OPERATING AND FINANCIAL REVIEW 9 incurred and we expect to continue to incur substantial expenses 9.2.2 REVENUES in connection with any Phase I I I clinical trials, as well as Chemistry Manufacturing and Controls, or CMC, activities that we may To date, we have not generated any revenue from the sale of our conduct for GS010 and our planned preclinical and clinical products. studies for GS030. We anticipate that our expenses will increase Our ability to generate product revenue and become profitable substantially in connection with our ongoing activities, as we: depends upon our ability to successfully develop and commercialize • continue the development of our product candidates, including our product candidates. Because of the numerous risks and planned and future clinical trials; uncertainties associated with product development, we are • seek regulatory approvals for our product candidates; unable to predict the amount or timing of product revenue. None of our product candidates have completed clinical development. • prepare for the potential launch and commercialization of our We expect top-line results from our two most advanced Phase I I I product candidates, if approved; trials for GS010, RESCUE and REVERSE, in 2018. Even if we are • establish a sales and marketing infrastructure for the able to bring GS010 or our other product candidates at earlier commercialization of our product candidates, if approved; and stages of development through to commercialization, we may be • add operational, financial and management information unable to continue our operations at planned levels and be forced systems and personnel, including personnel to support our to reduce our operations. product development and commercialization efforts and operations as a French public company. 9.2.3 OTHER INCOME Until such time that we can generate substantial revenue from Our other income consists of subsidies and conditional advances product sales, we expect to finance these expenses and our and research tax credits. operating activities through a combination of our existing liquidity and proceeds from any additional future financing. If we are Subsidies and Conditional Advances unable to generate revenue from product sales, in particular from GS010, in accordance with our desired timeframes, we will Due to the innovative nature of our product candidate need to raise additional capital. However, we may be unable to development programs, we have benefited from subsidies and raise additional funds or enter into other funding arrangements conditional advances from Bpifrance Financement. Bpifrance when needed on favorable terms, or at all, which would have a Financement’s mission is to provide assistance and support to negative impact on our financial condition and could force us emerging French companies to facilitate the development and to delay, limit, reduce or terminate our development programs commercialization of innovative technologies. or commercialization efforts or grant other rights to develop The funds we have received are intended to finance our research or market product candidates that we would otherwise prefer and development efforts and the recruitment of specific to develop and market ourselves. Failure to receive additional personnel. Such funding is in the form of non-refundable subsidies funding could cause us to cease operations, in part or in full. and conditional advances. As indicated in Note 2 of our consolidated financial statements for We account for non-refundable subsidies as other income ratably the period ended December 31, 2017, such consolidated financial over the duration of the funded project. Funds are recognized in statements have been prepared in accordance with International other income in our statement of income (loss) for the fiscal year Financial Reporting Standards, or IFRS, issued by the International in which the financed expenses or expenditures were recorded. Accounting Standards Board, or IASB, as adopted by the European Since inception, we have received a grant from Bpifrance Union. IFRS includes the International Accounting Standards, or Financement of a non-refundable subsidy of €1,147 K (of which IASs, approved by the IASB and the accounting interpretations €865 K was received in December 2014) in connection with issued by the International Financial Reporting Interpretations our development of product candidates using our optogenetics Committee, the former Standing Interpretations Committee. technology platform. The received non-refundable subsidy was ful ly amortized over 2014 and 2015, and we do not expect to receive any additional subsidies. 9.2 FINANCIAL OPERATIONS OVERVIEW Funds received from Bpifrance Financement in the form of conditional advances are recognized as financial liabilities, as 9.2.1 OPERATING INCOME we are obligated to reimburse Bpifrance Financement for such conditional advances in cash based on a repayment schedule and Our operating income consists of revenues and other income. are not included in other income. 114– GENSIGHT BIOLOGICS – 2017 Registration Document