OPERATING AND FINANCIAL REVIEW 9 The increase of research and development expenditures from General and Administrative Expenses year to year resulted from: During the period presented, our general and administrative • 8% or €359 K increase of total payroll dedicated to research expenses increased from €6.5 million in 2016 to €8.2 million in and development, resulting in the three fol lowing opposite 2017. effects: – additional recruitments in research and development staff, Our general and administrative expenses are broken down as from 20 employees at the end of 2016 to 25 employees at follows: the end of 2017, leading to an increase of €274 K in wages As of December 31, and salaries; increase of €393 K in social contributions related to free 2016 2017 – an K€ K€ shares granted in 2016 and 2017; and (1) Personnel expenses 4,533 5,824 – a decrease of €304 K in the share-based compensation expenses related to the forfeiture of performance shares Fees 699 756 and share warrants. Communication and travel 684 897 expenses • 31% or €251 K increase in travel expenses, mainly due to providing travel arrangements and accommodation for Real estate property rental 198 288 patients enrolled in the RESCUE and REVERSE Phase I I I trials Office furniture and small 64 68 of GS010, as well as staff travels. equipment • 3% or €314 K increase in subcontracting and collaborations Postal and telecommunication 84 14 expenses that includes the costs of service providers in connection with conducting manufacturing, non-clinical studies and clinical Allowance for amortization and 29 40 depreciation trials in 2017, and notably our Phase I I I trials for GS010, RESCUE, REVERSE and REFLECT. Directors attendance fees and 86 136 expenses • 86% or €920 K decrease in licensing and intellectual property. Insurance and banking fees 79 56 In 2016, we made a payment related to the achievement of a clinical milestone in connection with one of our license Equipment rental 21 11 agreements with GS010. Others 13 86 Excluding non-cash share-based compensation expenses, Total G&A expenses 6,490 8,173 research and development expenditures increased from (1) I ncludes €2.8 million and €3.2 million related to share-based compensation €16.7 million to €17.1 million, or an increase of 3%. expense as of December 31, 2016 and 2017, respectively. The table below summarizes our research and development The increased expenditures relating to our general and expenses incurred by program: administrative expenses (26% or €1.7 million) from year to year mainly result from a 28% increase in total payroll (€1.3 million As of December 31, dedicated to general and administrative). It mainly derived from 2016 2017 the following: K€ K€ • €671 K of social contributions related to AGA 2016 granted in Direct research and 2016 and 2017; and development expense by program: • an increase of €456 K in share-based compensation expenses GS010 9,380 8,295 related to the grant of warrants and free shares to employees. GS030 3,530 3,968 Excluding non-cash share-based compensation expenses, general Total direct research and and administrative expenditures increased by 33%. Excluding development expense 12,910 12,263 both non-cash share-based compensation expenses and social Personnel related (including contributions related to free shares, general and administrative share-based compensation) 4,375 4,734 expenses increased by 15%. Indirect research and development expense 1,244 1,678 Sales and Marketing Expenses Total research and In preparation for GS010 commercialization, we started to invest development expenses 18,529 18,675 in marketing activities in 2017. 120– GENSIGHT BIOLOGICS – 2017 Registration Document