under any of our authorized capitals or our contingent capital, you may experience additional dilution, which could cause our share price to fall.

Substantial future sales of our ADSs in the public market, or the perception that these sales could occur, could cause the price of the ADSs to decline.

Additional sales of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of the ADSs to decline. As of the date of this prospectus, we had 1,568,155 ordinary shares outstanding, 504,676 of which were represented by ADSs after completion of our initial public offering and the partial exercise by the underwriters of their over-allotment option. To the extent additional ordinary shares are deposited for ADSs and such additional or our existing ADSs are sold into the market, the market price of the ADSs could decline. See “Shares Eligible for Future Sales” for a more detailed description. We have agreed to file a registration statement covering the resale of ordinary shares held by certain of our current shareholders following the expiration of the 90-day lock-up period imposed by the underwriters. We expect that in connection therewith, we will enter into a registration rights agreement that will include commitments and obligations, including reimbursement of certain expenses and indemnification, customary for such an agreement.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

As widely reported, global credit and financial markets have experienced extreme disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and share price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

At December 31, 2014, we had approximately €45.6 million of cash, cash equivalents and short-term investments. While we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents since December 31, 2014, no assurance can be given that further deterioration of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or marketable securities or our ability to meet our financing objectives. Furthermore, our share price may decline due in part to the volatility of the stock market and the general economic downturn.

We could be subject to securities class action litigation.

In the past, 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 pharmaceutical

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companies have experienced significant share price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

If securities or industry analysts cease publishing research, or publish inaccurate or unfavorable research, about our business, our share price and trading volume could decline.

The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our shares or publishes inaccurate or unfavorable research about our business, our share price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our shares could decrease, which might cause our share price and trading volume to decline.

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 U.S. companies. This may limit the information available to holders of ADSs.

We are a “foreign private issuer,” as defined in the SEC rules and regulations, and, consequently, we are not subject to all of the disclosure requirements applicable to 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. In addition, members of our supervisory board and management board and our principal shareholders 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, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. Accordingly, there may be less publicly available information concerning our company than there is for U.S. public companies.

As a foreign private issuer, we will file an annual report on Form 20-F within four months of the close of each year ended December 31 and furnish reports on Form 6-K relating to certain material events promptly after we publicly announce these events. However, we are not required to issue quarterly financial information because of the above exemptions for foreign private issuers, our shareholders will not be afforded the same protections or information generally available to investors holding shares in public companies organized in the United States.

As we are a “foreign private issuer” that follows, and intends to continue to follow, certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all NASDAQ Global Market corporate governance requirements.

As a foreign private issuer, we have the option to follow certain German corporate governance practices rather than those of the NASDAQ Global Market, except to the extent that such laws would be contrary to U.S. securities laws, and provided that we disclose the requirements we are not following and describe the home country practices we follow instead. We intend to rely on this “foreign private issuer exemption” with respect to the NASDAQ Global Market’s shareholder approval requirements in respect of equity issuances and equity-based compensation plans, the requirement to have independent oversight on our director nominations process and the quorum requirement for meetings of our shareholders. In addition, we intend to rely on the “foreign private issuer exemption” in the future with respect to the NASDAQ Global Market requirement, once effective, to have a formal charter for the compensation committee. We may in the future elect to follow home country practices in Germany with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all the NASDAQ Global Market corporate governance requirements. See “Management—Differences between Our Corporate Governance Practices and the Rules of the NASDAQ Global Market.”

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We expect to lose our foreign private issuer status as a result of our initial public offering and this offering, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

We are currently a foreign private issuer and, therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (a) a majority of our ordinary shares must be either directly or indirectly owned of record by non-residents of the United States or (b) (i) a majority of our executive officers or directors may not be United States citizens or residents, (ii) more than fifty-percent (50%) of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. A foreign private issuer must determine its status on the last business day of its most recently completed second fiscal quarter. As a result of our initial public offering and this offering, we expect to lose our status as a foreign private issuer, effective as of January 1, 2016. If a foreign private issuer no longer satisfies these requirements, it will become subject to U.S. domestic reporting requirements on the first day of its fiscal year immediately succeeding such determination. If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and NASDAQ Global Market rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members to our management board and supervisory board.

Your rights as a shareholder in a German corporation may differ from your rights as a shareholder in a U.S. corporation.

We are organized as a stock corporation (Aktiengesellschaft) under the laws of Germany, and by participating in this offering you will become a holder of ADSs in a German stock corporation. You should be aware that the rights of shareholders under German law differ in important respects from those of shareholders in a U.S. corporation. These differences include, in particular:

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Under German law, certain important resolutions, including, for example, capital decreases, measures under the German Transformation Act (Umwandlungsgesetz), such as mergers, conversions and spin-offs, the issuance of convertible bonds or bonds with warrants attached and the dissolution of the German stock corporation apart from insolvency and certain other proceedings, require the vote of a 75% majority of the capital present or represented at the relevant shareholders’ meeting. Therefore, the holder or holders of a blocking minority of 25% or, depending on the attendance level at the shareholders’ meeting, the holder or holders of a smaller percentage of the shares in a German stock corporation may be able to block any such votes, possibly to our detriment or the detriment of our other shareholders.

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As a general rule under German law, a shareholder has no direct recourse against the members of the management board or supervisory board of a German stock corporation in the event that it is alleged that they have breached their duty of loyalty or duty of care to the German stock corporation. Apart from insolvency or other special circumstances, only the German stock corporation itself has the right to claim damages from members of either board. A German stock corporation may waive or settle these damages claims only if at least three years have passed and the shareholders approve the waiver or settlement at the

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shareholders’ meeting with a simple majority of the votes cast, provided that a minority holding, in the aggregate, 10% or more of the German stock corporation’s share capital does not have its opposition formally noted in the minutes maintained by a German civil law notary.

For more information, we have provided summaries of relevant German corporation law and of our articles of association under “Management” and “Description of Share Capital.”

We may qualify as a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors.

In general, we will be treated as a PFIC for any taxable year in which either (1) at least 75% of our gross income (looking through certain corporate subsidiaries) is passive income (the “income test”) or (2) at least 50% of the average value of our assets (looking through certain corporate subsidiaries) is attributable to assets that produce, or are held for the production of, passive income (the “asset test”). For purposes of both the income test and the asset test, passive income generally includes, without limitation, dividends, interest, rents, royalties and gains from the disposition of passive assets. In determining the average value of our assets for the current and future taxable years, as described in the following paragraph, we will likely be required to use the fair market value of our assets and not the tax basis of our assets. If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. holder (as defined in “Taxation—Additional United States Federal Income Tax Consequences—PFIC Rules”) of our ADSs, the U.S. Holder may be subject to increased U.S. federal income tax liability upon a sale or other disposition of our ADSs or the receipt of certain excess distributions from us and may be subject to additional reporting requirements. Based on the composition (and estimated values) of the assets and the nature of the income of us and our subsidiaries in 2014, we believe that we should not be treated as a PFIC in 2014. However, because of the complexity of the PFIC rules and because we have not performed a definitive analysis as to our PFIC status for such taxable year, there can be no assurance with respect to our PFIC status for such taxable year.

With respect to the current taxable year, we expect to be treated as a publicly traded corporation for purposes of the PFIC rules. In such case, the value of our assets for purposes of the asset test will generally be determined by reference to the market price of our shares. Fluctuations in the market price of our shares may cause us to become a PFIC for 2015 or later taxable years. In addition, the composition of our income and assets will be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering (and the previous offering). If we were unable to deploy significant amounts of cash for active purposes, our risk of being classified as a PFIC would substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year. We urge U.S. holders to consult their own tax advisors regarding the possible application of the PFIC rules. See “Taxation—Additional United States Federal Income Tax Consequences—PFIC Rules.”

We could be treated as a U.S. corporation for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to us and investors.

For U.S. federal income tax purposes, a corporation generally is considered a U.S. corporation if it is created or organized in the United States or under the law of the United States or of any state thereof or the District of Columbia. Entities treated as U.S. corporations are generally subject to U.S. federal income tax on their worldwide income, and U.S. reporting and withholding tax rules may apply to dividends that they pay. Because we were formed and organized under the law of Germany, we would ordinarily not be treated for U.S. federal income tax purposes as a U.S. corporation. Section 7874 of the Code, however, contains special rules that could result in a non-U.S. corporation being taxed as a U.S. corporation for U.S. federal income tax purposes where the corporation, directly or indirectly, re-domiciles from the U.S. to another country. Under Section 7874 of the Code, as a result of our re-domiciling from the U.S. to

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Germany, we would be treated as a U.S. corporation for U.S. federal income tax purposes unless our “expanded affiliated group” is treated as having “substantial business activities” in Germany. While we believe that we satisfied this “substantial business activities” test (and, thus, should not be treated as a U.S. corporation for U.S. federal income tax purposes), due to the complexity of certain aspects of the law and the very fact-specific nature of the inquiry, there is no assurance that the IRS will not challenge our determination. In addition, there have been proposals to expand the scope of U.S. corporate tax residence and there could be prospective or retroactive changes to Section 7874 of the Code that would result in us being treated as a U.S. corporation. If it were determined that we should be treated as a U.S. corporation for U.S. federal tax purposes, we could be liable for substantial U.S. federal taxes. In addition, our investors could be subject to U.S. withholding tax (including under the Foreign Account Tax Compliance Act) on the receipt of dividends from us.

If German tax authorities successfully challenge our migration to Ireland or take the view that we have built-up hidden reserves in our assets in the period between the liquidation of Innocoll Holdings, Inc. and the migration to Ireland, we may face material payments of German Corporate Income Tax (plus Solidarity Surcharge thereon) and German Trade Tax, which would negatively impact our profitability and our cash flow.

From our predecessor Innocoll GmbH’s inception in August 2013 until December 2013, our registered seat and our principal place of management and control were in Germany. As a result, we were subject to unlimited tax liability in Germany and our worldwide income was generally subject to German corporate income tax (plus solidarity surcharge thereon) and German trade tax. Effective January 1, 2014, we moved our principal place of management and control to Ireland. Due to the fact that Innocoll AG still maintains a registered seat in Germany, Innocoll AG is in principle still subject to German unlimited tax liability and therefore its worldwide income is theoretically still subject to German taxation. The group’s intellectual property is owned and controlled by Innocoll AG’s Irish incorporated and tax resident subsidiaries so if Innocoll AG were deemed to be subject to German taxation, a tax exposure relating to the group’s underlying trading activities would arise to the extent that the Irish subsidiaries might be deemed to be subject to the German controlled foreign corporation rules. However, we believe that under the Agreement between Ireland and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital, dated March 30, 2011, Germany does not have a right to tax Innocoll AG’s income because it no longer maintains a permanent establishment or a permanent representative in Germany and only generates income that is attributable to Innocoll AG’s Irish permanent establishment and this income does not stem from German sources. If German tax authorities take the view that Innocoll AG still maintains a permanent establishment or a permanent representative in Germany or that for any period after January 2014 its (or its predecessor’s) principal place of management and control was still in Germany, Innocoll AG’s income, in whole or in part, could still be subject to German taxation and we will have to rely on a mutual agreement procedure under the treaty to avoid double taxation in Germany and Ireland.

Because Innocoll AG no longer maintains a permanent establishment or a permanent representative in Germany, all assets that were formerly attributable to the German permanent establishment are now attributable to the Irish permanent establishment and these assets were deemed to be sold at fair market value for German tax purposes. Any unrealized gains in these assets are therefore subject to German corporate income tax (plus solidarity surcharge thereon) and German trade tax at the time of the migration, together also called “exit tax.” Most of Innocoll AG’s assets, in particular our interests in its subsidiaries, result from the contribution-in-kind of the shares in Innocoll Holdings, Inc. to Innocoll GmbH in July 2013. At that time, no unrealized gains for German tax purposes were contained in these assets. As a result, as it relates to these assets, only unrealized gains that were accrued between the liquidation of Innocoll Holdings, Inc. in July 2013 and the migration to Ireland would be subject to German exit tax. However, even if we had unrealized gains, 95% of the unrealized gains contained in the shares in Innocoll AG’s corporate subsidiaries are generally tax-exempt in Germany, unless Innocoll AG or its predecessor are deemed to be a financial company (Finanzunternehmen) and, at the time of the liquidation of Innocoll Holdings, Inc., intended to realize a short-term trading gain with the sale of its

49

subsidiaries’ shares, including the deemed sale of the shares due to its migration to Ireland. Whereas Innocoll AG or its predecessor did not intend to realize such a short-term trading gain, German tax authorities may assume such intention because less than one year passed between the liquidation of Innocoll Holdings, Inc. in July 2013 and the migration to Ireland in January 2014 and as a result, we would be unable to invoke the 95% exemption on any unrealized gains contained in the shares in Innocoll AG’s subsidiaries, which would negatively impact our profitability and our cash flow.

Exchange rate fluctuations may reduce the amount of U.S. dollars you receive in respect of any dividends or other distributions we may pay in the future in connection with your ADSs.

Under German law, the determination of whether we have been sufficiently profitable to pay dividends is made on the basis of our unconsolidated annual financial statements prepared under the German Commercial Code (Handelsgesetzbuch) in accordance with accounting principles generally accepted in Germany. Exchange rate fluctuations may affect the amount in U.S. dollars that our shareholders receive upon the payment of cash dividends or other distributions we declare and pay in euro, if any. Such fluctuations could adversely affect the value of our ADSs and, in turn, the U.S. dollar proceeds that holders receive from the sale of our ADSs.

You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.

Except as described in this prospectus and the deposit agreement, holders of the ADSs will not be able to exercise voting rights attaching to the ordinary shares evidenced by the ADSs on an individual basis. Under the terms of the deposit agreement, holders of the ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the ordinary shares represented by the ADSs. Pursuant to the deposit agreement and in light of the fact that pursuant to German law and our articles of association, one whole ordinary share represents one vote, voting instructions can be given only in respect of a number of ADSs representing a whole number of ordinary shares. Given that one ADS represents 1/13.25 of an ordinary share, you need to hold at least 14 ADSs to instruct the depositary or its nominee to exercise one vote and any number of ADSs you hold which do not represent, in the aggregate, one or more whole ordinary shares will be disregarded for voting purposes. In addition, you may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.

You may not receive distributions on our ordinary shares represented by the ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.

Under the terms of the deposit agreement, the depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of the ADSs, ordinary shares, rights or anything else to holders of the ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value from them if it is unlawful or impractical to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.

You may be subject to limitations on the transfer of your ADSs.

Your 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 doing so expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in

50

connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks that it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement. As a result, you may be unable to transfer your ADSs when you wish.

U.S. investors may have difficulty enforcing civil liabilities against our company or members of our supervisory and management boards and the experts named in this prospectus.

The members of our supervisory and management boards and certain of the experts named in this prospectus are non-residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible, or may be very difficult, to serve process on such persons or us in the United States or to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the United States. In addition, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in Germany. An award for monetary damages under the U.S. securities laws would be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and is intended to punish the defendant. The enforceability of any judgment in Germany will depend on the particular facts of the case as well as the laws and treaties in effect at the time. Litigation in Germany is also subject to rules of procedure that differ from the U.S. rules, including with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in Germany would have to be conducted in the German language, and all documents submitted to the court would, in principle, have to be translated into German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a German court predicated upon the civil liability provisions of the U.S. federal securities laws against us, the members of our supervisory and management boards and certain of the experts named in this prospectus. The United States and Germany do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters, though recognition and enforcement of foreign judgments in Germany is possible in accordance with applicable German laws.

We will continue to incur significant increased costs as a result of operating as a company whose ADSs are publicly traded in the United States, and our management will continue to be required to devote substantial time to new compliance initiatives.

As a company whose ADSs commenced trading in the United States in July 2014, we will continue to incur significant legal, accounting, insurance and other expenses that we did not previously incur. In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules implemented by the SEC and the NASDAQ Global Market have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls. These costs will increase at the time we are no longer an emerging growth company eligible to rely on exemptions under the JOBS Act from certain disclosure and governance requirements. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. These laws and regulations could also make it more difficult and expensive for us to attract and retain qualified persons to serve on our supervisory board or its committees or on our management board. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of the ADSs, fines, sanctions and other regulatory action and potentially civil litigation.

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If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls over financial reporting and disclosure controls and procedures. In particular, we will be required, beginning with our fiscal year ending December 31, 2015, under Section 404 of the Sarbanes-Oxley Act, to perform system and process evaluations and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. We are not yet required to provide an attestation. This assessment will need to include disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of the exemption permitting us not to comply with the independent registered public accounting firm attestation requirement. At the time when we are no longer an emerging growth company, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future.

Our compliance with Section 404 will cause us to incur substantial accounting expenses and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. 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 conclude that our internal control over financial reporting is 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 ordinary shares or ADSs could decline, and we could be subject to sanctions or investigations by the NASDAQ Global 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.

In order to satisfy our obligations as a public company, we may need to hire qualified accounting and financial personnel with appropriate public company experience.

As a newly public company, we will need to establish and maintain effective disclosure and financial controls and make changes in our corporate governance practices. We may need to hire additional accounting and financial personnel with appropriate public company experience and technical accounting knowledge, and it may be difficult to recruit and retain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources from research and development efforts.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, regulatory process, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this prospectus include, among other things, statements about:

•

our plans to develop and manufacture XaraColl, Cogenzia and our other product candidates;

​

•

the timing of, and our ability to obtain, regulatory approval of XaraColl, Cogenzia and our other product candidates;

​

•

the timing of our anticipated launches of XaraColl, Cogenzia and our other product candidates;

​

•

the rate and degree of market acceptance of XaraColl, Cogenzia and our other product candidates;

​

•

the size and growth of the potential markets for XaraColl, Cogenzia and our other product candidates and our ability to serve those markets;

​

•

our manufacturing and marketing capabilities;

​

•

regulatory developments in the United States and foreign countries;

​

•

our ability to obtain and maintain the scope, duration and protection of our intellectual property rights;

​

•

the accuracy of our estimates regarding expenses and capital requirements; and

​

•

the loss of key scientific or management personnel.

​

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly the factors described in the “Risk Factors” section of this prospectus, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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EXCHANGE RATES

Our business to date has been conducted primarily in the European Union and we prepare our consolidated financial statements in euros. All references in this prospectus to “U.S. dollars” or “$” are to the legal currency of the United States and all references to “€” or “euro” are to the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the treaty establishing the European Community, as amended. Solely for the convenience of the reader, unless otherwise indicated, all amounts in U.S. dollars have been converted from euros to U.S. dollars at an exchange rate of  $1.2141 per euro, the official exchange rate quoted as of December 31, 2014 by the European Central Bank. Such U.S. dollar amounts are not necessarily indicative of the amounts of U.S. dollars that could actually have been purchased upon exchange of euros at the dates indicated. Fluctuations in the exchange rate between the U.S. dollar and the euro will affect the U.S. dollar amounts received by owners of our ADSs on conversion of dividends, if any, paid in euros on the ordinary shares and will affect the U.S. dollar price of our ADSs on the NASDAQ Global Market. The following table presents information on the exchange rates between the U.S. dollar and the euro for the periods indicated. The rates set forth below are provided solely for your convenience and may differ from the actual rates used in the preparation of the financial statements included in this prospectus and other financial data appearing in this prospectus.

On April 22, 2015, the exchange rate was $1.0743 per euro.

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MARKET PRICE FOR OUR AMERICAN DEPOSITARY SHARES

Our ADSs, each representing 1/13.25 of an ordinary share, have been listed on the NASDAQ Global Market since July 25, 2014. Our ADSs are listed for trading on the NASDAQ Global Market under the symbol “INNL.”

The following table sets forth for the periods indicated the reported high and low sale prices of our ADSs on the NASDAQ Global Market.

On April 22, 2015 the last reported sale price of our ADSs on the NASDAQ Global Market was $8.16 per ADS.

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $14.5 million, assuming a public offering price of  $8.16 per ADS (the closing trading price of our ADSs on the NASDAQ Global Market on April 22, 2015). In addition, we will receive an aggregate of  €72,370 of proceeds to us in connection with the nominal value of  €1.00 per ordinary share the holders of phantom shares are obligated to pay in order to receive the ordinary shares they receive upon settlement of the phantom shares (see “Principal and Selling Shareholders”).

A $1.00 increase (decrease) from $8.16 per ADS, the last reported sale price for our ADSs on the NASDAQ Global Market on April 22, 2015, would increase (decrease) the net proceeds from this offering to us by approximately $1.9 million, assuming no change to the number of ADSs offered as set forth on the cover page of this prospectus. An increase (decrease) of 100,000 in the number of ADSs offered by us would increase (decrease) the net proceeds to us by approximately $0.8 million, assuming the public offering price remains the same.

The selling shareholders will receive an aggregate of approximately $10.3 million in net proceeds from their sale of 1,321,979 ADSs in this offering, after deducting the estimated underwriting discounts and commissions (payable only by certain of our selling shareholders), the estimated ADS issuance fees and estimated offering expenses payable by the selling shareholders. Other than the €72,370 from the holders of phantom shares, we will not receive any proceeds from the sale of ADSs by the selling shareholders. See “Principal and Selling Shareholders” and “Underwriting,”

We intend to use the net proceeds of this offering for general corporate purposes and the development of our products.

The foregoing represents our current intentions with respect to the use and allocation of the net proceeds of this offering based upon our present plans and business conditions, but our management will have significant flexibility and discretion in applying the net proceeds other than as described above. The occurrence of unforeseen events or changed market and business conditions, including factors described under “Risk Factors” in this prospectus, could result in the application of the net proceeds of this offering in a manner other than as described above. Pending our use of the net proceeds as described above, we may invest the net proceeds in short-term bank deposits or invest them in interest-bearing, investment-grade securities.

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our shares. We intend to retain future earnings, if any, to finance the operation of our business and do not anticipate paying any cash dividends in the foreseeable future. Any recommendation by our supervisory and management boards to pay dividends, subject to compliance with applicable law and any contractual provisions that restrict or limit our ability to pay dividends, including under agreements for indebtedness that we may incur, will depend on many factors, including our financial condition, results of operations, legal requirements, capital requirements, business prospects and other factors that our supervisory and management boards deem relevant. In addition, if, as expected, we draw down debt under the our EIB loan, we will be subject to covenants limiting or restricting our ability to take specific actions, such as declaring dividends.

All of the shares represented by the ADSs offered by this prospectus will have the same dividend rights as all of our other outstanding shares. Any distribution of dividends proposed by our supervisory and management boards requires the approval of our shareholders at a shareholders’ meeting. See “Description of Share Capital,” which explains in more detail the procedures we must follow and the German law provisions that determine whether we are entitled to declare a dividend.

As we are an Irish tax resident company, Irish dividend withholding tax, or DWT, currently at a rate of 20%, will arise in respect of dividends or other distributions to our shareholders unless an exemption applies. Where DWT does arise, we are responsible for deducting DWT at source and accounting for the relevant amount to the Irish Revenue Commissioners. See “Taxation—Taxation in Ireland—Dividend Withholding Tax.” For information regarding the German withholding tax applicable to dividends and related U.S. refund procedures, see “Taxation—Taxation in Germany.”

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2014, as follows:

•

on an actual basis;

​

•

on a pro forma basis to give effect to the issuance of 72,370 ordinary shares out of our Authorized Capital II to holders of phantom shares, prior to the closing of this offering, and the payment by our phantom share holders of the €1.00 nominal value per ordinary share, resulting in total proceeds to us of  €72,370 ($87,864) (see “Principal and Selling Shareholders”);

​

•

on a pro forma as-adjusted basis to reflect the sale by us of 1,999,690 ADSs in this offering at an assumed public offering price of  $8.16 per ADS (the closing trading price of our ADSs on the NASDAQ Global Market on April 22, 2015), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

​

You should read this information in conjunction with our consolidated financial statements and the related notes included in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.

(1)

Amounts in this column are not audited and have been converted from euros into U.S. dollars solely for the convenience of the reader at an exchange rate of  $1.2141 per euro, the exchange rate on December 31, 2014. See “Exchange Rates.”

​

(2)

Each $1.00 increase (decrease) from $8.16 per ADS, the last reported sale price for our ADSs on the NASDAQ Global Market on April 22, 2015, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total shareholders’ equity (deficit) and total capitalization by approximately $1.9 million, assuming that the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 100,000 ADSs offered by us at the public offering price of  $8.16 per ADS, would increase (decrease) the pro forma as adjusted amount of each of cash, cash equivalents, total shareholders’ equity (deficit) and total capitalization by approximately $0.8 million.

​

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The number of ordinary shares outstanding set forth in the table above is based on 1,568,155 ordinary shares outstanding as of December 31, 2014, which includes 64,884 ordinary shares awarded under our 2014 Restricted Share Plan that are subject to repurchase, and 58,953 ordinary shares accounted for as of December 31, 2014 but issued in February 2015 to former holders of our ordinary shares and series E preferred shares, and:

•

gives effect to the issuance of 72,370 ordinary shares to be issued out of our Authorized Capital II to holders of phantom shares (which we opted to settle in shares) prior to the closing of this offering, 35,736 of which are being sold by the selling shareholders to the underwriters and which, as represented by 473,502 ADSs, will form a part of this offering;

​

•

excludes 205,199 ordinary shares authorized and issuable upon the exercise of options outstanding and exercisable as of December 31, 2014;

​

•

excludes 24,784 ordinary shares reserved for options that have been awarded to members of our management board, management and employees pursuant to our 2014 Management Option Agreements, as of December 31, 2014;

​

•

excludes 37,761 restricted ordinary shares awarded to our Chief Executive Officer, Anthony Zook, pursuant to a restricted share award agreement entered into upon his appointment on December 8, 2014, the issue of which is subject to shareholder approval;

​

•

excludes up to 150,920 ordinary shares to be issued out of our Contingent Capital reserved for stock options for members of our management board and employees, pursuant to our stock option plan, of which 39,244 ordinary shares have been promised but not yet granted to James Tursi, our new Chief Medical Officer and to other members of management and employees pursuant to our Stock Option Plan; and

​

•

excludes up to 150,920 additional ordinary shares our management board is entitled to issue out of our Authorized Capital III with the consent of our supervisory board which ordinary shares, as represented by 1,999,690 ADSs, will form part of this offering

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DILUTION

If you invest in our ADSs in this offering, your interest will be diluted immediately to the extent of the difference between the assumed public offering price per ADS and the pro forma net tangible book value per ADS after this offering. Dilution results from the fact that the assumed public offering price per ADSs is substantially in excess of the net tangible book value per ADS attributable to our existing shareholders for our ordinary shares that will be outstanding immediately prior to the closing of this offering. We calculate net tangible book value per ordinary share by dividing the net tangible book value (total assets less intangible assets and total liabilities) by the number of outstanding ordinary shares. For purposes of illustration, the following discussion assumes that all of our outstanding shares both before and after this offering are in the form of ADSs, each representing 1/13.25 of an ordinary share. Dilution is determined by subtracting net tangible book value per ADS from the assumed public offering price per ADS.

Our net tangible book value as of December 31, 2014 was approximately $41.9 million, or $2.02 per ADS.

On a pro forma basis, after giving effect to the issuance of 72,370 ordinary shares out of our Authorized Capital II to holders of phantom shares, prior to the closing of this offering, and the payment by our phantom share holders of the €1.00 nominal value per ordinary share, resulting in total proceeds to us of €72,370 ($87,864), our pro forma net tangible book value as of December 31, 2014 would have been approximately $42.0 million, or approximately $25.60 per ordinary share, $1.93 per ADS.

After giving further effect to the sale by us of our ADSs in this offering at an assumed public offering price of  $8.16 per ADS (the closing trading price of our ADSs on the NASDAQ Global Market on April 22, 2015) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of December 31, 2014 would have been approximately $57.4 million, or $2.42 per ADS. This amount represents an immediate increase in our pro forma net tangible book value of  $0.40 per ADS to our existing shareholders and an immediate dilution of  $5.74 per ADS to new investors purchasing our ADSs in this offering at the public offering price.

The following table illustrates this dilution per ADS:

   

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The following table summarizes on a pro forma basis, including after giving effect to the pro forma adjustments described above, as of December 31, 2014, the differences between the shareholders as of December 31, 2014 and the new investors with respect to the number of ordinary shares purchased from us and the selling shareholders, the total consideration paid and the average price per ordinary share paid by existing shareholders and by investors participating in this offering at an assumed public offering price of  $8.16 per ADS, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us:

A $1.00 increase (decrease) from $8.16 per ADS, the last reported sale price for our ADSs on the NASDAQ Global Market on April 22, 2015, would increase (decrease) total consideration paid by new investors by $1.9 million, assuming that the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

To the extent any outstanding options under our 2014 Option Agreements or our 2014 Management Option Agreements are exercised, there will be further dilution to new investors. If all of such outstanding options had been exercised as of December 31, 2014, the pro forma as adjusted net tangible book value per ADS after this offering would be $2.98, and total dilution per ADS to new investors would be $5.18. We also promised, but have not yet granted, options out of our Stock Option Plan to purchase a total of 39,244 ordinary shares to James Tursi, in connection with the start of his employment, and to other of our management and employees. If additional options or other share-based awards are issued under our Stock Option Plan, or we issue additional share capital in the future, there will be further dilution to new investors.

   

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SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data in conjunction with our audited consolidated financial statements and the related notes thereto included elsewhere in this prospectus and in the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We present below our selected consolidated historical financial and operating data as of and for each of the years in the three-year period ended December 31, 2014. The consolidated financial data as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 have been derived from our audited consolidated financial statements and the related notes, which are included elsewhere in this prospectus and which have been prepared in accordance with IFRS as issued by the IASB and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States). Pursuant to Section 13(a) of the Exchange Act, we are permitted to provide fewer than five years of selected consolidated financial data.

Our historical results are not necessarily indicative of the financial results to be expected in any future periods.

Amounts presented in U.S. dollars are not audited and have been converted from euros to U.S. dollars solely for the convenience of the reader at an exchange rate of  $1.2141 per euro, the official exchange rate of the European Central Bank on December 31, 2014.

The consolidated financial data have been prepared in accordance with IFRS, unless otherwise noted.

(1)

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a global, commercial stage, specialty pharmaceutical company, with late stage development programs targeting areas of significant unmet medical need. We were incorporated in Delaware under the name Innocoll, Inc. in December 1997 and renamed Innocoll Holdings, Inc. in May 2004. Since 2004, our research and business development has been led and coordinated by our Irish subsidiaries. These Irish entities own our intellectual property and will be subject to Irish corporate tax on their future profits after the utilization of their tax losses. The applicable Irish corporate tax rate is 12.5%. In July 2013, we re-domiciled Innocoll Holdings, Inc. from the United States to Germany pursuant to a contribution-in-kind and share for share exchange into the recently formed Innocoll GmbH, a German limited liability company, as a result of which Innocoll Holdings, Inc. became Innocoll GmbH’s wholly-owned subsidiary. Accordingly, the consolidated information presented herein refers to Innocoll Holdings, Inc., as the “company,” and with its direct and indirect subsidiaries, collectively, as the “group,” for the period from January 1, 2012 until July 24, 2013 and to Innocoll GmbH, as the “company,” and with its direct and indirect subsidiaries, collectively, as the “group,” for the period from July 25, 2013 until March 31, 2014. On July 3, 2014, Innocoll GmbH transformed into a German stock corporation, “Innocoll AG.” Innocoll AG is effectively managed and controlled from Ireland and has, therefore, become tax resident in Ireland under the terms of the Ireland-Germany double tax treaty with effect as of January 1, 2014.

As of December 31, 2014, we had four marketed products: (i) CollaGUARD, which utilizes our CollaFilm® technology, a transparent, bioresorbable collagen film for the prevention of post-operative adhesions in multiple surgical applications, including digestive, colorectal, gynecological and urological surgeries; (ii) Collatamp Gentamicin Surgical Implant, or CollatampG, which utilizes our CollaRx® sponge technology indicated for the treatment or prevention of post-operative infection; (iii) Septocoll®, a bioresorbable, dual-action collagen sponge, indicated for the treatment or prevention of post-operative infection, which we manufacture and supply to Biomet Orthopedics Switzerland GmbH, or Biomet; and (iv) RegenePro, a bioresorbable collagen sponge for dental applications which we manufacture and supply to Biomet 3i.

All of our marketed products are currently sold by commercial partners. CollatampG has been marketed outside of the United States since 1985, and is currently approved for sale in 61 countries across Europe, Latin America, the Middle East, Africa and Asia. EUSA Pharma, through its international division, EUSA Pharma, has rights to distribute CollatampG in all worldwide markets, excluding the United States. We have been supplying Septocoll to Biomet since 2001, for distribution to markets in Europe and the Middle East. CollaGUARD has been approved in 49 countries within Europe, Asia, the Middle East and Latin America. We are preparing for launch of the product in many of its currently approved countries through our established distribution partners, such as Takeda Pharmaceutical Company Limited, or Takeda, which launched and distributed CollaGUARD in Russia in 2014 and is planning to add additional territories in 2015. RegenePro was launched by Biomet 3i in the United States in July 2014.

From 2004 to 2014, we incurred significant operating losses including a total of  €48.9 million spent on research and development in relation to our products and product candidates. Our operating losses were €16.1 million, €6.9 million and €5.8 million for the years ended December 31, 2014, 2013 and 2012,

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respectively. We do not expect that our currently marketed products alone will generate revenue that is sufficient for us to achieve profitability because we expect to continue to incur significant expenses as we advance the development of XaraColl, Cogenzia, CollaGUARD and our other product candidates, seek FDA and other regulatory approval for our product candidates that successfully complete clinical trials and develop our sales force and marketing capabilities to prepare for the commercial launch of our product candidates. We also expect to incur additional expenses expanding our operational, financial and management information systems and personnel, including personnel to support our product development efforts and our obligations as a public reporting company. For us to become and remain profitable, we believe that we must succeed in commercializing XaraColl, Cogenzia, CollaGUARD or other product candidates with significant market potential.

Financial Operations Overview

Revenues

In the years ended December 31, 2014, 2013 and 2012, our revenue was derived primarily from the supply of CollaGUARD, CollatampG and Septocoll, our products manufactured by us and sold by our commercial partners. Supply revenue is derived from a contractual supply price paid to us by our commercial partners. In the case of some of our distribution agreements, including for the sale of CollatampG, the supply price is a contractually agreed percentage of the net sales price received by our distribution partner, which is net of discounts, returns, and allowances incurred. In this case, revenue is recognized in two parts: the first amount is recognized for the manufacture and sale of the product at the point of sale, and the final amount is added or deducted when the product is sold by the distributor based upon the net sale price achieved.

Accordingly, the primary factors that determine our revenues derived from our products are:

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the level of orders submitted by our commercial partners;

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the level of prescription and institutional demand for our products;

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unit sales prices; and

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the amount of gross-to-net sales adjustments realized by our commercial partners.

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The following table sets forth a summary of our revenues by product for the years ended December 31, 2014, 2013 and 2012. The reasons for the increase in revenues in the years ended December 31, 2014 as compared to December 31, 2013 and the decrease in revenues in the year ended December 31, 2013 are more fully described in “—Results of Operations”:

(1)

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Cost of Sales

Cost of sales consists of the costs associated with producing our products for our commercial partners. In particular, our cost of sales includes:

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manufacturing overhead and fixed costs associated with running our manufacturing facilities in Saal, Germany, including salaries and related costs of personnel involved with our manufacturing activities;

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packaging, testing, freight and shipping; and

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the cost of raw materials and active pharmaceutical ingredients.

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All overhead costs associated with operating the manufacturing facility are included in the standard cost of our products as indirect costs and charged to cost of revenue based on sales volume.

Gross margins from supply revenue were (24%), (28%) and (6%) for the years ended December 31, 2014, 2013 and 2012, respectively. Our negative margin is primarily due to absorbing full indirect costs into the standard cost of our products. The amount of indirect costs included in cost of sales was €2.7 million, €2.2 million and €2.4 million for the years ended December 31, 2014, 2013 and 2012, respectively. Excluding these indirect costs, gross margins from supply revenue were 36%, 34%, and 51% for the years ended December 31, 2014, 2013 and 2012, respectively.

As we expand our manufacturing capacity in 2016 (as described in “Business—Facilities”) and increase production with the launch of new products, our indirect costs included in cost of sales will remain relatively fixed and therefore will decrease as a proportion of sales. Our direct costs consist primarily of labor associated with our batch production processes, quality control and manual packaging. In our expanded facility we will produce larger batch sizes and further automate our production and packaging processes, resulting in decreased labor costs per unit produced. Accordingly, our gross margins are expected to increase significantly with growth in product sales and expanded production capacity.

Research and Development Expenses

Our research and development expenses consist of expenses incurred in developing, testing, manufacturing and seeking regulatory approval of our product candidates, including:

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expenses associated with regulatory submissions, clinical trials and manufacturing, including additional expenses to prepare for the commercial manufacture of XaraColl, Cogenzia and CollaGUARD, such as the hiring and training of additional personnel;

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payments to third-party contract research organizations, contract laboratories and independent contractors;

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payments made to regulatory consultants;

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payments made to third-party investigators who perform clinical research on our behalf and clinical sites where such testing is conducted;

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personnel related expenses, such as salaries, benefits, travel and other related expenses, including share-based compensation;

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expenses incurred to maintain regulatory licenses, patents and trademarks; and

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facility, maintenance, and allocated rent, utilities, and depreciation and amortization, and other related expenses.

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Clinical trial expenses for our product candidates are a significant component of our research and development expenses. Product candidates in late-stage clinical development, such as XaraColl, Cogenzia and CollaGUARD, generally have higher research and development expenses than those in earlier stages of development, primarily due to the increased size and duration of the clinical trials. We coordinate clinical trials through a number of contracted investigational sites and recognize the associated expense based on a number of factors, including actual and estimated subject enrollment and visits, direct pass-through costs and other clinical site fees.

From January 1, 2004 through December 31, 2014, we incurred research and development expenses of €48.9 million net of contributions and collaboration agreements with third parties. We incurred below average research and development expenses of  €3.3 million, €1.7 million and €1.7 million for the years ended December 31, 2014, 2013 and 2012, respectively, due to the fact that substantially all of our Phase 2 clinical trials were completed prior to 2012 and we did not commence Phase 3 trials for XaraColl until the third quarter of 2014.

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Our current Phase 3 clinical programs for XaraColl and Cogenzia are expected to continue through 2016, and substantial expenditures to complete the Phase 3 clinical programs will be required after the receipt of pivotal data. Moreover, we are at the early stages of formulating our clinical development plan for XaraColl outside of the United States and for Cogenzia in indications other than DFIs. We expect the clinical development of XaraColl, Cogenzia and our other product candidates will continue for at least the next several years. At this time, we cannot reasonably estimate the remaining costs necessary to complete the clinical development of either XaraColl or Cogenzia and CollaGUARD, complete process development and manufacturing scale-up activities associated with XaraColl, Cogenzia and CollaGUARD and seek marketing approval for XaraColl, Cogenzia and CollaGUARD, or the nature, timing or costs of the efforts necessary to complete the development of any other product candidate we may develop.

The successful development of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with developing drugs and devices, including the uncertainty of:

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the scope, rate of progress and expense of our research and development activities;

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the potential benefits of our product candidates over other therapies;

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clinical trial results;

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the terms and timing of regulatory approvals; and

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

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A change in the outcome of any of these variables with respect to the development of XaraColl, Cogenzia, CollaGUARD or any other product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if regulatory authorities were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of XaraColl, Cogenzia, CollaGUARD or any other product candidate or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significantly more financial resources and time on the completion of the clinical development than expected.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and other related costs, including share-based compensation, for personnel serving in our executive, finance, business development, clinical and regulatory and administrative functions. Our general and administrative expenses also include facility and related costs not included in research and development expenses and cost of revenues, professional fees for legal, consulting, tax and accounting services, insurance, depreciation and general corporate expenses.

We incurred general and administrative expenses of  €11.7 million, €4.1 million and €3.3 million for the years ended December 31, 2014, 2013 and 2012, respectively. General and administrative expenses in the year ended December 31, 2014 included €5.1 million in non-cash charges for stock-based compensation, compared to €0.0 of such charges in the corresponding period in 2013. Stock-based compensation expense in the year ended December, 31, 2014 was exceptionally high due to the timing of share grants and vesting linked to the completion of our initial public offering in the third quarter 2014. Excluding stock-based compensation, we expect that our general and administrative expenses will increase with the continued development and potential commercialization of our marketed products and product candidates and increased expenses associated with us becoming a public company. Additionally, we plan to build a larger commercial infrastructure for the anticipated future launches of XaraColl, Cogenzia and CollaGUARD, and we currently plan to hire our own sales force if Cogenzia is approved by the FDA.

Finance Expense

Finance expense consists of interest income and interest expense, expense from the issue or settlement of options on our shares, fair value gain (expense) on investor options outstanding, and foreign exchange

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gains (losses). Interest income consists of interest earned on our cash and cash equivalents. Finance expense in the year ended December 31, 2014 consisted primarily of fair value expense of investor options outstanding, partially offset by foreign exchange gains, and for the years ended December 31, 2013 and 2012 consisted primarily of non-cash interest charges and accruals related to preferred shares and convertible notes issued to certain of our investors. We incurred finance expense of  €4.5 million, €6.9 million and €6.4 million in the years ended December 31, 2014, 2013 and 2012, respectively.

Other Income

Other income in the year ended December 31, 2013 consists of non-cash fair value gains on exchange of warrants, and settlement of preferred shares and extinguishment of related liabilities in connection with the debt for equity exchange for preferred shares in June 2013 and the re-domicile of our parent company to Germany in July 2013 (the “Re-domicile of Parent Company,” as described more fully in “—Results of Operations—Financing Activities”). For the year ended December 31, 2013, we had exceptionally high other income of  €16.1 million arising from the re-domicile of our parent company. In accordance with IAS 39, the liability associated with the series B convertible stock issued by Innocoll Holdings, Inc. was deemed to be extinguished as the new financial instruments issued had significantly different terms to the instruments they replaced. The difference between the fair value of the new financial instrument, and the carrying value of the extinguished series B convertible stock, was allocated against the carrying value of the liability and equity components with a resulting gain being recognized in profit and loss as noted above. Other income in the year ended December 31, 2012 was €0.4 million, representing the gain from the liquidation of one of our subsidiaries. Other income in the year ended December 31, 2014 was €0.1 million representing profit on the sale of a certain property, plant and equipment.

(Loss)/earnings per Share

The weighted-average number of ordinary shares (denominator – basic) was 735,416 at December 31, 2014 (2013: 44,848 and 2012: 50,947). The weighted-average number of ordinary shares for December 31, 2013 and 2012 have been adjusted for the effects of the Re-domicile of Parent Company, and the Innocoll GmbH conversion of preferred shares into ordinary shares and subsequent transformation into Innocoll AG which took place during the relevant financial periods. The weighted-average number of ordinary shares outstanding during the period and for all periods presented is adjusted for events, other than the conversion of potential ordinary shares, that have resulted in a change of the number of ordinary shares outstanding without a corresponding change in resources.

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(1)

For the years ended December 31, 2014 as well as the year ended December 31, 2012, we excluded the dilutive effect of both preferred shares and promissory notes, and the related interest expense from the computation of the diluted net loss and diluted weighted-average shares outstanding as the effect would be anti-dilutive.

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(2)

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The basic (loss)/earnings per share for the year ended December 31, 2014 was (€28.1) (2013: 47.0 and 2012: (€231.7)). For the purpose of calculating diluted loss per share for 2014 and 2012 the potentially exercisable instruments in issue would have the effect of being antidilutive and, as such, the diluted loss per share is the same as the basic loss per share for those periods.

Non-GAAP Earnings per Share

The tables below include a reconciliation of our GAAP results to non-GAAP results for the years ended December 31, 2014, 2013 and 2012. We define adjusted non-GAAP earnings per share as basic and diluted earnings per share excluding share based payments and fair value expense on warrants outstanding stock. We believe adjusted non-GAAP earnings per share is meaningful to our investors to enhance their understanding of our financial condition and results. The items excluded from non-GAAP earnings per share represent significant non-cash expense which may be settled through issuance of shares included in our authorized or contingent capital. We believe that non-GAAP earnings per share excluding these non-cash items may provide securities analysts, investors and other interested parties with a useful measure of our operating performance and cash requirements. Disclosure in this prospectus of non-GAAP earnings per share, which is a non-IFRS financial measure, is intended as a supplemental measure of our performance that is not required by, or presented in accordance with, IFRS. Non-GAAP earnings per share should not be considered as an alternative to earnings per share, profit (loss) or any other performance measure derived in accordance with IFRS. Our presentation of adjusted earnings per share should not be construed to imply that our future results will be unaffected by unusual non-cash or non-recurring items.

For the year ended December 31, 2014 the reconciliation primarily relates to non-cash expenses in the amount of  €5.1 million with respect to share-based compensation and €6.3 million with respect to fair value expense on warrants. On a non-GAAP-basis, the net loss for the year ended December 31, 2014 was €9.3 million, or €12.6 per share, compared to a net profit of  €2.3 million, or €51.6 per share for the year ended December 31, 2013.

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(1)

For the years ended December 31, 2014 as well as the year ended December 31, 2012, we excluded the dilutive effect of both preferred shares and promissory notes and the related interest expense from the computation of the diluted net loss and diluted weighted-average shares outstanding as the effect would be anti-dilutive.

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(2)

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Critical Accounting Policies and Use of Estimates

We have based our management’s discussion and analysis of financial condition and results of operations on our financial statements that have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors we believe to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully discussed in note 1 to our consolidated financial statements included in this prospectus, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements. We have reviewed these critical accounting policies and estimates with the audit committee of our advisory board:

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Revenue Recognition

Significant management judgments and estimates must be made and used in connection with the recognition of revenue in each accounting period. Material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management’s estimates change on the basis of development of the business or market conditions. To date there have been no material differences arising from these judgments and estimates.

Revenue from products is generally recorded as of the date of shipment, consistent with our typical shipment terms. Where the shipment terms do not permit revenue to be recognized as of the date of shipment, revenue is recognized when the group has satisfied all of its obligations to the customer in accordance with the shipping terms.

Revenue is recognized to the extent that it is probable that economic benefit will flow to the group, that the risks and rewards of ownership have passed to the buyer and that the revenue can be measured. No revenue is recognized if there is uncertainty regarding recovery of the consideration due at the outset of the transaction or the possible return of goods.

Revenue is recognized from milestone payments received under collaboration agreements when earned, provided that the milestone event is substantive, its achievability was not reasonably assured at the inception of the agreement, the group has no further performance obligations relating to the event, and collectability is reasonably assured. If these criteria are not met, the group recognizes milestone payments ratably over the remaining period of their performance obligations under the collaboration agreement.

Share-Based Payments

Stock-based compensation expense related to share-based awards granted to employees is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. The charge to comprehensive income in relation to share based payments in the years ending December 31, 2014, 2013 and 2012 were €5.1 million, €0.0 million and €0.0 million, respectively. With respect to any future stock-based awards, the company plans to re-evaluate each of the fair value assumptions, and revise them as appropriate, on an ongoing basis. We have granted restricted share, phantom share and option awards to members of our supervisory board, management board and employees as follows:

January/March 2014 Grants

Under the 2014 restricted share awards, Innocoll GmbH granted to members of its advisory board, management board and group employees a total of 47,840 restricted shares and 63,256 phantom shares. The total restricted shares and phantom shares represented 12.2% of the diluted share capital of Innocoll GmbH at the time of grant, excluding issued and outstanding options to acquire ordinary shares. We further created an authorized capital of 22,724 ordinary shares as part of Authorized Capital II (see “Description of Share Capital—Authorized Capital”) with the intention to grant options to acquire ordinary shares to certain members of our advisory board, management board and employees, and these options were subsequently granted in December 2014 (see “—2014 Management Options”). The restricted shares were issued in exchange for payment of nominal value of  €47,840. The phantom shares may be either settled in cash or a new issue of shares, at our option, on the date on which the repurchase right lapses. For purposes of valuing the share-based payment in relation to the restricted share and phantom share grants, management performed the valuation with the assistance of a well-recognized independent third-party valuation consultant, which valued all classes of shares fully diluted for the issue of the restricted shares and phantom shares and options, on a pro-forma basis. The share-based payments will be recognized over a one-year period.

May 2014 Grants

Pursuant to a notarial deed entered into on May 22, 2014, Innocoll GmbH granted to new and existing members of its supervisory board, management board and group employees a total of 43,596 restricted shares, 9,113 phantom shares and 869 unrestricted shares to a former member of our supervisory board

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(the “May 2014 Grant”). The total restricted shares and phantom shares issued pursuant to the May 2014 grant represented 5.1% of the diluted share capital of Innocoll GmbH at the time of grant, excluding issued and outstanding options to acquire ordinary shares. We further created an authorized capital of 2,060 ordinary shares as part of Authorized Capital II (see “Description of Share Capital—Authorized Capital”) with the intention to grant options to acquire ordinary shares to certain members of our advisory board, management board and employees which options were subsequently granted in December 2014 (see “—2014 Management Options”). The restricted shares were issued in exchange for payment of nominal value of  €43,596. The phantom shares may be either settled in cash or a new issue of shares, at our option, on the date in which the repurchase right lapses. The May 2014 Grant occurred simultaneously with a new issue of our series E preferred shares. The series E preferred shares were purchased in an arms-length transaction by existing investors, new supervisory board members who also received restricted stock grants, and three new investors who are partners of one of the existing shareholders. The pricing of the series E preferred shares at €112.52 per share was based upon our managing directors’ and our advisory board’s estimate, with the assistance of a third-party specialist, who concluded that the price of our ADS in an anticipated initial public offering would be at least equal to such price or higher. To obtain the series E financing, it was necessary to give the investors anti-dilution rights in the event the initial public offering would be priced at a discount to the expected valuation. As result of the initial public offering price of our ADS of  $9.00 per ADS, and the anti-dilution rights granted to the series E preferred investors, such investors have been issued additional shares at €1.00 per share, as a result of which their weighted-average purchase price is equal to €73.76 per share, a 16.7% discount to the effective value per ordinary share in our initial public offering (see “—Financing Events—Innocoll GmbH 2013 and 2014 Equity Financings”). There were no significant valuation events at the company between the May 2014 Grant date and date of our initial public offering in July 2014. Therefore, we have used the Series E preferred share adjusted weighted-average purchase price of  €73.76 per share as the value for the share-based payment charge arising out of the May 2014 Grant. The share-based payments will be recognized over a one to three year period as set out above.

July 2014, January 2015 and April 2015 Amendments and Restatements

In July 2014, after the transformation of Innocoll GmbH into Innocoll AG, each of the restricted shares and phantom share awards issued in January 2014 and May 2014 were combined and applied to ordinary shares of Innocoll AG pursuant to amended and restated award agreements entered into with Innocoll AG. In January 2015, the phantom share award agreements were each amended and restated to provide for the definition of Exit Event triggering the lapse of the repurchase right by us to be extended to any trading day within the period beginning on the third trading day after the publication of our quarterly reports for the fourth quarter 2014, and the ending on the trading day immediately preceding the first trading day that is two weeks prior to the end of the first quarter 2015, which may be designated by the company’s management board in its sole discretion. There was no impact to the 2014 financial statements as a result of this transaction.

Our publication of our quarterly reports for the fourth quarter 2014 took place on March 19, 2015, which occurred after trading day immediately preceding the first trading day that is two weeks prior to the end of the first quarter 2015, and accordingly the exit event as anticipated in the January 2015 amendment and restatement of the phantom share awards did not occur and we further amended and restated the phantom share awards to provide for the exit event to occur on or immediately prior to the date of this offering.

On April 16, 2015, our management board passed a resolution to settle all of our outstanding phantom shares in 72,370 ordinary shares issued out of our Authorized Capital II, 35,736 of which are being sold by the selling shareholders to the underwriters and which, as represented by 473,502 ADSs, will form part of this offering.

Restricted Stock and Phantom Stock Valuations

The estimated fair market value of the shares issued pursuant to, and underlying the January 2014 grant and May 2014 grant, was determined at the grant date by our supervisory board and was deemed appropriate for the valuation of the grants pursuant to IFRS 2: Share-based payments.

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The estimated fair value of our shares as of each grant date are based on numerous objective and subjective factors, combined with management’s judgment, including the following:

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the assistance of a well-recognized independent third-party valuation consultant in valuing our ordinary shares and series A through D-2 preferred shares, originally issued as of June 30, 2013 in connection with the re-domicile of our parent company, and updated as of December 31, 2013;

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the estimated likelihood of achieving a liquidity event for our shares, such as an initial public offering or an acquisition of our company, given prevailing market conditions and other contingencies affecting the probability or potential timing of such an event;

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the prices at which we sold series D preferred shares in arms-length transactions in October 2013 and November 2013 and the terms of the series D preferred shares relative to the terms of our series A, series B, series C and series D-2 preferred shares and ordinary shares;

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the price at which we sold our shares of series E preferred shares in an arms-length transaction in May 2014 and the terms of the series E preferred shares relative to the terms of our series A, series B, series C, series D and series D-2 preferred shares and ordinary shares, as well as the near term probability that all preferred shares would be converted into ordinary shares pursuant to our planned transformation into Innocoll AG in connection with our initial public offering;

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the subsequent issue of anti-dilution shares to holders of series E preferred and ordinary shares as result of the initial public offering price of our ADS of  $9.00 per ADS; and

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the fact that, at the time of the restricted share and phantom share grants, our shares were illiquid securities of a private company.

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Management performed the valuation of our ordinary shares and series A through D-2 preferred shares in the January/March 2014 grant with the assistance of a well-recognized independent third-party valuation consultant.

Valuation Approaches

Management, with the assistance of an independent third-party valuation consultant, considered several valuation approaches as follows: (1) Cost Approach; (2) Market Approach (including both the Guideline Public Company (“GPC”) method and the Guideline Merged and Acquired Company (“GMAC”) method); (3) Income Approach; (4) Current Value Method; (5) Probability Weighted Expected Return Method; (6) Option-Pricing Method; and (7) Back-Solve Method.

Management, with the assistance of an independent third-party valuation consultant, relied upon the income approach to determine the range of fair market value of equity of our company. Because our value is attributable to our business operations, rather than the assets we hold, management, with the assistance of the independent third-party valuation consultant, did not rely upon the cost approach in its conclusion of the range of the fair market value of our equity. Management, with the assistance of the independent third-party valuation consultant, also did not believe that the multiples of established publicly-traded companies provided reliable indicators of value given that we are relatively early-stage; therefore, they considered, but ultimately did not rely on the GPC method. They also considered, but ultimately did not rely on the GMAC method due to the lack of comparable transactions. As a corroborative approach, they utilized the Back-Solve Method to estimate our implied equity value as derived from the Option-Pricing Method, based on the most recent round of financing of the series D preferred shares.

Factors contributing to differences between grant date estimated fair values and the initial public offering price

We believe that the following factors, along with those set forth above with respect to each of the grants, explain the difference between the grant date estimated fair values of our shares on those grant dates and the initial public offering price of  $9.00 per ADS.

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In January 2014, we knew the initial public offering was a possibility but we were also considering other funding alternatives including the licensing of our products. As a independent third-party valuation was produced in connection with the re-domicile of our parent company in June 2013, updated to December 2013, it was determined that this valuation was a more reasonable estimate of the value than any potential initial public offering price which was far from certain and a potential liquidity event more distant.

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The U.S. markets affecting companies in our industry experienced a significant increase in activities with accompanying increased market multiples and valuations.

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In March 2014, the board determined to proceed with the initial public offering, and the underwriters were subsequently consulted as to the terms of the series E preferred financing, and advised that the valuation and anti-dilution terms reflected a reasonable discount to the expected initial public offering price.

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Simultaneous with the May 2014 grant, we added to our supervisory board three prominent and experienced pharmaceutical and business executives: Jonathan Symonds, CBE, David R. Brennan and Shumeet Banerji, Ph.D. This significantly enhanced the value and profile of our company from an investor perspective and was instrumental in bringing new investors into the series E preferred funding round.

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In June 2014, our pipeline product Cogenzia for the treatment of diabetic foot infections was approved in Canada, which was earlier than expected.

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Subsequent to the confidential submission of our registration statement to the U.S. Securities and Exchange Commission on March 26, 2014, we engaged in discussions with potential investors in reliance on Section 5(d) of the Securities Act of 1933, as amended. In connection with such testing the waters meetings, we received positive feedback from potential investors which caused management to increase its expectations regarding the anticipated price range of an initial public offering of our ordinary shares.

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The ADSs issued in the initial public offering are freely tradable in a public market, whereas the estimated fair value of the shares as of all of grant dates described above represents a contemporaneous estimate of the fair value of shares that were then illiquid, might never become liquid and, even if an initial public offering were successfully completed, would remain illiquid at least until the expiration of the 180-day lockup period following the initial public offering. This illiquidity also accounts for a substantial difference between the estimated fair values of the shares from January 2014 and the initial public offering price.

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The holders of our preferred shares enjoyed substantial economic rights and preferences over the holders of our ordinary shares, including the right to receive dividends prior to any dividends declared or paid on any shares of our ordinary shares and liquidation payments in preference to holders of ordinary shares. The initial public offering price was determined after the conversion of all of our convertible preferred shares prior to the completion of our initial public offering. The corresponding elimination of the preferences and rights enjoyed by the holders of such preferred shares results in a higher valuation.

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The successful completion of an initial public offering would strengthen our balance sheet, provide access to public equity and debt markets and provide a “currency” of publicly tradable securities to enable us to make strategic acquisitions as our supervisory board may deem appropriate, providing enhanced operational flexibility.

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2014 Management Options

In December 2014, the company entered into option agreements with members of its management board and group employees which memorialized options previously promised to them as consideration for past services. Pursuant to the terms of the 2014 Management Option Agreements, the members of the management board and group employees have the right to subscribe for 24,784 ordinary shares at an

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exercise price of  $119.25 per ordinary share (equivalent to $9.00 per ADS), which rights are exercisable through June 15, 2019, subject to certain black-out periods. The 2014 Management Option Agreements further provide that members of its management board and group employees have the right to exchange any ordinary shares they receive upon exercise of these options into ADSs. In January, 2014, the company created an authorized capital (Authorized Capital II, see “Description of Share Capital—Authorized Capital”) as set forth in the articles of association, to cover, among other issuances, the required share issuances under the 2014 Management Option Agreements. The Authorized Capital II will remain in effect until June 15, 2019, on which date any unexercised options expire pursuant to the terms of the 2014 Management Option Agreements, unless the shareholders approve the creation of a new authorized capital for an additional five-year period.

The share based payments cost of the options was calculated using a Black Scholes model. The following input assumptions were used to value the options:

Valuation of financial instruments

The group issued financial instruments during the relevant accounting periods and had financial instruments in issue at both accounting period ends. In conformity with IFRS, the group initially measured these financial instruments at their fair value and thereafter at amortized cost using the effective interest rate method or at fair value through the profit or loss if designated as such upon initial recognition. In order to value these various instruments, the group (and the experts engaged by the group to provide such valuations where applicable) made assumptions and estimates concerning variables such as future cashflows, discount rates, expected volatility, risk free rate and type of valuation models used. The assumptions of future outcomes, and other sources of estimation uncertainty concerning the determination of key inputs to the valuation models, are based on management’s (and relevant experts’) best assessment using the knowledge available, their historical experiences as well as other factors that are considered to be relevant. The estimates and assumptions are reviewed on an ongoing basis.

Taxation

Given the global nature of the business and the multiple taxing jurisdictions in which the group operates, the determination of the group’s provision for income taxes requires significant judgments and estimates, the ultimate tax outcome of which may not be certain. Although estimates are believed to be reasonable, the final outcome of these matters may be different than those reflected in the historical income tax provisions and accruals. Such differences could have a material effect on the income tax provision and results in the period during which such determination is made.

Deferred tax assets and liabilities are determined using enacted tax rates for the effects of net operating losses and temporary differences between the book and tax bases of assets and liabilities. In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. While management considers the scheduled reversal of deferred tax liabilities, and projected future taxable income in making this assessment, there can be no assurance that these deferred tax assets may be realizable.

In addition, the group may also be subject to audits in the multiple taxing jurisdictions in which it operates. These audits can involve complex issues which may require an extended period of time for resolution. Management believes that adequate provisions for income taxes have been made in the financial statements.

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Allowance for slow-moving and obsolete inventory

The group evaluates the realizability of their inventory on a case-by-case basis and makes adjustments to the inventory provision based on their estimates of expected losses. The group writes off any inventory that is approaching its “use-by” date and for which no further re-processing can be performed. The group also considers recent trends in revenues for various inventory items and instances where the realizable value of inventory is likely to be less than its carrying value. Due to the fact that the allowance is calculated on the basis of the actual inventory on hand at the particular balance sheet date, there were no material changes in estimates made during the years ended December 31, 2014, 2013 or 2012 which would have had an impact on the carrying values of inventory during those periods.

Trade receivables

The group evaluates customer accounts with past-due outstanding balances or specific accounts for which it has information that the customer may be unable to meet its financial obligations. Based upon a review of these accounts and management’s analysis and judgment, the group estimates the future cash flows expected to be recovered from these receivables. The amount of the impairment on doubtful receivables is measured individually and recorded as a specific allowance against that customer’s receivable balance to the amount expected to be recovered. The allowance is re-evaluated and adjusted periodically as additional information is received.

Provisions

Provisions are recognized and measured on the basis of the estimate and probability of future outflows of resources embodying benefits, as well as on the basis of experiential values and the circumstances known at the end of the reporting period. Assumptions also are made as to the probabilities whether and within what ranges the provisions may be used. The assessment of whether a present obligation exists is generally based on assessment of internal experts. Estimates can change on the basis of new information and the actual charges may affect the performance and financial position of the group.

JOBS Act

As a company with less than $1.0 billion in revenues for our fiscal year ended December 31, 2014, we qualify as an “emerging growth company” as defined in Section 2(a) of the U.S. Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act, or the JOBS Act, which was enacted in 2012. An emerging growth company may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to:

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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;

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being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;

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reduced disclosure obligations regarding executive compensation; and

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