Filed Pursuant to Rule 424(b)(5)
Registration No. 333-206710

 

PROSPECTUS SUPPLEMENT
(To Prospectus dated September 10, 2015)

 

 

 

Up to $35,000,000

 

Common Shares

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We have entered into a Controlled Equity Offering SM sales agreement with Cantor Fitzgerald & Co. relating to our common shares offered by this prospectus supplement. In accordance with the terms of the sales agreement, we may offer and sell through this prospectus supplement common shares having an aggregate offering price of up to $35,000,000 from time to time through Cantor Fitzgerald & Co., acting as our sales agent.

 

Sales of our common shares, if any, under this prospectus supplement may be made in sales deemed to be “at the market offerings” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, or the Securities Act, including sales made directly on or through the NASDAQ Global Market, the existing trading market for our common shares, sales made to or through a market maker other than on an exchange or otherwise, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law, including in negotiated transactions with our prior written consent.

 

We will pay Cantor Fitzgerald & Co. a fixed commission rate equal to 3.25% of the gross sales price per common share sold. In connection with the sale of our common shares on our behalf, Cantor Fitzgerald & Co. will be deemed to be an “underwriter” within the meaning of the Securities Act and the compensation of Cantor Fitzgerald & Co. will be deemed to be underwriting commissions or discounts. Subject to the terms of the sales agreement, Cantor Fitzgerald & Co. will use its commercially reasonable efforts to sell on our behalf any shares to be offered under the sales agreement, consistent with its normal trading and sales practices, on mutually agreed terms between Cantor Fitzgerald & Co. and us.

 

Our common shares are listed on the NASDAQ Global Market under the symbol “EARS.” The last recorded sale price of our common shares on the NASDAQ Global Market on May 26, 2016 was $3.37 per share.

 

Thomas Meyer, our Chief Executive Officer, or the Share Lender, has entered into a share lending agreement with Cantor Fitzgerald & Co., or the Share Borrower, to facilitate the timely settlement of common shares sold under this prospectus supplement due to certain Swiss legal requirements with respect to the issuance of common shares that could otherwise delay settlement. See “Related Party Transactions.”

 

Investing in our common shares involves a high degree of risk. You should carefully consider all of the information set forth in this prospectus supplement, the accompanying base prospectus and the documents incorporated by reference in this prospectus supplement before deciding to invest in our common shares. See “ Risk Factors ” beginning on page S-6 of this prospectus supplement and in the documents incorporated by reference in the accompanying prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of our common shares, or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

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The date of this prospectus supplement is June 1, 2016

 

table of contents

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Prospectus Supplement

 

Page

 

About This Prospectus Supplement S-i
Forward-Looking Statements S-i
Summary S-1
The Offering S-5
Risk Factors S-6
Use of Proceeds S-13
Market for Our Common Shares and Dividends S-14
Capitalization S-15
Dilution S-16
Description of Share Capital and Articles of Association S-17
Related Party Transactions S-28
Taxation S-29
Plan of Distribution S-38
Legal Matters S-40
Experts S-40
Where You Can Find More Information and Incorporation by Reference S-41

 

 

Prospectus

 

Page

 

About This Prospectus 1
Where You Can Find More Information 1
Special Note Regarding Forward-Looking Statements 1
Auris Medical Holding AG 2
Risk Factors 3
Ratio of Earnings to Fixed Charges 3
Use of Proceeds 3
Description of Share Capital and Articles of Association 3
Comparison of Swiss Law and Delaware Law 13
Description of Debt Securities 19
Description of Warrants 22
Description of Purchase Contracts 23
Description of Units 23
Forms of Securities 24
Plan of Distribution 25
Incorporation of Certain Information By Reference 26
Enforcement of Civil Liabilities 27
Expenses 28
Legal Matters 28
Experts 28

 

 

 

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About This Prospectus Supplement

 

This document consists of two parts. The first part is the prospectus supplement, which describes the specific terms of this offering. The second part is the prospectus, which describes more general information, some of which may not apply to this offering. You should read both this prospectus supplement and the accompanying prospectus, together with the additional information described under the heading “Where You Can Find More Information and Incorporation by Reference.”

 

Unless expressly stated or the context otherwise requires, all references in this prospectus supplement to “Auris Medical,” or the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to Auris Medical Holding AG, a Swiss corporation, together with its subsidiaries.

 

The terms “dollar,” “USD” or “$” refer to U.S. dollars and the terms “Swiss Franc” and “CHF” refer to the legal currency of Switzerland.

 

This prospectus supplement, the accompanying prospectus and any issuer free writing prospectus may be used only for the purpose for which they have been prepared. No one is authorized to give information other than that contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus and any issuer free writing prospectus. We have not, and the underwriter has not, authorized any other person to provide you with different information. We and the underwriter take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.

 

We are not, and the underwriter is not, making an offer to sell the common shares in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference is accurate only as of their respective dates. Our business, financial condition, results of operations and prospects may have changed since such dates. Neither this prospectus supplement nor the accompanying prospectus or any issuer free writing prospectus constitutes an offer, or a solicitation on our behalf or on behalf of the underwriter, to subscribe for and purchase any of the common shares and may not be used for or in connection with an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

 

Forward-Looking Statements

 

This prospectus supplement, the accompanying prospectus and documents incorporated by reference herein and therein contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Many of the forward-looking statements contained in this prospectus supplement can be identified by the use of words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “will,” “estimate” and “potential,” among others, or the negatives thereof.

 

Such forward-looking statements include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to those identified under the section “Item 3. Key Information—D. Risk factors” in our Annual Report on Form 20-F for the year ended December 31, 2015, incorporated by reference herein. These risks and uncertainties include factors relating to:

 

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

 

 

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· our need for substantial additional funding before we can expect to become profitable from sales of our products;

 

· our dependence on the success of AM-101 and AM-111, which are still in clinical development and may eventually prove to be unsuccessful;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

· other risk factors discussed under “Risk Factors.”

 

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

 

 

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Summary

 

The following summary highlights certain information contained elsewhere in this prospectus supplement and the accompanying prospectus or in the documents incorporated by reference herein. It may not contain all of the information that you should consider before investing in the common shares. For a more complete discussion of the information you should consider before investing in the common shares, you should carefully read this entire prospectus supplement, the accompanying prospectus and the incorporated documents.

 

Our Business

 

We are a clinical-stage biopharmaceutical company focused on the development of novel products for the treatment of inner ear disorders. Our most advanced product candidate, AM-101, is in Phase 3 clinical development for acute inner ear tinnitus under a special protocol assessment, or SPA, from the U.S. Food and Drug Administration, or FDA. We are also developing AM-111 for acute inner ear hearing loss, or ASNHL. Both acute inner ear tinnitus and hearing loss are conditions for which there is high unmet medical need, and we believe that we have the potential to be the first to market in these indications.

 

We believe we are currently the clinically most advanced company working on inner ear therapeutics. We believe that AM-101 and AM-111 are the only drug candidates that have demonstrated positive efficacy in randomized placebo-controlled clinical trials in acute inner ear tinnitus and acute inner ear hearing loss. Our products are protected through intellectual property rights and, in addition, orphan drug status has been granted to AM-111.

 

Our product candidates are injected under local anesthesia into the middle ear by a technique called intratympanic injection. Once injected into the middle ear, the active substance, which is formulated in a biocompatible gel, diffuses into the inner ear. The procedure is short, safe, has a long history of use and allows for highly targeted drug delivery with minimal systemic exposure. It is performed by an ear, nose and throat, or ENT, specialist on an outpatient basis over one or more visits.

 

Our Product Candidates

 

Our lead product candidate, AM-101, is targeting acute inner ear tinnitus. Tinnitus, frequently perceived as a ringing in the ears, is the perception of sound when no external sound is present. Similar to pain, it is an unwanted, unpleasant and thus distressing sensation. Tinnitus may result in further symptoms such as inability to concentrate, irritability, anxiety, insomnia, and clinical depression. In many cases, tinnitus significantly impairs quality of life and affects normal day-to-day activities.

 

Tinnitus is categorized as acute during the three months after onset and chronic when it persists for more than three months. Approximately 25% of American adults (50 million people) have experienced tinnitus with nearly 8% of American adults (16 million people) having frequent occurrences. Epidemiological studies reveal comparable prevalence rates for Europe. Among the tinnitus patients seen by general practitioners and ENT specialists in the United States and the top five European markets who reported seeing at least one tinnitus patient in the previous three months, approximately 36% of patients sought medical treatment during the first three months following tinnitus onset.

 

Possible causes of acute inner ear tinnitus include traumatic insult such as exposure to excessive noise, or middle ear infection (otitis media, or OM). We have conducted Phase 2 trials in this specific tinnitus population with AM-101, which demonstrated a favorable safety profile. Furthermore, in our Phase 2 clinical trials, AM-101 showed a dose dependent, persistent and clinically relevant improvement, as compared to the placebo, in subjective tinnitus loudness as well as other patient reported outcomes, such as tinnitus annoyance, tinnitus severity, sleep difficulties and general tinnitus impact. Our Phase 3 clinical program, which is similar in design to our Phase 2 trial design, is being conducted under an SPA from the FDA and also incorporates guidance from the European Medicines Agency, or EMA. The Phase 3 clinical program is comprised of two Phase 3 studies, one in North America (Efficacy and Safety of AM-101 in the Treatment of Acute Peripheral Tinnitus 2, or TACTT2) and one in Europe (Efficacy and Safety of AM-101 in the Treatment of Acute Peripheral Tinnitus 3, or TACTT3), and two open label follow-on

 

  

 

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studies, AM-101 in the Post-Acute Treatment of Peripheral Tinnitus 1 and 2, or AMPACT1 and AMPACT2. Enrollment of patients in TACTT2 was completed in the first quarter of 2016 and is expected to be completed in TACTT3 a few months later. We expect to have top-line results from the first Phase 3 trial for AM-101 in the third quarter of 2016, with results for the second trial following a few months later. We believe that AM-101 has the potential to become the first product approved for the treatment of acute inner ear tinnitus.

 

Our second product candidate, AM-111, is being developed for the treatment of ASNHL. In sensorineural hearing loss, which is also referred to as inner ear hearing loss, there is damage to the sensory cells of the inner ear or the auditory nerve. Hearing loss is a heterogeneous disorder of many forms with a variety of causes. ASNHL may be triggered by a variety of insults, such as exposure to excessively loud sound, infection, inflammation or certain ototoxic drugs. These insults may also result in tinnitus. In the United States, more than 66,000 patients covered by health insurance are treated for sudden deafness annually. There are no currently approved pharmaceutical treatments for this patient population in the United States.

 

In our Phase 2 clinical trial, AM-111 showed a favorable safety profile. Furthermore, in patients with severe to profound ASNHL, we observed a clinically relevant improvement in hearing threshold, speech discrimination and a higher rate of complete tinnitus remission compared with placebo. We intend to conduct two pivotal Phase 3 trials in the treatment of idiopathic inner ear hearing loss, or ISSNHL, a subset of ASNHL, titled Efficacy and Safety of AM-111 in the Treatment of Acute Inner Ear Hearing Loss, or HEALOS, and Efficacy and Safety of AM-111 as Acute Sudden Sensorineural Hearing Loss Treatment, or ASSENT. HEALOS has commenced enrollment in Europe and Asia and we intend to initiate ASSENT in the U.S., Canada and South Korea in mid-2016. In addition, we plan to conduct a Phase 2 trial in the treatment of surgery-induced hearing loss titled Efficacy and Safety of AM-111 in the Treatment of Surgery-Induced Hearing Loss, or REACH, in the U.S. Provided that we obtain grant or other funding, REACH could be initiated in the first half of 2017 at the earliest. We believe that, if approved, AM-111 could become the first approved pharmaceutical treatment for ASNHL. AM-111 received orphan drug designation for the treatment of ASNHL from both the FDA and the EMA.

 

The following table summarizes our product development pipeline:

 

 

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(1) Dates of key milestones are indicative and subject to change.

 

 

 

 

 

  

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Strengths

 

We believe we are a leader in the development of novel therapeutic products for inner ear disorders due to several factors.

 

·      First mover advantage. With two product candidates in late stage clinical development, we believe we are currently the clinically most advanced company working on inner ear therapeutics. We believe that AM-101 and AM-111 are the only drug candidates that have demonstrated positive efficacy in randomized placebo-controlled clinical trials in acute inner ear tinnitus and acute inner ear hearing loss. As a result, we believe we will be the first to market with FDA or EMA-approved products for these indications.

 

·       Barriers to entry. Our products are protected not only through intellectual property rights but also potentially by the orphan drug status granted to AM-111 as well as by the know-how across several disciplines that is required to formulate and reliably deliver drugs to the inner ear. Our proprietary gel formulation, its manufacturing and its application are part of our intellectual property, know-how and competitive advantage. In addition, we believe that our intellectual property broadly directed to polymer-based formulations for the treatment of middle or inner ear disorders will serve as barriers to entry beyond our current products.

 

·      Efficient commercialization. Given that the market for our therapeutic product candidates can be efficiently accessed through a limited number of specialist ENT physicians and specialist neurotologists, we intend to build our own sales force in order to commercialize these products in the United States and key European markets.

 

·       Experienced management. Having been focused on developing therapeutic products for inner ear indications for over a decade, we believe that our senior management provides us with significant capabilities. Our Chief Executive Officer and founder, Thomas Meyer, has played several pivotal roles in our development and evolution. Prior to Auris Medical, he was the CEO of Disetronic, a fast growing Swiss diabetes care company sold to Roche in 2003. Other key members of our management team bring significant experience in clinical, product and business development in biopharmaceutical companies.

 

Strategy

 

Our goal is to become the leading biopharmaceutical company focused on developing and commercializing novel therapeutics to treat inner ear disorders. The key elements of our strategy to achieve this goal are:

 

·     Target inner ear disorders that have a defined pathophysiology and that are amenable to treatment. We are focusing on inner ear disorders for which the pathophysiology is well characterized, can be effectively targeted and where affected patients seek medical attention proactively.

 

·     Use drug delivery techniques and proprietary drug formulations for effective, safe and rapid local administration to the inner ear. We are developing treatments for inner ear disorders based on intratympanic injections into the middle ear. This short outpatient procedure allows us to deliver therapeutic concentrations of drug in a highly targeted fashion with only minimal systemic exposure. We are using proprietary, fully biocompatible and biodegradable gel formulations for optimum middle ear tolerance and effective diffusion of active substances into the inner ear.

 

·     Bring AM-101 and AM-111 to market. We plan to focus most of our resources on the development and commercialization of our two lead product candidates. AM-101 is in two Phase 3 clinical trials, based on an SPA with the FDA and guidance from the EMA. We expect to have top-line results from the first Phase 3 trial for AM-101 in the third quarter of 2016, with results for the second trial following in a few months later. We intend to conduct two pivotal Phase 3 trials with AM-111 in the treatment of ISSNHL, titled HEALOS and ASSENT. HEALOS, has commenced enrollment in Europe and Asia and we intend to initiate ASSENT in the U.S., Canada and South Korea in mid-2016. In addition, we are planning a Phase 2

 

 

 

 

 

 

 

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trial titled REACH in order to test AM-111 in the treatment of surgery-induced hearing loss. Provided we obtain grant or other funding for REACH, REACH could be initiated in the first half 2017.

 

·      Build an efficient commercial infrastructure to maximize the value of our product candidates. We intend to build commercial operations in the North American market and in select European markets. In those markets, we expect our commercial operations to include specialty sales forces targeting ENTs and specialists in neurotology both in hospitals and in private practice. In other markets, we expect to seek partnerships that would maximize our products’ commercial potential.

 

·      Expand our pipeline through internal development, academic collaborations, in-licensing and acquisitions. Through our work with academic research partners on the pathophysiology of tinnitus and hearing loss and clinical development we have gained novel insights that will help us both to create new pipeline products that act by way of novel mechanisms as well as to expand the therapeutic focus for our existing product candidates beyond their current indications. We plan to further maximize our commercial potential through product life cycle management, and with licensing or acquisition of compounds that could augment our product offering in ENT disorders.

 

Risk Factors

 

An investment in our common shares involves risk. You should carefully consider the information set forth in the section of this prospectus supplement entitled “Risk Factors” beginning on page S-6, as well as other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus, before deciding whether to invest in our common shares.

 

Other Information

 

We are a stock corporation organized under the laws of Switzerland. We began our current operations in 2003. On April 22, 2014, we changed our name from Auris Medical AG to Auris Medical Holding AG and transferred our operational business to our newly incorporated subsidiary Auris Medical AG, which is now our main operating subsidiary. Our principal office is located at Bahnhofstrasse 21, 6300 Zug, Switzerland, telephone number +41 41 729 71 94. We maintain a website at www.aurismedical.com where general information about us is available. Investors can obtain copies of our filings with the Securities and Exchange Commission, or SEC, from this site free of charge, as well as from the SEC website at www.sec.gov. We are not incorporating the contents of our website into this prospectus supplement and the accompanying prospectus.

 

 

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The Offering  

 

Issuer Auris Medical Holding AG
Common shares offered by us Common shares, nominal value CHF 0.40 per share, having an aggregate offering price of up to $35,000,000.
Manner of offering “At the market offering” that may be made from time to time through our sales agent, Cantor Fitzgerald & Co. See “Plan of Distribution” in this prospectus supplement.
Use of proceeds We currently intend to use the net proceeds from the sale of our common shares pursuant to the sales agreement, if any, for working capital and general corporate purposes. See “Use of Proceeds” in this prospectus supplement.
Risk factors An investment in our common shares involves a high degree of risk. Please refer to “Risk Factors” in this prospectus supplement, “Item 3. Key Information—D. Risk factors” in our Annual Report on Form 20-F for the year ended December 31, 2015, incorporated by reference herein, and other information included or incorporated by reference in this prospectus supplement or the accompanying prospectus for a discussion of factors you should carefully consider before investing in our common shares.
NASDAQ Global Market symbol “EARS.”

  

 

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Risk Factors

 

Any investment in our common shares involves a high degree of risk. You should carefully consider the risks described below and in “Item 3. Key Information—D. Risk factors” in our Annual Report on Form 20-F for the year ended December 31, 2015, incorporated by reference herein and all of the information included or incorporated by reference in this prospectus supplement and the accompanying prospectus before deciding whether to purchase our common shares. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the events or circumstances described in the following risk factors actually occur, our business, financial condition and results of operations would suffer. In that event, the price of our common shares could decline, and you may lose all or part of your investment. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See “Forward-Looking Statements.”

 

Risks Related to this Offering and Our Common Shares

 

The price of our common shares may be volatile and may fluctuate due to factors beyond our control.

 

The share price of publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and is likely to remain highly volatile in the future. The market price of our common shares may fluctuate significantly due to a variety of factors, including:

 

· positive or negative results of testing and clinical trials by us, strategic partners, or competitors;

 

· delays in entering into strategic relationships with respect to development and/or commercialization of our product candidates or entry into strategic relationships on terms that are not deemed to be favorable to us;

 

· technological innovations or commercial product introductions by us or competitors;

 

· changes in government regulations;

 

· developments concerning proprietary rights, including patents and litigation matters;

 

· public concern relating to the commercial value or safety of any of our product candidates;

 

· financing or other corporate transactions;

 

· publication of research reports or comments by securities or industry analysts;

 

· general market conditions in the pharmaceutical industry or in the economy as a whole; or

 

· other events and factors beyond our control.

 

In addition, the stock market in general has recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. Broad market and industry factors may materially affect the market price of companies’ stock, including ours, regardless of actual operating performance.

 

Certain principal shareholders and members of our executive team and board of directors own a majority of our common shares and as a result will be able to exercise significant control over us, and your interests may conflict with the interests of such shareholders.

 

Certain principal shareholders and their affiliated entities as well as members of our executive team and board of directors own approximately 73.5% of our common shares. Depending on the level of attendance at our general meetings of shareholders, these shareholders may be in a position to determine the outcome of decisions taken at any

 

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such general meeting. Any shareholder or group of shareholders controlling more than 50% of the shares represented at our general meetings of shareholders may control any shareholder resolution requiring an absolute majority of the shares represented, including the election of members to the board of directors of our company, certain decisions relating to our capital structure, the approval of certain significant corporate transactions and certain amendments to our articles of association. To the extent that the interests of these shareholders may differ from the interests of the Company’s other shareholders, the latter may be disadvantaged by any action that these shareholders may seek to pursue. Among other consequences, this concentration of ownership may have the effect of delaying or preventing a change in control and might therefore negatively affect the market price of our common shares.

 

Future sales, or the possibility of future sales, of a substantial number of our common shares could adversely affect the price of our common shares.

 

Future sales of a substantial number of our common shares, or the perception that such sales will occur, could cause a decline in the market price of our common shares. Approximately 53.0% of our common shares outstanding are held by affiliates. If these shareholders sell substantial amounts of common shares in the public market, or the market perceives that such sales may occur, the market price of our common shares and our ability to raise capital through an issue of equity securities could be adversely affected. We have also entered into a registration rights agreement pursuant to which we have agreed under certain circumstances to file a registration statement to register the resale of common shares held by certain of our shareholders, as well as to cooperate in certain public offerings of such common shares. We have also filed registration statements to register all common shares and other equity securities that we have issued under our prior equity incentive plans or may issue under our new omnibus equity compensation plan. These common shares may be freely sold in the public market upon issuance, subject to certain limitations applicable to affiliates. If a large number of our common shares are sold in the public market, the sales could reduce the trading price of our common shares and impede our ability to raise future capital.

 

If you purchase the common shares sold in this offering, you may experience immediate dilution as a result of this offering and future equity issuances.

 

Because the price per share of the common shares being offered may be higher than the book value per share of our common shares, you may suffer immediate and substantial dilution in the net tangible book value of the common shares you purchase in this offering. The issuance of additional common shares in future offerings could be dilutive to shareholders if they do not invest in future offerings. Moreover, to the extent that we issue options or warrants to purchase, or securities convertible into or exchangeable for, common shares in the future and those options, warrants or other securities are exercised, converted or exchanged, shareholders may experience further dilution.

 

We have broad discretion in the use of the net proceeds from this offering, if any, and may not use them effectively.

 

Our management has broad discretion in the application of the net proceeds from this offering, if any, and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common shares. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common shares to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

 

We do not expect to pay dividends in the foreseeable future.

 

We have not paid any dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend that any earnings will be reinvested in our business and that dividends will not be paid until we have an established revenue stream to support continuing dividends. The proposal to pay future dividends to shareholders will in addition effectively be at the discretion of our board of directors and shareholders after taking into account various factors including our business prospects, cash requirements, financial performance and new product development. In addition, payment of future dividends is subject to certain limitation pursuant to

 

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Swiss law or by our articles of association. Accordingly, investors cannot rely on dividend income from our common shares and any returns on an investment in our common shares will likely depend entirely upon any future appreciation in the price of our common shares.

 

We are a holding company with no material direct operations.

 

We are a holding company with no material direct operations. As a result, we would be dependent on dividends, other payments or loans from our subsidiaries in order to pay a dividend. Our subsidiaries are subject to legal requirements of their respective jurisdictions of organization that may restrict their paying dividends or other payments, or making loans, to us.

 

We are a Swiss corporation. The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.

 

We are a Swiss corporation. Our corporate affairs are governed by our articles of association and by the laws governing companies incorporated in Switzerland. The rights of our shareholders and the responsibilities of members of our board of directors may be different from the rights and obligations of shareholders and directors of companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board of directors is required by Swiss law to consider the interests of our company, our shareholders, our employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder. Swiss corporate law limits the ability of our shareholders to challenge resolutions made or other actions taken by our board of directors in court. Our shareholders generally are not permitted to file a suit to reverse a decision or an action taken by our board of directors but are instead only permitted to seek damages for breaches of fiduciary duty. As a matter of Swiss law, shareholder claims against a member of our board of directors for breach of fiduciary duty would have to be brought in Zug, Switzerland, or where the relevant member of our board of directors is domiciled. In addition, under Swiss law, any claims by our shareholders against us must be brought exclusively in Zug, Switzerland.

 

Our common shares are issued under the laws of Switzerland, which may not protect investors in a similar fashion afforded by incorporation in a U.S. state.

 

We are organized under the laws of Switzerland. There can be no assurance that Swiss law will not change in the future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the U.S., which could adversely affect the rights of investors.

 

U.S. shareholders may not be able to obtain judgments or enforce civil liabilities against us or our executive officers or members of our board of directors.

 

We are organized under the laws of Switzerland and our jurisdiction of incorporation is Zug, Switzerland. Moreover, a number of our directors and executive officers and a number of directors of each of our subsidiaries are not 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 for investors to effect service of process within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our Swiss counsel that there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent predicated upon the federal and state securities laws of the United States. Original actions against persons in Switzerland based solely upon the U.S. federal or state securities laws are governed, among other things, by the principles set forth in the Swiss Federal Act on International Private Law. This statute provides that the application of provisions of non-Swiss law by the courts in Switzerland shall be precluded if the result is incompatible with Swiss public policy. Also, mandatory provisions of Swiss law may be applicable regardless of any other law that would otherwise apply.

 

Switzerland and the United States do not have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. The recognition and enforcement of a judgment of the courts of the

 

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United States in Switzerland is governed by the principles set forth in the Swiss Federal Act on Private International Law. This statute provides in principle that a judgment rendered by a non-Swiss court may be enforced in Switzerland only if:

 

· the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law;

 

· the judgment of such non-Swiss court has become final and non-appealable;

 

· the judgment does not contravene Swiss public policy;

 

· the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and

 

· no proceeding involving the same position and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland, or was earlier adjudicated in a third state and this decision is recognizable in Switzerland.

 

Our status as a Swiss corporation means that our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends and otherwise manage ongoing capital needs.

 

Swiss law reserves for approval by shareholders certain corporate actions over which a board of directors would have authority in some other jurisdictions. For example, the payment of dividends and cancellation of treasury shares must be approved by shareholders. Swiss law also requires that our shareholders themselves resolve to, or authorize our board of directors to, increase our share capital. While our shareholders may authorize share capital that can be issued by our board of directors without additional shareholder approval, Swiss law limits this authorization to 50% of the issued share capital at the time of the authorization. The authorization, furthermore, has a limited duration of up to two years and must be renewed by the shareholders from time to time thereafter in order to be available for raising capital. Additionally, Swiss law grants pre-emptive rights to existing shareholders to subscribe for new issuances of shares. In certain circumstances, including those explicitly described in our articles of association, our board of directors may withdraw such pre-emption rights. Shareholders who believe pre-emption rights were improperly withdrawn may sue us for damages. Swiss law also does not provide as much flexibility in the various rights and regulations that can attach to different categories of shares as do the laws of some other jurisdictions. These Swiss law requirements relating to our capital management may limit our flexibility, and situations may arise where greater flexibility would have provided benefits to our shareholders.

 

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

 

We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we are subject to Swiss laws and regulations with regard to such matters and intend to furnish quarterly financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

 

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As a foreign private issuer and as permitted by the listing requirements of Nasdaq, we follow certain home country governance practices rather than the corporate governance requirements of Nasdaq.

 

We are a foreign private issuer. As a result, in accordance with Nasdaq Listing Rule 5615(a)(3), we comply with home country governance requirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of Nasdaq.

 

Swiss law does not require that a majority of our board of directors consists of independent directors. Our board of directors therefore may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we are not subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors regularly have scheduled meetings at which only independent directors are present.

 

Although Swiss law also requires that we adopt a compensation committee, we follow home country requirements with respect to such committee. As a result, our practice varies from the requirements of Nasdaq Listing Rule 5605(d), which sets forth certain requirements as to the responsibilities, composition and independence of compensation committees. In addition, in accordance with Swiss law, we have opted not to implement a standalone nominating committee. To this extent, our practice varies from the independent director oversight of director nominations requirements of Nasdaq Listing Rule 5605(e).

 

Furthermore, in accordance with Swiss law and generally accepted business practices, our articles of association do not provide quorum requirements generally applicable to general meetings of shareholders. Our practice thus varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock. Our articles of association provide for an independent proxy holder elected by our shareholders, who may represent our shareholders at a general meeting of shareholders, and we must provide shareholders with an agenda and other relevant documents for the general meeting of shareholders. However, Swiss law does not have a regulatory regime for the solicitation of proxies and company solicitation of proxies is prohibited for public companies in Switzerland, thus our practice varies from the requirement of Nasdaq Listing Rule 5620(b), which sets forth certain requirements regarding the solicitation of proxies. In addition, we have opted out of shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from the requirements of Nasdaq Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events.

 

As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

 

We may lose our foreign private issuer status, 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 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 common 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 50 percent of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. These criteria are tested on the last business day of our second fiscal quarter, each year. 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 stock exchange 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

 

S- 10

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 of our board of directors.

 

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” will make our common shares less attractive to investors.

 

We are an “emerging growth company,” as defined in 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, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” until 2019, although circumstances could cause us to lose that status earlier, including if the market value of our common shares held by non-affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an “emerging growth company” as of the following December 31 (our fiscal year end). We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and the price of our common shares may be more volatile.

 

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common shares.

 

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue and cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common shares.

 

We will be required to disclose changes made in our internal controls and procedures and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” until 2019. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

 

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

 

The trading market for our common shares depends in part on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. We cannot assure you that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business, the price of our common shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common shares could decrease, which might cause the price of our common shares and trading volume to decline.

 

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We believe that we were a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for our 2014 and 2015 taxable years, and we expect to be a PFIC for our current year and for the foreseeable future.

 

We believe that we were a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for our 2014 and 2015 taxable years, and we expect to be a PFIC for our current year and for the foreseeable future. In addition, we may, directly or indirectly, hold equity interests in other PFICs, or Lower-tier PFICs. Under the Internal Revenue Code of 1986, as amended, or the Code, we will be a PFIC for any taxable year in which (i) 75% or more of our gross income consists of passive income or (ii) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and capital gains.

 

If we are a PFIC for any taxable year during which a U.S. investor holds our shares, the U.S. investor may be subject to adverse tax consequences, including (i) the treatment of all or a portion of any gain on disposition as ordinary income, (ii) the application of a deferred interest charge on such gain and the receipt of certain dividends and (iii) compliance with certain reporting requirements.

 

For further discussion of the adverse U.S. federal income tax consequences of our classification as a PFIC, see “Taxation—Material U.S. Federal Income Tax Consideration for U.S. Holders.”

 

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Use of Proceeds

 

The amount of proceeds from this offering will depend upon the number of our common shares sold and the price at which they are sold. There can be no assurance that we will be able to sell any common shares under, or fully utilize, the sales agreement with Cantor Fitzgerald & Co. as a source of financing.

 

We intend to use the net proceeds from the sale of our common shares pursuant to the sales agreement, if any, for working capital and general corporate purposes.

 

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Market for Our Common Shares and Dividends

 

Our common shares are quoted on the NASDAQ Global Market under the symbol “EARS.” The following table sets forth on a per share basis the low and high closing sale prices of our common shares as reported by the NASDAQ Global Market for the periods presented.

 

 

High 

Low 

Year Ended:    
December 31, 2014 (starting August 6, 2014) 7.23 3.51
December 31, 2015 6.38 3.02
Year Ended December 31, 2014:    
Third Quarter (starting August 6, 2014) 7.23 5.37
Fourth Quarter 5.75 3.51
Year Ended December 31, 2015:    
First Quarter 6.38 3.51
Second Quarter 6.05 4.33
Third Quarter 5.56 3.50
Fourth Quarter 5.00 3.02
Month Ended:    
November 30, 2015 3.88 3.02
December 31, 2015 5.00 3.09
January 31, 2016 7.79 4.13
February 29, 2016 4.75 3.91
March 31, 2016 4.79 3.36
April 30, 2016 4.33 3.61
May 2016 (through May 26, 2016) 3.64 3.13

 

As of May 26, 2016, we had 34,329,704 common shares issued and outstanding held by 14 registered holders, one of which is Cede & Co., a nominee for The Depository Trust Company (“DTC”). All of the common shares held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC and therefore are considered to be held of record by Cede & Co. as one shareholder.

 

We have never paid a dividend, and we do not anticipate paying dividends in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. As a result, investors in our common shares will benefit in the foreseeable future only if our common shares appreciate in value.

 

Under Swiss law, any dividend must be proposed by our board of directors and approved by a shareholders’ meeting. In addition, our auditors must confirm that the dividend proposal of our board of directors conforms to Swiss statutory law and our articles of incorporation. A Swiss corporation may pay dividends only if it has sufficient distributable profits brought forward from the previous business years (“ Gewinnvortrag ”) or if it has distributable reserves (“ frei verfügbare Reserven ”), each as evidenced by its audited standalone statutory balance sheet prepared pursuant to Swiss law and after allocations to reserves required by Swiss law and its articles of association have been deducted. Distributable reserves are generally booked either as “free reserves” (“ freie Reserven ”) or as “reserve from capital contributions” (“ Reserven aus Kapitaleinlagen ”). Distributions out of issued share capital, which is the aggregate nominal value of a corporation’s issued shares, may be made only by way of a share capital reduction.

 

We are a holding company with no material direct operations. As a result, we would be dependent on dividends, other payments or loans from our subsidiaries in order to pay a dividend. Our subsidiaries are subject to legal requirements of their respective jurisdictions of organization that may restrict their paying dividends or other payments, or making loans, to us.

 

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Capitalization

 

The table below sets forth our cash and cash equivalents and our total capitalization (defined as total debt and shareholders’ equity) as of March 31, 2016, derived from our unaudited consolidated interim financial statements, prepared in accordance with IFRS and incorporated by reference in this prospectus supplement:

 

· on an actual basis; and

 

· on an as adjusted basis to give effect to our issuance and sale of $35,000,000 of common shares in this offering, at the assumed public offering price of $3.37 per common share, which is the last reported sale price of our common shares on the Nasdaq Global Market on May 26, 2016, after deducting commissions and estimated offering expenses payable by us.

 

The as adjusted information is illustrative only and will adjust based on the actual price to the public, the actual number of common shares sold and other terms of the offering determined at the time our common shares are sold pursuant to this prospectus supplement. Investors should read this table in conjunction with our audited consolidated financial statements and our unaudited consolidated interim financial statements and management’s discussion and analysis thereon, each as incorporated by reference into this prospectus supplement.

 

Swiss Franc amounts have been translated into U.S. dollars at a rate of CHF 0.9583 to USD 1.00, the official exchange rate quoted as of March 31, 2016 by the U.S. Federal Reserve 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 Swiss Francs on March 31, 2016 and have been provided solely for the convenience of the reader.

 

 

March 31, 2016 

 

Actual 

As Adjusted 

  (in thousands of CHF except share
and per share data)
Cash and cash equivalents (1)

41,393 

73,412 

Total debt

—

—

Shareholders’ equity:    
Share capital    
Common shares, nominal value CHF 0.40 per share; 34,329,704 shares issued and outstanding on an actual basis; 44,715,460 shares issued and outstanding on an adjusted basis 13,732 17,886
Share premium 112,841  140,706 
Foreign currency translation reserve       (22)       (22)
Accumulated deficit

(90,659) 

(90,659) 

Total shareholders’ equity attributable to owners of the company (1)

35,892 

67,911 

Total capitalization (1)

35,892 

67,911 

_______________