OPERATING AND FINANCIAL REVIEW 9 not rely on implied volatilities of traded warrants and options 9.3 in our industry peers’ shares because the volume of activity RESULTS OF OPERATIONS was relatively low. We intend to continue to consistently apply this process using the same or similar public companies until a Comparisons for the Twelve Months Ended December 31, 2016 sufficient amount of historical information regarding the volatility and 2017 of our own ordinary share price becomes available. Operating Income Risk-Free Interest Rate. The risk-free interest rate is based on the We generated operating income of €3.0 mil lion in 2016 and yields of France Treasury securities with maturities similar to the €3.7 million in 2017, an increase of 23%. Operating Income was expected term of the warrant for each warrant group. mainly generated by our CIR. Dividend Yield. We have never declared or paid any cash dividends As of December 31, and do not presently plan to pay cash dividends in the foreseeable 2016 2017 future. Consequently, we used an expected dividend yield of zero. K€ K€ If any of the assumptions used in the Black-Scholes model changes Revenues — — significantly, share-based compensation for future awards may Other income 3,001 3,702 differ materially compared with the awards granted previously. CIR 2,930 3,692 The following table presents the weighted-average assumptions Subsidies 71 10 used to estimate the fair value of warrants and stock options Total operating income 3,001 3,702 granted during the periods presented: BCE / BSA As no research and development expenditure is capitalized before obtaining a marketing authorization, the CIR related to a research As of December 31, program is entirely recorded as operating income. 2016 2017 For 2016, we recorded other income related to CIR of €2.9 million, Volatility 62.46% 49.37% which was reimbursed in cash in August 2017. We requested the Risk-free interest rate -0.5% -0.2% reimbursement of the 2017 CIR in the amount of €3.7 million, Expected life (in years) 3.73 years 4.25 years which has not been received at the date of this Registration Document. Dividend yield — % — % Research and Development Expenditures Stock Options From 2016 to 2017, the total amount spent by us for research and July 27, December 19, development activity remained stable (from €18.5 million in 2016 2017 2017 to €18.7 million as at December 2017). Volatility 51.09% 50.36% As of December 31, Risk-free interest rate -0.1% -0.2% 2016 2017 Expected life (in years) 4.25 years 4.25 years K€ K€ Dividend yield — % — % Personnel expenses(1) 4,375 4,734 Fair Value of Our Ordinary Shares Sub-contracting, collaboration 11,358 11,672 and consultants Since being listed on Euronext Paris in July 2016, the fair value of Licensing and intellectual 1,075 155 our ordinary shares generally has been determined by reference property to the closing price of a share on the grant date. Offices costs 615 516 Travel and entertainment 815 1,065 expenses Allowance for amortization and 173 184 depreciation Others 118 348 Total research and 18,529 18,675 development expenses (1) I ncludes €1.8 million and €1.5 million related to share-based compensation expense for 2016 and 2017, respectively. GENSIGHT BIOLOGICS – 2017 Registration Document– 119