**As filed with the Securities and Exchange Commission on June 13, 2007**

| ** ** | UNITED STATES                                                       | OMB APPROVAL                                                                      |
|------------|---------------------------------------------------------------------|-----------------------------------------------------------------------------------|
| ** ** | **SECURITIES  AND EXCHANGE COMMISSION**

**Washington, D.C. 20549** | OMB Number: 3235-0288  Expires: September 30, 2007  Estimated average burden |
| ** ** |                                                                     | hours per response... 2631.00                                                     |
|       | **FORM 20-F**                                                       |                                                                              |

 

 

**(Mark One)**

**o**   Registration statement pursuant to Section 12(b) or 12(g) ofthe Securities Exchange Act of 1934

**OR**

**x**  Annual Report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934

**For the fiscal year ended December 31, 2006**

**OR**

**o**   Transition Report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934

**Date of event requiring this shell company report**

**OR**

**o**   Shell Company Report pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934

**Date of event requiring this Shell Company Report**

**For the transition period from N/A to N/A**

**Commission file number: 0-30962**

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**Crucell N.V.**

(Exact name of Registrant as Specified in its Charter)

**Crucell N.V.**

(Translation of Registrant’s Name into English)

**The Netherlands**

(Jurisdiction of Incorporation or Organization)

**Archimedesweg 4-6, 2333 CN Leiden, The Netherlands**

(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) ofthe Act.

| **Title  of each class**                   | ** ** | **Name of each exchange on which registered** |
|--------------------------------------------|------------|-----------------------------------------------|
| **American Depositary  Shares,**           | ** ** | **Nasdaq Global Market**                      |
| **each representing one  ordinary share,** | ** ** | ** **                                    |
| **par value****€****0.24**            | ** ** | ** **                                    |

 

Securities for which there isa reporting obligation pursuant to Section 12(g) of the Act.

**None**

(Title of Class)

(Title of Class)

Securities for which there isa reporting obligation pursuant to Section 15(d) of the Act.

**None**

(Title of Class)

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Indicate the number of outstanding shares of each of the issuer’sclasses of capital or common stock as of the close of the period covered by theannual report.

**64,802,325 Ordinary Shares**

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act.  oYes  x No

If this report is an annual or transition report, indicate by checkmark if the registrant is not required to file reports pursuant to Section 13or 15(d) of the Securities Exchange Act of 1934.  oYes  x No

Note—Checking the box above will not relieve any registrant required tofile reports pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  xYes  o No

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, or a non-accelerated filer.See definition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act. (Check one):

| Large  accelerated filer x | Accelerated  filer o | Non-accelerated  filer o |
|---------------------------------|---------------------------|-------------------------------|

 

Indicate by check mark which financial statement item the registranthas elected to follow.  x Item17  o Item 18

If this is an annual report, indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  o Yes  x No

 

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**TABLEOF CONTENTS**
| Presentation of Financial  and Other Information |   | 1                                                                       |
|--------------------------------------------------|--------|-------------------------------------------------------------------------|
| Forward-Looking Statements                       |   | 1                                                                       |
| Other                                            |   | 1                                                                       |
| **PART I**                                  |
| Item  1.                                         |   | Identity of Directors, Senior  Management and Advisors                  |   | 2 |
| Item  2.                                         |   | Offer Statistics and  Expected Timetable                                |   | 2 |
| Item 3.                                          |   | Key Information                                                         |   | 2 |
| Item  4.                                         |   | Information on the Company                                              |   | 19 |
| Item  5.                                         |   | Operating and Financial  Review and Prospects                           |   | 61 |
| Item  6.                                         |   | Directors, Senior Management  and Employees                             |   | 80 |
| Item  7.                                         |   | Major Shareholders and  Related Party Transactions                      |   | 96 |
| Item 8.                                          |   | Financial Information                                                   |   | 98 |
| Item 9.                                          |   | The Offer and Listing                                                   |   | 98 |
| Item  10.                                        |   | Additional Information                                                  |   | 100 |
| Item  11.                                        |   | Quantitative and Qualitative  Disclosures about Market Risk             |   | 113 |
| Item  12.                                        |   | Description of Securities  Other than Equity Securities                 |   | 113 |
| **PART II**                                 |
| Item  13.                                        |   | Defaults, Dividend  Arrearages and Delinquencies                        |   | 114 |
| Item  14.                                        |   | Material Modifications to  the Rights of Security Holders               |   | 114 |
| Item  15.                                        |   | Controls and Procedures                                                 |   | 114 |
| Item 16.                                         |   | Reserved                                                                |   | 117 |
| Item  16A.                                       |   | Audit Committee Financial  Expert                                       |   | 117 |
| Item 16B.                                        |   | Code of Ethics                                                          |   | 117 |
| Item  16C.                                       |   | Principal Accountant Fees  and Services                                 |   | 117 |
| Item  16D.                                       |   | Exemptions from the Listing  Standards for Audit Committees             |   | 118 |
| Item  16E.                                       |   | Purchases of Equity  Securities by the Issuer and Affiliated Purchasers |   | 118 |
| **PART III**                                |
| Item  17.                                        |   | Financial Statements                                                    |   | 119 |
| Item  18.                                        |   | Financial Statements                                                    |   | 119 |
| Item 19.                                         |   | Exhibits                                                                |   | 119 |

 

i

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**PRESENTATIONOF FINANCIAL AND OTHER INFORMATION**

We publish our financial statements in Euro. In thisdocument, references to (1) “€”, “EUR” and “Euro” are tothe currency introduced at the start of the third stage of the EuropeanEconomic and Monetary Union pursuant to the Treaty establishing the EuropeanEconomic Community as amended by the Treaty on European Union, and (2) “$”,“USD” and “dollars” are to the currency of the United States.

All amounts set forth in this annual report, unlessotherwise noted, are in thousands of Euro, except share and option data.

During 2006 we acquired the business of Berna BiotechAG (Berna Biotech), SBL Vaccin AB (SBL) and Berna Products Corp. (BPC).

For more information onBerna Biotech, including their historical financial statements, you can visittheir website at *http://www.bernabiotech.com.*Formore information on SBL you can visit their website at *http://www.sblvaccines.se.*The contents of these websites are not incorporated by referenceinto this annual report.

**FORWARD-LOOKINGSTATEMENTS**

This annual report contains forward-lookingstatements. All statements regarding our future financial condition, results ofoperations and business strategy, plans and objectives are forward-looking.Statements containing the words “believes”, “intends”, “expects”, and words ofsimilar meaning are also forward-looking. In particular, the followingare forward-looking in nature: statements with regard to strategy andmanagement objectives; technology and product development efforts; our abilityto realize commercially valuable discoveries; our intellectual propertyportfolio; our ability to develop potential products and technologies suitablefor commercialization; the effects of changes or prospective changes inregulation; and trends in results, operations and overall market trends.

These forward-lookingstatements involve risks, uncertainties and other factors, some of which arebeyond our control, that may cause our results, performance or achievements orconditions in the markets in which we operate to differ from those expressed orimplied in these forward-looking statements. We describe certain of theserisks and uncertainties in Item 3, “Key Information—Risk Factors.” We cautionyou not to place undue reliance on these forward-looking statements,which reflect our management’s view only as of the date of this document.

**OTHER**

We are the owner of over 150 registered trademarks.The most important of these are: Crucell®, Berna®, the Berna and Crucell logos,ChromaGenics®, Aerugen®, Te Anatoxal Berna®, Di Anatoxal Berna®, Di Te Anatoxal Berna®, Epaxal®, Epaxal Berna®, Inflexal®, Inflexal Berna®, Vivotif®, Vivotif Berna®, Hepimmune® andFlavimun®, PER.C6®, AdVac®, MAbstract® andSTARTM. In addition we hold rights to use certain trademarks that are owned byour partners, such as QuinvaxemTM from Chiron. All other trademarks, servicemarks, trade names and registered marks used in this report are trademarks,trade names or registered marks of their respective owners. Crucell N.V. andits subsidiaries own a number of additional trademarks, including registeredtrademarks, that are not referenced in this report.

1

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**PART I**

**Item1.**                        Identityof Directors, Senior Management and Advisors

This item is notapplicable.

**Item2.**                        OfferStatistics and Expected Timetable

This item is notapplicable.

**Item3.**                        KeyInformation

**Selected FinancialData**

The following tables show the selected financial dataunder IFRS for the years ended December 31, 2004 through 2006 and theselected financial data under US GAAP for the years December 31, 2002through 2006.

Our consolidated financial statements, and the notesthereto, as of and for the years ended December 31, 2006, 2005 and 2004 havebeen prepared in accordance with International Financial Reporting Standards(“IFRS”) as endorsed by the European Union (“EU”) and effective for each of thereporting years. There is no difference between IFRS as applied to Crucell andIFRS as issued by the International Accounting Standards Board (“IASB”).  

This is the first time our financial statements includedin Form 20-F are prepared in accordance with IFRS. For the years prior to 2006,we prepared our financial statements, as included in form 20-F, in accordancewith accounting principals generally accepted in the United States (“US GAAP”),which differs in certain significant respects from and is not comparable withIFRS. For a description of the principal differences between IFRS and US GAAPas they relate to our consolidated financial statements, see note 6 to ourfinancial statements.

In April 2006, we published our 2005 Annual Report asrequired under Dutch law.  In thatdocument, we presented our financial statements as of and for the years endedDecember 31, 2005 and 2004 prepared in accordance with IFRS.

When we adopted IFRS for the first time, pursuant toIFRS 1, we elected to use the following exemption:

·       Businesscombinations that were recognized before January 1, 2004 were not restatedto IAS 22/IFRS 3 “Business Combinations”.

The selected financial data should be read inconjunction with Item 5, “Operating and Financial Review and Prospects”, ouraudited historical financial statements and accompanying notes that areincluded elsewhere in this annual report.

2

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**IFRS selected financial data**

| ** **                                                  | ** ** | **Years ended December 31,**                                 | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2006**                                                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                  | ** ** | **(In thousands of Euro, except share data)** | ** ** |
| **Consolidated Income Statement  Data:**                    |       |                                                                        |       |   |   |   |   |
| Revenues                                                    |       |                                                                        |       |   |   |   |   |
| Product sales                                               |       | 103,918                                                                     |       | — |   | — |   |
| License fees                                                |       | 16,955                                                                      |       | 20,848 |   | 12,429 |   |
| Service fees                                                |       | 10,694                                                                      |       | 11,881 |   | 5,712 |   |
| Total revenues                                              |       | 131,567                                                                     |       | 32,729 |   | 18,141 |   |
| Cost of goods sold                                          |       | (90,489                                                                     | )          | (7,156 | ) | (5,644 | ) |
| Other operating  income                                     |       | 9,356                                                                       |       | 4,840 |   | 4,481 |   |
| Operating expenses:                                         |       |                                                                        |       |   |   |   |   |
| Research and development                                    |       | (67,606                                                                     | )          | (34,048 | ) | (23,676 | ) |
| Selling, general and administrative                         |       | (47,199                                                                     | )          | (13,689 | ) | (16,819 | ) |
| Restructuring                                               |       | (3,120                                                                      | )          | — |   | — |   |
| Impairment                                                  |       | (30,416                                                                     | )          | — |   | — |   |
| Total Operating  expenses                                   |       | (148,341                                                                    | )          | (47,737 | ) | (40,495 | ) |
| Operating loss                                              |       | (97,907                                                                     | )          | (17,324 | ) | (23,517 | ) |
| Financial income                                            |       | 13,453                                                                      |       | 2,322 |   | 1,789 |   |
| Financial  expenses                                         |       | (11,706                                                                     | )          | (131 | ) | (394 | ) |
| Result  investments associates and joint ventures           |       | (1,956                                                                      | )          | (455 | ) | (704 | ) |
| Loss before tax                                             |       | (98,116                                                                     | )          | (15,578 | ) | (22,826 | ) |
| Income tax                                                  |       | (10,551                                                                     | )          | — |   | — |   |
| Loss for the year                                           |       | (87,565                                                                     | )          | (15,578 | ) | (22,826 | ) |
| Net loss per share—basic and diluted                   |       | (1.53                                                                       | )          | (0.39 | ) | (0.63 | ) |
| Weighted average shares  outstanding—basic and diluted |       | 57,064,034                                                                  |       | 39,852,064 |   | 36,382,662 |   |

 

| ** **                                       | ** ** | **As of December 31,**                                      | ** ** |
|--------------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                       | ** ** | **(in thousands of Euro,  except for number of employees)** | ** ** |
| **Consolidated Balance Sheet  Data:**            |       |                                                                       |       |   |   |   |   |
| Assets:                                          |       |                                                                       |       |   |   |   |   |
| Cash and cash  equivalents                       |       | 157,837                                                                    |       | 111,734 |   | 76,711 |   |
| Total current  assets                            |       | 317,071                                                                    |       | 131,038 |   | 84,155 |   |
| Total assets                                     |       | 653,215                                                                    |       | 169,737 |   | 101,015 |   |
| Liabilities and  shareholders’ equity:      |       |                                                                       |       |   |   |   |   |
| Total  shareholders’ equity                 |       | 497,300                                                                    |       | 137,609 |   | 80,659 |   |
| Total non-current  liabilities                   |       | 65,663                                                                     |       | 9,380 |   | 5,583 |   |
| Total current  liabilities                       |       | 90,252                                                                     |       | 22,748 |   | 14,773 |   |
| Total liabilities and  shareholders’ equity |       | 653,215                                                                    |       | 169,737 |   | 101,015 |   |
| Number of  employees                             |       | 1,073                                                                      |       | 282 |   | 210 |   |

 

3

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**US GAAP selected financial data**

| ** **                                                  | ** ** | **Years ended December 31,**                                 | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2006**                                                                    | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                  | ** ** | **(in thousands of Euro, except share data)** | ** ** |
| **Consolidated Income  Statement Data:**                    | ** ** | ** **                                                                  |       |   |   |   |   |   |   |   |   |
| Product  sales                                              |       | 103,918                                                                     |       | — |   | — |   | — |   | — |   |
| License  fees                                               |       | 16,955                                                                      |       | 20,848 |   | 12,429 |   | 4,800 |   | 6,664 |   |
| Service  fees                                               |       | 10,694                                                                      |       | 11,881 |   | 5,712 |   | 404 |   | — |   |
| Government  grants and other                                |       | 9,356                                                                       |       | 4,840 |   | 4,481 |   | 2,220 |   | 2,911 |   |
| Total  revenues                                             |       | 140,923                                                                     |       | 37,569 |   | 22,622 |   | 7,424 |   | 9,575 |   |
| Cost of goods sold                                          |       | 90,489                                                                      |       | 7,156 |   | 5,644 |   | 399 |   | — |   |
| Operating  expenses                                         |       | 196,429                                                                     |       | 48,139 |   | 39,704 |   | 33,517 |   | 68,231 |   |
| Operating  loss                                             |       | (145,995                                                                    | )          | (17,726 | ) | (22,726 | ) | (26,492 | ) | (58,656 | ) |
| Net  loss                                                   |       | (138,405                                                                    | )          | (15,525 | ) | (21,331 | ) | (23,386 | ) | (55,670 | ) |
| Net loss per share—basic and  diluted                  |       | (2.43                                                                       | )          | (0.39 | ) | (0.59 | ) | (0.65 | ) | (1.57 | ) |
| Weighted  average shares outstanding—basic and diluted |       | 57,064,034                                                                  |       | 39,852,064 |   | 36,382,662 |   | 35,920,626 |   | 35,547,635 |   |

 

| ** **                                       | ** ** | **As of December 31,**     | ** ** |
|--------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                  | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                       | ** ** | **(in thousands of Euro)** | ** ** |
| **Consolidated Balance  Sheet Data:**            | ** ** | ** **                                |       |   |   |   |   |   |   |   |   |
| Assets:                                          |       |                                      |       |   |   |   |   |   |   |   |   |
| Cash  and cash equivalents                       |       | 157,837                                   |       | 111,734 |   | 76,711 |   | 87,210 |   | 110,645 |   |
| Total  current assets                            |       | 316,679                                   |       | 131,038 |   | 84,155 |   | 99,753 |   | 113,576 |   |
| Total  assets                                    |       | 623,838                                   |       | 169,543 |   | 98,667 |   | 113,744 |   | 128,956 |   |
| Liabilities  and shareholders’ equity:      |       |                                      |       |   |   |   |   |   |   |   |   |
| Total  current liabilities                       |       | 89,403                                    |       | 15,977 |   | 14,773 |   | 11,716 |   | 12,799 |   |
| Total non-current  liabilities                   |       | 60,984                                    |       | 16,151 |   | 5,583 |   | 11,045 |   | 5,649 |   |
| Total  shareholders’ equity                 |       | 473,451                                   |       | 137,415 |   | 78,311 |   | 90,983 |   | 110,508 |   |
| Total  liabilities and shareholders’ equity |       | 623,838                                   |       | 169,543 |   | 98,667 |   | 113,744 |   | 128,956 |   |

 

**ExchangeRate Information**

The following table sets forth, for the years indicated, the high, low,average and year-end noon buying rates in New York City for cable transfers ascertified for customs purposes by the Federal Reserve Bank of New York (“NoonBuying Rates”) expressed in Euros per USD 1.00.

| **Year ended December 31,** | ** ** | ** ** | ** ** | **High**   | ** ** | **Low**    | ** ** | **Average(1)** | ** ** | **End of   Period** | ** ** |
|--------------------------------------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|-------------------------------|------------|
| ** **                                 | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | **€**     | ** ** |
| 2002                                       |       | 1.16       |       | 0.95       |       |       | 1.06       |           |       |                          | 0.95       |   |   |
| 2003                                       |       | 0.97       |       | 0.80       |       |       | 0.89       |           |       |                          | 0.80       |   |   |
| 2004                                       |       | 0.85       |       | 0.73       |       |       | 0.81       |           |       |                          | 0.73       |   |   |
| 2005                                       |       | 0.86       |       | 0.73       |       |       | 0.80       |           |       |                          | 0.84       |   |   |
| 2006                                       |       | 0.84       |       | 0.75       |       |       | 0.80       |           |       |                          | 0.76       |   |   |

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(1)          The average of the Noon Buying Rates on the last business day ofeach month during the period indicated.

4

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The following table sets forth, for the previous six months, the highand low Noon Buying Rates expressed in Euros per USD 1.00. 

| ** **         | ** ** | **High**   | ** ** | **Low**    | ** ** |
|--------------------|------------|------------|------------|------------|------------|
| ** **         | ** ** | **€** | ** ** | **€** | ** ** |
| December 2006 |       | 0.76       |       | 0.75       |       |
| January 2007  |       | 0.77       |       | 0.75       |       |
| February 2007 |       | 0.77       |       | 0.75       |       |
| March 2007    |       | 0.76       |       | 0.75       |       |
| April 2007    |       | 0.75       |       | 0.73       |       |
| May 2007           |       | 0.75       |       | 0.73       |       |

 

On June 1,2007 the Noon Buying Rate was USD 1.00 = EUR 0.74. These rates may differ fromthe actual rates used in the preparation of our financial statements and otherfinancial information appearing in this annual report.

**Capitalizationand Indebtedness**

Not applicable.

**Reasonsfor the Offer and Use of Proceeds**

Not applicable.

**RiskFactors**

*You should carefully consider all theinformation in this annual report, including these material risk factors. Therisks we face are not limited to the risks listed here. Some risks are not yetknown to us and some of the risks that we currently do not believe to bematerial to our operations could prove to be material at a later date. All ofthese risks can materially affect our business, financial condition and resultsof operations.*

**Risksrelated to our Company**

***We have a history of net losses and we maynot achieve or maintain profitability.***

We haveincurred net losses since our incorporation. At December 31, 2006, we hadan accumulated deficit of € 247.9 million. We expect to have net losses in the foreseeablefuture and neutral operational cash flow in 2007. Achieving profitability willdepend, in part, on:

·       the rateof growth, if any, in our product sales and licensing revenues;

·       ourability, in the longer term, to obtain approval for current pipeline productsand to develop potential products either on our own or through partnerships,collaborations or strategic alliances; and

·       the levelof our expenses.

We may nevergenerate sufficient revenues to achieve profitability. Growth of our revenuesis dependent on expanding current product sales, obtaining approval of theproducts in our pipeline, the success of our technologies—in particular, PER.C6—andon our success and that of our licensees in developing commercially successfulproducts based on our technologies. Revenue growth related to our existingproducts may be dependent on factors beyond our control as discussed below under“—Our products may fail at any stage of development or after marketintroduction due to factors beyond our control.”  Further, we do not have control over theability of our licensees to develop commercially successful products based onour technologies. We expect to continue to invest in research and 

5

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developmentto enhance our technologies and develop potential products. Even if we doachieve profitability, we may not be able to sustain or increase profitabilityon a quarterly or annual basis.

***We have used substantial capital in ourbusiness in the past, and we may need to raise additional capital in thefuture. If we do not raise this additional capital, we may have to scale backcertain research and development activities.***

In the past, we have had to raiseadditional funds to continue the research and development of our technologiesand potential products. In this regard, on May 10, 2005, we raised netproceeds of  € 50.1 million in a private offering of our ordinary sharespriced at € 14.50per share. The capital raised from this private offering supported theacceleration of our product development with new opportunities especially inthe field of antibodies and therapeutic proteins. To make acquisitions, we haveraised additional capital and issued new shares. In this regard, on February 22,2006, we issued 16.7 million ordinary shares in connection with our acquisitionof shares of Berna Biotech. In addition, in November 2006, we raised grossproceeds of € 80million in a private offering of our ordinary shares priced at € 17.50 per share. The proceeds were used to fund the acquisition ofSBL and BPC and repay outstanding mortgage loans previously incurred by BernaBiotech.

We expect thatour future capital requirements will continue to be substantial. Changes mayoccur that would consume available capital resources significantly sooner thanwe currently expect. We may seek additional funding through public or privatefinancing, strategic alliances or other arrangements. We may not have access toadditional financing and, if we do, it may not be on favorable terms. If wefail to raise sufficient funds, we may have to reduce our capital expenditures,scale back our development of new potential products, reduce our workforce andlicense potential products or technologies to others that we otherwise wouldseek to commercialize ourselves.

***We expect that our interim results ofoperations will fluctuate, and this fluctuation could cause the price of ourordinary shares and American Depositary Shares (ADSs) to decline, causinginvestor losses.***

Our interim operating results have fluctuated in the past and arelikely to do so in the future. These fluctuations could cause the price of ourordinary shares and ADSs to fluctuate significantly or decline. Some of thefactors that could cause our operating results to fluctuate include:

·       the timingof sales and shipments of our existing products;

·       the timingand recognition of payments related to license agreements and collaborationarrangements; and

·       generaland industry specific economic conditions, which may affect product sales andmay also affect our own and our licensees’ research and developmentexpenditures.

A large portionof our expenses is relatively fixed, including expenses for personnel,facilities and equipment. If revenues do not grow as anticipated, we may not beable to correspondingly reduce our operating expenses and will suffer lossesaccordingly. In addition, we expect to increase our research costs in 2007,which may increase our operating expenses in the foreseeable future. Due to thepossibility of fluctuations in our revenues and expenses, we believe thatperiod-to-period comparisons of our operating results may not always be a goodindication of our future performance. Our operating results in some periods maynot meet the expectations of stock market analysts and investors. In that case,the price of our ordinary shares and ADSs would probably decline.

6

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***Our results fluctuate as a result ofseasonality in our business, particularly with respect to our flu vaccine product.***

Our influenzavaccine, Inflexal, accounts for a significant proportion of net sales from ourvaccines business. The market for flu vaccines is extremely seasonal. There isa narrow window of time for production, regulatory approval and marketing offlu vaccines. Possible delays in stock availability or marketing of theInflexal vaccine could have a significant negative effect on us, since amajority of the distribution and sales occurs during only a few weeks in thethird and/or fourth quarter of every year. Potential delays in any step of theregulatory approval, production and marketing process could result in asignificant sales reduction for us. In addition, the antigen necessary to produceinfluenza vaccine is in limited supply, and we generally rely on a singlesource for our supply of this antigen. Any interruption or delay in our antigensupply could have a materially adverse effect on our sales of Inflexal andnegatively impact our earnings and financial position.

***We may be unable to make desirableacquisitions or to integrate successfully any business we acquire.***

Ourfuture success may depend in part on the acquisition of business ortechnologies intended to complement, enhance or expand our current business orproducts or that might otherwise offer us growth opportunities. Our ability tocomplete such transactions may be hindered by a number of factors, includingpotential difficulties in obtaining financing or in issuing our own securitiesas payment in acquisitions. We expect any acquisitions we undertake would beexpected to result in future growth benefits, cost savings and other benefits.However, our ability to successfully realize these benefits and the timing oftheir realization may be affected by a variety of factors, including:

·       thechallenges of integrating the businesses, management teams and workforce of thetwo companies;

·       unexpectedevents including major changes in the vaccine industry; and

·       aligningnew priorities.

Given these andother risks related to the combination of Crucell and any business we acquire,there can be no assurance that the benefits we expect from any combination willbe realized. If the expected benefits of any combination we undertake are notor only partially realized, our business, financial condition and results ofoperations may be materially and adversely affected.

***Our products may fail at any stage ofdevelopment or after market introduction due to factors beyond our control.***

There are inherentrisks in the business of biotechnological development and production inconnection with the development of biological products. Pre-clinical testing,clinical research and regulatory approval of a pharmaceutical or medicalproduct is a very lengthy and costly process, and there is a significant riskof failure at each stage of the process, should issues arise with respect tothe efficacy or safety of a product. In particular, pre-clinical and earlyclinical studies cannot ensure efficacy for humans, and human studies are thusrequired for vaccine development. Such studies may, however, fail to prove theefficacy of the product candidates and are at constant risk of suspension forposing unreasonable health risks. There can be no assurance that any productcandidate in our pipeline will either reach or successfully complete theclinical research process. Although a number of our products have reached latestage of development and offer a reasonably high probability of successrelative to earlier stage products, the chances of failure remain significant.We have had products fail at this stage of development in the past. Any or allof our current late-stage products could fail to be proved sufficiently safe oreffective to be brought to market or could fail to receive necessary regulatoryapprovals. Such failures could have a material adverse effect on our businessand prospects.

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Even if theproducts currently in late-stage development are introduced, there can be noassurance that a market for such products will develop or be sustained. If amarket does develop, there can be no assurance that our existing facilities andresources will be sufficient to meet demand. Accordingly, there can be noassurance that we will realize any potential benefits that may be associatedwith our late-stage development product portfolio.

***If we or our licensees do not developcommercially successful products we may fail to realize significant sales androyalty revenues in future years.***

Very littledata exists regarding the safety and effectiveness of the type of potentialproducts that we and our licensees are developing. All of our potentialproducts, and those of our licensees, including those based on our PER.C6technology are either in research or in pre-clinical or clinical development.We and our licensees may not succeed in developing commercial products based onPER.C6 technology that are safe and effective, meet applicable regulatorystandards, are capable of being manufactured at reasonable cost, or can bemarketed successfully.

Development ofproducts requires significant investment, including pre-clinical and clinicaltesting, to demonstrate their effectiveness prior to their commercialdistribution. To a certain extent, we are dependent on the research andperformance of third parties to bring potential products to market. Certainpotential products entered clinical trials during 2006, including our candidatevaccines against ebola, malaria, Tuberculosis (TB) and West Nile Virus, as wellas our antibody “cocktail” against rabies. We and our licensees must conduct asubstantial amount of additional research and development before any regulatoryauthority will approve any of our or their potential products. Our research anddevelopment or that of our licensees may not establish that our technologies orour or their potential products are safe and effective, in which caseregulatory authorities may not approve them. Further, our government anduniversity licensees and collaborators may have goals, such as academic publicationor data collection, that are not solely focused on producing marketableproducts. Problems frequently encountered in connection with the developmentand use of new and unproven technologies and the competitive environment inwhich we and our licensees operate may further limit our and their ability todevelop commercially successful products.

***If our licensees or partners do notcontinue to use our potential products, PER.C6 technology or our othertechnologies, or if they terminate their agreements with us, we will earn lessor no revenue from our agreements with them.***

License,service and manufacturing revenues and government grants from our potentialproducts, PER.C6 and other technologies have accounted for a substantialportion of our revenues to date and we expect that they will continue tocomprise a significant portion of our revenues for the foreseeable future. Ifour current or prospective partners or licensees do not continue to use ourpotential products or technologies, or if they terminate their relationshipwith us, we may not be able to continue to realize the revenues related tothose partners or licensees. In particular, our current or prospectivelicensees or partners may use or develop alternative technologies or developcompeting products or potential products independently or in collaboration withothers, including our competitors. If any of our licensees or partners becomeinvolved in a business combination or other major corporate transaction, thiscould cause a strategic shift in their business focus and the technologies theyuse. Our agreements with our licensees do not routinely require them todedicate resources to developing and distributing commercial products based onour technologies. Furthermore, our licensees or partners may generallyterminate their agreements with us on short notice. If they do terminate theiragreements with us, we may not be able to enter into new arrangements withother parties to replace those agreements. During 2006, existing licenses witheight licensees were not renewed.

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***We are dependent on a small number ofproducts for a majority of our revenues and expect this dependence to continuefor the foreseeable future.***

We are dependent on a small number ofproducts that account for the majority of our revenues. By the end of 2006 yearour core product portfolio contains of six vaccines, namely Quinvaxem,Hepavax-Gene (Paediatric vaccines), Inflexal (Influenza), Dukoral, Epaxal andVivotif (Travel vaccines). The aggregated revenues for our core productportfolio amount to € 91,664 in 2006 and represent 88.2% of our total product sales.In particular, we will be dependent on sales of Quinvaxem and Inflexal.

If theseproducts were to become subject to any problem such as loss of patentprotection, unexpected side effects, regulatory proceedings, publicityaffecting doctor or patient confidence or pressure from competitive products,or if new, more effective treatments should be introduced, we could experiencea significant decrease in revenues and an adverse effect on our financialresults.

***We may have conflicts with our licenseesthat could make collecting payments due to us more difficult or that couldnegatively affect our relationship with our current and potential licensees.***

We may havedisagreements with our licensees over royalty payments due to us and may havedifficulty in collecting these payments. Our existing license arrangementsgenerally entitle us to receive royalty payments for any potential productsdeveloped using our technology. We depend on our licensees to inform us whenthey develop products using our technology. If our licensees fail to inform usof their progress in these developments, we may not know of payments to whichwe would be entitled. In addition, our licensees may have difficulties makingpayments to us given the current economic climate or other factors. We may alsoincur significant expenses in collecting payments or, in some instances, we maynot succeed in collecting these payments at all.

Our licenseesmay dispute the scope of the licenses that we have granted them, which couldnegatively affect our relationships with them and other licensees and ourability to grant additional licenses to other companies. In addition, a recentU.S. Supreme Court decision has established that a party need not break orterminate a license agreement before seeking a court judgment that the patentsunderlying the license agreement are not valid, not enforceable or notinfringed. Some commentators in the intellectual property field have expressedthe opinion that, due to this decision, patent challenges by licensees ingeneral will increase. If, in the future, we become subject to additionalpatent challenges, it would cause us to have to expend greater resourcesdefending such challenges. Challenges decided adversely to us could cause us toforego royalty payments which could have a material adverse effect on ourbusiness, financial condition and results of operations.

A number of ourlicense agreements provide that if more favorable royalty terms are granted toanother licensee pursuant to a license of substantially the same scope, theinitial licensee will also be entitled to the more favorable terms. A licenseemay claim that other license agreements contain more favorable terms and thatwe should extend these terms to it. This may lead to a licensee disputing theamounts payable to us.

***An inability to attract and retainqualified personnel could adversely impact our business.***

We may not beable to recruit and retain the qualified personnel necessary to develop ourcore technologies and potential products and execute our business plan. Thereis currently a shortage of skilled executives, scientific personnel andintellectual property and regulatory experts in our industry, particularly inthe markets in which we operate. We believe this shortage is likely tocontinue. As a result, competition for skilled personnel is intense.Competition for experienced executives, scientists, developers andmanufacturers of pharmaceutical products, and other experts from numerouscompanies and academic and other research institutions may limit our ability toattract and retain qualified personnel on acceptable terms or may significantlyincrease our labor costs. The inability to attract and retain highly skilled 

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personnelon acceptable terms could have a material adverse effect on our business,financial condition, results of operations and prospects.

***We may encounter difficulties in managingour growth. These difficulties could increase our losses.***

We have experiencedrapid and substantial growth and may continue to experience such growth in thefuture. This growth may be organic or through the acquisition of othercompanies or entities, and such growth will continue to place a strain on ourhuman and capital resources. The aggregate number of full-time equivalentemployees was  282 at December 31,2005. Mainly due to the acquisition of Berna Biotech AG and SBL Vaccin HoldingAB in 2006 our total head count increased to 1,073 employees atDecember 31, 2006. In addition, we will need to continue to expend fundsto manage our operations and growth effectively. We will also need to continueto expend funds to attract and retain sufficient numbers of talented employees.If we do not have sufficient revenues to address these issues and otherwisemake adequate expenditures, we may not be able to manage our growtheffectively. If we are unable to manage our growth effectively, our lossescould increase.

***A number of our research and productdevelopment programs depend on access to biological materials without which wewould be unable to conduct certain research and development.***

To continue todevelop our core technologies and potential products, we will need access tobiological materials, such as virus and tissue samples, which may be in limitedsupply. If we lose or do not obtain access to appropriate biological materials,or if tighter restrictions are imposed on their use or on information generatedfrom them, we could be restricted or prevented from conducting certain researchand product development. In addition, government regulations could result inrestricted access to, or use of, human and other biological material samples.

***We require a reliable supply of crucialmaterials for the production of our products and for our serum-free medium.Some of these supplies are provided by a limited number of third-partysuppliers and some of these supplies we produce or are planning to produceourselves. Any interruption in certain supplies would interrupt our productionand ability to conduct research and product development.***

We and some ofour licensees rely on third parties for the supply of the serum-free medium inwhich we grow our PER.C6 cells. We cannot guarantee this medium will beavailable in the future on an industrial or bulk scale. If supply problemsforce us to use a new medium, we would need to spend time and resources toadapt our technology and processes to that medium, and during this period ofadaptation, our use of PER.C6 would be interrupted. Any such interruption orother failure of the serum-free medium upon which we currently rely coulddecrease the potential viability and profitability of our PER.C6 technology.

In addition, werely at least in part on third-party suppliers including CSL and Novartis forthe supply of crucial materials for the production of some of our marketedproducts or those under development, including starting materials as well asantigens present in the final product. This includes, but is not limited to,the supply of A-Singapore flu antigen for the production of the currentlymarketed hepatitis A vaccine Epaxal, flu antigen for the production of thecurrently marketed flu vaccine Inflexal and DiTeWPHiB antigen for the currentlymarketed pentavalent vaccine Quinvaxem. Any interruption or termination ofthese supply relationships may have adverse effects on our ability to produceand supply these products as well as on our ability to launch new products indevelopment and thus on our overall results.

For example, we currently source oursupplies of A-Singapore flu antigen used in the production of our Hepatitis Avaccine Epaxal from Novartis. Concurrently, we are planning to produce thisantigen at our production facility in Berne, Switzerland, beginning in early 2008.A significant shortfall of the supply of the antigen before December 31,2007, when our agreement with Novartis for the supply of this antigenterminates, may have a material adverse effect on our ability to produceEpaxal. Likewise, if a delay in 

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commencement ofour own planned production of the antigen were to occur after our agreementwith Novartis expires, and we were not able to find an alternative source forthe antigen, this may have a material adverse effect on our ability to produceEpaxal.

In addition,our agreement with CSL for the supply of flu antigen for the production of ourflu vaccine Inflexal will terminate as of December 31, 2009. Due to theshortage of antigen production capacity worldwide, we anticipate that it may bedifficult to establish a new contract for the supply of flu antigen on theterms and conditions we currently have. If we are unable to establish a newsupply agreement, or are only able to establish a new agreement on lessfavorable terms and conditions, it could increase our costs, and there is noguarantee that we would be able to pass on these increased costs to ourcustomers.

***The manufacture and distribution of ourproducts is technically complex. Supply interruptions, product recalls orinventory losses caused by unforeseen events, cold chain interruption andtesting difficulties may reduce sales, delay the launch of new products andadversely affect our operating results and financial condition.***

Our products are manufactured anddistributed using technically complex processes requiring specializedfacilities, highly specific raw materials and other production constraints. Thecomplexity of these processes as well as strict company and governmentstandards for the manufacture of our products subject us to production risks.For example, during the manufacturing process, defects in equipment orinfrastructure may generate production delays. In addition, process deviationsor unanticipated effects of approved process changes may result in theseintermediate products not complying with stability requirements orspecifications. Our vaccine products in particular are subject to the risk ofmanufacturing stoppages or the risk of loss of inventory because of thedifficulties inherent to the aseptic processing of biological materials at thisstage. Vaccine components cannot be sterilized nor can conservative agents beadded to the manufactured vaccine. If our products were to be contaminated bymicro-organisms, it could result in the rejection of entire batches of finishedvaccine, which would result in lost sales and possibly product recall, ifcontaminated vaccines have been shipped to customers.

Most of our products must be stored andtransported at temperatures within a certain range, which is known as “strictcold chain” storage and transportation. If these environmental conditionsdeviate, our products’ remaining shelf-lives could be impaired or theirefficacy and safety could even become so impaired that they are no longersuitable for use. Further, most of our products are subject to additionaltesting upon receipt, both by our customers and by governmental agencies thatregulate drugs in the markets in which we sell our products. Due to significantlab-to-lab variability of certain type of tests, in particular tests on biologicalproducts such as ours, batches of products may not be cleared by customers orthese agencies, despite our having successfully tested them at the end of themanufacturing process. Failed tests may of course lead to customers rejectingdelivery of the product or government agencies not releasing the product formarketing.

The occurrence or suspected occurrence ofproduction, distribution and testing difficulties can lead to lost inventories,and in some case product recalls, with consequential reputational damage andthe risk of product liability. See “—We may have significant product liabilityexposure, and our product liability insurance may be inadequate to coverproduct liability or other claims against us”. The investigation andremediation of any identified problems can cause production delays, substantialexpense, lost sales and the delay of new product launches.

***We relyon our manufacturing facilities in Korea to produce all of our supplies ofQuinvaxem, and any events or disputes concerning that facility that interrupt,reduce or terminate production there may harm our business.***

Our manufacturing facility in Korea is oursole source of our supplies of our Quinvaxem vaccine. As such, we arevulnerable to any event there that interrupts, reduces or slows our productionof Quinvaxem. For example, we could experience natural disasters such as floodsor storms or work slow-downs or work stoppages by our employees. Inaddition, we lease the property on which our factory is build from our 

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landlord, GreenCross Holdings Corp under a lease that expires in 2010, and which can beextended for an additional five years at our election. We are the only partyentitled to terminate the lease. Our landlord also provides our utilities, suchas access to water and electricity, at the site.

We have been notified that our landlordwill have to surrender a portion of the land on which our Korean facility sitsto the local and regional authorities due to construction of a light railway, asubway line extension and a transfer station between those two transit lines.Our landlord plans to vacate the property by the end of 2008 and has advised usthey will stop providing utilities to us at that time. We are currently engagedin negotiations with the local and regional authorities to determine the exactimpact of the construction projects on our facilities as well as the exactnature of the compensation we are to receive. While we may be entitled to atleast partial compensation for any of our leasehold which the authoritiescondemn, our predecessor signed certain waivers in relation to the right toreceive such compensation, as a condition to receiving permission to build thefacilities. At the time the facilities were constructed, the authorities hadmade these construction projects part of their longer-term plan for the localarea’s infrastructure. We may not be able to successfully challenge thesewaivers in court and, in turn, may not be legally entitled to full compensationfor any condemnation by the authorities.

Currently, we plan to modify our facilitiesin order to allow enough land to be surrendered to the authorities in order toallow for the construction projects to take place. We also plan to apply forpermits that will permit us access to utilities in our own right. We cannotguarantee that we will be granted these permits, nor can we assure you that anycompensation we receive from the authorities will be sufficient to cover all ofour expense that arise due to this construction.

If our leasewere terminated or we were otherwise forced to leave the land, we would have tomanufacture Quinvaxem at another of our facilities, build another facility tomanufacture Quinvaxem or find a third party to manufacture the vaccine. Wewould incur substantial costs if we were to have to either move production to adifferent facility or build a new facility without necessarily beingcompensated for those expenses. Further, there is no guarantee that we couldfind a suitable third party to manufacture our vaccine or that if we did findone, we could enter into an agreement with them on favorable terms or at all.If we were to suffer any interruption, including a permanent one at our Koreanfacility, this would reduce our sales of Quinvaxem, may increase our expensesand, in turn, have a material adverse effect on our business, financialcondition and results of operations.

***We cannot be certain that our licensing orother agreements are not in breach of applicable competition laws and will notbe considered void.***

In the past, wehave not notified the European Commission competition authorities of any of ourlicensing or other agreements or sought clearance from any other competitionauthority. We take the view that these agreements are unlikely to be found toinfringe European Union or other applicable competition regulations. It ispossible, however, that our current or future similar agreements could be foundto infringe applicable competition regulations. In this event, among otherthings, we may be subject to fines, claims of damages and our licensing orother agreements may be considered void and unenforceable. Under the 2004Technology Transfer Block Exemption Regulation, or the Regulation, in theEuropean Union we may be required to review and possibly amend existing licenseand technology transfer agreements in the future. For example, if certainmarket share thresholds will or have been reached in the relevant markets bythose third parties that use our technologies to produce their products, theRegulation may require us to revise our agreements with those parties to ensurethe agreements are in compliance with European competition law. This reviewprocess may be costly and time consuming and may require renegotiation ofcertain portions of our licenses and other agreements, but we do not expectthis process to have a material adverse effect on our license portfolio orresults of operations.

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***Potential patent disputes withGlaxoSmithKline, if decided adversely to us, could cause us to lose asignificant share of our future revenues.***

Berna Biotech’s subsidiary Green CrossVaccine Corporation, currently operating under the name Berna Biotech KoreaCorp., and our partner Novartis, lodged oppositions against a patent ofGlaxoSmithKline (GSK) in Korea. The patent is concerned with multivalentvaccine formulations, such as our pentavalent vaccine Quinvaxem which isregistered in Korea. In response to the opposition, the patent was revoked bythe Korean Intellectual Property Office in December 2004 on the groundsthat the subject-matter claimed in the patent lacks novelty. GSK appealed thatdecision before the Korean Patent Court. After a hearing which took place inApril 2006, the Korean Patent Court dismissed the appeal inJune 2006. GSK has appealed this decision. If the Korean Supreme Courtwere to reverse the decision of the Patent Court and if GSK were to decide toenforce its patent, Berna Biotech Korea Corp. could be found to have infringedor be infringing the patent. If we are found to be infringing, we may be forcedto suspend, or even cancel, our commercial activities with this vaccine. As aconsequence we would lose revenues and our business would be adverselyaffected.

In addition,production of our Quinvaxem requires a particular vaccine component that maybecome the subject of a patent dispute between either GSK and us or GSK and oursupplier of that component. The patent on that particular component, held byGSK, is currently under opposition before the European patent office and adefinitive outcome on the validity of the patent is expected to take a numberof years. A negative outcome of this opposition proceeding could lead toinfringement proceedings between GSK and us or GSK and our supplier, althoughwe believe that neither we nor our supplier would be held to have infringed orbe infringing that patent. The outcome of legal disputes is invariablydifficult to predict with accuracy, but in the event GSK were to prevail ininfringement proceedings against us, this would adversely affect our business.

**Risksrelated to our Industry**

***We face competition in discovering,commercializing and licensing new technologies from biotechnology firms inEurope, the United States and elsewhere. This competition may limit our abilityto derive revenues from our technologies and development programs.***

The field ofbiotechnology is new and rapidly evolving, and we expect that it will continueto undergo significant and rapid technological change. We operate in highlycompetitive markets and we may experience competition from companies that havesimilar or other technologies, or other products or forms of treatment for thediseases we are targeting. We are aware of a number of commercial initiativesin the fields in which we operate that may result in marketable products withwhich we would compete. We also may experience competition from companies thathave acquired or may acquire technology from companies, universities and otherresearch institutions. As these companies develop their technologies, they maydevelop proprietary positions in the areas of our core technologies or obtainregulatory approval for alternative technologies or commercial products earlierthan we or our licensees do. Other companies are developing products to addressthe same diseases and conditions that we and our licensees target and may haveor develop products or potential products that are more effective than thosebased on our technologies. We also compete with our licensees in developing newpotential products. It is possible that we will not be able to effectivelycompete with these or other entities, and such competition could hamper ourability to bring products to market or license and derive revenue from ourtechnology. Such an inability to compete could have a material adverse effecton our business, results of operations and ability to achieve profitability.For more information on our competitive position, see Item 4, “Information onthe Company—Competition”.

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***We may have significant product liabilityexposure, and our product liability insurance may be inadequate to coverproduct liability or other claims against us.***

Like othermanufacturers active in the biopharmaceutical industry, we may be exposed toproduct liability and other claims if third parties allege that ourtechnologies, potential products or future products have caused harm. If athird party successfully sues us for an injury caused by our products,potential products or products developed using our technologies, our liabilitycould exceed our total assets. This risk may be more pronounced in the case ofthe prophylactic vaccines, which constitute our marketed products, than withrespect to other pharmaceutical and medicinal products generally. Suits againstus arising out of clinical trials may increase as more licensees utilize ourtechnologies or potential products, thereby lessening our control over themanner of use of such technologies and potential products. We maintain productliability insurance in respect of all marketed products. We may seek to obtainadditional product liability insurance in the future, though such additionalinsurance may be prohibitively expensive, or may not cover all of our potentialliabilities. If we are unable to obtain sufficient insurance coverage at anacceptable cost or if we are otherwise unable to protect ourselves againstpotential product liability claims, this could prevent or inhibit thecommercialization of products that we or our licensees develop. We arecurrently involved in a small number of product liability cases related toproducts that our subsidiary Berna Biotech marketed in the past. While wecannot predict the outcome of these cases, we do not believe that, if decidedagainst us, any of these matters would have a material adverse effect on ourbusiness, financial condition or results of operations.

***If ethical, legal and social issues relatedto the use of genetic technology, human-based materials and pre-clinical andclinical  testing negatively affectregulatory approval, patentability or market acceptance of our coretechnologies and of the products developed using these technologies, we wouldnot be able to generate revenues from those products or our technologies.***

The use ofgenetic technology and materials derived from human fetal tissue, such as PER.C6technology, raises many ethical, legal and social issues that could hinderregulatory approval, patentability or market acceptance of its technologies andproducts developed using them. Further, public expressions of concern andadverse events involving new biopharmaceutical technologies or products (suchas stem cells or genetically modified foods or organisms) could result ingreater governmental regulation of its existing technologies and potentialregulatory delays relating to the testing or approval of Crucell’s own or itslicensees’ potential products. Any of these factors could generate negativepublicity or other adverse consequences regarding its business or industry, andcould reduce or eliminate the potential markets for for its own or its licensees’potential products.

***We cannot be certain that we will besuccessful in public tenders to provide national governments and supranationalorganizations with our vaccine products.***

For the sale ofour paediatric vaccines, we rely to a considerable extent on the publicmarkets, which typically operate via a tender system. In a tender system,national governments or supranational organizations request proposals for theterms under which a vaccine manufacturer will provide a large quantity of oneor more vaccines. The award of the tender is typically based on a number offactors, including price and other non-financial attributes such as supplyreliability and quality. The tender is often for a period of one or more years,meaning that only the chosen manufacturer will be permitted to supply thesubject vaccine for that length of time. Failure to win a tender therefore, maycause us to be ineligible to supply the relevant national government orsupranational organization for one or more years, and in turn, have a materialadverse effect on our business, results of operations and financial condition.

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***Third parties may bring claims relating toimproper handling, storage or disposal of the hazardous materials we use in ourbusiness, which may require us to spend significant time and financialresources to defend and to pay damages.***

Our researchand development processes involve the controlled use of hazardous materials,including chemicals and radioactive and biological materials. Our BioSafetyLevel III (BSL-III) laboratory facilities allow us to work on-site withhazardous materials like West Nile virus. Our operations also produce hazardouswaste products. Given the inherently dangerous nature of certain of thematerials we may work with in our BSL-III laboratory facilities and otherhazardous materials incident to our work, we cannot eliminate the risk ofaccidental contamination or discharge and any resultant injury from thesematerials. Various laws and regulations govern the use, manufacture, storage,handling and disposal of these materials. We could be subject to civil damagesand significant adverse publicity in the event of an improper or unauthorizedrelease of, or exposure of individuals to, hazardous materials. In addition,claimants may sue us for injury or contamination that results from our use orthe use by third parties of these materials, and our liability may exceed ourtotal assets. Compliance with environmental laws and regulations may beexpensive, and current or future environmental regulations may make us adoptmore labor-intensive, time-consuming or complicated practices or proceduresin connection with our research, development or production activities.

***We may be unable to obtain regulatoryapproval to manufacture and market our new products and may have regulatoryapproval of the manufacture and marketing of our existing products revoked.***

Regulatory bodies such as the U.S. Food andDrug Administration (FDA) and comparable authorities elsewhere, such as theEuropean Medicines Agency (EMEA) and the European Commission, regulate themarket introduction of biopharmaceutical products. In the approval process, aproduct candidate must undergo extensive testing, which can take many years andrequire substantial expenditures. The costs of pursuing and securing regulatoryapproval are increasing, necessitating additional regulatory complianceexpenditure on our part. Required testing and trials include a review of theunderlying technologies (including the cell line on which companies producebiopharmaceuticals) and are particularly rigorous with respect to vaccines.Product development involving new technologies is highly uncertain. Inaddition, different regulatory authorities may impose different conditions uponthe marketing of a given product or may refuse to grant, or require additionaldata before granting, an approval to market a product even though the productmay have been approved by another regulatory authority. There can be noassurance that regulatory approvals will ultimately be obtained to manufactureand market any such product candidates in which we are, or may in the futurebe, interested.

Although the FDA allows PER.C6 cells to beused to produce clinical materials that are being used in clinical trials atthis time, the FDA has in the past raised concerns over the history and some ofthe properties of PER.C6 cells. If we or our licensees are unable to satisfyregulatory authorities as to the history and properties of PER.C6 or itsappropriateness as a system from which companies can producebiopharmaceuticals, new regulations could be adopted that would preclude use ofPER.C6 cells in the future. If this were to occur, our licensing and otherrevenues from PER.C6 will suffer. Our other technologies have not yet been usedin clinical trials, and may face significant hurdles in obtaining regulatoryapproval if and when such trials begin.

Once a productis approved, the manufacture and marketing of the product remains subject toperiodic review. Changes in applicable regulations, breaches of regulatoryrequirements or the discovery of problems related to the manufacture, safety,quality or efficacy of a product may result in the imposition of fines orrestrictions upon the manufacture and sale of such product, including in theworst case withdrawal of the product from the market and/or the revocation ofthe relevant regulatory approvals. If the relevant regulatory authorities donot approve products developed using our technologies, or revokes approval of 

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ourexisting products, we may not receive any licensing or royalty revenues, whichmay have a material adverse impact on our business, financial condition,results of operations and prospects.

***Anypotential health risks associated with our products may lead to significantadverse regulatory and market consequences.***

The possibilityof product failure or adverse side effects poses a variety of risks formanufacturers of pharmaceutical and medical products. These risks may be morepronounced in the case of the prophylactic vaccines that constitute our coreproducts than with respect to other pharmaceutical and medical productsgenerally. Because such vaccines are administered to healthy subjects, anyadverse health consequences associated with such administration may beperceived as less tolerable than side effects associated with the treatment ofdisease. Accordingly, there can be no assurance that even relatively minorpotential health risks associated with our products will not give rise toadverse regulatory action, and/or negative market perception of us and ourproducts, resulting in a material adverse effect on our business, financialcondition, results of operations and prospects.

***Ourefforts to protect our intellectual property rights or to defend ourselvesagainst any claims of infringement may be costly and, if unsuccessful, we maybe barred from using or licensing our technologies.***

Our commercialsuccess depends in part on our ability to obtain and maintain adequateprotection of our intellectual property rights, including patents, in ourtechnologies and potential products in Europe, the United States and elsewhere.However, the patent positions of technology-based enterprises like us aresubject to complex factual and legal issues that may give rise to uncertaintyas to the validity, scope and priority of a particular patent. There can be noassurance that we will develop products that are patentable, that patents willbe granted under pending or future applications or that patents granted to usor our collaborators will be of sufficient breadth to provide adequateprotection against competitors with similar technologies or products or willnot be successfully challenged. If we do not adequately protect ourintellectual property, competitors may be able to use our technologies and anypotential products we develop and erode our competitive advantage and/or erodethe value of our technologies.

Our commercialsuccess also depends in part on not infringing patents and proprietary rightsof third parties. Our work is in areas of technology where a large number ofpatent rights exist. As our activities in the biotechnology andbiopharmaceutical markets expand and more patents are issued, the risk that ourtechnologies and potential products may give rise to claims of allegedinfringement increases. In addition, we may in the future wish to undertakeactivities which raise patent infringement issues.

We routinelymonitor the public disclosures of other companies operating in our industryregarding their technological development efforts to ensure that we do notundertake activities that infringe their intellectual property rights and tomonitor whether those companies’ activities may infringe our intellectualproperty rights. Due to the inherent imperfections of patent searching, we cannever be certain that our monitoring will be exhaustive, and it is possiblethere may be third-party intellectual property rights of which we are notyet aware. If we determine that other companies’ technological developmentefforts violate our intellectual property rights, we intend to take appropriateaction. We are aware of a few patents held by third parties which arepotentially relevant to our past, current or anticipated activities. We believethat our current activities do not infringe any valid claims of these patents.Third parties, however, may seek to enforce patents against us and a court mayfind against us. Enforcing intellectual property rights against others ordefending ourselves against claims of infringement can be very expensive, andany action in which we are involved could result in substantial costs and diversionof management and technical personnel and resources.

Other companiesare and may become involved in proceedings regarding patents that covertechnologies related to ours. The outcome of any intellectual propertyproceedings in which we or they are involved could effectively block ourability to further use or license our technologies or enter into 

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co-developmentarrangements. It could also impair our or our licensees’ ability to develop andcommercialize potential products or products, and could result in the award ofsubstantial damages against us. In the event of an unfavorable outcome inlitigation, we may need to obtain licenses or redesign our technologies orpotential products to avoid infringement. In the event that we must cease usinga technology, we could encounter delays in license revenue generation,milestone or royalty payments or product introductions while we attempt todevelop alternative technologies or potential products. If we do not succeed insuch attempts, we may be forced to cease operations. In addition, if litigationresults in a successful challenge to one of our patents, then competitors couldbe free to use the subject matter covered by the patent, or we may need tolicense the technology to others in settlement of such litigation.

Oppositions arerelatively straightforward proceedings where any third party can seek to have apatent revoked. The proceedings typically have a stage where the patent’sopponents and proprietor may each file observations in writing, followed by oralproceedings. The decision, which may be a dismissal of the opposition, arevocation of the patent or a maintenance of the patent in more limited form,usually takes between two to three years from the start of the proceedings. Inmost jurisdictions the decision is subject to appeal by the adversely affectedparty or parties. If the oppositions against our PER.C6 and AdVac patents aresuccessful we may lose some or all patent protection in Europe.

***If we or our licensees are unable to obtainany necessary licenses from third parties for use of their intellectualproperty on acceptable terms, we or our licensees may be unable to develop ormarket products based on our technologies.***

Before we canmarket some of our products or technologies, we may need to obtain licensesfrom third parties who have patents or other intellectual property rights. Wemay be unable to earn revenues from products based on our technologies or fromour own potential products if a third party does not grant us or our licenseesa necessary license or offers a license only on unacceptable terms. Forexample, in the patent context, others have filed, and in the future are likelyto file, patent applications covering technologies that we may wish to use orproducts that are similar to products that may be developed using ourtechnologies. If these patent applications result in issued patents, we mayneed to obtain a license from the proprietors to use their patented technology.These licenses may not be available, or may not be available on acceptable orcommercially reasonable terms. Without these licenses, we may be required toalter our technologies or potential products, or to avoid or stop certainactivities. Our licensees may face similar problems.

**Risks related to the securities markets andownership of our shares or ADSs**

***The protective measures included in ourarticles of association may prevent unfriendly action that might otherwise bein the best interests of our shareholders.***

***Our articles of association have, in accordance withthe laws of The Netherlands, protective effects. Among other things, ourarticles of association provide that our Supervisory Board may make bindingnominations for the election of its board members, and only a shareholders’resolution approved by an absolute majority of the votes cast, representingmore than one-third of our outstanding shares, can set the nominations aside.Furthermore under Dutch law, we may issue preference shares to a foundation,Stichting Preferente Aandelen Crucell, or the Preferred Foundation, giving itpreferred dividend rights and diluting the voting rights held by the holders ofthe other classes of shares. The Preferred Foundation has an option to acquirea number of preference shares equal to the number of our outstanding shares.The chairman of our Supervisory Board, Jan Oosterveld, and four independentmembers comprise the board of the Preferred Foundation.  These and other provisions in our articles ofassociation may have the effect of delaying, deterring or preventing unfriendlyaction that might otherwise be in the best interest of our shareholders oroffer them the opportunity to sell their ordinary shares or ADSs at a premiumover the***

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***market price. See Item 10, “AdditionalInformation” for additional information regarding the preference shares and ourarticles of association.***

***U.S. and other non-Dutch holders of ourordinary shares may not be able to exercise pre-emption rights.***

In the event ofan increase in our share capital, holders of our ordinary shares are generallyentitled to certain pre-emption rights unless these rights are excluded by aresolution of the general meeting of shareholders or of our board of directors,if so designated by the general meeting of shareholders or pursuant to ourarticles of association. However, U.S. holders of our ordinary shares may notbe able to exercise pre-emption rights unless a registration statement underthe Securities Act is declared effective with respect to the shares issuableupon exercise of such rights or an exemption from the registration requirementsis available. No assurance can be given that any registration statement will befiled or, that if filed, will be declared effective, or that any exemption fromregistration would be available to enable the exercise of a U.S. holder’spre-emption rights.

***Our shareholders may have difficultyprotecting their rights as a shareholder and in enforcing civil liabilitiesbecause we are a Dutch limited liability company.***

Dutch law andour articles of association govern issues regarding the legal organization,internal constitution, corporate authority and the liability of members of ourManagement Board and Supervisory Board. Most of our offices and assets arelocated outside the United States. In addition, a majority of the members ofour Supervisory Board, all of the members of our Management Board andmanagement team are residents of, and most of their assets are located in,jurisdictions outside the United States. As a result, it may be difficult to serveprocess on us or these persons within the United States. It may also bedifficult to enforce a U.S. court judgment against them in a U.S. court or in aDutch court or to enforce a Dutch court’s judgment against them in a U.S.court. This can include actions under the U.S. securities laws. In addition, itmay be difficult to enforce, in original actions brought in courts injurisdictions located outside the United States, liabilities under the U.S.securities laws. For a more complete discussion of potential difficulties inprotecting your rights, see Item 10, “Additional Information—Enforcement ofCivil Liabilities.”

***Ourordinary shares and ADSs may have a highly volatile trading price. You may notbe able to resell your ordinary shares or ADSs at or above the price you payfor them, the ADSs may vary in value, and our share price may render usvulnerable to a takeover bid.***

Our ordinary shares are listed on EuronextAmsterdam’s Eurolist by Euronext, also called the Amsterdam Stock Exchange. OurADSs are quoted on the Nasdaq National Market. An active trading market for ourordinary shares or ADSs may not continue to develop or be sustained. The ADSs’low closing price during 2004, 2005 and 2006 has been $ 6.38, $ 12.30and $ 17.27 respectively, and the closing price as of June 1, 2007was $ 22.90. The trading prices of ordinary shares of biotechnologycompanies in general have experienced significant volatility in the past andare likely to continue to be volatile. In addition, any negative change in thepublic’s perception of the prospects of biotechnology companies could depressour ordinary share or ADS price regardless of our results of operations. Otherbroad market and industry factors may affect the trading price of our ordinaryshares and ADSs, regardless of our performance.

***If securities or industry analysts do notpublish research or reports about our business, or if they change theirrecommendations regarding our ordinary shares or ADSs adversely, our share orADS price and trading volume could decline.***

The tradingmarket for our ordinary shares and ADSs will be influenced by the research andreports that industry or securities analysts publish about us or our business.If one or more of the analysts who 

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coverus or our industry downgrade our ordinary shares or our ADSs, the market priceof the shares or ADSs would likely decline. If one or more of these analystsceases coverage of us or fails to regularly publish reports on us, we couldlose visibility in the financial markets, which could cause the market price ofour shares or ADSs or trading volume to decline.

***We believe that we were or may have been apassive foreign investment company before 2005, causing certain adverse U.S.tax rules to apply to U.S. holders that held our ordinary shares or ADSsbefore 2005.***

Although webelieve that we were not a “passive foreign investment company” or “PFIC” forU.S. tax purposes with respect to the year 2006 and also do not anticipatebecoming a PFIC with respect to the year 2007 or thereafter, we believe that wewere or may have been a PFIC with respect to the years before 2005. If we werea PFIC in the past, U.S. holders that held our ordinary shares or ADSs at anytime during the years when we were treated as a PFIC and did not make amark-to-market election or a qualified electing fund (“QEF”) election willgenerally continue to be subject to certain adverse U.S. federal tax rules (the“PFIC rules”), even though we later ceased to qualify as a PFIC. In order toavoid being subject to these rules in the future, affected U.S. investorsmay wish to make a deemed sale election with respect to our ordinary shares orADSs. The PFIC rules are extremely complex, and U.S. investors are urgedto consult their own tax advisers regarding the potential consequences to themof making the deemed sale election. See Item 10, “Taxation—Taxation of U.S.Investors—Passive Foreign Investment Company Rules.”

**Item 4.**                        Information on the Company

**History and Development of Crucell**

We are a limited liability companyincorporated in The Netherlands with the legal and commercial name CrucellN.V., registered under number 28087740. We were incorporated on October 9,2000, as the holding company for Crucell Holland B.V., formerly calledIntroGene B.V., following the combination of IntroGene B.V. and U-BiSys B.V.Our principal executive office is located at Archimedesweg 4-6, 2333 CN Leiden,The Netherlands and our telephone number is +31 (0)71 519 9100. Our agent inthe United States is CT Corporation, 111 Eigth Avenue, New York, New York10011.

We concluded a share exchange offer on February 22,2006  and at March 31, 2006 we owned98.4% of Berna Biotech A.G. (“Berna Biotech” or “Berna”) a stockcorporation (*Aktiengesellschaft*) under Swisslaw. In September 2006, we completed the squeeze-out of the remainingshares and since then hold all outstanding Berna shares. The SWX Swiss Exchangeapproved Berna’s delisting, which was effected on September 18,2006. Berna was founded in 1898 when many disease causing bacteria werebeing identified for the first time. Then calling itself the Swiss Serum andVaccine Institute, the company focused on methods to harness the human immunesystem against these pathogens. Berna changed its name to “Berna Biotech AG” in2001. Its registered office is at Rehhagstrasse 79, 3018 Bern, Switzerland.Its reference number is CH- 35.3.000.374-7.

In the second quarter of 2006 we sold theveterinary division of the Berna Biotech Group, which included the companies Dr. E.Gräub AG, Switzerland and Berna Veterinary AG, Switzerland to the GermanVetinvest GmbH for an amount of € 5,390 in cash. In the same quarter the biopharmaceutical andvaccine manufacturer Rhein Biotech GmbH was sold to Dynavax TechnologiesCorporation, a U.S. based biotech company, for an amount of € 6,383 in cash. Both divestments were steps towards aligning ourportfolio of activities with our strategic priorities.

Prior to its sale, Rhein Biotech GmbH was asubsidiary of Rhein Biotech N.V., which was listed on the Frankfurt StockExchange. Berna owned 92.7% of Rhein Biotech N.V. while external shareholdersheld the remaining 7.3% of shares. On December 28, 2006, Crucellsqueezed-out the remaining 7.3% minority shareholders of Rhein Biotech N.V.Upon approval by the its shareholders, Rhein Biotech N.V. legally merged intoBerna Rhein BV, a fully owned subsidiary of the Crucell group in exchangefor 0.3 million 

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Crucell shareswith a fair value of € 18.51 per share, resulting in a transaction value of € 6.4 million. As a result, Rhein Biotech N.V. ceased toexist and its shares were delisted at the Frankfurt Stock Exchange. With thistransaction, Crucell completed the integration of the Berna Biotech.

In October 2006 we purchased, viaCrucell Vaccines Inc., the assets and liabilities of Florida-based BernaProducts Corp. (“BPC”) from Acambis plc for € 13.8 million, excluding transaction costs. BPC was originallyestablished in 1990 by Berna and was formed to market Vivotif, Berna’s oraltyphoid fever vaccine, in the United States and Canada. The company wasacquired by Acambis in 2003. In November 2006 we acquired Stockholm-basedSBL Vaccin Holding AB (“SBL”), a fully integrated independent biotechnologycompany, from the private equity firm 3i and the financial group SEB, for € 39.3 million in cash, excluding transaction costs. Both acquisitionsprovide a powerful platform for accelerated growth as an integratedbiopharmaceuticals company, strengthening our travel vaccine franchise andsales capabilities.

In November 2006 we and our technologypartner DSM Biologics opened the PERCIVIA PER.C6 Development Center inCambridge, Massachusetts. Our joint licensing business with DSM Biologics, abusiness unit of DSM Pharmaceutical Products, is based on a collaborationagreement, signed in 2002 and amended in January 2006. PERCIVIA was conceivedand designed to further develop the PER.C6 cell line and provide turnkeysolutions for the production of pharmaceutical proteins to licensees utilizingthe PER.C6 human cell line in the biotech industry.

Our common shares are listed on Euronext(Amsterdam), quoted on NASDAQ (New York) in the form of American DepositaryShares (“ADS”) under the symbol CRXL and also listed on the SWX Swiss Exchangein Zürich, under the symbol CRX.

Crucell N.V. is the parent for a group ofsubsidiary companies, which together constitute the Crucell Group (the “Group”or the “Company”). The following companies were the most significantsubsidiaries part of the Group as of December 31, 2006:

*Subsidiaries (fully consolidated)*
|                               | ** ** | ** **      | ** ** | ** **          | ** ** | **2006**    | ** ** | **2005**               | ** ** |
|-------------------------------|------------|-----------------|------------|---------------------|------------|-------------|------------|------------------------|------------|
| **Name**                      | ** ** | ** **      | ** ** | **Legal Seat** | ** ** | **Country** | ** ** | **Ownership   %** | ** ** | **Ownership  %** | ** ** |
| Crucell  Holland B.V.         |       | Leiden          |       | the  Netherlands    |       |        | 100        | %                      |       |   | 100 | % |   |
| U-BiSys  B.V.                 |       | Utrecht         |       | the  Netherlands    |       |        | 100        | %                      |       |   | 100 | % |   |
| ChromaGenics  B.V.            |       | Amsterdam       |       | the  Netherlands    |       |        | 100        | %                      |       |   | 100 | % |   |
| Berna  Biotech AG             |       | Bern            |       | Switzerland         |       |        | 100        | %                      |       |   | 0 | % |   |
| Berna  Biotech España SA |       | Madrid          |       | Spain               |       |        | 100        | %                      |       |   | 0 | % |   |
| Berna  Biotech Italia Srl     |       | Milano          |       | Italy               |       |        | 100        | %                      |       |   | 0 | % |   |
| Etna  Biotech Srl             |       | Catania         |       | Italy               |       |        | 100        | %                      |       |   | 0 | % |   |
| Berna  Rhein B.V.             |       | Leiden          |       | the  Netherlands    |       |        | 100        | %                      |       |   | 0 | % |   |
| Rhein  Vaccines B.V.          |       | Maastricht      |       | the  Netherlands    |       |        | 100        | %                      |       |   | 0 | % |   |
| Berna  Biotech Korea corp.    |       | Seoul           |       | Korea               |       |        | 100        | %                      |       |   | 0 | % |   |
| Crucell  Holding Inc.         |       | Wilmington,  DE |       | United States       |       |        | 100        | %                      |       |   | 0 | % |   |
| Crucell  Vaccines Inc.        |       | Wilmington,  DE |       | United States       |       |        | 100        | %                      |       |   | 0 | % |   |
| Crucell  Biologics Inc.       |       | Wilmington,  DE |       | United States       |       |        | 100        | %                      |       |   | 0 | % |   |
| SBL  Vaccin Holding AB        |       | Stockholm       |       | Sweden              |       |        | 100        | %                      |       |   | 0 | % |   |
| SBL  Vaccin AB                |       | Stockholm       |       | Sweden              |       |        | 100        | %                      |       |   | 0 | % |   |
| Vitec AB                      |       | Stockholm       |       | Sweden              |       |        | 100        | %                      |       |   | 0 | % |   |
|                               |            |                 |            |                     |            |             |            |                        |            |  |  |  |  |  |  |

 

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The Group has a stake in the following joint ventures and associatedcompanies, which are not consolidated.

| ** **         | ** ** | ** **          | ** ** | ** **    | ** ** | ** **          | ** ** | **2006**    | ** ** | **2005**         | ** ** |
|--------------------|------------|---------------------|------------|---------------|------------|---------------------|------------|-------------|------------|------------------|------------|
| **Name**           | ** ** | ** **          | ** ** | ** **    | ** ** | **Legal Seat** | ** ** | **Country** | ** ** | **Ownership  %** | ** ** | **Ownership  %** | ** ** |
| Pevion  Biotech AG |       | Joint venture       |       | Bern          |       | Switzerland         |       |        | 50         | %                |       |   | 0 | % |   |
| Kenta  Biotech AG  |       | Associated  company |       | Bern          |       | Switzerland         |       |        | 37         | %                |       |   | 0 | % |   |
| Percivia LLC       |       | Joint venture       |       | Cambridge, MA |       | United States       |       |        | 50         | %                |       |   | 0 | % |   |
|                    |            |                     |            |               |            |                     |            |             |            |                  |            |  |  |  |  |  |  |

 

**Businessoverview**

***Profile***

We are a fully integrated biopharmaceuticalcompany, focused on developing, producing and marketing vaccines and antibodiesagainst infectious diseases for private and public markets worldwide, andleveraging our novel, proprietary technologies to develop monoclonal antibodiesand therapeutic protein products. Our core portfolio includes Quinvaxem, afully-liquid vaccine against five important childhood diseases, Hepavax-Gene, avaccine against hepatitis B, and Inflexal, a virosome-adjuvanted vaccineagainst influenza. We also market travel vaccines, such as Vivotif, the onlyoral anti-typhoid vaccine, Dukoral, an oral cholera vaccine and Epaxal, theonly aluminum-free hepatitis A vaccine on the market. Besides this portfolio ofwell known vaccines we have a broad pipeline of new potential vaccines,antibodies and a blood clotting protein.

We have developed various proprietarytechnologies such as the PER.C6, AdVac, MAbstract, STAR and our virosomaltechnology as well as our Hansenula polymorpha expression system. We believeour proprietary PER.C6 human cell line technology is well suited for thedevelopment and large-scale manufacturing of a wide range of biopharmaceuticalsincluding vaccines, antibodies, therapeutic proteins and gene therapy products.AdVac is used to develop novel adenoviral-based products. MAbstract can be usedto develop human antibodies. Our novel STAR technology is useful for increasingproduction output of recombinant antibodies and therapeutic proteins onmammalian cell lines.

Our researchand development facilities are located in the Netherlands, Switzerland, Korea ,Italy and Sweden. We also have manufacturing facilities in Switzerland, Korea,Spain and Sweden, and a sales and marketing infrastructure in our core marketsof the Netherlands, Switzerland, United States, Italy, Spain, Korea and theNordic region. At December 31, 2006 we had 1,073 employees. As of January 1,2007 our research and development (“R&D”) facilities employed approximately310 employees of which one third are outside the Netherlands, primarily inSwitzerland. Our R&D activities are concentrated in our headquarters in TheNetherlands. Clinical development is concentrated in our Swiss operations inBern.

***Strategy***

We aim toincrease revenue growth by developing, manufacturing and marketing vaccines andantibodies that address currently unmet medical needs and to leverage ourproprietary technologies to develop monoclonal antibodies and therapeuticprotein products to combat infectious and other diseases. We do this by discovering,researching and developing technologies, vaccines, antibodies and proteins,using our own fully integrated infrastructure for in-house development,production and marketing, and, where useful or necessary, by forgingpartnerships with other companies and organizations. We may alter or expand ourproduct pipeline to include products that, in some instances, we may co-developand market through collaborations or strategic alliances with third parties toshare risks and costs. We also will continue licensing our core technologies toother companies in biotech industry.

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***Business drivers***

Ourbusiness strategy is based on the following business drivers:

·       *Leveragingpresence of our marketed vaccines in public and private markets*.   Weproduce and sell established hepatitis B, paediatric, respiratory and travelvaccines. We intend to enhance our position in these markets by highlightingthe unique features of these products and by providing outstanding customerservice in terms of delivery, reliability and quality and by leveraging ourworldwide presence in both public and private markets.

·       *Productpipeline with competitive advantage*.   We believe that each of our selected products either targets unmetmedical needs, improves current medications, or is perceived as a marketableproduct due to predictive study models and/or perceived favorable regulatoryconditions. We currently have nine programs in clinical trials including onevaccine in Phase III / registration stage, as well as several programs invarious stages of pre-clinical development. These products are based on ourPER.C6 production technology. In addition, we have various discovery programsto find new vaccine antibody and therapeutic protein leads.

·       *Ongoingtechnology licensing program*.   We have a broad base of excellent technologies with applicabilityfor vaccines, antibodies, other recombinant proteins and gene therapy. Ourlicensing program provides a source of revenue as well as the potential forfuture, additional revenue in the form of royalties from products developed byour licensees. In areas where we are not developing our own products, we offerour technologies to the biopharmaceutical industry for the development andproduction of diverse biopharmaceutical products. The ongoing and extensivePER.C6 technology licensing program and as of yet more limited licensingprograms for our other technologies support and accelerate our in-house productdevelopment. In the coming years,  weexpect a contribution from the licensing of our novel STAR technology to thebiopharmaceutical industry. We believe that our licensing program results inincreased awareness in, and acceptance by, the biopharmaceutical industry andthe regulatory authorities of our technology as a production technology forbiopharmaceutical products.

**Our CoreProducts**

Our coreproduct portfolio currently consists of six marketed vaccines: Quinvaxem,Hepavax-Gene, Inflexal, Epaxal, Vivotif and Dukoral.

*Quinvaxem*

On March 27, 2006 the Korea Food andDrug Administration (KFDA) awarded a licence to Quinvaxem, a fully liquidpentavalent (five-component) vaccine we produce in Korea. Following WHOprequalification in September 2006, Quinvaxem was made available tosupranational purchasing organizations. Supranational organizations are majorcustomers for combination vaccines, which are used in large vaccinationprograms in developing countries. Quinvaxem combines antigens for protectionagainst five important childhood diseases: diphtheria, tetanus, pertussis(whooping cough), hepatitis B and Haemophilus influenzae type b, one of theleading causes of bacterial meningitis in children. It is the firstinternationally available fully liquid vaccine containing all five of the aboveantigens to reach the market, offering a clear advantage in terms ofconvenience of use. Quinvaxem was co-developed with Novartis (then Chiron),which provides four of the five components as bulk.

In December 2006we were awarded contracts totaling over US$ 230 million for our Quinvaxemand Hepavax-Gene paediatric vaccines by supranational organizations. Thecontracts provide for the supply of these vaccines until 2009, with the awardedamount growing over those three years. In addition to these contracts a LatinAmerican supranational organization has awarded us a contract totaling over US$ 20 millionfor our Quinvaxem pediatric vaccine. This contract relates to sales of thevaccine in 2007.

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*Hepavax-Gene*

Hepavax-Gene isa Hansenula polymorpha-based recombinant hepatitis B vaccine. Since its launchin 1996, more than 350 million doses of Hepavax-Gene have been commerciallydistributed in more than 90 countries, making it the third most usedhepatitis B vaccine in the world. A key competitive advantage for Hepavax-Geneis that its immunogenic component, HBsAg, is produced in modified yeast usingour proprietary Hansenula polymorpha expression system, which allows for stableand efficient production. We launched a thiomersal-free formulation in 2004 inKorea. In addition, Hepavax-Gene forms the foundation of two combinationpaediatric vaccines, one of which has already received its marketingauthorization from the Korean FDA.

*Inflexal*

Inflexal is avirosome-adjuvanted influenza vaccine administered by injection. It is thefirst vaccine in our portfolio to use our patented virosome technology. Due tothe absence of aluminium, which in consequence reduces adverse effects onpatients compared to alternative influenza vaccines, the vaccine has a hightolerability. In addition, it has a good immunogenicity profile, making itparticularly effective with high-risk patients, such as the elderly, in whomthe immune response is generally weaker. Inflexal was originally introduced in1997 and was successfully registered through the Mutual Recognition procedurein most European markets in October 2001. The vaccine is currentlyregistered in 43 countries.

*Epaxal*

Epaxal is the first virosome-adjuvantedvaccine for hepatitis A. The vaccine has a high tolerability due to the absenceof aluminum and thiomersal and is highly effective, offering protectiveimmunity within a few days following the first dose and, following the second(booster) dose, providing immunity for up to 20 years. The product iscurrently licensed in more than 40 countries world-wide under the brand namesEpaxal and HAVpurandin most of these countries is licensed for adults and children over the age ofone year.

The pediatricdose of Epaxal has been shown in a Phase III study to be effective incombination with other children’s vaccines, providing immediate and longlasting protection. The product’s registration dossier has been filed with theSwiss Health Authorities and has been approved. Submission of the files forapproval to Health Authorities in various European and other countries isplanned in the course of 2007.

*Vivotif*

Vivotif is alive attenuated typhoid fever vaccine administered orally. It is the only liveoral vaccine indicated for use against Salmonella typhi, the most prevalent ofthe typhoid fever-causing bacteria. Vivotif consists of a live strain ofSalmonella typhi that has been altered so that it stimulates an immuneresponse, but not the disease. The bacteria are enclosed in coated capsulesthat dissolve in the intestines, releasing the live organism. Vivotif exhibitshigh tolerability and efficacy. Vivotif has an established track-record forsafety, having been on the market for over twenty years. The vaccine isindicated for adults and children over the age of five. Vivotif is currentlylicensed in 44 countries, including the United States.

*Dukoral*

Dukoral is anoral vaccine which offers protection against cholera and is registered in morethan 50 countries excluding the United States. Dukoral is also registeredmany of those 50 countries (excluding the European Union and Australia) toprotect against ETEC (travelers’ diarrhea). The vaccine is indicated forimmunisation against disease caused by *Vibrio cholerae*(serogroup O1) in adults and children from 2 years of age who will bevisiting endemic/epidemic areas. Dukoral acts by inducing antibodies againstboth the bacterial components and cholera toxin (CTB).

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*Complementaryvaccines*

Our corevaccines business also includes a range of paediatric and booster vaccines andvaccines for special indications which we offer in our key markets and, throughregional sales partners, world-wide. We currently offer, through ourpartnership with Novartis (then Chiron), Di Te Anatoxal for diphtheria andtetanus, Encepur for tick-borne encephalitis, Menjugatefor meningitis C, Te Anatoxalfor tetanus and MoRuviratenfor measles/rubella.

*Seasonality*

Our sales ofrespiratory vaccines are exposed to seasonal variations. The sales areprimarily made in the second half of the financial year. In other respects, ourbusiness is not significantly seasonal.

***Product development programs***

Our early-stage product developmentprograms comprise vaccines against influenza, West Nile virus, Ebola, HIV,malaria, and tuberculosis as well as antibody products against rabies andpreclinical research on the blood clotting Factor V a coagulation factor thatis a central regulator in the early phases of blood clot formation.

In late-stagedevelopment, our yellow fever vaccine is in the process of finalizing itsregistration. We also have programs in various stages of pre-clinicaldevelopment, including programs focused on therapeutic hepatitis B vaccines andRecombinant Live Paramyxovirus vaccines intended to combat HIV.

**Our CoreTechnologies**

Our product portfolio is supported througha range of proprietary technology platforms. Besides revenues generated fromproduct sales, we also generate revenues and other operating income fromlicensing our proprietary technologies to pharmaceutical and biotechnologycompanies, from grants and government subsidies obtained to support thedevelopment of our technologies and potential products, and from service feesearned under development contracts with our partners. We intend to increase ourrevenues in the future from initial license fees, license maintenance fees andmilestone and royalty payments from products that our licensees develop usingour technologies.

Our coreproprietary technologies are described below.

**PER.C6technology**

***Overview***

Our PER.C6 technology provides amanufacturing system that consists of a human cell line that can be used toproduce a variety of biopharmaceutical products. We developed the PER.C6technology from a single source of healthy, human retina cells. To obtain thePER.C6 cell line, we inserted an exactly defined fragment of the E1 region ofthe genome of the adenovirus type 5 into a healthy human retina cell so thatthe cell can grow indefinitely. The PER.C6 cell line has been successfullyadapted to grow without the need for serum components or materials that allowcell attachment (microcarriers) and demonstrates excellent cell densities inbioreactors. These features of our cell line are important to produce safebiopharmaceutical products in sufficient quantities.

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There are four areas in which our PER.C6 technology is currently beingapplied:

*Vaccine production.*   PER.C6 technology can be used as a production system fordeveloping and manufacturing both classical and recombinant vaccines.

·       Forclassical vaccine production, PER.C6 cells are infected with the virus against whichthe vaccine is meant to protect. The virus is subsequently multiplied on PER.C6cells to high virus titer, yielding a potent starting material that can beprocessed and purified to produce a final formulation of a whole-killed, splitor subunit vaccine.

·       Forrecombinant vaccine production, the PER.C6 technology produces delivery agentscalled adenoviral vectors. These vectors have been made replication incompetentand thus are only capable of delivering into the human body a portion of DNAencoding for a protein from the pathogen against which the vaccine is meant toprotect. The DNA inserted into the vector can be derived from a virus, aparasite or even bacteria, providing a versatile vaccine vector platform.

*Proteinproduction.*   PER.C6 technologycan be used as a production system for developing and manufacturing bothantibodies and other proteins. For both antibody and protein production, DNAencoding for a particular protein of interest is inserted into PER.C6 cells.These modified PER.C6 cells will secrete the desired antibody or protein.

*Gene therapy.*   The primary function of PER.C6 technology in the field ofgene therapy is the production of adenoviral vectors—a gene delivery mechanismbased on a common human virus—that carries therapeutic genes and facilitatesthe delivery of the gene into the cells. Since the PER.C6 cell line is the onlyavailable cell line that does not allow any formation of classical replicationcompetent adenoviruses during the production of replication deficient vectors,the cell line may be applied across the entire adenovirus gene therapy field.

*Functionalgenomics.*   Our PER.C6 technologycan be used to produce libraries of adenoviruses into which individual humangenes can be inserted to perform studies of gene functions. The adenoviruslibraries carry many genes with unknown functions, which can be used todetermine the function of individual genes in a disease process. We believethat our PER.C6 technology, therefore, represents a key analytical tool in thediscovery of new genes and their role in biological pathways and human disease.

***Keyfeatures and advantages***

We believe thatour PER.C6 technology has the following key advantages over alternativemanufacturing systems:

*High yields.*   PER.C6 technology potentially offers a system for high yield,large-scale biopharmaceutical product production. PER.C6 can be cultured at highdensities and engineered to produce large quantities of biopharmaceuticals andmay reduce production expense.

*Scalability inserum-free conditions.*   PER.C6cells can be cultured in a serum-free medium, without micro-carriers, using avariety of scaling systems, including bioreactors. This simplifies theexpansion from laboratory- to industrial-scale production, potentially leadingto the production of cost-efficient biopharmaceuticals in large quantities. Theuse of a serum-free medium also offers the potential to significantly improvethe purification of biopharmaceuticals produced using the PER.C6 technology andmay facilitate regulatory approval.

*BiologicsMaster File at the FDA.*   We havefiled a Cell Substrate Biologics Master File (BMF) with the U.S. Food and DrugAdministration (FDA) describing the PER.C6 technology, including itsestablishment, development and potential use in production processes. The FDAwill only evaluate the PER.C6 technology in the context of  Investigational New Drug (IND) applications.We believe that the information in the BMF will facilitate the FDA’s appraisalof any biopharmaceutical product that our licensees or we produce using thePER.C6 technology.

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*Broad industryendorsement.*   The PER.C6technology can now claim to have achieved a broad endorsement within theindustry, with more than 45 licensees and partners. For a list of licensees,see “—Licensing and Collaborations—Licenses and Partners”.

*Human-based.*   We believe that antibody and other protein products based onthe human based PER.C6 technology will demonstrate enhanced biologicalproperties, rendering them potentially more efficacious. In addition, PER.C6technology efficiently supports the growth of certain human viruses for vaccinedevelopment.

**AdVac technology**

***Overview***

We use our AdVac technology, in combinationwith our PER.C6 production technology, to develop recombinant vaccines.

While no adenovirus-based recombinantvaccines are currently licensed for human use, the scientific community istesting the ability of these vaccines to counter viruses such as HIV and Ebola,parasites such as malaria and bacteria such as Mycobacterium tuberculosis.Recombinant vaccines are necessary for these diseases because inactivated wholevirus vaccine approaches are either ineffective against these particularpathogens, or are too difficult or dangerous to produce. Within the field ofvaccination and gene therapy, adenovirus serotype 5 (Ad5) is the most commonlyused vector.

The portion of the human population thathas been exposed to Ad5 is high, and early clinical trial data demonstrates aclear correlation between the level of pre-existing immunity against Ad5 andthe frequency of non-response against Ad5-based vaccines. Moreover,immunity and resistance to Ad5 has been proven to vary from person-to-person,creating difficulties with respect to vaccine dosing issues.

We designed the AdVac technology to managethe problem of pre-existing immunity in humans against the recombinantadenovirus serotype 5 (rAd5) vaccine vector, without compromising large-scaleproduction capabilities or the immunogenic properties of rAd5.

AdVactechnology is based on adenovirus vectors that do not regularly occur in thehuman population, such as Ad35 and Ad11. The technology supports the practiceof inserting DNA coding for pathogen-derived proteins into a vector. AdVactechnology may also be used to develop gene therapy products.

***Key features and advantages***

We believe our AdVac technology has thefollowing key advantages over the commonly used vector systems:

*Safety and efficacy.**  *Because AdVac technology is based on adenovirus vectors not commonlyfound in the human population, pre-existing immunity to the vector is rare.This may allow for lower dosage schedules.

*Scale andmanufacturing.*   The cellcultures that complement AdVac technology are based on PER.C6 technology, andwe expect PER.C6 technology to help make large-scale manufacturing ofrecombinant vaccines possible. We believe that the biopharmaceutical industryrequires this capability to meet the global demand for vaccines required toeradicate existing and emerging infectious diseases.

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**MAbstracttechnology**

***Overview***

Our MAbstract technology can be applied forthe discovery of novel drug targets and the identification of human antibodiesagainst those drug targets. MAbstract technology employs a bacteria-infectingvirus called a bacteriophage, or phage, which expresses part of a humanantibody on its surface. The technology employs a library of phages that carrymany different human antibodies. To identify and subsequently isolate relevantantibodies, the library is contacted with pathogens, or cells suspected ofcarrying the drug target, or if the target is already known in advance, thelibrary may be contacted with the target directly. Subsequently, phage antibodiesbinding to the diseased cells or the known target are separated fromphage-antibodies that do not bind at all, or bind to healthy cells added tosubtract irrelevant phage-antibodies present in the library. Since irrelevantphage antibodies for the target in question are often present in greatabundance, the subtraction step aids in enriching the phage-antibody populationfor potentially relevant, selectively binding phage antibodies.

Once such phage antibodies have beenisolated, they can either be used to subsequently identify the target or aspecific binding place on the target (referred to as epitope), or be used tosubsequently isolate the DNA coding for the binding part of the antibody. Thispart may genetically be combined with other parts of the antibody that have nofunction in binding but have assessory functions in the human immune system.Thus, different formats of antibodies with different modes of action orfunctions can be made, but with the same specificity for the target.

We use ourMAbstract technology to identify antibodies reactive with whole pathogens, orantibodies against protein elements from pathogens, or antibodies directedagainst targets already known to be associated with disease. In additionMAbstract can be used to identify targets or epitopes on disease-causing agentsthat were previously unknown and may make suitable candidates forantibody-based diagnosis, prevention or therapy of the associated disease.

***Key features and advantages***

MAbstract employs a human-basedantibody-display technology. We believe that MAbstract allows for the discoveryof therapeutic antibodies with several potential advantages over currenttechnologies using transgenic mice. These advantages include the following:

*Subtraction method of selection.*   MAbstract technology selects antibodies for possibletherapeutic use and discovers novel drug targets using whole cells, tissues orinfectious agents. The subtraction method of selection is not available whengenerating human antibodies in transgenic mice.

*No inherent limitation on antibody specificity.*   MAbstract technology does not have the inherent limitation onantibody specificity that is seen in transgenic mice.

*Productionusing PER.C6 technology.*   MAbstracttechnology has been used to isolate antibodies for numerous diseaseapplications. Selected antibody specificities can be directly reformatted intoantibodies for production using PER.C6 technology.

***STARtechnology***

STAR technologyis a gene expression technology based on epigenetic control mechanisms thatblock repression of gene expression. STAR’s production technology isparticularly useful for the production of recombinant human antibodies andproteins. It has a potentially broad application and is effective forproduction of antibodies and proteins on mammalian cell lines such as thewidely used Chinese hamster ovary (CHO) cell line and has the potential to workon our PER.C6 cell line. In an evaluation program, Genentech, Genzyme, Medarex,Xoma, UCB, Novartis, Novo Nordisk and Abbott are currently 

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investigatingwhether STAR technology can increase production yields of biologicals. Weacquired STAR technology in 2004 through the purchase of ChromaGenics B.V., aprivately held biotechnology company based in Amsterdam. In connectionwith the purchase, we also entered into a contingent payment agreement thatcould result in an additional payment of € 7.0 million upon receipt of revenues generated from the STARtechnology and royalties. In 2007 and beyond we are strongly focused on signingnew licensees.

***Key features and advantages***

Webelieve our STAR  technology has thefollowing key advantages over other gene expression technologies:

·       Establishedmammalian cell banks for antibody and protein production are the starting pointfor STAR technology, thus specially engineered mammalian cells are not needed.

·       The STARtechnology allows for very rapid stable mammalian cell clone generation.

·       The STAR technology typically yields stable mammalian cell clonesthat produce 5 to 10 fold higher antibody or other therapeutic proteins ascompared to cell clones generated without STAR.

***Virosomaltechnology***

One of thechallenges in vaccine development is the creation of products that containdefined antigens of high purity that efficiently induce a protective immuneresponse. Many antigen preparations are therefore supplemented with adjuvantsto enhance the body’s immune response to the specific antigens. The mostcommonly used and approved adjuvants for human use are aluminum saltderivatives, which are known to cause adverse reactions such as irritation andinflammation at the injection site. Virosomes are a broadly applicable adjuvantand carrier system with prospective applications in areas beyond conventionalantigen-based vaccines. Our virosome technology offers a tool for developingnovel, predominantly synthetic vaccines applicable for infectious and chronicdiseases. These vaccines offer additional benefits because they are effectiveeven in immune-suppressed patients and also in infants.

***Key features and advantages***

We believe our Virosome technology has thefollowing key advantages over other antigen delivery technologies:

·       Virosometechnology provides a broadly applicable delivery system for antigens orDNA/RNA encoding specific immune stimulatory proteins.

·       Virosometechnology enables target-specific delivery of antigens and amplification ofthe immune response.

·       Virosomesstimulate both arms of the immune system—eliciting antibody and cellular immuneresponses—against inserted immune stimulatory proteins derived from humanpathogens.

·       Virosomesare completely biodegradable and can exert an immune response via differentroutes of administration.

·       Virosome technology is used in the manufacture of several ofCrucell’s registered products and as such has an excellent safety record andmanufacturing know-how.

***Hansenulapolymorpha***

The yeastexpression technology Hansenula polymorpha provides us a highly efficientprocess production technology for protein, which can be used as a basis for developingand manufacturing new 

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vaccines.The yeast Hansenula polymorpha production system provides superiorcharacteristics for a wide range of industrial applications. Particularly thelack of pyrogens, pathogens or viral inclusions, its ease of geneticmanipulation and its robustness in industrial scale fermentations add to itsattractiveness for the synthesis of pharmaceutical compounds. Our registeredHBV vaccine Hepavax-Gene is based on recombinant production in this yeast.

***Key features and advantages***

We believe our Hansenula  polymorpha technology has the following keyadvantages over other yeast expression technologies:

·       Hansenulapolymorpha provides an expression system with superior characteristics for thesynthesis of pharmaceutical compounds, including vaccines.

·       Hansenulapolymorpha provides a safe production platform lacking pyrogens, pathogens orviral inclusions.

·       Hansenula polymorpha**is easy withregard to genetic manipulation and robust in industrial scale fermentations.

**OtherTechnology Platforms**

We, througheither our own resources or through our research collaborations, have inaddition to our core proprietary technologies, access to the followingtechnology platforms.

*Polysaccharide-proteinconjugates*

The causativeagents of many common bacterial infections contain surface structures made ofpolysaccharides, against which protective antibodies are directed. However,vaccines based on polysaccharide antigens alone do not induce a T-cell responseand therefore are not able to elicit immunological memory (memory immuneresponses). By linking the specific antibody-inducing polysaccharides withT-cell activating carrier proteins it is possible to induce the desired immuneresponse and enhance long term protection against the corresponding pathogen.

*Recombinantlive bacteria*

Recombinantlive bacteria are harmless but highly immunogenic bacteria that elicit immunityagainst specific pathogens. The technology can also be applied for therapeuticvaccines against cancer.

*Recombinantlive paramyxoviruses*

The use of liveattenuated viruses in vaccines is a well established method of conferringimmunity against a number of diseases. But these viruses can also be used tointroduce genes encoding foreign antigens into their genomes, thus creating arecombinant vaccine that would simultaneously confer immunity against more thanone disease, e.g. measles and malaria.

*Therapeutichuman monoclonal antibodies (MAb)*

A monoclonalantibody is a special class of antibody that originates from a single clone oflymphocyte. A single MAb is highly specific for a unique antigen and can beisolated at a high level of purity. The purity of the product combined with theuniqueness of source and specificity, as well as high consistency makes MAbsattractive both as research tools and as potential products.

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*Particlepresentation technology*

The immunesystem is activated by antigens. For each immune cell, there is only onecorresponding antigen/epitope which activates it. Our Particle PresentationTechnology combines the desired antigens in a form that elicits an efficientimmune response. Our therapeutic hepatitis B vaccine, currently in pre-clinicaldevelopment, uses this technology. This technology can potentially be appliedto the development of other therapeutic vaccines.

**Industryand Scientific Overview**

***Manufacturing systems for biopharmaceuticalproducts***

Biopharmaceuticalproducts are therapeutics produced by means of biological production systems.Modified bacteria and yeast were initially used to produce the first generationof biopharmaceutical products for humans. The first available human cell-basedproduction systems employed human cells that spontaneously acquired the abilityto divide indefinitely. These include the MRC-5 and WI-38 celllines, which were both divided from human lung tissue. These cell lines havebeen successfully used to produce a number of human vaccines including thosefor rubella, mumps, measles, rabies and hepatitis A. More recent and betterdefined human cell lines were created by extracting a small and well definedpart of the genome (E1) from the adenovirus type 5 and inserting this intohealthy primary human cells where it subsequently causes stable, indefinitecell growth. The immortalized cell and its progeny are called a “cell line.”Examples of cell lines that were made by E1 immortalization include 293, 911,N52.E6 and our proprietary PER.C6 cell line.

***Vaccines***

Vaccines are designed to protect peopleagainst potentially life-threatening diseases, including those caused byparasites, viruses and bacteria.

***Scientific progress in vaccines.***   Vaccines have contributed significantly to the improvement ofglobal public health in the twentieth century. Smallpox was eradicated throughthe use of vaccines, and polio is well on its way to eradication. Significantdevelopments include the introduction of combination vaccines and thedevelopment of new vaccine technologies that may advance vaccine development.Today, research is underway to develop efficacious and safe vaccines against

·       viruses such as HIV;

·       parasites such as those that cause malaria;

·       bacteria such as those that cause tuberculosis; and

·       inherited or acquired diseases such as cancer.

***Vaccineformats.***   A variety ofvaccine formats are in use today and others are evolving through ongoingresearch and development efforts. Some of the most common vaccine formatsinclude live-attenuated virus vaccines, inactivated whole-killed virusvaccines, subunit vaccines, DNA vaccines, recombinant vector-based vaccines,synthetic vaccines and peptide-based vaccines.

***Vaccine technology development.***   A large variety of vaccine technologies are under developmentin an attempt to improve safety and overall vaccine efficacy. The keyobjectives of current vaccine technology research and development are to makesafer vaccines without compromising efficacy, to generate new vaccines withstronger and broader immunogenicity, to make vaccines using more efficientmanufacturing processes and to make vaccines easier to administer.

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***Antibodies***

Antibodiesare proteins made naturally by cells of the body’s immune system. They functionas one of the body’s principal defense mechanisms against pathogens, which aredisease causing agents such as parasites, viruses or bacteria. Antibodiesrecognize and bind to invading pathogens, ultimately eliminating them, thusplaying a crucial role in protecting humans against disease. Because of theirbinding characteristics, antibodies can distinguish subtle cell differencesbetween healthy and diseased cells. Antibodies are used to develop therapeuticproducts that can

·       triggerthe death of a target cell, such as a cancer cell,

·       bind toand block a key interaction of a disease-related cell, such as an inflammatorycell,

·       blockinfectious agents.

Antibodies mayalso be used to bind and neutralize toxic products, to develop diagnosticproducts to detect viruses or bacteria and as tools in scientific research suchas genomics and proteomics.

***Scientific progress in antibodies.***

Methods forgenerating monoclonal antibodies have evolved considerably over the last 25years. The technology originally involved immunizing mice with a targetmolecule and isolating relevant antibody-producing cells from the mice. Becausemonoclonal antibodies of rodent origin are recognized as foreign proteins andare rapidly eliminated when applied in humans, methods were developed toproduce therapeutic antibodies that are of human origin. These antibodies canbe developed either using transgenic mice or by means of phage antibody-displaytechnology. Transgenic mice are genetically engineered mice that carry humanantibody genes. This allows the immune systems of mice to generate humanantibodies in response to any administered antigenic material. Phageantibody-display technology allows human antibody genes to be cloned intobacteriophages, which are viruses that only infect bacteria. Phages displayingantibody fragments that attach to specific molecules can be selected, enablingisolation of antibodies against targets and/or enabling the identification oftarget molecules. Phage antibody-display libraries are large collections ofantibody-phages for use in identifying the targets and related antibodies.

***Therapeuticproteins***

Proteins aremain constituents of the human body. They consist of amino acid peptide chainsfolded in a specific conformation, and often contain a number of so-calledposttranslational modifications (one of the later steps in proteinbiosynthesis) which include glycosylation, sulphation, phosphorylation,gamma-carboxylation, and others. Since the 1950s, proteins have beenincreasingly used as therapeutic drugs, especially diseases caused by adeficiency of certain proteins. According to various market research reports  the total market size (based on sales) oftherapeutic proteins was in 2005 over US$ 38 billion. Hematology,endocrinology and oncology are the main disease areas in which therapeuticproteins are applied.

***Scientificprogress in recombinant therapeutic proteins.***

Initiallytherapeutic proteins were isolated from natural sources such as blood, urineand tissue. Clinical experience with these proteins in the 1960s, andafterwards, revealed a significant risk of transmission of infectiouspathogens, particular viruses, from the source material to the recipient.Hence, production of proteins in vitro was investigated. Since the 1970s,developments in molecular biology have made it possible to produce proteins inthe laboratory. In addition, transgenics were developed that secrete theprotein of interest in milk. Today, there are a number of production platformsfor non-mammalian cells such as yeast, as well as mammalian cells.

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Mammaliancell-based protein production systems mostly use non-human cell lines such asCHO, BHK and others. The type of post-translational modifications carried outby the platform is often determined by the cell-type used. Current thoughtholds that recombinant proteins should be produced by cell lines in culturemedia that are completely devoid of human serum components.

***Vaccinemarkets***

Importantsegments of the vaccine market are influenza vaccines, paediatric vaccinecombinations that include protection against hepatitis B as well as travelvaccines.

*Influenza*

Influenza,commonly known as “flu”, affects large sections of the world’s population eachyear. The disease is characterized by annual winter outbreaks, which oftenreach epidemic, and sometimes pandemic, proportions due to the fact that thevirus can mutate quickly, often producing new strains against which humanbeings do not have immunity. Typical symptoms of flu include fever andrespiratory symptoms, such as a cough, sore throat, runny or stuffy nose, aswell as headaches, muscle aches, and, often, extreme fatigue. These symptomsare usually relatively mild but can become life threatening in vulnerablepatient groups, such as the elderly and immunodeficient individuals.Transmission of the flu virus occurs via droplets of respiratory secretionsand, following infection, the incubation period ranges from one to three days.

The influenzavaccine market is the fastest growing vaccine market. Global sales of influenzavaccine are, according to a market research report  (Datamonitor) and to Crucell’s own estimates,expected to grow from an estimated US$ 1.4 billion in 2004 to US$ 3.7billion in 2010.

Several factors contribute to the rapidgrowth of the influenza market. National governments are strongly in favor ofinfluenza vaccination and tend to continually increase their target vaccinationcoverage. Influenza vaccinations save millions of dollars each year in reducedhospitalizations and fewer lost workdays. The past few years have seen significantgrowth in the use of influenza vaccines in China, Taiwan, Mexico, Japan andEastern Europe.

It is expected that the threat of apandemic of avian flu, higher awareness of the public at large as well as dueto specific production contracts for vaccines that combat strains of pandemicflu and ongoing activities to increase the preparedness for a flu pandemic willlead to further growth in the interpandemic flu markets.

Sanofi pasteurdominates the influenza vaccine market with approximately a 50% share of theworld market. GlaxoSmithKline (GSK) is also well established, with anapproximate market share of 15%. Following its acquisition of ID Biomedical,GSK increased its market share and became a significant participant in the U.S.market. Following Chiron’s acquisition of PowderJect, it is also one of themain producers of the influenza vaccine for the U.S., and commands a leadingposition in Europe. Fluad, Chiron’s adjuvant flu vaccine, is the main directcompetitor of Inflexal, our influenza product. Fluad has been particularlysuccessful in Germany and Italy. In 2006, Novartis acquired all of theremaining publicly held shares of Chiron it did not currently own.

*Paediatricvaccines including hepatitis B*

Hepatitis B (“HBV”) is a viral infection ofthe liver which causes various complications if left untreated. Infection withHBV leads to one of three outcomes. An infected individual may die of fulminanthepatitis within days or weeks after the onset of the disease, recover aftersymptomatic or asymptomatic infection and develop lifelong immunity against thedisease, or develop chronic infection for which no specific treatment isavailable and which may ultimately cause death from cirrhosis of the liver andliver cancer.

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Transmission of HBV occurs as a result ofthe exchange of blood, the exchange of fluids during sexual intercourse, andthe exchange of body fluids between an infected mother and a new-born babyduring birth (perinatal transmission). Groups of persons at risk for HBVinfection include sexually active men and women, healthcare workers, infantsborn to infected mothers, injection drug users, hemodialysis patients,hemophiliacs and travelers to endemic areas. According to the WHO,approximately 350 million people are chronically infected.

The market for HBV monovalent vaccine wasclose to US$ 0.5 billion in 2004 according to  a market research report (Frost &Sullivan) and our own recent estimates, split between the United States (50%),Europe (30%) and the rest of the world (20%). However, the market is in steadydecline. This is due to the increasing number of people being vaccinated atbirth with a combination vaccine in the United States and Europe, the largestmarkets. The same trend is seen in the developing countries in the rest of theworld, where there is a strong demand for HBV combination vaccines.

The keyparticipants in the HBV market are GSK, Merck & Co. and Novartis. Inaddition to our monovalent HBV vaccine, Hepavax-Gene, we have collaborated withNovartis (then Chiron) to develop Quinvaxem, a combination vaccine against HBV,diphtheria, tetanus, pertussis, and Haemophilus influenzae type b. The KoreanFDA awarded a license to Quinvaxem  andthe World Health Organization awarded a pre-qualification to the vaccine,making it eligible for sale to various supranational organizations. The vaccine  is being produced in Korea.

*Travelvaccines*

Travel vaccines include all vaccineproducts that protect against diseases which are not endemic to specificcountries. Generally, the target population groups for these vaccine productsare individuals traveling to endemic regions, although in regions where certaindiseases combated by travel vaccines are prevalent, widespread immunizationprograms are sometimes undertaken.

According to the World TourismOrganization, the number of travelers from developed countries to regions withendemic diseases is set to grow each year. This growth in the number oftravelers is driven by decreasing relative costs and journey times of travel,increased accessibility to travel and a social trend to travel abroad. Vaccinesfor hepatitis A, yellow fever, typhoid and cholera can all be classified astravel vaccines.

*Hepatitis A.*   HepatitisA (HAV) is a highly contagious infection that causes acute inflammation of theliver. HAV is generally contracted orally through fecal contamination of foodor water, and is considered the least dangerous form of hepatitis because itdoes not lead to chronic inflammation of the liver. HAV commonly spreadsthrough improper handling of food, contact with household members, sharing toysat day-care centers, and eating raw shellfish taken from polluted waters.

The HAV market is estimated to be worth approximatelyUS$ 340 million in 2004 according to a market research report(Frost & Sullivan) and our own recent estimates.

GSK, Merck and sanofi pasteur dominate themonovalent HAV market. In addition, GSK markets Twinrix, a combination vaccinefor HAV and HBV, while sanofi pasteur and GSK have recently introducedcombination vaccines for HAV and typhoid fever. We currently market Epaxal forHAV in Europe, Latin America and Asia.

*Typhoid fever.*   Typhoidfever is a debilitating and life-threatening illness caused by the bacteriaSalmonella typhi. Symptoms of typhoid fever include fever, stomach pains,weight loss, loss of appetite, delirium, severe diarrhea (in children) andconstipation (in adults).

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Typhoid fever is transmitted by fecalcontamination of food or water, or by person to person contact. Approximately17 million people worldwide develop typhoid fever each year and approximately4% of patients with typhoid fever die.****The disease isendemic to Africa, Asia (except Japan) and Latin America.

The key participants in the typhoid marketare sanofi pasteur and GSK, with their injected vaccine products TyphimViand Typherix respectively. Wemarket Vivotif, the only oral vaccine for active immunization against typhoidfever.

*Cholera.**  *Cholera is an acute, diarrheal illness caused by infection of theintestine with the bacterium Vibrio cholerae. The infection is often mild orwithout symptoms, but sometimes it can be severe. Approximately 5% of infectedpersons has a severe case characterized, by profuse watery diarrhea, leg crampsand vomiting, resulting in rapid loss of body fluids leading to shock anddehydration. Without treatment, death can occur within hours.

According to the Centers for DiseaseControl and Prevention cholera has been very rare in industrialized nations forthe last 100 years; however, the disease is still common today in other partsof the world, including the Indian subcontinent and sub-Saharan Africa.

We produce and market Dukoral, our recentlydeveloped and licensed oral vaccine registered for the treatment of cholera andin some regions for ETEC (travelers diarrhea).

*Blood-clotting factors*.*  *In 2006, we began development ofa blood-clotting Factor V product. We have acquired intellectual propertyrights for the novel Factor V Leiden/Cambridge blood clotting factor. With amarket potential, estimated by us to be over US$ 3 billion, Factor V isdesigned to treat bleeding in haemophiliacs and to treat other bleedingconditions. We are also working on the production of improved versions ofcurrently marketed protein products on our PER.C6 production technology.

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**Licensingand Collaborations**

***Licensees and partners***

Our current licensees and partners are as follows:

**VACCINES**

| **PARTNER/LICENSEE**                                                                | ** ** | ** **     | ** ** | **STARTING  DATE** | ** ** | **TECHNOLOGY**                                  | ** ** | **DISEASE TARGET** | ** ** | **DEVELOPMENT  STAGE** |
|-------------------------------------------------------------------------------------|------------|----------------|------------|--------------------|------------|-------------------------------------------------|------------|--------------------|------------|------------------------|
| AdImmune Corp.                                                                      |       | Oct. 2006 |       | PER.C6             |       | Japanese Encephalitis                           |       | Pre-clinical       |
| Aeras Global TB Vaccine Foundation                                                  |       | Mar. 2004 |       | PER.C6 and AdVac   |       | Tuberculosis                                    |       | Phase 1            |
| Bestewil Holding BV                                                                 |       | Jan. 2006 |       | Co-micelles        |       | Influenza                                       |       | Pre-clinical       |
| Chiron Corp.                                                                        |       | Dec. 2004 |       | PER.C6             |       | Alphavirus vectors                              |       | Pre-clinical       |
| Harvard School of Medicine                                                          |       | Dec. 2003 |       | AdVac + Ad5HVR48   |       | HIV                                             |       | Pre-clinical       |
| International AIDS Vaccine Initiative (IAVI)                                        |       | Sep. 2004 |       | AdVac              |       | HIV                                             |       | Pre-clinical       |
| Kimron Veterinary Institute                                                         |       | Jul. 2003 |       | PER.C6             |       | West Nile virus—Veterinary vaccine (avian) |       | Marketed in Israel |
| Merck & Co. Inc.                                                           |       | Oct. 2005 |       | PER.C6             |       | Hepatitis C                                     |       | Pre-clinical       |
| Merck & Co. Inc.                                                           |       | Oct. 2000 |       | PER.C6             |       | HIV                                             |       | Phase II           |
| Merck & Co Inc.                                                            |       | Dec 2006       |       | Ad5HVR48           |       | HIV                                             |       | Pre-clinical       |
| Merial LLC                                                                          |       | Oct. 2004 |       | PER.C6             |       | Veterinary vaccine—Foot and mouth disease  |       | Pre-clinical       |
| National Institutes of Health (NIH)                                            |       | Mar. 2002 |       | PER.C6 and AdVac   |       | Ebola, Lassa and Marburg                        |       | Phase 1            |
| National Institutes of Health (NIH)                                            |       | Mar. 2004 |       | PER.C6 and AdVac   |       | Malaria                                         |       | Phase 1            |
| New York University                                                                 |       | Aug. 2002 |       | PER.C6 and AdVac   |       | Malaria                                         |       | Terminated         |
| Sanofi Pasteur                                                                      |       | Dec. 2003 |       | PER.C6             |       | Influenza                                       |       | Phase 1            |
| Singvax                                                                             |       | Mar. 2005 |       | PER.C6             |       | Japanese Encephalitis                           |       | Pre-clinical       |
| Tibotec Pharmaceuticals Limited                                                     |       | Nov. 2005 |       | PER.C6             |       | Undisclosed vaccine                             |       | Pre-clinical       |
| Vakzine Project Management                                                          |       | Dec. 2005 |       | PER.C6             |       | Undisclosed vaccine                             |       | Terminated         |
| Vaxin, Inc.                                                                    |       | Sep. 2004 |       | PER.C6             |       | Respiratory viruses                             |       | Phase 1            |
| Walter Reed Army Institute of Research &  GlaxoSmithKline Biologicals |       | Mar. 2003 |       | PER.C6 and AdVac   |       | Malaria                                         |       | Pre-clinical       |

 

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**ANTIBODIES AND THERAPEUTIC PROTEINS**

| **PARTNER/LICENSEE**                           | ** ** | ** **     | ** ** | **STARTING DATE** | ** ** | **TECHNOLOGY**                 | ** ** | **DISEASE TARGET** | ** ** | **DEVELOPMENT  STAGE** |
|------------------------------------------------|------------|----------------|------------|-------------------|------------|--------------------------------|------------|--------------------|------------|------------------------|
| Abbott                                         |       | Jan. 2007 |       | STAR              |       | Portfolio antibodies           |       | Pre-clinical       |
| Applied Molecular Evolution, Inc. (Lilly) |       | Oct. 2002 |       | PER.C6            |       | Portfolio antibodies           |       | Phase I            |
| Chiron Corp.                                   |       | Aug. 2004 |       | PER.C6            |       | HCV protein                    |       | Pre-clinical       |
| Ferring International Research Center SA       |       | May 2005  |       | PER.C6            |       | Women’s healthcare        |       | Pre-clinical       |
| Ferring International Research Center SA       |       | Dec. 2005 |       | PER.C6            |       | Women’s healthcare        |       | Pre-clinical       |
| Genentech                                      |       | Feb. 2004 |       | STAR              |       | —                         |       | —             |
| Genzyme Corporation                            |       | Dec. 2005 |       | STAR              |       | Portfolio proteins             |       | Pre-clinical       |
| Innogenetics                                   |       | Jan. 2002 |       | PER.C6            |       | Portfolio antibodies           |       | Pre-clinical       |
| IQ Corporation                                 |       | Oct. 2005 |       | PER.C6            |       | Anti-anthrax antibody          |       | Pre-clinical       |
| JCR Pharmaceuticals Co. Ltd                    |       | Mar. 2005 |       | PER.C6            |       | Undisclosed proteins           |       | Pre-clinical       |
| Medarex                                        |       | May 2005  |       | STAR              |       | Portfolio antibodies           |       | Pre-clinical       |
| Merck & Co., Inc.                |       | May 2003  |       | PER.C6            |       | Portfolio antibodies           |       | Pre-clinical       |
| Merus B.V.                                     |       | Jun. 2004 |       | PER.C6            |       | Portfolio oligoclonics         |       | Pre-clinical       |
| Micromet AG                                    |       | Nov. 2004 |       | PER.C6            |       | Portfolio antibodies           |       | Pre-clinical       |
| Millennium Pharmaceuticals                     |       | Apr. 2006 |       | STAR              |       | Portfolio antibodies           |       | Terminated         |
| Mitsubishi Pharma Corporation                  |       | Mar. 2005 |       | PER.C6            |       | Undisclosed proteins           |       | Pre-clinical       |
| MorphoSys AG                                   |       | Sep. 2004 |       | PER.C6            |       | Portfolio antibodies           |       | Pre-clinical       |
| Novartis                                       |       | Sep. 2006 |       | STAR              |       | Portfolio antibodies, Proteins |       | Pre-clinical       |
| Novo Nordisk                                   |       | Jan. 2007 |       | STAR              |       | Portfolio antibodies           |       | Pre-clinical       |
| Roche                                          |       | Jan. 2005 |       | PER.C6            |       | Undisclosed proteins           |       | Pre-clinical       |
| Symphogen                                      |       | Apr. 2005 |       | PER.C6            |       | Portfolio antibodies           |       | Pre-clinical       |
| Synergenics/Synco Biopartners Investments B.V. |       | Aug. 2004 |       | PER.C6            |       | Portfolio antibodies           |       | Pre-clinical       |
| UCB S.A.                                       |       | Mar. 2006 |       | PER.C6            |       | Portfolio antibodies           |       | Pre-clinical       |
| UCB Celltech                                   |       | Sep. 2006 |       | STAR              |       | Portfolio antibodies           |       | Pre-clinical       |
| UMN Pharma                                     |       | Mar. 2006 |       | PER.C6            |       | Undisclosed protein            |       | Pre-clinical       |
| XOMA Ltd                                       |       | Jan. 2006 |       | STAR              |       | Portfolio antibodies, Proteins |       | Pre-clinical       |
| Zystor Therapeutics                            |       | Dec. 2005 |       | PER.C6            |       | Undisclosed protein            |       | Pre-clinical       |

 

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**GENE THERAPY**

| **PARTNER/LICENSEE**                            | ** ** | ** **     | ** ** | **STARTING DATE** | ** ** | **TECHNOLOGY**          | ** ** | **DISEASE TARGET** | ** ** | **DEVELOPMENT STAGE** |
|-------------------------------------------------|------------|----------------|------------|-------------------|------------|-------------------------|------------|--------------------|------------|-----------------------|
| Ark  Therapeutics                               |       | Jan. 2006 |       | PER.C6            |       | Portfolio               |       | Phase II           |
| BIOA&D  Co. Ltd                             |       | May 2006  |       | PER.C6 and ceNOS  |       | Cardiovascular  disease |       | Pre-clinical       |
| Edwards Life  Sciences Corp.                    |       | Nov. 2004 |       | PER.C6            |       | Portfolio               |       | Pre-clinical       |
| EMD Lexigen  Pharmaceuticals Corp. (Merck KgaA) |       | Dec. 2001 |       | PER.C6            |       | Portfolio               |       | Pre-clinical       |
| GeneMax Corp.                                   |       | Aug. 2003 |       | PER.C6            |       | Portfolio               |       | Pre-clinical       |
| GenVec Inc.                                     |       | Jul. 2002 |       | PER.C6            |       | Cardiovascular          |       | Phase II           |
| GlaxoSmithKline  Ltd.                           |       | Feb. 1999 |       | PER.C6            |       | Portfolio               |       | Pre-clinical       |
| Merck &  Co., Inc.                |       | Nov. 1998 |       | PER.C6            |       | Portfolio               |       | Pre-clinical       |
| Merial Ltd.                                     |       | Dec. 2005 |       | PER.C6            |       | Veterinary              |       | Pre-clinical       |
| NeoTropix                                       |       | Mar. 2004 |       | PER.C6            |       | Oncology                |       | Pre-clinical       |
| Upstate USA                                     |       | May 2006  |       | PER.C6            |       | Portfolio               |       | Pre-clinical       |
| Selective  Genetics Inc.                        |       | Jun. 2001 |       | PER.C6            |       | Portfolio               |       | Phase I/II         |
| Transgene SA                                    |       | Apr. 2001 |       | PER.C6            |       | Portfolio               |       | Phase I/II         |
| Vascular Biogenics Ltd                          |       | Mar. 2005 |       | PER.C6            |       | Portfolio               |       | Pre-clinical       |

 

**ALLIANCES WITH CONTRACT MANUFACTURERS FORPRODUCTION**

| **PARTNER/LICENSEE**                       | ** ** | ** **     | ** ** | **STARTING DATE** | ** ** | **TECHNOLOGY**                                               | ** **

** ** | **AREA** |
|--------------------------------------------|------------|----------------|------------|-------------------|------------|--------------------------------------------------------------|------------------------|----------|
| Cambrex                                    |       | Aug. 2004 |       | PER.C6            |       | Medium  development                                          |
| DSM Biologics                              |       | Dec. 2002 |       | PER.C6            |       | Therapeutic  proteins (including antibodies)                 |
| Gene Medicine  Japan, Inc.            |       | Oct. 2003 |       | PER.C6            |       | Recombinant  vaccines & gene therapy products Asia) |
| Hyclone, Inc.                         |       | Dec. 2003 |       | PER.C6            |       | Medium  development                                          |
| Invitrogen  Corp.                          |       | Jun. 2003 |       | PER.C6            |       | Medium  development                                          |
| JRH  Biosciences Inc.                      |       | May 2004  |       | PER.C6            |       | Medium  development                                          |
| Molecular  Medicine BioServices, Inc. |       | Dec. 2001 |       | PER.C6            |       | Recombinant vaccines & gene therapy products (USA)  |
| Saskatchewan  Research Council             |       | Dec. 2005 |       | PER.C6            |       | Terminated                                                   |
| Sigma-Aldrich Corp.                        |       | Dec. 2003 |       | PER.C6            |       | Medium development                                           |

 

**FUNCTIONAL GENOMICS**

| **PARTNER/LICENSEE**     | ** ** | ** ** | ** ** | **STARTING  DATE** | ** ** | **TECHNOLOGY** | ** ** | **AREA** |
|--------------------------|------------|------------|------------|--------------------|------------|----------------|------------|----------|
| Galapagos  Genomics N.V. |       | Jun. 1999  |       | PER.C6             |       | Genomics       |

 

 

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***License agreement structure and payments***

Our licensees can elect to take either alicense for commercial development or a license for research only. In addition,we have issued exclusive licenses to certain licensees. Our research licensesgranted in the areas of antibodies and gene therapy typically cover the entireportfolio of antibodies and genes, respectively, that the customer may wish touse in the future.

Thegeneral payment structure under the terms of our commercial licenses is asfollows:

·       *one-timeissuance fee:*   We usually charge our licenseesa one-time issuance fee, the amount of which is determined by the nature of thelicense, e.g., whether the license is for commercial development or researchuse, whether the license is exclusive or non-exclusive, and the area of use ofthe license.

·       *Licensemaintenance:*   our licensees usually pay annualfixed payments to maintain their licenses. The license maintenance fee isgenerally offset against any royalty payments accruing from the time of initialcommercial sales.

·       *milestonepayments:*   certain licenses provide foradditional fees to be paid if the applicable licensee achieves certain agreedupon targets, or milestones. Milestone payments are typically not offsetagainst future royalty payments.

·       *royaltypayments:*   with the exception of a limitednumber of licenses (including Transgene SA, MedImmune, Millipore and GalapagosN.V.), and the majority of our contract manufacturers and service providers, wewill receive a percentage of the value of any net sales that the licensee maygenerate related to the eventual product. Royalty payments are typically onlypayable once they exceed the license maintenance fees. Our license agreementsgenerally do not contain stacking provisions, meaning that royalty payments arenot reduced in the event that total payments by the licensee to all licensorsgo above a certain percentage. We have received minor royalty payments from onelicensee, Molecular Medicine BioServices, Inc., a contract manufacturingorganization that licensed the PER.C6 technology to offer manufacturing ofrecombinant vaccines and gene therapy products.

·       *Servicefees:*   as part of various collaborationagreements, we receive service fees for work performed under such agreements.These fees are invoiced on quarterly basis at the end of the period.

Research only licenses provide for lowerissuance and license maintenance fees and do not provide for royalty payments.Generally our research only licenses permit the license to be converted into acommercial development license, but typically do not allow (late) clinicaldevelopment and commercial distribution of any product using the licensedtechnology.

Our commercial development licenseagreements generally provide that the applicable commercial license will expireafter the expiration of the last applicable patent or 10 to 15 years after thefirst commercial sale of a product developed under the agreement with thatlicensee. Our research only licenses generally expire two to five years aftertheir effective date. Most of our licenses may be terminated on 90 days’notice from the licensee. Under our license agreements, because the technologythat we transfer is fully developed, we are not required to deliver any updatedtechnology to any of our licensees, though we update our know-how with respectto our technology from time- to- time through Biologics Master Files to whichour licensees have access.

*Exclusive Licenses.*   Wehave issued certain licenses on an exclusive basis. These licenses generallystate that we will not provide the licensed technology to a party other thanthe exclusive licensee for use in the area covered by the exclusive license.These licenses also generally provide for higher payments. InDecember 2003 we granted Aventis Pasteur (now sanofi pasteur) an exclusivelicense for the development 

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andcommercialization of PER.C6-based influenza vaccines. The agreementincludes provision for milestone payments, annual payments and research anddevelopment funding, as well as high single-to double-digit royalties on futurePER.C6-based influenza vaccine sales. The agreement also includesfinancial diligence provisions designed to encourage sanofi pasteur to obtainsuccessful regulatory approval in the United States and countries of theEuropean Union for the PER.C6-based influenza vaccine as promptly aspossible.

In 2004, we granted an exclusive license tothe International AIDS Vaccine Initiative (IAVI) for the development of an AIDSvaccine based on our AdVac technology. Other exclusive licenses include ouragreements with DSM Biologics for the licensing of PER.C6 technology forproteins and antibodies, and for contract manufacturing of recombinant proteinsand monoclonal antibodies under PER.C6 licenses, Merck & Co. for aPER.C6-cell produced HIV/AIDS vaccine and HCV vaccine, which latterlicense is co-exclusive, and Ferring for certain female health proteins. Anextension to our agreement with Merck relates to our PER.C6 Cell SubstrateBiologics Master File (BMF), BB-MF 8453 in the U.S., and equivalents in otherjurisdictions. We will work with Merck on matters relevant to maintaining theBMF, including the provision of technical assistance and guidance from Merck asappropriate. We believe that this agreement broadens our relationship withMerck and helps to ensure that our BMF will be upgraded in line with evolvingregulatory guidelines.

InDecember 2006, we signed a cross-licensing agreement with Merck &Co., Inc. In addition to previously licensed rights to PER.C6, theagreement allows Merck to use Crucell technology on an exclusive basis inadditional undisclosed vaccine fields. In return, we receive access to Merck’slarge scale manufacturing technology for our AdVac-based vaccines underdevelopment. The agreement will make it possible to speed up our malaria and TBvaccines development programs, as well as our Ebola vaccine development programwith the Vaccine Research Centre (“VRC”), which has recently entered a Phase Iclinical trial. Our malaria vaccine program is supported by the National Instituteof Allergy and Infectious Diseases (“NIAID”) of the U.S. National Institutes ofHealth (“NIH”). The TB vaccine program is a collaboration with the Aeras GlobalTB Vaccine Foundation. Both programs are based on Crucell’s adenovirus vectortechnology, AdVac, and are currently in Phase 1 clinical trials.

***Manufacturing Service Arrangements***

We have signed manufacturing serviceagreements with a number of our licensees and partners. Under these agreements,we have produced and may produce in the future clinical batches of adenoviralmaterials, antibodies, or other materials using our PER.C6 cell line for theapplicable licensee. We have received and may receive in the future initialfees upon signing and subsequent payments upon delivery of the batches we producein accordance with the specifications of the agreement.

In December 2005 we finalized acontract manufacturing agreement to manufacture vaccines with NewJersey-headquartered Wyeth Biotech. Under the terms of the agreement we havereceived our first orders for the formulation and filling of a vaccine, whichwill be supplied from our Swiss facility. We expect this agreement to have thefirst impact on our business in 2007.

We follow goodmanufacturing practice level (GMP) manufacturing services for our customers. Wehave built a small-scale production facility in Leiden, The Netherlands, and in2000 we obtained the license required for the manufacture of clinical trialmaterials at this facility from the Dutch regulatory authorities. To date wehave used the facility to manufacture clinical grade adenoviral vectors. Theproduction facility consists of classified clean rooms suitable formanufacturing purified bulk drug products. We continuously explore additionalor alternative uses for our GMP production facility. Production and testing isdone under quality assurance control. Full batch documentation is generated andreviewed for product release according to EU and U.S. regulations.

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**Researchand development**

***Overview of our late-stage pipeline***

*Yellowfever vaccine*

An infectiousdisease transmitted by mosquitoes, yellow fever is prevalent in tropicalregions of Africa and South and Central America. Approximately 200,000 casesand 30,000 fatalities occur each year. Endemic areas have increased over thepast twenty years, and because the yellow fever virus circulates in natureindependently of humans, it has not been possible to eradicate it. Also thereis a worldwide shortage in the supply of yellow fever vaccines. Since 1963, oneof the most reliable vaccines for yellow fever has been produced by the RobertKoch Institute in Berlin. Over 2.5 million doses of the vaccine have beendistributed. Based on attenuated viruses grown on chick embryos, the vaccine issafe, highly immunogenic and well tolerated. Protection starts from ten daysafter a single dose and persists for ten years. In 1999 we acquired the rightsand know-how for this vaccine from the Robert Koch Institute. Technologytransfer has been successfully completed and we are in the process of finalizingthe registration process.

***Overview of our early-stage pipeline basedon proprietary technologies***

Our PER.C6 technology, complemented by ourAdVac and MAbstracttechnologies, drives the development of our early-stage productpipeline. We continue to develop our technologies while selecting product leadsfor further development based on careful product selection criteria thatsupport our long-term business objectives. We currently have severalpotential products in various stages of development. We may enter intocollaborative and/or strategic alliance arrangements with third parties toco-develop and market products that we may develop.

Ourprimary focus is the development of a range of novel vaccine and antibodyproducts in the area of infectious diseases. We currently have a number of corepotential products we are developing using our core technologies:

·       *PER.C6.*   An influenza vaccine, in collaboration with sanofi pasteur,and our West Nile virus vaccine are both being developed using our PER.C6technology.

·       *PER.C6and AdVac.*   Our Ebola, Malaria and TB vaccinescandidates are recombinant vaccines based on PER.C6 that also use AdVactechnologies.

·       *PER.C6 and MAbstract.*   Ourcandidate Rabies product is produced using our and PER.C6 MAbstract technology.

*Virosomal subunit vaccine technology*

We have a proprietary virosomal subunitvaccine technology which we also license to third parties. In May 2006 wecommenced a large randomized, observer-blind and dose-ranging study to test avaccine against avian influenza virus in humans. The trial, performed incollaboration with a team based in Leicester, UK, will oversee the vaccinationof 560 healthy adult individuals. Three types of vaccine will be tested forsafety and immunogenicity: a non-adjuvanted whole virion vaccine, analum-adjuvanted whole virion vaccine and a virosomal subunit vaccine, all basedon the H9N2 virus. Trials with potentially pandemic subtypes of influenza Asuch as H9N2 can be used in support of a “pandemic core dossier”, which wouldform the basis for rapid approval of a vaccine against an actual pandemicthreat once it emerges by the regulatory authorities. Conventional vaccinesagainst H5 and H9 avian influenza subtypes work only at much higher doses thanin seasonal (interpandemic) vaccines, making it impossible to meet the world’svaccine requirements in the event of an H5 or H9 pandemic. Formulations of H9vaccine that 

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are expected toenhance the immune response while enabling the vaccine to be used sparingly arebeing tested in the trial, with different dose levels also being studied.

The H9N2 virosomal vaccine uses ourproprietary virosomal subunit vaccine technology. Inflexal, our licensedvirosomal adjuvanted vaccine for seasonal flu, has already shown goodimmunogenicity in healthy and immune-compromised elderly, adults and children.The study will allow us to choose the best vaccine modality to be tested infurther clinical studies with pandemic vaccines, including vaccines againstH5N1 avian influenza. The first results of the study are expected in 2007

A shortdescription of our main potential products in the early-stage pipeline, and thediseases those products target, follows.

**Influenza**

Each year approximately 10-20% of theworld’s population contracts influenza, and an estimated 250,000 to 500,000people die annually from influenza-associated complications according to theWorld Health Organization. As well as these annual epidemics, a major geneticshift in the influenza virus can occasionally lead to a deadly new virus strainto which the human population does not have immunity, resulting in a globalpandemic. Concerns currently exist that a new avian influenza strain (H5N1)endemic among birds in Asia, and showing high pathogenicity for humans, couldpresent a genuine pandemic threat.

Influenza vaccines are classically producedon embryonated chicken eggs. However, various challenges have led thebiopharmaceutical industry and the scientific community to explore other waysof producing influenza vaccines. Currently, cell culture systems are beingdeveloped for influenza vaccine production based on VERO cells and Madin DarbyCanine Kidney (MDCK) cells. These cell systems often need to be grown on micro-carriers,which makes the production process expensive and difficult to scale. Incontrast, PER.C6 cells grow well in suspension and are easily scalable,potentially permitting the production of cost-efficient vaccines in largequantities. Virus yields on VERO cells have been shown to be significantlylower than the yields grown on PER.C6 cells. PER.C6 cells can produce allinfluenza strains that we have tested, possessing the different receptors requiredfor the production of both human strains and the avian strains that may presenta pandemic threat.

In December 2003, we entered into astrategic agreement with sanofi pasteur to further develop and commercializenovel influenza vaccines using our PER.C6 production technology. Sanofi pasteuris the world leader in vaccines, and has been the largest supplier of influenzavaccines for more than 50 years, providing more than 170 million dosesworldwide during the 2006 season. Since the inception of the collaboration,production processes have been under development, with the production of a GMPmaster cell bank already completed. Sanofi pasteur, with us as a subcontractor,was awarded a US$ 97 million contract by the U.S. Department of Health andHuman Services in April 2005 for clinical development of PER.C6-basedinfluenza vaccine and other related activities. Currently, we are working todevelop a pandemic flu vaccine as well as an interpandemic, or seasonal, fluvaccine under this contract. The Phase I clinical trial involves thevaccination of 100 healthy adults, 18-64 years of age. Phase Iclinical trials for the pandemic flu vaccine started in September 2006.Phase I clinical trials for the interpandemic, or seasonal, flu vaccine inhealthy adults and in the elderly began in the third quarter of 2006. A Phase Ipaediatric trial is scheduled to begin in 2007. A further Phase I/II trial isplanned for the second half of 2007.

FLUPAN, acollaborative research project by research institutions, universities and ourpartner sanofi pasteur, funded by the European Commission, began a Phase Iclinical trial for a pandemic flu vaccine with 60 healthy adults inNorway. The trial is the first to assess safety and ability to generate animmune response of a split, inactivated pandemic H7N1 vaccine produced on ourPER.C6 cells.

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**WestNile virus**

Named after the West Nile district ofUganda where the disease was discovered in 1937, West Nile virus infection canlead to mortality in humans and animals by causing a fatal form ofencephalitis, or inflammation of the brain, according to U.S. GeologicalSurvey. It is estimated that 20% of the people who become infected with WestNile virus will develop West Nile fever. Persons over 50 years of age have thehighest risk of developing a severe disease, such as meningitis, aninflammation of the membrane around the brain and the spinal cord, orencephalitis.****Between 1999 and 2005, West Nilevirus has caused disease in more than 16,000 U.S. citizens, leading to morethan 650 deaths.

Continued efforts are being made to findsuitable treatments and vaccines to stop this virus. The virus may become arecurring threat in the United States. In 2003 and 2004, a number of West Nilevirus cases were reported in Europe.

In June 2003, we announced ourdecision to develop a vaccine against the West Nile virus based on our PER.C6technology. Our vaccine uses an inactivated whole virus concept, which isdifferent from vaccines currently under development by our competitors.Currently there is no vaccine or antiviral therapy available to protect humansagainst West Nile virus.

We completed the Phase I safety study withthe alum adjuvanted formulation of our whole inactivated West Nile vaccinemanufactured using PER.C6 technology in January 2007. Results of the trialare under evaluation.

In a separate but related program, weentered collaboration with Kimron Veterinary Institute of Israel inJune 2003, granting Kimron a commercial license to our PER.C6 technologyto develop a West Nile veterinary vaccine for use in geese and other birdssusceptible to the virus in Israel. This veterinary vaccine achieved marketauthorization in Israel in June 2004. The vaccine is currently beingproduced in advance of the West Nile season. Kimron has announced that itintends to replace its existing West Nile veterinary vaccine, which is producedusing mouse brain cells, with the PER.C6-based vaccine.

Thesignificance to our human vaccine program is that a PER.C6-based vaccineprotects against the Israel 1998 Goose strain of West Nile virus. The fact thatthis strain is closely related to the New York 1999 strain, which caused theWest Nile outbreaks in the U.S., supported our decision to develop a West Nilevaccine for humans. Our dossier for clinical trial was submitted in Belgium inNovember 2005 and approved in December 2005. Phase I clinical trialswere completed at the beginning of 2007. Results of the trial are underevaluation.

**Ebola**

Ebola fever is one of the most lethal viraldiseases, with a mortality ranging from 50% to 90% according to the WorldHealth Organization. Ebola outbreaks occur regularly in tropical Africa,affecting both human and great ape populations. To date, approximately 2,000cases have been reported since the virus was first discovered in 1976. TheEbola virus belongs to the group of ‘hemorrhagic fever viruses’, which alsoincludes the highly pathogenic Marburg and Lassa viruses. Ebola virus causes adisease characterized by high fever and massive internal bleeding. Because novaccine or therapy is presently available, Ebola virus is on the Centers forDisease Control (CDC), National Institutes of Allergy and Infectious Diseases(NIAID), and U.S. Department of Defense Category “A” list of bioterror agents.In 2003 the U.S. government announced that once available, an Ebola vaccine maybe stockpiled as part of its preparedness for bio-terror attacks under ProjectBioShield, a comprehensive effort to develop and make available modern,effective drugs and vaccines to protect against attack by biological andchemical weapons. The BioShield Act was enacted in July 2004, with a totalappropriation of US$ 5.6 billion across all programs.

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Numerous attempts to vaccinate against Ebola virususing inactivated virus or protein-based vaccine modalities have failed, anddeveloping a live attenuated vaccine is considered too dangerous. However, ithas been shown in pre-clinical experiments conducted by the Vaccine ResearchCentre (VRC) of the U.S. National Institutes of Health (NIH) in 2005 that asingle-dose immunization with a recombinant adenovirus (expressing Ebola virusproteins) vaccine protects against an otherwise lethal challenge with wild-typeEbola virus. Based on these results, we decided to develop an Ebola vaccine.The vaccine could provide protection from the lethal virus in the event ofbiological warfare.

In May 2002 we entered into a CollaborativeResearch and Development Agreement (CRADA) with the VRC to develop jointly,test and manufacture an adenovirus-based Ebola vaccine. Under the terms of theagreement, we have an option for exclusive worldwide commercialization rightsto the Ebola vaccine resulting from this collaboration. In August 2002,the CRADA was extended to cover vaccines against Marburg and Lassa infections.The recombinant vaccine will encompass the glycoproteins and the nucleoproteinof Ebola virus, but cannot replicate in humans. This method thus provides a veryimportant safety advantage, while ensuring that a strong humoral and cellularimmune response is elicited against the Ebola virus.

Under a separate production contract with NIH, we aremanufacturing adenovirus Ebola vaccine vectors according to current good manufacturingpractice (cGMP) requirements. In March 2005 we extended the CRADA with NIHand continue to develop this vaccine and will use the Ebola vaccine results inthe development of Marburg and Lassa vaccines. In addition, we obtained anexclusive license to certain NIH patents to develop and commercializerecombinant vaccines against Ebola. The patents cover valuable vaccinecomponents, such as Ebola antigens and vectors. This was subsequently confirmedin a contract signed in April 2005.

In experiments conducted by the VRC together with theU.S. Army Medical Research Institute of Infectious Diseases (USAMRIID) duringthe first half of 2004, our vaccine candidate confirmed single-dose protectionin preclinical testing against Ebola. What set the results of this trial apartfrom the earlier successful trial, which established a proof-of-concept, wasthat the vaccine in this instance was produced on PER.C6 cells. All preclinicalmaterial was produced at our FDA-compliant production facilities in Leiden. Forpotential safety reasons, VRC switched the development of the vaccine from theuse of the wild-type Ebola glycoprotein sequences to mutant sequences, after asingle dose of this new candidate vaccine showed protection in pre-clinicaltesting against Ebola.

Phase I clinical testingcommenced in the third quarter of 2006. In the randomized, double-blind,placebo-controlled study in 48 healthy volunteers the single-shot vaccine isbeing tested in a dose-escalation trial. The start of the trial follows thesuccessful completion of the Investigational New Drug (IND) application processrequired by the Food and Drug Administration (FDA). The Phase I study is beingcarried out by the VRC at the NIH Clinical Center in Bethesda, Maryland.

**Malaria**

Malaria is alife-threatening infectious disease caused by the plasmodium parasite andtransmitted from person-to-person through the bite of a female Anophelesmosquito. It is one of today’s top three killers among communicable diseases.The disease currently represents one of the most prevalent infections intropical and subtropical areas causing severe illness in 300 to 500 million individualsworldwide according to the World Health Organization****andcausing one to three million deaths every year. Most of these deaths occuramong children and pregnant women in the developing world, especially insub-Saharan Africa. Unfortunately, mortality associated with severe orcomplicated malaria still exceeds 10-30%. The widespread occurrence andelevated incidence of malaria are a consequence of discontinued malaria controlprograms and increasing numbers of drug-resistant parasites andinsecticide-resistant parasite vectors. Other factors include environmental andclimatic changes, civil disturbances and 

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increasedmobility of populations. Although the overwhelming majority of morbidity andmortality associated with malaria occur in the developing world, this diseasealso affects travelers.

Currently there is nocommercially available vaccine to protect against malaria. Our candidatemalaria vaccine is based on our AdVac technology and produced using our PER.C6technology. In a study carried out by the Department of Medical MolecularParasitology at New York University, the efficacy of our malaria vaccinecandidate was tested in NYU’s mouse malaria model. The study showed that asingle administration of a prototype AdVac vaccine, a recombinant adenovirus 35(rAd35) vector expressing the malaria parasite-derived immunogeniccircumsporozoite antigen, protects mice upon challenge with the mouse specificparasite. In March 2004 it was announced that the National Institute ofAllergy and Infectious Diseases (NIAID), part of the U.S. National Institutesof Health (NIH), will support the development of our candidate malaria vaccine.The agreement has an estimated value of up to US$ 3.5 million andcovers process development of the candidate AdVac-based malaria vaccine. Thework is being done under a subcontract agreement with Science ApplicationsInternational Corporation (SAIC). In September 2006, we extended thecollaboration with the NIAID with the signing of a clinical trial agreement.The clinical trial started in January 2007 and is a randomized,double-blind, placebo-controlled study that will test the vaccine in adose-escalation trial involving 96 healthy volunteers. The Phase I trial isfunded by NIAID and conducted by researchers at Vanderbilt University, one ofNIAID’s Vaccine and Treatment Evaluation Units.

In December 2004 wereceived a grant up to a maximum of € 2 million from theDutch Ministry of Economic Affairs in support of our malaria research and AdVactechnology development. Research carried out under this grant will aim toexpand the number of antigens able to be carried by an rAd35-vectoredvaccine, such as our AdVac-based malaria candidate.

In December 2006 wewere awarded a grant to our subsidiary toward the development of a malariavaccine. The € 1.7 million grant was given to aconsortium of four leading groups in the field of malaria research includingEtna Biotech, a fully-owned Crucell group company. The malaria vaccine thegroup is developing will be based on our Recombinant Paramyxovirus technology.

In January 2007 wereceived a European Union-funded grant aimed at advancing the development of amalaria vaccine. The € 2.4 million grant,which was awarded to a Crucell-led consortium of six leading Europeanuniversities and companies in the field of malaria research, will financepre-clinical studies toward an affordable, safe and efficacious two-componentpediatric malaria vaccine.

**Tuberculosis**

Mycobacterium tuberculosis(TB) represents one of the most prevalent infectious diseases throughout theworld. It is estimated that 2 billion people are infected with TB, representinga third of the world’s population. Each year sees 8 million new cases and 2million deaths as a result of the disease according to the World HealthOrganization.

TB is spread when peoplewho have the active form of the disease cough or sneeze and people nearbybreathe in these bacteria and become infected. Only 5-10% of infected butotherwise healthy people develop an active TB disease. Most people who carrythe bacteria suffer no obvious symptoms and cannot pass on the disease toothers during this latent phase of the infection. But if the immune system isweakened, active TB disease can occur. This occurs most in people infected withHIV/AIDS, which severely weakens the immune system.

The increased incidence ofTB is a consequence of the spread of HIV/AIDS, the emergence of multi-drugresistant strains of TB and variability in protective efficacy of the onlycurrently available vaccine, Bacillus Calmette-Guérin (BCG). Although the BCGvaccine offers protection against the most serious forms of TB in childhood,its efficacy wanes over a period of 10-15 years after the vaccination. Aneed for an alternative vaccination approach has emerged in the last twodecades.

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In March 2004 weannounced a new collaboration with the Aeras Global TB Vaccine Foundation onthe pre-clinical and clinical development of candidate TB vaccines. TheCrucell-Aeras TB vaccine program is focusing on improvement of BCG, using ourPER.C6 and AdVac technologies. Aeras has agreed to pay us up to US$ 2.9million, contingent upon meeting certain development milestones, for processdevelopment and production of clinical material of TB vaccine candidates. Webegan Phase 1 clinical trials of the AdVac-based tuberculosis vaccine in thefourth quarter of 2006. The trial is an open-label study that will test thevaccine in a dose-escalation trial involving 32****healthyvolunteers. The trial is funded and managed by Aeras through a contractresearch organization, PRA Clinical Pharmacology Center in Lenexa, Kansas, USA.The main parameters under examination will be safety, tolerability and immunogenicity.

**Rabies**

Rabies is a viral diseaseof mammals most often transmitted through the bite of a rabid animal. The virusinfects the central nervous system, causing encephalopathy and ultimately deathif medical treatment is not sought before symptoms appear. Rabies is prevalentin all the continental regions of Europe, Asia, America and Africa. Globally,approximately 10 million people a year are treated after exposure to rabies.Some 40,000 to 70,000 people are thought to die of the disease each year, mainlyin China and India according to various medical publications.

Post-exposure treatmentfor rabies is 100% effective and involves the use of a vaccine plus antibodies.Neither vaccine nor antibodies are effective independent of one another.

Current supply and qualityof rabies vaccine is sufficient, but anti-rabies antibodies (Human RabiesImmune Globulin (HRIG) and Equine Rabies Immune Globulin (ERIG)) are widelyrecognized as being insufficient in quality and supply, as well as posingsafety concerns because they originate from human or equine serum. Marketopportunities for rabies treatments are projected to grow significantly asaffected countries such as India and China grow in affluence.

We have developed a humanmonoclonal antibody product in collaboration with two leaders in the rabiesantibody field, the Thomas Jefferson University (TJU) based in Philadelphia andthe U.S. CDC in Atlanta, using MAbstract and PER.C6 technology.

In experiments conductedduring 2004 in collaboration with TJU under a Collaborative Research andDevelopment Agreement with the CDC, the antibody product demonstratedprotection in the industry standard hamster model at least equivalent to HRIG.The pre-clinical evaluation of the antibody product was performed incollaboration with the CDC’s Rabies Program. The product is a combination oftwo monoclonal antibodies for the post-exposure prophylaxis of rabies, producedusing our MAbstract and PER.C6 technology. In the fourth quarter of 2006, webegan a Phase I clinical study in the United States. The Crucell-funded trialis a randomized, double-blind, placebo controlled study in 60 healthyvolunteers that will test the antibody product alone in a dose escalation studyas well as in combination with a rabies vaccine. We expect a second Phase Istudy to start in the first half of 2007 in India, selected as a prototype of arabies endemic country.

**Other Collaborations and Agreements**

***DSM***

In January 2006 theCompany and DSM signed an amended collaboration agreement to strengthen andexpand the development of the PER.C6 protein and monoclonal antibody licensingbusiness. The two companies will create an integrated solution for theproduction of recombinant proteins and monoclonal antibodies on PER.C6 in orderto increase licensing and royalty income and accelerate the development androll-out of the PER.C6 technology platform in the market. The existingcollaboration agreement was terminated, resulting in release of deferredrevenues and recognition of certain milestones and agreed to by DSM.

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On November 8, 2006the Company and DSM Biologics already announced the opening of the jointventure PERCIVIA PER.C6 Development Center in Cambridge, Massachusets. Thisdevelopment center provides a fully integrated technology platform and turn-keysolutions for the production of pharmaceutical proteins to the biotech industryand scientific community. The center is involved in the development andoptimization of the human PER.C6 cells as an expression platform for proteinsand monoclonal antibodies for therapeutic use in humans.

***Pevion Biotech AG***

In 2002 Pevion Biotech wasfounded as joint venture by Berna Biotech and Bachem AG. The company isdedicated to creating novel virosomal formulated vaccines and bringing themfrom research into clinical development. We indirectly own 50% of the sharecapital since our acquisition of Berna Biotech AG in February 2006.

***Kenta Biotech AG***

In 2006, Kenta Biotech AGwas founded. The Crucell Company, Berna Biotech AG contributed investments inkind of million in exchange for shares equal to 36.74% of Kenta Biotech’s sharecapital. Kenta Biotech AG is focusing on the discovery and development ofinnovative, fully human monoclonal antibodies for the life-saving treatment ofpatients with serious infectious diseases.

***TalecrisBiotherapeutics***

In April 2007, weannounced a long-term distribution deal with North Carolina-headquarteredTalecris Biotherapeutics, GmbH. Under the terms of the agreement, we will serveas the exclusive distributor of Talecris’ Prolastin (alpha-1 proteinaseinhibitor) in 9 Western European countries, replacing current distributor,Bayer.

***ADImmuneCorporation***

In March 2007, weannounced that we have completed an influenza alliance with Taiwanese-basedADImmune Corporation. Under the terms of the deal, ADImmune will use ourvirosome technology to produce a virosomal adjuvanted influenza vaccine forspecified markets: Taiwan, Japan and Macau. Additionally, ADImmune will produceinfluenza antigen, which we may purchase for the production of our vaccineproduct, Inflexal V. 

In consideration of therights and licenses granted in respect of the technology, ADImmune shall pay anamount of € 8.7 million (NT$ 394,887). Wewill obtain a 20% equity stake in ADImmune for which we will pay ADImmune anamount € 8.7 million(NT$ 394,887). We expect to complete these transactions during 2007.

***Galapagos N.V.***

Galapagos N.V. (“Galapagos”)is a discovery company focused on the rapid identification of disease-modifyingdrug targets through the functional screening of human disease models, and thesubsequent progression of these targets into drug discovery. The company islisted on the Euronext Brussels and Euronext Amsterdam stock exchanges (tickersymbol: GLPG).

Galapagos holds anexclusive license to our PER.C6 technology for conducting activities in thefield of functional genomics research. Under the license, Galapagos uses PER.C6technology in conjunction with Tibotec’s bioinformatics technology to generateadenoviral gene libraries. Tibotec and we have agreed not to compete with theactivities of Galapagos, which holds the rights to the products and technologythat it develops.

Crucell has an investmentin Galapagos N.V, which is a publicly traded company. Crucell owns 6.2% as of December 31,2006 (December 31, 2005: 11.7%).

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***Novartis (formerlyChiron)***

In 2001, Berna enteredinto a worldwide collaboration agreement with Novartis (then Chiron) to developand commercialize Quinvaxem. This agreement was amended in 2004. Under theagreements, the parties agreed to jointly develop, manufacture, register andmarket Quinvaxem. In addition to the right to manufacture the product on behalfof the parties, Berna has the commercial rights to market the productworldwide, with the exception of two undisclosed countries, in the publicmarkets via supranational institutions. Chiron has the worldwide rights, withthe exception of the two countries, to market the vaccine in private markets.In addition, the agreements provide for Novartis to supply Berna with the DTPand Hib components required to manufacture the vaccine. The parties agreed notto compete outside the collaboration in the pediatric markets.

***CSL Pharmaceuticals***

In November 2001Berna Biotech entered into an agreement with CSL Pharmaceuticals, pursuant towhich CSL supplies flu antigen to Berna for the manufacture and sale ofvirosome-based flu vaccines, such as Inflexal. Under the agreement, Berna is entitledto a minimum quantity of seasonal flu antigens, which is adjusted upward eachyear. However, due to external factors, such as slower growth rates of certainseasonal flu strains, even the minimum quantities may be difficult to obtain intime for a particular year’s flu season, or at all. This may affect revenues inany given year in which this occurs. The agreement terminates after 2009. Dueto the shortage of antigen production capacity worldwide, it may be difficultto renew the contract against the same terms and conditions, or at all. If thisrisk materializes it will adversely affect our results.

***Universitycollaborations***

We collaborate with anumber of universities worldwide in the areas of vaccines, antibodies, celllines, gene therapy, cancer and cardiovascular disease. Some of ourcollaborations provide for royalty payments to be made to the universities inthe event of product sales arising out of the collaborations. Generally, thesecollaborations specify that Crucell provides the applicable university with aspecific amount of funding, and in consideration of such, Crucell receivescertain intellectual property rights and access to the results of theuniversity research.

***Consultingarrangements***

We hire people withhigh-level experience in our fields of interest to provide advice andconsulting services. We generally pay consultants on a per project basis andtheir term generally runs year-to-year. We require consultants, among otherthings, to adhere to confidentiality undertakings, and generally we have theright to all intellectual property created during the term of the consultingagreement.

**Intellectual property**

Our success and ability tocompete depends in large part on our ability to protect our proprietarytechnology and information, and to operate without infringing the intellectualproperty rights of others. We rely on a combination of patent, trademark andtrade secret laws, as well as confidentiality, assignment and licensingagreements, to establish and protect our proprietary and intellectual propertyrights. Our policy is to actively seek patent protection of our intellectualproperty in the United States and Europe, as well as in other jurisdictions asappropriate.

In addition to retainingoutside patent counsel, we also employ European and Dutch patent attorneys thatfile, prosecute, defend and enforce patent rights as well as manage our patentportfolio. Our patent portfolio comprises 1,325 active cases (i.e. grantedpatents in force or pending patent applications) as of December 31, 2006 intotal for the group. We aggressively protect our inventions and employ aproactive filing strategy with respect to patent applications. Our portfoliomanagement involves active 

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commercializationand enforcement strategies combined with disposal of cases that we no longerconsider commercially attractive.

Thefollowing table reflects the total number of active cases (pending or granted)through December 31, 2006, organized according to our different fields ofoperation. All figures include acquired and jointly owned patent cases, butexclude patent positions licensed-in from third parties. Patent filingsclassified under “vaccines” relate to AdVac-based, live viral vector vaccinesbased on our proprietary measles technology, our virsomal technology andclassical whole inactivated virus, split and sub-unit vaccines. Patent filingsclassified under “antibodies” relate to antibodies and/or drug targets,excluding the enabling technologies which are classified as technology. Patentfilings classified under “technology” relate primarily to cell-based productiontechnology, adenoviral vector technology, STAR-technology and relatedtechnology, functional genomics and target and antibody discovery technology.

| ** **   | ** ** | **Patent Filings** | ** ** |
|--------------|------------|-------------------------|------------|
| ** **   | ** ** | **Pending**             | ** ** | **Granted** | ** ** | **Total Active** | ** ** |
| Vaccines     |       |                    | 250        |   |   |   | 425 |   |   |   | 675 |   |   |
| Antibodies   |       |                    | 146        |   |   |   | 31 |   |   |   | 177 |   |   |
| Technology   |       |                    | 189        |   |   |   | 149 |   |   |   | 338 |   |   |
| Gene Therapy |       |                    | 57         |   |   |   | 78 |   |   |   | 135 |   |   |
| **Total**    | ** ** | ** **              | **642**    |   | ** ** | ** ** | **683** |   | ** ** | ** ** | **1,325** |   |   |

 

***Patent filings***

In 2006 we filed patentapplications for 16 new inventions, in the fields of vaccines (4),antibodies (9) and technology (3). Our new filings in the antibodyand vaccine fields in 2006 reflect our efforts to further strengthen our patentportfolio in support of product development programs in that area. The newfilings in the technology area relate to our continuing effort to protect andcommercialize the PER.C6 technology and related uses of the PER.C6 cell lines,as well as the STAR technology. Since we are not actively involved in genetherapy research and development, no new filings were made in that area during2006.

We maintain ageographically diversified filing strategy, depending on our technological andbusiness needs, as well as our view of long-term economic trends anddevelopments in legal systems in various parts of the world. As of December 31,2006, we have 84 pending applications in the EU(1), 108 pending applications in theU.S.(2), 19 international patentapplications (so-called “PCT(3) applications”)and 431 applications in the rest of the world(4).

A significant number ofour pending patent applications are filed under the Patent Cooperation Treaty(PCT), which offers a cost-effective method to seek provisional worldwideprotection in more than 100 countries and territories for the duration of 30 or31 months from the filing date. The decision to divide the PCT application intoterritories in which a granted patent is desired may be postponed until theobtainable scope of protection and the technical and commercial usefulness ofthe invention becomes clearer. During the pendency of a European patentapplication, a single application may designate 30 countries but iscounted as one pending application. As soon as the European patent applicationis granted it may be validated for each of the designated countries by filing atranslation into the official language of that designated state. Once such atranslation has been filed, we count each such patent as a separate patent.

(1)         EUrefers to filings made under the European patent convention. The EU figures donot include European patent applications designated in Patent CooperationTreaty (PCT) applications while still in the international phase.

(2)         U.S.figures do not include U.S. patent applications designated in PCT applicationswhile still in the international phase.

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(3)         Figuresreflect PCT applications still in the international phase. Our PCT applicationsroutinely designate all territories and contracting states that are party tothe Patent Cooperation Treaty per the international filing date.

(4)         Rest ofworld consists of Australia, Brazil, Canada, China, India, Israel, Japan, HongKong, Mexico, New Zealand, Norway, Russia, Singapore, South Africa and SouthKorea. Rest of world figures do not include PCT applications designating thesecountries while still in the international phase.

**Patents**

AtDecember 31, 2006 we owned or co-owned 445 granted patents in the EUterritory, 58 patents in the U.S. and 180 patents in the rest of the world.

The followingis a summary of the intellectual property rights related to our major productsand product developments.

*Epaxal andInflexal.**  *Epaxal and Inflexal are the two virosomal products which areprotected by the patent family “Immunostimulating and immunopotentiatingreconstituted influenza virosomes and vaccines containing them”, which willexpire in 2012. In addition, the hepatitis A strain used to produce Epaxal isclaimed in a patent family which will expire in 2012.

*Hepavax-Gene.*   The active substance of this monovalent recombinant hepatitisB vaccine is HbsAg which is no longer protected by patent in Europe and mostcountries in the rest of the world. The Supplementary Protection Certificateswith respect to Hepavax-Gene are still valid in Sweden, Italy, and France.However, we are not currently considering western European countries forproduct registration and marketing. The production technology is based on ourproprietary Hansenula polymorpha expression technology.

*Quinvaxem.**  *We have nopatent protection for the active substances of Quinvaxem.

*Vivotif.**  *We have nopatent protection for the active substances of Vivotif.

*Dukoral.**  *We have nopatent protection for the active substances in Dukoral, but certain aspects ofmanufacturing are subject to patent.

We seek patentprotection, whenever possible, commercially feasible and appropriate, inrespect of any technology or product development that is important to ourbusiness. Together with our affiliates in Germany, Italy and Korea, we haveseveral platform technologies and consequently our intellectual propertyactivities concentrate on protecting these technologies and any improvementsthereof in the main worldwide vaccine markets of Europe, the United States,Canada, Japan and Australia. However, because some vaccine markets are outsidethese countries, we have also sought protection in other countries, such asKorea. The IP portfolio is constantly reviewed to decide on maintenance ofindividual patents or patent families considering parameters such as actualproduct performance, product development, patent term, options forcommercialization or outlicensing of non-core IP. Our IP tasks are coordinated,patents are filed on a worldwide basis by specialized patent attorneys.

Our patent-relatedactivities do not afford complete protection to our intellectual propertyrights. Patents in the biotechnology and biopharmaceutical fields involvecomplex factual and legal questions. Patents may not be issued in respect ofour pending applications or in respect of future applications that we file. Inaddition, a patent that is issued to us may be narrower than our application orfound to be invalid. Others may make attempts to copy, reverse engineer ordesign around aspects of our technology, or to obtain and use information thatwe regard as proprietary. Our patent filings may be subject to challenges.

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*Patent enforcement and proceedings*

We may need to litigate or instituteadministrative proceedings such as oppositions to a patent to enforce or upholdour intellectual property rights or determine the validity and scope of theproprietary rights of others. Likewise, from time to time it may be necessaryto defend our patents in litigation or administrative patent proceedings suchas opposition proceedings. We believe that litigation can play a significantrole in defining and protecting our intellectual property rights. We are aware,however, that legal and administrative proceedings can be costly andtime-consuming, and result in a diversion of resources. As an alternative tolitigation, we may enter into licensing, including cross-licensing,arrangements as a means of clarifying the status of our intellectual propertyrights.

In 2005, Probiogen and CEVECPharmaceuticals each individually filed oppositions before the European PatentOffice against one or more of our PER.C6 patents. The basic PER.C6 technologypatent was upheld after first instance opposition proceedings.

Cell Genesys has filed opposition againstour European patent related to our AdVAc technology. The opposition is stillpending before the opposition division.

In 2005 we lodged opposition against aEuropean patent held by Chiron related to certain aspects of the production ofinfluenza viruses in cell culture; the opposition is still pending.

Our subsidiary Berna Biotech KoreaCorporation (formerly Green Cross Vaccine Corporation) and our partner Novartis(formerly Chiron) lodged oppositions against a patent of GlaxoSmithKline (GSK)in Korea. The patent relates to multivalent vaccine formulations, such as ourpentavalent vaccine Quinvaxem. In response to the opposition, the patent wasrevoked by the Korean Intellectual Property Office in December 2004 on thegrounds that the subject-matter claimed in the patent lacks novelty. GSK appealedthat decision to the Korean Patent Court. After a hearing which took place inApril, 2006, the Korean Patent court dismissed the appeal in June, 2006. GSKhas appealed this decision. If the Korean Supreme Court were to reverse thedecision of the Patent Court and if GSK were to enforce its patent, BernaBiotech Korea Corp. could be found to have infringed the patent. In this case,we may be forced to delay or even cancel our commercial activities with thisvaccine. As a consequence, we would lose revenue and our business would beadversely affected.

In addition, production of Quinvaxemrequires a particular vaccine component that may become the subject of a patentdispute between either GSK and us or GSK and our supplier of that component.The patent on that particular component, held by GSK, is currently underopposition before the patent office and a definitive outcome on the validity ofthe patent is expected to take a number of years. A negative outcome of thisopposition proceeding could lead to infringement proceedings between GSK and usor GSK and our supplier, although we believe that neither we nor our supplierwould be held to have infringed or be infringing that patent. The outcome oflegal disputes is invariably difficult to predict with accuracy, but in theevent GSK were to prevail in infringement proceedings against us, this wouldadversely affect our business.

In addition to protecting our intellectualproperty rights, our commercial success also depends on our ability to operatewithout infringing the intellectual property rights of others. We monitorpatent applications to the extent available, patents issued and publications ofdiscoveries in scientific or patent literature to keep abreast of theactivities of others in our field and, with the assistance of our internal andexternal patent counsel and other external advisors, assess whether ouractivities or products infringe the patents or proprietary rights of thirdparties. A number of third parties have been granted patents that cover technologiesrelated to ours and similar patents may be granted in the future. We believethat our current activities do not infringe any valid claims of patents or anyother proprietary rights of third parties. We will consider the intellectualproperty rights of others as we continue to identify and develop potentialproducts and may have to enter into licensing or other agreements or usealternative technologies.

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Research hasbeen conducted for many years in the fields of biotechnology andbiopharmaceuticals. This has resulted in a substantial number of issued patentsand an even larger number of patent applications. The U.S. Patent Officemaintains patent applications that are filed only in the United States insecrecy until patents issue, and publication of patent applications elsewhereand of discoveries in the scientific or patent literature frequently occurssubstantially later than the date of the underlying discoveries. Moreover,patents that appear not to affect our activities may be construed broadly. Assuch, we or our licensees may be found to infringe the patents or violate otherproprietary rights of third parties and may be enjoined from pursuing research,development or commercialization of our or their products or be required to paydamages. In these circumstances, licensing or other arrangements for addressingthese infringements or violations may not be available, or may not be availableon commercially acceptable terms.

***Technology licenses from third parties***

We license technology and patents forspecific use as part of our technology platforms from a number of thirdparties. We entered into a technology license agreement with Xoma in the fieldof bacterial expression technology. This license allows us to developdiagnostic and therapeutic antibodies in the field of infectious disease usingphage-display technology. The agreement provides us with options to expand thelicense to cover additional disease fields. Under the terms of the agreement,we pay Xoma milestone payments and royalties on products as and when developedand marketed using the licensed technology.

We also hold a license under the phageantibody display patent portfolio owned or controlled by Cambridge AntibodyTechnology and MRC, a cross-license with Transgene S.A. under which we grantedto Transgene a non-exclusive PER.C6license for the manufacture and sale of certaintypes of vectors for use in gene therapy, and a license to phageantibody-display technology and part human, or chimeric, binding proteins andmolecules from Enzon Corporation’s subsidiary, SCA Ventures, Inc.

We also have exclusive licenses or anoption for an exclusive license to a number of genes, which we may use in thedevelopment of products in the area of gene therapy. In some cases we will berequired to make royalty payments in the event of product sales based on thesegenes.

In the field of vaccines, we have concludedan agreement with the Rockefeller University in New York. According to theagreement, we have the exclusive rights to use and exploit the Rockefellerpatents related to *ex vivo* and *in vivo* targeting of dendritic cells with the use of viralvectors.

Berna has licensed adjuvation technologycalled ISCOMS from Isconova AB for the development, manufacture andcommercialisation of improved influenza vaccines.

When licensingour technology to third parties we seek to obtain access to any improvementpatents via so-called grant-back provisions to reduce the risk of beingexempted from using such improvements for our own benefit, or that of ourlicensees.

***Trademarks***

New trademarksfor our products are registered on a worldwide basis. Distribution and agencyagreements normally include a clause specifying that, at the termination of theagreement, trademark and product registration rights return to us. We are theowner of over 150 registered trademarks. The most important in the largestsales markets are: Crucell, Berna, the Berna and Crucell Logo, ChromaGenics,Aerugen, Te Anatoxal Berna, Di Anatoxal Berna, Di Te Anatoxal Berna, Epaxal,Epaxal Berna, Inflexal, Inflexal Berna, Vivotif, Vivotif Berna, Hepimmune andFlavimun, PER.C6, AdVac, MAbstract and STAR. In addition, we hold rights to usetrademarks held by our partners, such as Quinvaxem from Chiron, now NovartisVaccines.

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**LegalProceedings**

In addition tothe matters discussed under “Intellectual Property—Patent Enforcement andProceedings” we have been notified of the following matter:

***Competition Law***

The TechnologyTransfer Block Exemption Regulation (EC 772/2004) that entered into force on May 1,2004 may require us to review and possibly amend existing license andtechnology transfer agreements to comply with this regulation. This reviewprocess may be costly and time consuming and may require renegotiation ofcertain portions of our licenses and other agreements. Based on Crucell’smarket position, such evaluation is not foreseen in the coming year.

**Regulation**

We operate in a highly regulated industry.Our activities involve the use of hazardous materials, including chemicals andradioactive and biological materials, and pre-clinical testing, all of whichare subject to regulation. Environmental laws and regulations and laws andregulations relating to safe working conditions, laboratory conditions, andlaboratory and manufacturing practices also apply to our operations. We conductour operations in a manner designed to comply with applicable regulations andwe believe that we have all the licenses and permits required to carry out ourcurrent activities.

Our ability and that of our licensees tocommercially distribute biopharmaceuticals depends in part on the extent towhich governmental health administration authorities, health insurancecompanies, government health policies, health maintenance organizations, orHMOs, and other organizations are willing to pay for the costs of theseproducts. The willingness of governments and HMOs to pay for the costs of newlydeveloped health care products is uncertain. There are efforts by governmentalpayers and HMOs to contain or reduce the costs of health care and we expectthat there will continue to be a number of legislative proposals to do so.

Obtaining product approval is a costly andtime-consuming process. All of our potential products, and those of ourlicensees, are either in research or development. Any products our licensees orwe develop will require regulatory clearances prior to clinical trials andadditional regulatory clearances prior to being produced and distributedcommercially. These regulatory processes are generally stringent and time-consuming.We expect the European Medicines Agency (EMEA) in the European Union, the Food &Drug Administration (FDA) in the United States, the College ter Beoordeling vanGeneesmiddelen (CBG) in The Netherlands and comparable agencies in othercountries to subject new biopharmaceutical products to extensive regulation.These regulatory requirements with which we and our licensees will have tocomply will evolve over time due to the novelty of the biopharmaceuticalproducts and therapies currently under development. Fortunately, theharmonization of these requirements is promoted at an international level(International Conferences on Harmonization (ICH)) to avoid unnecessaryrepetition of studies when seeking approval in various countries. Under thecurrent definitions, we believe that products developed using our technologieswill be regulated either as biological products or as drugs.

Before marketing a (bio)pharmaceuticalproduct, companies require regulatory approval from the relevant authorities.To obtain this approval, pre-clinical and clinical trials must be conducted todemonstrate the safety and efficacy of the product candidates. Clinical trialsare the means by which experimental drugs or treatments are tested in humanvolunteers. New therapies typically advance from laboratory research testingthrough pre-clinical testing and finally through several phases of clinicalhuman testing. On successful completion of the clinical trials anddemonstration that the product can be manufactured in a safe and consistentmanner, approval to market the biopharmaceutical may be 

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requested fromthe EMEA in Europe, the FDA in the United States or their counterparts in othercountries.

Clinicaltrials are normally done in three phases:

·       *Phase I:*   Firstclinical trial of a new compound, generally performed in a small number ofhealthy human volunteers, to assess clinical safety, tolerability as well asmetabolic and pharmacologic properties.

·       *Phase II:*   Clinicalstudies that test the safety and efficacy of the compound in patients withtargeted disease with the goal of determining the appropriate doses for furthertesting and evaluating study design as well as identifying common side effectsand risks.

·       *Phase III:*   Large-scaleclinical studies with several hundred or several thousand patients to establishsafety and effectiveness for regulatory approval for indicated uses and toevaluate the overall benefit-risk relationship.

Our research and development and productionactivities are undertaken in a number of countries around the world. Theseactivities are subject to strict regulatory requirements of national andsupranational authorities in the countries in which they are undertaken such asrequirements governing the testing, manufacturing and marketing ofpharmaceutical products. In most countries, it is necessary to obtain anapproval to market a pharmaceutical or medical product. The grant of such anapproval is subject to a detailed evaluation of data submitted by the applicantrelated to the quality, safety and efficacy of the product. Many countries,including member states of the EU and the United States, impose extensivetesting and data submission requirements and conduct rigorous technicalappraisals of product candidates. In addition, different regulatory authoritiesmay impose different conditions upon the marketing of a given product or mayrefuse to grant or require additional data before granting an approval tomarket a product even though the product may have been approved by anotherregulatory authority. Pre-clinical testing, clinical research and regulatoryapproval of a pharmaceutical or medical product is a very lengthy and costlyprocess.

Once a productis approved, the manufacturing and marketing of the product remains subject toperiodic review. Changes in applicable regulations, breaches of regulatoryrequirements or the discovery of problems related to the manufacturing, safety,quality or efficacy of a product may result in the imposition of restrictionsupon the manufacturing and sale of such product, including at worst withdrawalof the product from the market and/ or the revocation of the relevantregulatory approvals.

***The European Union***

There is a broad range of legislation inforce in member states of the European Union governing testing, manufacturingand marketing biopharmaceutical products, both at an individual state level aswell as on a Union-wide level (European Union Directives). These laws imposespecific requirements on various topics including pre-clinical and clinicaltesting and the operation of laboratories and manufacturing sites. Furthermore,there are specific directives and other legislation on, among other things,pricing, distribution, labeling and advertising of medicinal products.

At the Union-wide level, legislation onmedicinal products was first enacted in Directive 65/65/EEC: “on theapproximation of provisions laid down by law, regulation or administrativeaction relating to medicinal products”. Subsequent Directives (75/318/EEC,75/319/EEC and 93/39/EEC) further amended and expanded the original provisions,resulting in a system for the regulation of drugs, or medicinal products asthey are called in the EU, based on the principle of mutual recognition. Underthis mutual recognition procedure, the applicant first submits its product forreview to one or more EU member states. The first member state that decides toevaluate the product is called the reference member state.

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After the reference member state has assessed themedicinal product for quality, safety, and efficacy and has granted a nationalmarketing authorization, other member states that have received copies of theapplication have 90 days for evaluation before they must grant authorization aswell. In case of refusal, the application will be sent to the Committee forHuman Medicinal Products (CHMP) for arbitration.

An alternative, centralized, approach for registrationwas provided by Directive 93/41/EEC and Council Regulation No 2309/93, whichestablished EU procedures for the authorization and supervision of medicinalproducts for human and veterinary use and established a European MedicinesAgency (EMEA). Under this centralized procedure, which has been implemented forso-called high technology medicinal products, and especially for those derivedfrom biotechnological processes, applicants submit their dossier forauthorization to the EMEA. The EMEA coordinates the assessment process byappointing two EU member states as a rapporteur and co-rapporteur,respectively, who will assess the application and prepare draft reports forreview by the CHMP. The CHMP issues an opinion on the product’s quality, safetyand efficacy and sends its opinion to the European Commission, which drafts adecision based on that opinion. After consulting with its standing committee,the European Commission may grant a marketing authorization, subject toadequate evidence of quality, safety and efficacy. The marketing authorizationgranted is valid in all EU member states. For biopharmaceuticals thecentralized procedure is mandatory.

Since May 1, 2004, the Clinical Trial Directive(2001/20/EC) has been in effect. The aim of this directive is to harmonize theprocess for authorization and conduct of clinical trials as it is implementedin the individual EU member states. As a result of the Clinical TrialDirective, the Good Manufacturing Practice (GMP) requirements for themanufacture of investigational drugs have been changed, and a specificrequirement for product release by a Qualified Person has been included in therequirements. Also, regulatory inspections of manufacturing facilities forinvestigated drugs have been made obligatory, where in the past this was on avoluntary basis in most European countries. Manufacturers of pharmaceuticalproducts operating within the EU must hold a manufacturer’s authorization andmust comply with the requirements of GMP incorporated into EU legislation(2003/94/EC). These requirements are intended to set minimum standards withrespect to manufacturing facilities and the way of operating these facilities.Failure to comply with these requirements may result in the suspension orrevocation of the manufacturer’s manufacturing authorization. In the Netherlandswe have a license to manufacture clinical trial material under GMP conditions.To maintain this license we are inspected every two years by the Dutchregulatory authorities. The most recent inspections were in July 2005 forour temporary BSL-3 manufacturing facilities at NVI in Bilthoven, and inNovember 2005 for our facilities in Leiden. Both inspections weresatisfactory. Additionally we employ two Qualified Persons in Leiden forproduct release according to the European Clinical Trial Directive.

Manufacturers of pharmaceutical products operatingwithin the EU must hold a manufacturer’s authorization and must comply with therequirements of “Good Manufacturing Practice” incorporated into EU legislation.These requirements are intended to set minimum standards with respect tomanufacturing facilities. Failure to comply with these requirements may resultin the suspension or revocation of the manufacturer’s manufacturingauthorization. EU legislation provides for a centralized procedure forauthorizations to market certain specific pharmaceutical products. Theprocedure is initiated with the submission of an application for a marketingauthorization to the European Agency for the Evaluation of Medicinal Products.This agency processes the application and co-ordinates an evaluation of theproduct candidate. EU legislation provides for mutual recognition, whereby anauthorization for a product granted in one member state is recognized by andforms the basis for granting an authorization in other member states. Thewholesale distribution of pharmaceutical products within the EU is regulated by“Good Distribution Practice” guidelines.

Both the Netherlands andSweden are members of the European Union. As such both fully comply with EUlegislation on medicines, meaning that their national legislation is inaccordance to all relevant EC Council Directives and EC Regulations includingprocedures for the authorisation and supervision for 

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medicinalproducts for human use and the establishment of the European Agency for theEvaluation of Medicinal Products

***Switzerland***

Marketing a new pharmaceutical product requires aproduct marketing authorization. In Switzerland this is granted by Swissmedicif rigorous pre-clinical and clinical trials have shown that the product fulfilsthe legal criteria of quality, safety and efficacy. Marketing authorizationsand maintenance of approved products in our home markets are of majorimportance.

In addition to therequirements of pre-marketing authorization, production licenses for the manufactureof pharmaceuticals in Switzerland is an important requirement. Obtaining andmaintaining this license requires a production standard according to GoodManufacturing Practice (GMP). We believe rules and regulations inSwitzerland set standards comparable with those of the EU. Crucell has at itsdisposal all necessary licenses to manufacture pharmaceuticals in Switzerland.

***United States***

The Federal Food, Drug and Cosmetic Act regulates bothdrugs and biological products, and the Public Health Service Act also regulatesbiological products. The areas that these two Acts and related regulationsgovern include testing, manufacturing, safety, efficacy, labeling, storage,record keeping and advertising and other promotional practices. The FDA mustapprove a product or provide alternative clearances before clinical testing ormanufacturing and marketing of biologics or drugs may begin.

To gain FDA approval to conduct clinical trials,pre-clinical studies must generally be conducted in the laboratory to gain preliminaryinformation on an agent’s efficacy and to identify any major safety concerns.Applicants submit the results of these studies, in addition to informationregarding the manufacture of the medicinal product, as a part of an applicationfor an Investigational New Drug, or IND. Furthermore, the IND applicationincludes a detailed description of the clinical investigations.

The clinical studies are designed to demonstrate thesafety and efficacy of the new drug. The FDA receives reports on the progressof each phase of clinical testing, and it may require the modification,suspension, or termination of clinical trials if an unwarranted risk ispresented to patients.

After all studies and trials of a new product havebeen completed, applicants must submit all data to the FDA for review in orderto obtain marketing approval. If the product is regulated as a biologic,applicants must submit a Biologic License Application, or BLA. If the productis classified as a new drug, a New Drug Application, or NDA is required. TheNDA or BLA must include results of product development activities, pre-clinicalstudies and clinical trials in addition to detailed manufacturing information.

The FDA subjects NDAs or BLAs to a detailed andpotentially time-consuming approval process. The FDA may ultimately decide thatthe application does not satisfy its criteria for approval or may requireadditional pre-clinical or clinical studies. Before marketing clearance issecured, the manufacturing facility will be inspected for compliance withcurrent Good Manufacturing Practices requirements by FDA inspectors and will beinspected periodically for continuing compliance by FDA inspectors. Afterapplicants obtain FDA regulatory clearances, the FDA subjects a marketedproduct to continual review, and subsequent discovery of previously unknownproblems or failure to comply with the applicable regulatory requirements mayresult in restrictions on the marketing of a product or mandated withdrawal ofthe product from the market as well as possible civil or criminal sanctions.

In addition to the FDA requirements, the NIH hasestablished guidelines for research involving recombinant DNA molecules. Theseguidelines apply to all recombinant DNA research that the NIH conducts orsupports, including proposals to conduct clinical research involving DNAtherapeutics, 

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including ourcollaboration with the NIH to develop Ebola and malaria vaccines. The NIHreview of clinical trial proposals is a public process and usually involvesreview and approval by its Recombinant DNA Advisory Committee. In addition,before a product can receive approval from the FDA, a process for manufacturingthe product in accordance with good manufacturing practice requirements must bedeveloped. Failure to comply with good manufacturing practice or other U.S.regulatory requirements could result in a product being denied approval fromthe FDA or, once approval for a product is issued, could result in the FDAwithdrawing its approval until regulatory compliance is re-established.

***Biologics MasterFile.***   The PER.C6 cell substrate BiologicsMaster File (BMF) is the regulatory dossier filed with the FDA in the UnitedStates, which describes various aspects of our PER.C6 technology. The companiesto which we license our PER.C6 technology can refer to the BMF and need notcompile their own history of the PER.C6 cell line when they seek regulatoryapproval of any biopharmaceutical product that they may produce using it. Thismay assist our licensees in applications they may make to the FDA for productsmanufactured using the PER.C6 technology. We are required to supplement our BMFwhen new information arises.

During 2003, we expandedour cooperation agreement with Merck & Co., Inc., which relatesto the PER.C6 cell substrate Biologics Master File in the U.S. and equivalentauthorities in other jurisdictions. Under the terms of the agreement, we agreedto work closely with Merck on matters relevant to maintenance of the PER.C6cell substrate BMF, including the provision of technical assistance andguidance from Merck as appropriate.

***South Korea***

The Korean Food and DrugAdministration (“KFDA”) is the regulatory authority for the regulation of thevaccine industry in Korea. KFDA is one of the leading regulatory authorities inAsia and employs competent staff for the review of vaccine product submissions,the control of manufacturing and the release of vaccines of Korean production.KFDA regulates vaccines under the Korean Pharmaceutical Law, which establishesthe requirements for the lawful marketing of pharmaceutical products, i.e.quality, efficacy and safety. Different kinds of product permits are foreseenfor the approval of products for the domestic market, respectively for theexport situation. International standards as established by the InternationalConference on Harmonization for the structure and content of product dossiersare recognized by KFDA while the authority reserves the right to ask forspecific input and data as result of the regulatory review. The timelines forthe review of submission dossiers are defined by the law and, therefore,predictable to a certain extent.

***Regulation outside the European Union, Switzerland,the United States and South Korea***

Highly regulated countriessuch as the United States of America, Australia and Canada are to be distinguishedfrom those where similar regulation is only just emerging. Harmonization ofstandards and formats between the EU, the United States and Japan, which iscoordinated by the International Conference on Harmonization, will have aglobal impact. In some countries, limitations may be placed on the price atwhich products may be sold and the amount of royalties payable to licensors.

**Competition inProduct and Technology Development**

The field of biotechnologyis one of rapid change and innovation. We expect that this industry willcontinue to experience significant technological and other changes in the yearsahead. We operate in highly competitive markets and we may experiencecompetition from companies that have similar or other technologies, and other productsor forms of treatment for the diseases we are targeting. We also may experiencecompetition from companies that have acquired or may acquire technology fromuniversities and other research institutions. As these companies develop theirtechnologies, they may develop 

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proprietarypositions in the areas of our core technologies or obtain regulatory approvalfor alternative technologies or commercial products earlier than we or itslicensees do. Other companies are developing products to address the samediseases and conditions that we and our licensees target and may have ordevelop products that are more effective than those based on our technologies.We also compete with our licensees in developing new products.

***Vaccines***

Other biotechnology and pharmaceutical companies thatare focused on developing vaccines against infectious diseases include Wyeth,sanofi pasteur, Merck & Co., GlaxoSmithKline, Novartis, Acambis,Baxter, GenVec, Bavarian Nordic, Baxter, Solvay, Vical and Nobilon.

With respect to vaccines, other companies usealternative non-human expression platform technologies. We are aware oflicensed vaccines that are produced in cell substrates such as MDCK (MadinDarby Canine Kidney cells) and VERO as well as on production platforms based onembryonated chicken eggs. There are also mouse brain-derived inactivatedvaccines that are produced in several Asian countries. We are also aware ofother human expression technologies such as WI-38 and MRC-5 forlicensed and marketed vaccines, as well as human cell lines supporting productsin development such as (HEK)-293.

In the area of influenza, we are aware that Solvay hasobtained registration in the Netherlands for a vaccine based on MDCK cells. Weare aware of other biotechnology and pharmaceutical companies that currentlyare developing influenza vaccines based on MDCK cells, includingGlaxoSmithKline (including IDB/Shire), Nobilon and Chiron. In addition, we areaware that Baxter has obtained approval in Austria for its VERO-based influenzavaccine. For other European markets Baxter appears to have stopped at Phase IIin December 2004.

In the area of West Nile virus, we are aware thatAcambis has completed successfully Phase II clinical safety study in humanswith its West Nile ChimeriVax vaccine. This vaccine uses a geneticallyengineered yellow fever 17D live virus containing the genes encoding theantigens responsible for protection against West Nile virus. We are also awarethat Vical is developing a DNA-based West Nile virus vaccine that uses portionsof the genetic code of a pathogen to cause the host to produce specificfeatures of the pathogen that may induce an immune response. This method couldpotentially offer superior safety, ease and reliability of manufacturing, aswell as storage and handling advantages, compared with conventional vaccinesthat use live, weakened or dead pathogens to produce an immune response. Inaddition, other parties are working on human West Nile virus vaccine research.The University of Queensland is working on a vaccine based on the relativelyharmless Kunjin virus, a flavivirus found in Australia, and Hawaii Biotechreceived significant funding from the NIH in December 2004 in support ofthe pre-clinical development of its West Nile vaccine candidate.

In the area of Ebola, we are aware that Vical isconducting Phase I clinical efficacy studies with its DNA-based Ebola vaccineand has initiated GMP manufacturing for the NIH with whom they are jointlydeveloping the vaccine. We are aware that Health Canada, a federal governmentorganization, is conducting pre-clinical studies with its Ebola vaccine that isbased on a live replication competent Vesicular Stomatitis Virus (VSV) vector.We are also aware that the U.S. Army Medical Research Institute of InfectiousDiseases (USAMRIID) is conducting pre-clinical studies with its recombinantEbola vaccine, which is based on Ebola virus-like-particle (VLP) technology.USAMRIID is also involved in a CRADA with AVI BioPharma in testing the latter’santisense drugs against Ebola. AVI BioPharma received funding from the U.S.Senate Committee on Appropriations in June 2004 to support this and itswork on Marburg virus.

In the area of malaria, we are aware of two companiesconducting Phase I/II clinical studies with malaria vaccine candidates based onvirus-like-particle (VLP) technology: GlaxoSmithKline Biologicals 

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(GSK) and Apovia. GSK hassecured significant funding from NGOs for its malaria vaccine RTS,S. We arealso aware that Oxford (The Wellcome Trust Centre for Human Genetics) and GSKare jointly developing a malaria vaccine using live vector technology, and thatthis vaccine is in Phase I/IIa clinical studies. In addition, Oxford isconducting Phase I/II clinical studies with three additional malaria vaccinecandidates based on live vector technology, as well as pre-clinical studieswith one additional vaccine candidate based on live vector technology. We areaware that the Pasteur Institute is conducting Phase I/IIa clinical studieswith its malaria vaccine candidate, which is based on Long Synthetic peptidetechnology (LSA-3).

For tuberculosis, a numberof companies, government bodies and academic institutes around the world areworking on the development of new vaccines. The NIAID in the U.S. is involvedin a range of early-stage efforts relating to live-attenuated, subunit andnaked DNA type vaccine candidates. Our partner, the Aeras Global TB VaccineFoundation, is working on various other programs including a live recombinantTB vaccine with the David Geffen School of Medicine at UCLA, which entered itsfirst clinical trial in March 2004. In October 2004 Nature Medicineannounced an Oxford University subunit vaccine, designed to work in tandem withthe existing BCG vaccine, had successfully completed safety trials with positiveT-cell responses.

***Antibodies***

Other biotechnology companies, including CelltechGroup plc and Protein Design Laboratories, Inc., currently generatehumanized antibodies, and Medarex, Inc., GenMab AG, and Abgenix Corp.produce fully-human antibodies from transgenic mice. MorphoSys AG and CambridgeAntibody Technology Group plc generate fully-human antibodies using phageantibody-display libraries that are similar to ours. Companies such as DyaxCorp., XOMA and SCA Ventures, Inc., a subsidiary of Enzon Corporation, arealso working in the field of phage display libraries and related technologies.

In the area of infectiousdisease antibodies, potential competitors include serum antibody companies suchas Chiron and Baxter, and monoclonal antibody companies like Neutec Pharma,MedImmune, XTL Bio, Inhibitex and Biosynexis. For rabies specifically, ourantibody product may offer an alternative to the existing Rabies ImmuneGlobulin products, both Human (HRIG) and Equine (HRIG), that are currentlypaired with rabies vaccine for effective post-exposure treatment.

***Production of recombinant proteins and monoclonalantibodies***

Monoclonal antibodies and recombinant proteins areproduced by other companies on a variety of platforms. Simple proteins that donot demand extensive post-translational modifications are produced in bacterialsystems (E. coli). For example, the human recombinant insulin is producedentirely on E. coli.

Monoclonal antibodies and complex recombinant proteinsare produced mainly on mammalian cell lines like Chinese Hamster Ovary (CHO),murine myeloma cells like NS0 and Sp2/0, and occasionally on human 293 cells.CHO, NS0 and Sp2/0 are used for commercial production of monoclonal antibodiesand other recombinant proteins by companies including Genentech, Biogen,Centocor, Amgen, Lonza and Boehringer Ingelheim. We are aware of a human cellline expression platform used for production of recombinant proteins, the 293human cell line, which shares some of the advantages of the PER.C6 cell line.The 293 human cell line is utilized by Eli Lilly & Company to producea protein for the treatment of adult severe sepsis. The FDA and the EMEA haveapproved this product and it is currently available for use. We are aware thatscientists have published research describing human cell culture systems thatappear to have similarities to our PER.C6 cell line.

In addition to microbialand mammalian cell culture systems, transgenics are also exploited for themanufacture of complex recombinant proteins. Transgenics are, for example, usedfor the manufacture of recombinant C1 inhibitor by Pharming. This product iscurrently in Phase III clinical testing for angio-edema. Other examples are GTCtherapeutics which produces amongst other things, monoclonal 

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antibodiesin transgenics, and PPL therapeutics manufactures a number of complexrecombinant proteins, amongst which are blood clotting factors, in transgenicsheep. Transgenic plants are also used as a platform for the manufacture ofmonoclonal antibodies and complex recombinant proteins. Cell culture systemsderived from plants are currently used as well, like moss and cultured plantcells, which are currently used for manufacturing recombinant proteins. None ifthe products produced in transgenics have reached the market yet.

***Adenoviral vector technology and other recombinantvectors***

With respect to vectordevelopment, we are aware of several competing technologies, including those ofGenVec and Merck & Co., which may pose a threat to the commercialviability of our AdVac technology. In particular, Merck & Co. researchhas established methods that may prevent problems relating to pre-existingimmunity to adenovirus 5 vectors. We jointly own intellectual property on othervectors with Harvard.

**Property, Plant andEquipment**

Our corporate offices and research activities arelocated in facilities of approximately 7,800 square meters in Leiden, TheNetherlands. We sublease 1,000 square meters of this space to PharmingTechnologies B.V. and 500 square meters to Galapagos N.V. The section of thisbuilding that we use in Leiden includes 2,100 square meters of laboratories,with BioSafety Level (BSL) 1, BSL 2 and BSL 3 labs. The remainder of themain building is divided into 2,800 square meters of office space and 1,400square meters for storage, technical areas, washrooms, waste destruction andsterilization.

In addition, we lease 770 square meters of spaceadjacent to these corporate offices, of which 439 square meters issubleased to a third party. Our plant and production facilities in theNetherlands are located in a separate building in the Leiden BioScience Park,including 265 square meters of production space, 75 square meters ofquality-control laboratories and 228 square meters of office space. The leasecontract of this facility ended September 1, 2006, except for theproduction space, which ended April 30, 2007. We do not anticipate anyproblems in renewing the lease until our new production facility is ready foruse.

In 2005, we began to construct a new GMP productionfacility of 4,100 square meters in Leiden. This new facility is built as aBioSafety Level (BSL) 3 facility, in which two concurrent products can beproduced, on either BSL 2 and/or BSL 3 safety level. The building will consistof 1,200 square meters of production space; 220 square meters of qualitycontrol labs; 185 square meters BSL 3 research and development labs;80 square meters filling (up to 2,000 ampoules); 40 square meters ofbuffer and medium preparation; 310 square meters of offices; 350 squaremeters of storage and 1,715 square meters for utilities, washing area, wastedestruction and sterilization and technical areas.

The new center is to take the name of Crucellco-founder Dinko Valerio, becoming the “Valerio Building”. The Valerio Buildingwill give us the in-house capability to support vaccine, protein and monoclonalantibody process design and development, minimizing requirements foroutsourcing. Bioreactors of 2, 10, 30 and 100 liter capacities have alreadybeen constructed off-site and are currently being installed. There is also roomfor expansion, with multiple 100-liter wave-bags, disposable stirred tankbioreactions, large scale down stream processing equipment and scale-up of filland finish capacity.

When fully operational, the Valerio Building will meetthe highest environmental and safety standards recommended for the laboratoryactivities to be conducted there. The facility must receive approval from theDutch government to produce material for use in humans. Extensive precautionswill be taken to ensure safety and continuity of operations. Product qualitywill be strictly monitored, maintained and administered in-house. The facilityis currently scheduled to become operational by the end of 2007.

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Upon our 2006 acquisitions, we also have office space,laboratories, production facilities, pre-clinical facilities and storage spacein Switzerland, Spain, Germany, Sweden and Korea.

The following table setsout information regarding our main facilities outside the Netherlands:

| **Location**                       | ** ** | ** **                                                                                                                                                                                      | ** ** | **Use** |
|------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------|
| Berne, Switzerland (two locations) |       | Research and development (including pre-clinical  facilities) 8,618 m2 and production facilities (12,427 m2); office space (5,635 m2) and storage buildings (15,988  m2) (owned) |
| Madrid, Spain                      |       | Production facilities  (1600 m2),  storage buildings (2400 m2)  and office space/labs (1409 m2) (owned)                                                                                         |
| Seoul, Korea                       |       | Development and  production facilities (2,201 m2), pre-clinical facilities (999 m2), storage facilities (1,243  m2), office  space (1,819 m2) (leased until 2010)                          |
| Stockholm, Sweden                  |       | Development and production facilities (8,764 m2), pre-clinical facilities  (999 m2), storage  facilities (4,319m2),  office space (2,396 m2) (leased until 2010)                           |

 

Our manufacturing facilities in Switzerland are FDA/EMEA-approvedand are used primarily for the production of Inflexal, Vivotif, Epaxal andmammalian cell culture-based products. One of our facilities also includefacilities for lyophilization and a Center of Mammalian Cell Culture, which isnot in use any more.

Our manufacturing facilities in Korea are World HealthOrganization-approved and are used primarily for the production of Quinvaxemand Hepavax-Gene and for formulating and filling vials. The manufacturingprocess used at our Korean facilities are based on the patented Hansenulapolymorpha yeast expression technology.

In Spain, the center ofour European filling and packaging operations, we operate a filling line for syringes.

**Insurance**

We have in place generalthird party public and product liability insurance. Our policy has a limit ofliability and has certain additional conditions to coverage and deductibles. Wedo not insure our phage antibody-display library or PER.C6 master cellbank, though identical copies of the same cell bank are stored in multiplelocations in Europe. We carry insurance relating to theft, fire and damage tothe moveable assets within our facilities and other customary insurancecoverage for most of our activities, including liability insurance coverage forthe members of the Management Board, management committee and the SupervisoryBoard.

**Sales and BusinessDevelopment**

***Business Development***

We currently employthirteen people in our business development operations in the Netherlands andan additional two in the U.S. Our business development strategy hashistorically involved contacting prospective licensees and partners, assessingtheir interest in our technologies and products, and, if the prospectivelicensee or partner indicates interest, negotiating a license and/orcollaboration agreement pursuant to which we deliver the applicable technologyto, or collaborate with, the licensee or partner. For some of the contracts weprovide services, for which we are paid at different rates.

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***Marketing and sales***

We have our ownsales and marketing infrastructure in our core markets Switzerland, UnitesStates, Korea, Sweden, Italy and Spain. To ensure broader market access for ourproducts, we have established a strong network of partnerships forcommercialization. Through our dedicated sales force for supranationalorganizations, our own sales and marketing infrastructures in Korea and keyEuropean markets and the United States, and our network of distributors inother countries, we have established a global position in both public andprivate markets.

**Item 4A.     Unresolved Staff Comments**

Not applicable.

**Item 5.**                        Operating and Financial Review and Prospects

The following discussion contains forward-lookingstatements based upon current expectations that involve risks anduncertainties. When used in this annual report, the words “intend”,“anticipate”, “believe”, “estimate”, “plan”, and “expect” and similarexpressions as they relate to us are included to identify forward-lookingstatements. Our actual results and the timing of certain events could differmaterially from those anticipated in these forward-looking statements asa result of certain factors, including those set forth below and elsewhere inthis annual report. See “Forward-looking Statements” and Item 3, “KeyInformation—Risk Factors.” You should read the following discussion inconjunction with our consolidated financial statements and the notes theretoincluded elsewhere in this annual report.

Unless otherwise mentioned all amounts inthis Item 5 are in thousands, except share and option data.

Crucell N.V.reports its financial results in Euro and in conformity with InternationalFinancial reporting Standards (“IFRS”) as endorsed by the EU and effective foreach of the reporting years. There is no difference between IFRS as applied toCrucell and IFRS as issued by the IASB. Please see “Key Information—SelectedFinancial Data” and the notes to our consolidated financial stements for a moredetailed discussion on the basis of preparation.

**Overview**

The year ended December 31,2006 formed a turning point in the history of our Company as we transformedfrom a start-up company geared exclusively towards developing technologies andbiotech products into a fully integrated vaccine and other biopharmaceuticalsproducer. Our internationally oriented activities now cover the entire rangefrom laboratory to sales, from product and process development to productionand distribution. This change was due to a number of acquisitions anddivestments described below. This made 2006 a year of rapidly integrating thecompanies and assets acquired, streamlining our corporate organization andupgrading of our internal financial and administrative procedures. In addition,we set new priorities in terms of research and development and drafted anactive and focused sales strategy to maximize the revenues from our currentportfolio.

*Summaryof the full year results*

Total revenue and other operating incomefor the year ended December 31, 2006 were € 140.9 million, which represents a more than 275%-foldincrease over the € 37.6million in revenues and other operating income reported in 2005. The increasein total revenues is attributable to sales of respiratory, travel and paediatricvaccines added to our product portfolio in the acquisition of Berna Biotech bythe company during 2006. Total other operating expenses amounted to € 148.3 million and included restructuring and impairment charges of € 33.5 million. Research and development expenses of € 67.6 million reflect increasing emphasis on clinicaldevelopment, since we successfully initiated clinical 

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trials for nineprograms during the year, and reflect research spending in Berna Biotech AG andSBL Vaccin AB. Reported loss over 2006 amounted to € 87.6 million. Reported loss includes amortization charges of € 19.7 million related to purchase price accounting, in addition tothe impairment and restructuring charges of € 33.5 million. For income taxes the company reported a € 10.6 million benefit, which was mainly related to the impairmentcharge.

Cash and cashequivalents at December 31, 2006 amounted € 157.8 million, which includes the cash acquired in the BernaBiotech business combination and the proceeds of the € 80.0 million equity offering the company executed in November 2006.

*Acquisitionsand divestments*

In early 2006, Crucell acquired 98.4% ofthe Swiss biotech company Berna Biotech AG (Berna Biotech) in a share exchange.In February and March 2006, Crucell issued a total of 16.9 millionordinary shares to Berna Biotech’s shareholders with an average fair value of € 20.93 per share resulting in total purchase price of € 354.4 million (excluding acquisition costs). In the second quarterof 2006, we divested Dr. E. Gräub AG, which was sold to German basedVetinvest GmbH for € 5,390 incash. In the same quarter, the biopharmaceutical and vaccine manufacturer RheinBiotech GmbH was sold to Dynavax Technologies Corporation, a U.S. based biotechcompany, for € 6,383 incash. Both divestments were steps towards aligning our portfolio of activitieswith our strategic priorities.

In September 2006, we squeezed-out theremaining shareholders, purchasing the remaining 1.6% minority interest inBerna Biotech. After the squeeze-out, the SWX Swiss Exchange approved thedelisting of Berna Biotech’s shares, which was effected on September 18,2006.

In October 2006 we purchased theassets and liabilities of Florida-based Berna Products Corp. (“BPC”) from Acambisplc for € 13.8million in cash, excluding acquisition costs. BPC markets and distributesVivotif, Berna Biotech’s oral typhoid fever vaccine, in the US and Canada.

In November 2006, we acquiredStockholm-based SBL Vaccine Holding AB (“SBL”), a fully integratedindependent biotechnology company, from the private equity firm 3i and thefinancial group SEB for € 39.3 million in cash, excluding acquisition costs.

On December 28,2006, Crucell squeezed-out the remaining 7.3% minority shareholders of RheinBiotech N.V. Upon approval by the its shareholders, Rhein Biotech N.V. legallymerged into Berna Rhein BV, a fully owned subsidiary of the Crucell group inexchange for 0.3 million Crucell shares with a fair value of € 18.51 per share, resulting in a transaction value of € 6.4 million. As a result, Rhein Biotech N.V. ceased to exist andits shares were delisted at the Frankfurt Stock Exchange. With thistransaction, Crucell completed the integration of the Berna Biotech.

*Economicfactors*

Our financialstrength and ability to adapt to the current market and economic conditions aredependent, in part, on the success of our existing products, the cost ofbringing novel vaccines to market, the success of our licensees in developingcommercial products using our technology, and effective management of ourworking capital.

**CriticalAccounting policies**

Themethods, estimates and judgments we use in applying our most criticalaccounting policies have a significant impact on the results we report in ourfinancial statements. The U.S. Securities and Exchange Commission has definedthe most critical accounting policies as the ones that are most important tothe portrayal of our financial condition and results, and requires us to make difficultand subjective judgments, 

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often as a result of the need to make estimates of matters that areinherently uncertain. Based on this definition, our most critical policies onour historical operations include:

·       Revenuerecognition.

·       Utilizationof tax carry forward losses.

·       Accountingfor business combinations.

·       Impairmentreviews of property, plant and equipment, intangible assets and goodwill.

·       Valuationof defined benefit plans.

·       Valuationof stock option plans.

·       Recognitionof provisions for litigations and claims.

·       Valuationof inventories.

Below wediscuss these policies further, as well as the estimates and judgmentsinvolved.

***Revenue recognition***

Revenue is recognized to the extent that itis probable that the economic benefits will flow to the Group and the revenuecan be measured reliably. Revenue is measured at the fair value of theconsideration received excluding discounts, rebates, value added taxes andduties.

Revenues are recognized on a gross basiswhen the Group acts as the principal in an arrangement. Revenues are recognizedon a net basis when the Group acts as agent.

Goods orservices traded for items of a similar nature are not regarded as transactionsthat generate revenue. Goods or services traded for dissimilar items are regardedas transactions that generate revenue.

*Productsales*

Revenue from productsales is recognized when the significant risks and rewards of ownership of theproducts have passed to the buyer. In addition the Group does not retainmanagerial involvement to the degree usually associated with ownership noreffective control over the goods sold and the cost of the transaction can bemeasured reliably.

*Licence revenues*

We recognize initial fees to the licensingof our technology as revenues over the period of our significant continuingperformance obligations, if any, and upon transfer of the significant risks andrewards to the buyer.

Under certain arrangements, the Group hasno continuing performance obligations after delivery of the associatedtechnology under the license agreement or any other arrangement with thelicensee. In such arrangements, initial license fees are recognized as revenuewhen significant risks and rewards pass to the buyer, which is the moment, thetransfer of developed technology is completed. The Group’s arrangements providefor continuing support of its technology at standard consulting rates. Revenuesderived from consulting services that are not essential to licensee’s abilityto use the Company’s technology, are recognized as earned during the periodthat the consulting services are performed.

In certain arrangements, the Groupcollaborates with third parties to develop novel products or processes usingthe Company’s proprietary technology. These arrangements generally include aninitial license fee upon the delivery of the Company’s proprietary technologyand incremental fees for the Company providing ongoing research and developmentactivities. The research and development activities 

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performed bythe Company are substantive and critical to the licensees’ exploitation of thedelivered technology. When significant risks and rewards pass to the buyer,initial fees from these arrangements are recognized as revenues over the periodof continuing performance obligations. Incremental fees from research anddevelopment activities are recognized as revenues earned over the period of thedevelopment collaboration or the manufacturing obligation. All fees receivedunder the Company’s collaboration agreements are non-refundable.

Certain license arrangements provide foradditional non-refundable license fees to be paid upon the achievement ofmilestones. These additional license fees are recognized as revenue when theamounts become due and payable upon achievement of the milestone.

In addition tothe initial fee, the Group’s arrangements generally provide that the licenseemake semi-annual or annual payments (called “license maintenance fees”) tomaintain the license for a subsequent term. Generally, licensees may terminatethe license and related maintenance fees upon 30 days’ to 90 days’notice. License maintenance fees are recognized as revenues when the amountsbecome fixed and payable. The aggregate of license maintenance fees paid willgenerally reduce any royalty payments which may be due on future product salesof the licensee, if any, under the license agreement. Royalties are recognizedas revenue when they become fixed and payable.

*Service fees*

As part ofvarious collaboration agreements, the Company receives service fees for workperformed under such agreements. Revenues and related costs associated withcompleting performance services are recognized when the service is completedand the collectibility of the receivable is deemed probable. Revenuesassociated with time and material performance contracts are recognized when thecosts incurred and the costs to complete the transaction can be measuredreliably.

***Utilization of tax carry forward losses***

We are required to estimate our incometaxes in jurisdictions in which we operate. This involves estimating our actualcurrent tax exposure together with assessing the valuation for carry forwardlosses and temporary differences resulting from different treatment for taxpurposes compared to IFRS.  Thesetemporary differences mainly relate to intangible fixed assets, property, plantand equipment and inventories.

As at December 31,2006 we have tax carry forward losses for € 222,238 (2005: € 103,714, 2004: € 85,766) that are available, with certain restrictions in time,for offset against future taxable profits of the companies in which the lossesarose. We assessed the likelihood that our carry forward losses will berecovered from future taxable profit, and to the extent we believe thatrecovery is probable we recognized a deferred tax asset, which is € 308 as at December 31, 2006. To the extent the likelihood of arecovery of deferred tax assets changes, we include an expense or a gain withinthe tax charge in our Income Statement for the relevant period. Significantmanagement judgment is required in the valuation of our deferred tax assets. Weconsider future taxable profit projections, historical results and ongoing taxplanning strategies in assessing the recoverability of deferred tax assets. Inthe event that actual results differ from these estimates due to future changesin income tax law or results from final review of our tax returns by taxauthorities, we may need to adjust the valuation of our deferred tax assets,which could materially impact our financial position and results of operations.

***Accounting for business combinations***

Business combinations are accounted forusing the purchase method. This involves recognising identifiable assets(including previously unrecognized intangible assets) and liabilities(including contingent liabilities, but excluding future restructuring) of theacquired business at fair value. Goodwill 

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acquired in abusiness combination is initially measured at cost being the excess of the costof the business combination over the Group’s interest in the net fair value ofthe acquiree’s identifiable assets, liabilities and contingent liabilities.Following initial recognition, goodwill is measured at cost less accumulatedimpairment losses.

Goodwill includes intangible assets thatwere identified in a business combination, but not valued separately becausethe assets were either not separable or could not be measured reliably. Assetsidentified and included as part of goodwill can be specific customerrelationships, supply contracts not meeting the recognition requirements or theworkforce acquired.

Assigning fair values to the assets andliabilities acquired in a business combination inherently requires the use ofestimates. Under IFRS 3 Business Combinations, these fair values can beadjusted up to one year after the acquisition date, which can affect the amountrecognized as goodwill. The acquisition of SBL has been accounted for on aprovisional basis.

The accountingfor business combinations is discussed in detail in Note 3 of the financialstatements.

***Impairment reviews of property, plant andequipment, intangible assets and goodwill***

For property, plant and equipment andintangible assets, Crucell assesses at each reporting date whether there is anindication that an asset may be impaired. If this indication exists, or whenannual impairment testing for an asset is required, the Group makes an estimateof the asset’s recoverable amount. Where the carrying amount of an assetexceeds its recoverable amount, the asset is considered impaired and is writtendown to its recoverable amount.

An impairment loss of € 19,568 was recognized relating to two buildings inSwitzerland. The buildings and their equipment were used to manufactureproducts whose production ended or was phased out during 2006. The buildingsare specially set up for biotechnology purposes and it is impractible toseparate the buildings and the equipment. Thus there is no direct use for thesebuildings in any of the other activities of the Company, nor is there anymarket for the sale of the buildings to outside parties. The Company believesthat the outlook for these buildings is not likely to change in the forseeablefuture, accordingly the carrying value has been impaired for the total amountof € 19,568.

The intangible assets were impaired for thein process research and development of the Tetra vaccine. In February 2006Crucell acquired Berna Biotech, including rights to the Tetra vaccine. Managementdecided to stop the development of Tetra after Quinvaxem received approval bythe WHO. Consequently the carrying value of Tetra has been impaired for thetotal amount of € 10,848.

Goodwill is reviewed annually forimpairment, or more frequently if events or changes in circumstances indicatethat the carrying value may be impaired. Where the recoverable amount of thecash-generating unit is less than the carrying amount of the cash-generatingunit to which goodwill has been allocated an impairment loss is recognized.

Managementbelieves that any reasonable possible change in the key assumptions would notdecrease the value in use to the extent that the related goodwill would exceedthe recoverable amount. Reference is made to the key assumptions below as theyhave a significant impact on the calculated recoverable amount. The recoverableamount for the goodwill of Berna and Berna Biotech Korea Corp. exceeds itscarrying amount by € 58,600and € 2,600 respectively.The implications of the key assumptions on the recoverable amount are discussedbelow:

·       Therecoverable goodwill amounts of Berna Biotech AG based and Berna Biotech KoreaCorp. were determined with a pre-tax weighted average cost of capital (“WACC”)of 11.0% and 14.8% respectively. A higher WACC percentage would reduce therecoverable amount of the goodwill;

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·       In determining the goodwill of Berna Biotech Korea calculations weremade with a 50% chance of a possible relocation of the site. If calculationswere made with an estimated chance of relocation between the 50% and 100% thiswould lead to a reduction of the recoverable amount of the goodwill.

***Valuation of defined benefit plans***

Under defined benefit plans, the pensionentitlements are calculated using the projected unit credit actuarial method.The pension liability recognized in the balance sheet is the present value ofthe defined benefit obligation at the balance sheet date, less the fair valueof the plan assets after adding or subtracting unrecognized actuarial gains orlosses and past-service costs.

The defined benefit obligation iscalculated separately for each plan by estimating the amount of future benefitthat employees have earned in return for their service in the current and priorperiods. That benefit is discounted to determine its present value and anyunrecognized past service costs and the fair value of any plan assets arededucted.

The weighted average of the principal assumptions used in determiningthe employee benefit obligations for the defined benefit plans of the Group areshown below:

| ** **                      | ** ** | **  2006  ** | ** ** |
|---------------------------------|------------|----------------------------------|------------|
| Discount  rate                  |       |                             | 3.32       | % |   |
| Expected  return on plan assets |       |                             | 4.55       | % |   |
| Future  salary increases        |       |                             | 1.19       | % |   |
| Future  pension increases       |       |                             | 0.66       | % |   |

 

***Prior to the acquisition of BernaBiotech and SBL the Group did not operate any defined benefit plans.***

***Valuation of stock-option plans***

*Optionplans*

Employees (including senior executives) ofthe Group receive remuneration in the form of share-based payment transactions,whereby employees render services as consideration for equity instruments (“equity-settledtransactions”).

The cost of equity-settled transactionswith employees is measured by reference to the fair value at the date on whichthey are granted. The Group accounts for its employee stock options under thefair value method. The fair value of options was estimated at the date of grantusing the Black-Scholes option-pricing model.

The following weighted average assumptions are key in determining thefair value of the stock options.

| ** **               | ** ** | **Year ended December 31,** | ** ** |
|--------------------------|------------|--------------------------------------------|------------|
| ** **               | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Risk-free  interest rate |       |                                       | 3.6        | % |   |   | 4.1 | % |   |   | 2.9 | % |   |
| Expected  dividend yield |       |                                       | —     |   |   |   | — |   |   |   | — |   |   |
| Expected  volatility     |       |                                       | 52.6       | % |   |   | 52.8 | % |   |   | 62.3 | % |   |
| Expected life  (years)   |       |                                       | 4.25       |   |   |   | 4.31 |   |   |   | 4.00 |   |   |

 

In valuing equity-settled transactions, noaccount is taken of any performance conditions, other than conditions linked tothe price of the shares of Crucell (“market conditions”), if applicable.

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The cost ofequity-settled transactions is recognized, together with a correspondingincrease in equity, over the period in which the performance and/or serviceconditions are fulfilled, ending on the date on which the relevant employeesbecome fully entitled to the award (“the vesting date”). The cumulative expenserecognized for equity-settled transactions at each reporting date until thevesting date reflects the extent to which the vesting period has expired andthe Group’s best estimate of the number of equity instruments that willultimately vest. The income statement charge or credit for a period representsthe movement in cumulative expense recognized as at the beginning and end ofthat period.

***Recognition of provisions for litigationsand claims***

Provisions are recognized when the Grouphas a present obligation (legal or constructive) as a result of a past event,it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of theamount of the obligation.

The Group is subjected to (potential)lawsuits and other legal proceedings, resulting from the ordinary course ofbusiness. The current status of any pending proceedings has been reviewed witha legal counsel. Upon consideration of known relevant facts and circumstances, provisionswere recognized for losses that are considered to be more likely than not andthat can be reasonably estimabled as of the balance sheet date.

The Group usessignificant judgement in determining the provision for litigations and exposureto contingent liabilities related to pending litigation or other outstandingclaims. Judgement is used in assessing the likelihood that a pending claim willsucceed or a liability will arise and to quantify the possible range of thefinal settlement.

***Valuation of inventories***

Inventories arestated at the lower of cost and net realisable value. The cost of inventoriesincludes expenditures for materials acquired, directly attributable costs andrelated production overhead expenses. Allowances are made for obsolete inventory.Management exercises judgment in determining the allowance for obsoleteinventory. The allowance recognised in 2006 is € 4,722.

**Resultsof Operations**

**Revenues**

The following table shows our revenues for each of the years in thethree-year period ended December 31, 2006 and the percentage changebetween these periods.

| ** **         | ** ** | **Year ended December 31,** | ** ** | **%-Change** | ** ** |
|--------------------|------------|--------------------------------------------|------------|--------------|------------|
| ** **         | ** ** | **2006**                                   | ** ** | **2005**     | ** ** | **2004** | ** ** | **06 vs. 05** | ** ** | **05 vs. 04** | ** ** |
| Product  sales     |       | 103,918                                    |       | —       |       | — |   |   | — |   |   |   | — |   |   |
| License  revenues  |       | 16,955                                     |       | 20,848       |       | 12,429 |   |   | (18.7 | ) |   |   | 67.7 |   |   |
| Service  fees      |       | 10,694                                     |       | 11,881       |       | 5,712 |   |   | (10.0 | ) |   |   | 108.0 |   |   |
| **Total revenues** | ** ** | **131,567**                                | ** ** | **32,729**   | ** ** | **18,141** | ** ** | ** ** | **302.0** |   | ** ** | ** ** | **80.4** |   |   |

 

In 2006, ourrevenues increased to € 131,567 from € 32,729in 2005 and € 18,141in 2004. The total revenue for the year ended December 31, 2006 increasedby 302% compared to the year ended December 31, 2005. The increase intotal revenues is mainly attributable to product sales after the acquisition ofour product portfolio as a result of Crucell’s acquisitions of Berna Biotech inFebruary 2006 and SBL in November 2006.

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*Productsales*

Product sales amounted to € 103,918 in 2006. Total revenue from sales of those products addedto our portfolio by the acquisition of Berna Biotech, or legacy-Berna Biotechproducts (including BPC sales) amount to € 100,404 total revenue generated by sales of those products added to ourportfolio by the acquisition of SBL, or legacy-SBL products, amounted to € 3,513.

By the end of the year, our core productportfolio contains of six vaccines, Quinvaxem, Hepavax-Gene (Paediatric vaccines),Inflexal (Respiratory), Dukoral, Epaxal and Vivotif (Travel vaccines). Theaggregated revenues for our core product portfolio amounted to € 91,664 in 2006 and represented 88.2% of our total product sales.

In October 2006we successfully launched Quinvaxem, a pentavalent combination vaccine. It wasapproved by the Korean FDA in March 2006 and received World HealthOrganization (WHO) pre-qualification in September 2006. We have beenawarded contracts totaling over $ 230 million for our Quinvaxem pediatricvaccines by supranational organizations. The contracts cover the next threeyears until 2009, with the awarded amount growing over those three years. Wereceived an additional order totaling over US$ 20 million for Quinvaxem from asupranational organization serving Latin America. The contract covers sales in2007. Current demand for the Quinvaxem vaccine exceeds 50 million doses a year.We estimate the total market potential to be 150 million doses per year in 3 to4 years.

*Licenserevenues*

License revenues decreased by € 3,893 in 2006 to a total of € 16,955. The decrease is caused by developments under a limitednumber of contracts. Total license revenues generated on IAVI (Internation AIDSVaccine Initiative) contracts decreased by € 2.6 million; license revenues on DSM contracts decreased by € 1.4 million; license revenues on Sanofi contracts decreased by € 1 million. This reduction was partially offset by severalcontracts with other parties such as Merck and Ferring.

In 2005, theincrease in license revenues of € 8,419 or 67.7% compared to 2004 was primarily due to anincrease in license revenues from new and existing contracts, and realizationof contractual milestones. For example, in 2005, we recognized revenue of € 4,754 from 15 new PER.C6 license arrangements versus € 3,886 from twenty new PER.C6 license arrangements in 2004.Also, a significant initial license fee from an arrangement we entered intowith Sanofi Pasteur in 2003 was not immediately recognized as revenue, but wasdeferred and is being recognized as revenue over three years, the period of ourexpected continuing involvement.

*Servicefees*

Service fees decreased to € 10,694, a decrease of € 1,187 or 10% compared to 2005. This decrease was mainly due to lowerservice fees generated on contracts related to the National Institute ofAllergy and Infectious Diseases (NIAID).

In 2005 servicefees for colloboration agreements increased by € 6,919 or 108.0% compared to 2004 due to increasedactivities performed under various collaboration agreements.

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**Cost of goods sold**

Thefollowing table shows our cost of goods sold for each of the years in thethree-year period ended December 31, 2006 and the percentage changebetween these periods.

| ** **                   | ** ** | **Year ended December 31,** | ** ** | **%-Change** | ** ** |
|------------------------------|------------|--------------------------------------------|------------|--------------|------------|
| ** **                   | ** ** | **2006**                                   | ** ** | **2005**     | ** ** | **2004** | ** ** | **06 vs. 05** | ** ** | **05 vs. 04** | ** ** |
| Cost of product  sales       |       | 83,518                                     |       | —       |       | — |   |   | — |   |   |   | — |   |   |
| Cost of service  fees        |       | 6,971                                      |       | 7,156        |       | 5,644 |   |   | (2.6 | ) |   |   | 26.8 |   |   |
| **Total cost of goods sold** | ** ** | **90,489**                                 | ** ** | **7,156**    | ** ** | **5,644** | ** ** | ** ** | **1164.5** |   | ** ** | ** ** | **26.8** |   |   |

 

*Cost of productsales*

Costs of product sales andcosts of service fees both comprise direct labor, materials, and overhead costsincurred in performing work under various collaboration agreements thatdirectly relate to revenues earned through product sales. The 2006 cost ofproduct sales includes additional expenses of €16,186 relating to the purchase price allocations of the acquired businesses. Thegross margin on product sales amounts to 57.5%.

*Cost of servicefees*

Cost of service fees comprise direct labor, materialsand overhead costs related to work under various collaboration agreementsexcluding collaboration agreement relate to product sales. The decrease of 2.6%in these costs reflects the lower level of services provided by fee revenuesoffset by slightly increased costs. Gross margin on service fees was 54.4% in2006 compared to 66.0% and 1.2% in 2005 and 2004, respectively.

The costs increased in2005 compared to 2004 by 26.8% because the number of activities performed underthe various collaboration agreements increased as well.

**Other operatingincome**

Thefollowing table shows our other operating income for each of the years in thethree-year period ended December 31, 2006 and the percentage changebetween these periods.

| ** **                       | ** ** | **Year ended December 31,** | ** ** | **%-Change** | ** ** |
|----------------------------------|------------|--------------------------------------------|------------|--------------|------------|
| ** **                       | ** ** | **2006**                                   | ** ** | **2005**     | ** ** | **2004** | ** ** | **06 vs. 05** | ** ** | **05 vs. 04** | ** ** |
| ** **                       | ** ** | **In thousands of Euro**    | ** ** |
| Government grants                |       | 6,901                                      |       | 4,137        |       | 3,441 |   |   | 66.8 |   |   |   | 20.2 |   |   |
| Other income                     |       | 2,455                                      |       | 703          |       | 1,040 |   |   | 249.2 |   |   |   | (32.4 | ) |   |
| **Total other operating income** | ** ** | **9,356**                                  | ** ** | **4,840**    | ** ** | **4,481** | ** ** | ** ** | **93.3** |   | ** ** | ** ** | **8.0** |   |   |

 

*Government grants*

Revenues generated from government grants increased66.8% in 2006 to € 6,901 after increasing by20.2% in 2005. The increase in 2006 is primary the result of additionalsubsidies from NIAID for further research on HIV.

The increase in 2005 wasprimarily a result of additional subsidies granted by the Dutch government.

*Other income*

Other income results fromnon-core business transactions and mainly consists of the sale of tangible andintangible assets incidental to the business, reimbursement of developmentcosts and sublet of 

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premises.The increase in 2006 compared to 2005 is due to the other income generated inthe acquired subsidiaries.

**Other operatingexpenses**

Thefollowing table shows our other operating expenses for each of the years in thethree-year period ended December 31, 2006 and the percentage change betweenthese periods.

| ** **                           | ** ** | **Year ended December 31,** | ** ** | **%-Change** | ** ** |
|--------------------------------------|------------|--------------------------------------------|------------|--------------|------------|
| ** **                           | ** ** | **2006**                                   | ** ** | **2005**     | ** ** | **2004** | ** ** | **06 vs. 05** | ** ** | **05 vs. 04** | ** ** |
| Research and  development            |       | 67,606                                     |       | 34,048       |       | 23,676 |   |   | 98.6 |   |   |   | 43.8 |   |   |
| Selling, general  and administrative |       | 47,199                                     |       | 13,689       |       | 16,819 |   |   | 244.8 |   |   |   | (18.7 | ) |   |
| Restructuring                        |       | 3,120                                      |       | —       |       | — |   |   | — |   |   |   | — |   |   |
| Impairment                           |       | 30,416                                     |       | —       |       | — |   |   | — |   |   |   | — |   |   |
| **Total other operating expenses**   | ** ** | **148,341**                                | ** ** | **47,737**   | ** ** | **40,495** | ** ** | ** ** | **210.7** |   | ** ** | ** ** | **17.9** |   |   |

 

*Research anddevelopment expenses*

Research and development expenses consist of personnelexpenses, laboratory expenses, technology purchases, patent related fees,technology license fees, depreciation and amortization of tangible assetsrelated to research and development, and lease expenses for lab space andequipment lease. Research and development expenses also include fees we pay tothird parties who conduct research on our behalf.

Research and development expenses increased in 2006 by€33,558 or 98.6% compared to 2005. € 27,339 of thisincrease can be attributed to the research and development programs ofbusinesses we acquired during 2006. The remaining increase of €6,219 is the result of the increased number of development programs progressinginto the clinical phase. Research and development expenses increased by 43.8%in 2005 compared to 2004, due to a significant increase in R&D staffinglevels, reflecting the scaling up of our then-core activity.

Research and developmentexpenses comprised 45.6% of total other operating expenses in 2006 (and 58.9%of our total operating expenses excluding restructuring and impairment). Weexpect that research and development expenses will continue to be a significantportion of our overall expenses. The expenses of our R&D activities supportthe development of our technology platforms and research on potential newproducts.

*Selling, Generaland administrative expenses*

Selling, general and administrative expenses consistof personnel expenses and other operating expenses in the areas of marketingand sales, finance, human resources, investor relations, legal and generalmanagement.

Selling, general and administrative expenses amountedto €47,199 in 2006, compared to € 13,689 in 2005. Sellingcosts increased as a result of the cost base of the sales force and otherselling costs of the acquired companies. General and administrative expensesalso included integration costs of the 2006 acquisitions and incremental costsrelating to compliance with the internal control over financial reportingrequirements under U.S. law.

In 2005, selling, generaland administrative expenses were € 13,689, a decrease of18.7% compared to €16,819 in 2004. This decrease was primarily driven by warrants and non-employeestock options that vested in 2004, as these costs did not recur in 2005. Inaddition to employee salaries, our compensation program includes the issuanceof options to employees as a means of attracting and retaining talentedpersonnel. Total expenses employee shares and option plans amount to €4,296; €3,927; €3,357 in 2006, 2005 and 2004, respectively.

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*Restructuring*

The restructuring expense is related to centralizingR&D functions in Leiden and phasing out of R&D projects, includingAerugen, in Switzerland.

The decision to concentrate R&D in Leiden was madeto increase efficiency in R&D spending. The provision was recognized in2006 as recognition criteria were met at that time. The actual reduction in thenumber of staff employed was effected in the first quarter of 2007.

Furthermore, due to thesuspension in July 2006 of research related to Aerugen, the candidatevaccine for the prevention of Pseudomonas aeruginosa infection in cysticfibrosis patients, there are fewer projects requiring development support atBern. Additionally, part of the restructuring costs relate to the Center ofMammalian Cell Culture, which is not in use any more.

*Impairment*

The impairment relates to two buildings in Switzerlandand to acquired in-process research and development related to the Tetra vaccine.

An impairment loss of € 19,568was recognized relating to two buildings in Switzerland. The buildings andtheir equipment were used to manufacture products whose production ended or wasphased out during 2006. The buildings are specially set up for biotechnologypurposes and it is impractible to separate the buildings and the equipment. Thusthere is no direct use for these buildings in any of the other activities ofthe Company, nor is there any market for the sale of the buildings to outsideparties. The Company believes that the outlook for these buildings is notlikely to change in the forseeable future, accordingly the carrying value hasbeen impaired for the total amount of € 19,568.

The impairment loss of € 10,848is related to the in process research and development of the Tetra vaccine. In February 2006Crucell acquired Berna Biotech, including rights to the Tetra vaccine.Management decided to stop the development of Tetra after Quinvaxem receivedapproval by the WHO. Consequently, the carrying value of Tetra has beenimpaired for the total amount of € 10,848.

**Operating loss**

Thefollowing table shows our operating loss, net for each of the years in thethree-year period ended December 31, 2006 and the percentage changebetween these periods.

| ** **     | ** ** | **Year ended December 31,** | ** ** | **%-Change** | ** ** |
|----------------|------------|--------------------------------------------|------------|--------------|------------|
| ** **     | ** ** | **2006**                                   | ** ** | **2005**     | ** ** | **2004** | ** ** | **06 vs. 05** | ** ** | **05 vs. 04** | ** ** |
| Operating loss |       | (97,907                                    | )          | (17,324      | )          | (23,517 | ) |   | 465.2 |   |   |   | (26.3 | ) |   |
|                |            |                                            |            |              |            |  |  |  |  |  |  |  |  |  |  |

 

The movements in operatingloss are explained by the operating results discussed above.

**Financial incomeand expense, net**

Thefollowing table shows our financial income and expenses, net for each of theyears in the three-year period ended December 31, 2006 and the percentagechange between these periods.

| ** **                                      | ** ** | **Year ended December 31,** | ** ** | **%-Change** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------|------------|--------------|------------|
| ** **                                      | ** ** | **2006**                                   | ** ** | **2005**     | ** ** | **2004** | ** ** | **06 vs. 05** | ** ** | **05 vs. 04** | ** ** |
| Financial income                                |       | 13,453                                     |       | 2,332        |       | 1,789 |   |   | 476.9 |   |   |   | 30.4 |   |   |
| Financial  expenses                             |       | (11,706                                    | )          | (131         | )          | (394 | ) |   | 8835.9 |   |   |   | (66.8 | ) |   |
| Results  investments non-consolidated companies |       | (1,956                                     | )          | (455         | )          | (704 | ) |   | 329.9 |   |   |   | (35.4 | ) |   |
| **Total Financial  income/(expense), net**      | ** ** | **(209**                                   | **)**      | **1,746**    | ** ** | **691** | ** ** | ** ** | **(112.0** | **)** | ** ** | ** ** | **152.7** |   |   |

 

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***Financial income***

Financial income consists of interest income andcurrency gains. Interest income totaled €3,718, an increase of € 1,753 compared to 2005. This is primarilydue to higher cash balances resulting from proceeds from share issuances andcash acquired in business combinations.

Foreign exchange results are the effect of thetranslation of transactions and balances denominated in foreign currencies.Total currency gains amounted to € 9.5 million in 2006.

The 2005 and 2004, financial income consists primarilyof interest income. Interest income increased primarily due to higher cashbalances resulting from the private share placement in May 2005.

Foreign exchange resultshad limited impact in 2005 and 2004 as Crucell was not an international companyat the time.

***Financial expense***

Financial expense consist mainly of interest expensesand currency losses. Interest expense increased by €1,737 compared to 2005. The increase is due to the mortgage loan in theNetherlands, which is being used to finance the new production facility, andthe loan obligations of the companies acquired in 2006.

Foreign exchange results are the effect of thetranslation of transactions and balances denominated in foreign currencies.Total foreign currency expenses amounted to €9.6 million in 2006.

Financial expensesdecreased by € 263 in 2005 compared to 2004 mainly dueto a reduction in the interest expenses.

*Results investmentsassociates and joint ventures*

Crucell has twoinvestments in Joint ventures (Pevion Biotech AG in Switzerland and PerciviaLLC in the United States) and holds a 37% investment in the associated company KentaBiotech AG in Switzerland. These investments have either been made in 2006 orresult from the acquisition of Berna Biotech. The results of the companies areaccounted for under the equity method and amount to a total loss of €1,956. In 2005 and 2004 losses of € 455 and €704, respectively, reflected the investment in Galapagos B.V. in theNetherlands. In 2006, our holding in Galapagos decreased to 6.2% of its sharecapital. Since then, the investment has been treated as anavailable-for-sale-investment, as it no longer qualifies as an associate.

**Income Tax**

*Change in deferredtaxes*

Deferred income tax isprovided by using the asset and liability method on temporary differencesbetween the tax base of assets and liabilities and their carrying amounts forfinancial reporting purposes. Changes in the base in 2006 result in a taxationincome of € 11,022. This includes taxation income of € 7,027as a result of the impairment charges discussed above.

*Tax loss carryforwards*

The Group has tax carry forward losses in 2006 of €222,238, of €103,714 in 2005 , and € 85,766 in 2004 that are available, withcertain restrictions in time, for offset against future taxable profits of thecompanies in which the losses arose.

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Theunrecognized carry forward losses expire as follows:
| Before 2011   | ** ** | **2011** | ** **   | **After 2011** | ** ** | **Unlimited** | ** ** | **Total** | ** **   |
|--------------------|------------|----------|--------------|---------------------|------------|---------------|------------|-----------|--------------|
| € 16,504 |       | €   |  98,202 |                | €     |  88,902  |       | €    |  18,630 |   | € |  222,238 |   |   |
|                    |            |          |              |                     |            |               |            |           |              |  |  |  |  |  |

 

The Company has evaluatedevidence impacting the recoverability of its deferred tax assets, which consistprincipally of tax loss carry forwards. Management has considered the Company’shistory of net losses and concluded that it is not probable that the benefitsof these tax loss carry forwards will be realized in the near term.Accordingly, the Company did not recognize any deferred tax assets relating tothe carry forward losses.

*Transfer pricing*

The acquisition of BernaBiotech, SBL and the assets and liabilities of Berna Products Corp. and theintegration of those businesses and assets into the Group, has resulted in asignificant increase of inter-company transactions. Therefore, in January 2007,the Company began a transfer pricing study and analysis, with a view toensuring its transfer pricing regime remains in good order.

**Liquidity andcapital resources**

*Sources ofliquidity*

Thefollowing table shows our cash position for each of the years in the three-yearperiod ended December 31, 2006 and the percentage changes between theseperiods.

| ** **                 | ** ** | **Year ended December 31,** | ** ** | **%-Change** | ** ** |
|----------------------------|------------|--------------------------------------------|------------|--------------|------------|
| ** **                 | ** ** | **2006**                                   | ** ** | **2005**     | ** ** | **2004** | ** ** | **06 vs. 05** | ** ** | **05 vs. 04** | ** ** |
| Cash at banks and in  hand |       | 87,761                                     |       | 71,559       |       | 7,808 |   |   | 22.6 |   |   |   | 816.5 |   |   |
| Call deposits              |       | 70,076                                     |       | 40,175       |       | 68,903 |   |   | 74.4 |   |   |   | (41,7 | ) |   |
| **Total**                  | ** ** | **157,837**                                | ** ** | **111,734**  | ** ** | **76,711** | ** ** | ** ** | **41.3** |   | ** ** | ** ** | **45.7** |   |   |

 

Cashand cash equivalent include the following main currencies:

| ** **           | ** ** | **Year ended December 31,** | ** ** |
|----------------------|------------|--------------------------------------------|------------|
| ** **           | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Euros (€)       |       | 109,465                                    |       | 109,324 |   | 76,620 |   |
| Swiss Francs (CHF)   |       | 26,364                                     |       | — |   | — |   |
| Korean Won (KRW)     |       | 7,268                                      |       | — |   | — |   |
| US Dollars ($)       |       | 7,363                                      |       | 2,410 |   | 91 |   |
| Swedish Crowns (SEK) |       | 7,113                                      |       | — |   | — |   |
| Other currencies     |       | 264                                        |       | — |   | — |   |
| **Total**            | ** ** | **157,837**                                | ** ** | **111,734** | ** ** | **76,711** | ** ** |

 

We have a strong cash position, which we believe makesit possible to continue financing important development programs.

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We have the followingfinancial liabilities outstanding December 31, 2004, 2005 and 2006:

| ** **               | ** ** | **Date of maturity** | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**  | ** ** |
|--------------------------|------------|--------------------------------|------------|------------|------------|------------|------------|-----------|------------|
| Mortgage loan            |       | 31  December 2021         |       | 17,091     |       | 8,982      |       | —    |       |
| Berna Biotech Korea loan |       | 1  August 2010            |       | 5,819      |       | —     |       | —    |       |
| Equipment finance leases |       | December 31,  2011        | *          | 6,967      |       | 1,296      |       | 2,597     |       |
| Privately placed bond    |       | 13 June 2008              |       | 16,536     |       | —     |       | —    |       |
|                     |       |                           | ** ** | **46,413** | ** ** | **10,278** | ** ** | **2,597** | ** ** |

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*                    Date financiallease with longest term expires.

Weexpect to repay our financial liabilities that are outstanding December 31,2006 as follows:

| ** **               | ** ** | **Total**  | ** ** | **2007**  | ** ** | **2008**   | ** ** | **2009**  | ** ** | **2010**  | ** ** | **2011**  | ** ** | **More   than 5   years** | ** ** |
|--------------------------|------------|------------|------------|-----------|------------|------------|------------|-----------|------------|-----------|------------|-----------|------------|------------------------------------------|------------|
| Mortgage loan agreement* |       | 17,091     |       | 338       |       | 353        |       | 370       |       | 387       |       | 405       |       | 15,238                                   |       |
| Berna Biotech Korea loan |       | 5,819      |       | 1,455     |       | 1,455      |       | 1,455     |       | 1,454     |       | —    |       | —                                   |       |
| Equipment finance leases |       | 6,967      |       | 1,139     |       | 794        |       | 851       |       | 913       |       | 1,133     |       | 2,137                                    |       |
| Privately placed bond    |       | 16,536     |       | —    |       | 16,536     |       | —    |       | —    |       | —    |       | —                                   |       |
|                     | ** ** | **46,413** | ** ** | **2,932** | ** ** | **19,138** | ** ** | **2,676** | ** ** | **2,754** | ** ** | **1,538** | ** ** | **17,375**                               | ** ** |

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*                    Interestrate until December 31, 2010.

*Mortgage loan*

In December 2005, theCompany entered into a mortgage loan for a maximum amount of € 17,091and as of December 31, 2006 the Company had drawn the maximum amount. Theloan bears interest at 4.55% for the first five years. After this period therate will be renegotiated. The land, building and a compensating cash balancearrangement secure the loan in the amount of € 10,000. For thefirst year, interest was accrued to the loan and no payments of principal orinterest were required. The loan will be repaid through monthly payments over15 years, starting January 1, 2007, with a balloon repayment of € 10,000after 15 years. The maturity date of the loan is December 31, 2021.

*Berna Biotech Korealoan*

Berna Biotech Korea Corp.has entered into a loan that will be repaid within four years and bearsinterest at 2.48%. The maturity date of the loan is August 1, 2010. Theloan is unsecured.

*Equipment financeleases*

Crucell leases certain ofits lab equipment in the Netherlands. All leases are on a fixed repayment basisand interest rates are fixed at the contract date. See Note Tabular disclosureof contractual obligations in this item.

*Privately placedbond*

Berna Biotech Korea Corpissued this bond with an interest percentage of 6.73%. The bond matures June 13,2008, and contains covenants that require Berna Biotech Korea to maintaincertain profit and liquidity ratios. Berna Biotech Korea was required to be inongoing compliance with the covenants as of January 1, 2006, but was not. Consequentlythe bond is presented as a short-term bond, although, the Company does not haveany indications that the bond has to be repaid before the end of its term. Itis expected that Berna Biotech Korea Corp. will be in compliance with thecovenants during 2007.

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*Cash flows*

Thefollowing table shows our cash flow statement for each of the years in thethree-year period ended December 31, 2006 and the percentage changesbetween these periods.

| ** **                                                | ** ** | **Year ended December 31,** | ** ** | **% change** | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------------|------------|-------------------|------------|
| ** **                                                | ** ** | **2006**                                   | ** ** | **2005**          | ** ** | **2004** | ** ** | **06 vs. 05** | ** ** | **05 vs. 04** | ** ** |
| Loss of the  period                                       |       | (87,565                                    | )          | (15,578           | )          | (22,826 | ) | 462.1 |   |   | 31.8 |   |   |
| Reversal of  non-cash items                               |       | 58,872                                     |       | 9,616             |       | 11,860 |   | 512.2 |   |   | (18.9 | ) |   |
| Changes in net  working capital                           |       | (23,174                                    | )          | (8,915            | )          | 4,184 |   | 166.0 |   |   | (313.1 | ) |   |
| Interest/Taxes/Provisions  paid                           |       | (2,087                                     | )          | (132              | )          | (212 | ) | 1,481.1 |   |   | (37.7 | ) |   |
| **Net  cash flows (used in) operating activities**        | ** ** | **(53,954**                                | **)**      | **(15,009**       | **)**      | **(6,994** | **)** | **259.5** |   | ** ** | **114.6** |   |   |
| **Net  cash flows from/(used in) investing activities**   | ** ** | **23,159**                                 | ** ** | **(15,273**       | **)**      | **(3,782** | **)** | **(251.6** | ) | ** ** | **303.8** |   |   |
| **Net  cash flows from financing activities**             | ** ** | **78,731**                                 | ** ** | **65,305**        | ** ** | **277** | ** ** | **20.6** |   | ** ** | **—** |   |   |
| Effect of  exchange rates on cash and cash equivalent     |       | (1,833                                     | )          | —            |       | — |   | — |   |   | — |   |   |
| **Net  increase/(decrease) in cash and cash equivalents** | ** ** | **46,103**                                 | ** ** | **35,023**        | ** ** | **(10,499** | **)** | **31.6** |   | ** ** | **(433.6** | **)** |   |
| Cash and cash  equivalents at beginning of the period     |       | 111,734                                    |       | 76,711            |       | 87,210 |   | 45.7 |   |   | (12.0 | ) |   |
| Cash and cash  equivalents at end of the period           |       | 157,837                                    |       | 111,734           |       | 76,711 |   | 41.3 |   |   | 45.7 |   |   |

 

*Net cash flowsfrom/(used in) operating activities*

Net cash flows used inoperating activities increased in 2006 by €38,945 compared to 2005. This is mainly due to increase of the operationsresulting from the business acquisitions made in 2006.

*Net cash flowsfrom/(used in) investing activities*

Our cash flow from/(used in) in investing activitiesamounted to € 23,159 in 2006, compared to (€ 15,273)in 2005 and (€3,782) in 2004.

In 2006, the mostsignificant cash flows from investing activities were from the followingtransactions:

·       Theacquisition of Berna Biotech caused a net cash in-flow of € 67.8million. Although the acquisition itself was completed by a share exchange, thecash used for acquisition costs amounted to € 10.1 million. Crucellacquired an amount of € 77.6 million cash with the subsidiary.

·       Thesale of Berna Biotech’s veterinary division, which included Dr. E. GräubAG and Berna Veterinary AG and the divestment of the biopharmaceutical andvaccine manufacturer Rhein Biotech caused a cash in-flow of €11,772.

·       Reductionof restricted cash with Berna Biotech accounted for a net cash inflow of €7,627.

·       Interestreceived for the amount of € 3,075 in 2006 compared to €1,864 in 2005.

The increase ispartly offset by investing cash flows used in investing activities:

·       Theacquisition of SBL caused a net cash-outflow of € 33.4 million. Theacquisition price, including acquisition costs, amounted to €40.5 million. Crucell acquired an amount of € 7.1 million cash with thesubsidiary.

·       Purchaseof property, plant and equipment for an amount of € 20,337 in 2006 comparedto €17,137 in 2005. Investments in each of 2005 and 2006 are mainly related tobuilding and equipping our new GMP production facility in Leiden, theNetherlands.

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·       Acquisitionsof intangible assets in 2006 in the amount of €12,371 that are related to the acquisition of the business of BPC. The companypaid goodwill in the amount of € 4,055 and purchased thecustomer list from Acambis for € 8,316.

·       Interestreceived for the amount of € 1,864 in 2005 compared to €1,864 in 2005.

In 2005, the Company used €17,137 cash to invest in property, plant and equipment, in particular in thenew production and development facility in Leiden. This expenditure waspartially offset by the receipt of interest in the amount of €1,864, on cash deposits. In 2004, the Company invested €2,114 cash in property, plant and equipment. This expenditure was partiallyoffset by receipt of € 1,608 on cash deposits.

In 2004 we acquired theoutstanding capital stock of ChromaGenics B.V., a privately held biotechnologycompany based in Amsterdam, the Netherlands for an amount of €4,017 in cash. The acquisition was accounted for as an acquisition of developedtechnology.

*Net cash flows from financing activities*

Our cash flow from financingactivities amounted to € 78,731 in 2006, €65,305 in 2005 and €277 in 2004.

Proceeds from the issuanceof share capital amounted in 2006 to € 82,797. The Companyreceived proceeds of € 76,835 from the private placement ofordinary shares in November 2006. The remaining amount represents proceedsfrom the issuance of ordinary shares in relation to the exercise of employeestock options. In 2005, the company received proceeds from a private placementof ordinary shares in May 2005 of € 50,112. Together with theissuance of ordinary shares in relation to the exercise of employee stockoptions in the amount of € 7,423, the total proceeds from the issuanceof share capital in 2005 amounted to € 57,535.

Crucell issued a mortgageloan contract to finance its production facility in Leiden, Netherlands. TheCompany used in 2006 € 8,109 (2005: €8,982) of this loan. The mortgage amounts to € 17,091 as at December 31,2006, which is the maximum amount under this contract. For further detailsreference is made to the “borrowings” described in this section.

Crucell entered into newfinance lease contracts in 2006 with proceeds of €6,493. These finance leases mainly relate to equipment for the new productionand development facility in Leiden.

In 2006 Crucell repaid €17,834 in loans that had been made to Berna Biotech. An amount of €462 (2005: €1,212, 2004: €1,132) is related to repayments of finance leases.

*Outlook*

Continued investment inR&D is required to progress our development program in clinical trials andeventually obtain regulatory approval. We want to increase the overalleffectiveness of our global sales network to increase product sales and amongothers sell more third-party products through our sales channels to gainadditional revenue. We are expecting to reach operational cash break-even in2007, despite increased investment in R&D, sales and marketing. Furtherguidance will be given during the year.

**Quantative and Qualatative disclosure about Marketrisk**

Market risk is the risk ofloss related to adverse changes in market prices, including foreign exchangerates and interest rates, of financial instruments. During the ordinary courseof business, the Group is exposed to various financial market risks, primarilyfrom foreign exchange and interest rates and credit risk.

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**Foreign Exchange and Interest Rate Risk**

Although we prepare ourcombined financial statements in Euro, most of our sales volumes, as well asmost of our costs, (primarily those relating to manufacturing, selling,marketing, general and administrative functions, and research and developmentof products), are denominated in other currencies, primarily U.S. dollars,Swedish Kroner, Swiss Franc and Korean Won. The portions of our sales andexpenses denominated in currencies other than the Euro are exposed to exchangerate fluctuations in the values of these currencies relative to the Euro. Weare therefore subject to both transaction and translation risk. Exchange ratefluctuations may have substantial effects on our sales, our costs and ouroverall results of operations.

*Transaction Risk*

Transactionrisk arises where sales of a product are generated in one currency but costsrelating to those revenues are incurred in a different currency. In the case oftransaction risk, changes in the value of the Euro relative to the U.S. dollarand other currencies generally have interrelated consequences. For example, anincrease in the value of the Euro relative to the U.S. dollar and othercurrencies generally has these effects:

·       Ourmargins (in Euros) decline or become negative to the extent our costs wereincurred in Euros and the sales were generated in currencies weaker than theEuro, and

·       Ourcompetitiveness may decline as compared with competitors based in the countrieswith weaker currencies because our products manufactured in the Euro-zone willhave been produced at constant costs (in Euro) while their (constant) costsdenominated in weaker currencies will appear to have declined.

Conversely,a decrease in the value of the Euro relative to the U.S. dollar and othercurrencies generally has these effects:

·       Ourmargins (in Euros) increase to the extent our costs were incurred in Euros andthe sales were generated in currencies stronger than the Euro, and

·       Ourcompetitiveness may increase as compared with competitors based in thecountries with stronger currencies because our products manufactured in theEuro-zone will have been produced at constant costs (in Buro) while their(constant) costs denominated in stronger currencies will appear to haveincreased.

If our non-Eurodenominated expenses do not match our non-Euro denominated sales, this currencydifference may have an adverse effect on our operative result.

Over time, transactionrisk could adversely affect our cash flows and results of operations to theextent we are unable to reflect changes in exchange rates in the pricing of theproducts in local currency. Given our revenue and expense structure, in whichmost of our revenues are denominated in dollars but a substantial portion ofthe costs relating to those revenue are in Euro, we could experience pressure,on our gross margin in particular as a result of transaction risk. The effectsof transaction risk are not quantified in our financial statements.

*Translation Risk*

Translation risk refers tothe fact that the Euro-denominated amounts in our consolidated financialstatements will differ based on the exchange rates we use to prepare ourEuro-denominated financial statements. Our subsidiaries located outside theEuro zone prepare their financial statements in their local currencies. When weprepare our financial statements, we translate the local currency amounts inwhich the financial statements of our non-Euro zone subsidiaries are preparedinto Euro. Changes in the value of 

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thesecurrencies relative to the Euro from period to period therefore affect ourresults of operations and financial condition as expressed in Euro. Currencytranslation risks do not affect local currency cash flows or results ofoperations, but do affect our consolidated annual financial statements. Ingeneral, an increase in the Euro value relative to the U.S. dollar, Swiss Francand Korean Won will result in a lower Euro value of the sales generated incurrencies that have depreciate relative to the Euro. Even if the margin onthese sales remains constant in a non-Euro currency, its value translated intoEuro will be reduced.

*Impact of inflation*

Crucell does not operatesubsidiaries in countries with hyperinflation. Sales to countries withhyperinflation are made in hard currency, mainly Euro, USD and CHF.

*Derivative transactions*

Ingeneral, the Group does not engage in derivative transactions to hedge itscurrency exposure. Prior to SBL’s acquisition by the Company, it had engaged infour forward exchange contracts to hedge its currency exposure. At December 31,2006, the Group continued to hold these contracts. The terms of these contractsare as follows:

| ** **                                           | ** ** | **Expiry date**   | ** ** | **Exchange rate** | ** ** | **Fair value in  Euros** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|------------------------|------------|------------------------------------|------------|
| Forward contracts  to hedge expected future sales    |       |                   |       |                   |       |                               |       |   |   |
| Sell                                                 |       |                   |       |                   |       |                               |       |   |   |
| €  1,000                                        |       | February, 20 2007 |       | SEK/€ 9,181  |       |                               | €     |  1,016 |   |   |
| €  1,000                                        |       | February, 28 2007 |       | SEK/€ 9,220  |       |                               | €     |  1,021 |   |   |
| €  1,000                                        |       | April, 10 2007    |       | SEK/€ 9,311  |       |                               | €     |  1,031 |   |   |
| Forward contracts to hedge expected future purchases |       |                   |       |                   |       |                               |       |   |   |
| Buy                                                  |       |                   |       |                   |       |                               |       |   |   |
| CHF 500                                              |       | March, 5 2007     |       | SEK/CHF 5,719     |       |                               | €     | 317 |   |   |

 

The total fair value ofthe forward exchange contracts at December 31, 2006 amounts to SEK 516 (€ 57)*.* The Group did not have any additional derivative financialinstruments at December 31, 2006.

The Group is currently inthe process of determining the most optimal manner of mitigating the effects ofits structural currency exposures. The Group did not apply formal hedgeaccounting in 2006.

*Interest rate risk*

We are exposed to interestrate risk through out fixed term deposits and loans. We have historically kepta substantial amount of cash and cash equivalents. These assets are mainlyinvested in instruments with contractual maturities ranging from three totwelve months, bearing interest at short-term rates. The Group has cashbalances for an amount of € 172,200 of which € 14,396is restricted (2005: € 111,700 of which € 13,322is restricted). Details on these cash balances are provided in note 5.12 and5.13 of the financial statement. There are no other receivables that generateinterest.

The Group runs risks as aresult of changes in market interest rates compared to its loans with fixedrates. The Group has several loans with fixed interest rates, which total € 46,413.For tabular information on the expected cash flows of the loans and additionalinformation on the relevant contract terms see“—sources of liquidity’’ in this section.

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*Credit risk*

Credit risk represents therisk of financial loss caused by default of the counter party. The principal financialassets of the Group are cash and cash equivalents, short-term deposits, tradeand other receivables and securities available for sale. These assets representthe Company’s maximum exposure to credit risk in relation to financial assets.The Company’s credit risk is primarily attributable to its trade and otherreceivables. The Group trades only with recognized, creditworthy third parties.It is the Group’s policy that all customers who wish to trade on credit termsare subject to credit verification procedures. In addition, receivable balancesare monitored on an ongoing basis. Allowances are recognized for receivablebalances deemed uncollectible upon identification.

The credit risk on cashand cash equivalents, and short-term deposits is limited because the counterparties are banks with high credit ratings assigned by internationalcredit-rating agencies. The credit risk for the securities available for saleis limited as these stocks are traded in an active market.

*Price risk*

In addition to currencyrisks and interest rate risks the Company is exposed to other market pricerisks in relation to its financial instruments due to changes in the marketprices. The Company has no direct influence on this risk. Specifically theinvestment in Galapagos, which is valued at fair value, is subjected to thisrisk.

*Liquidity risk*

Liquidity risk representsthe risk that an entity will encounter difficulty in meeting obligationsassociated with its financial liabilities. The liquidity risk is considered tobe limited as the Group has sufficient funding to meet its obligations in theforthcoming period. The Group has a total cash balance of € 157,800as per December 31, 2006 (2005: € 111,700).

**Fair values**

Thefair values of the financial instruments of the Group approximate the carryingamount of the Group’s financial instruments, except for the following:

·       aloan entered into by Berna Biotech Korea Corp. with an amount of €5,819. The fair value of this loan is estimated to be € 6,082as the current interest rate in the market is higher than the interestpercentage of the loan.

·       Thetotal fair value of the forward exchange contracts as per December 31,2006 amounts to SEK 516 (€ 57).

The fair values of theloans have been calculated by discounting the face values with the interestrate of financial instruments with a similar risk profile and term. The fairvalues of the forward exchange contracts were calculated making use of the spotrate of the underlying exchange rates as per December 31, 2006.

**Trend information**

Please see “OperatingResults” and “Item 4. Information on the Company” for trend information.

**Off-balance sheet arrangements**

As of December 31,2006 we have no unconsolidated special purpose financing or partnershipentities or other off-balance sheet arrangements that have or are reasonablylikely to have a current or future effect on our financial condition, changesin financial condition, revenues or expenses, results of operations, liquidity,capital expenditures or capital resources, that is material to investors.

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The Company has aninvestment in an associate and two investments in joint ventures. Details onthese investments are provided in note 5.9 of the financial statements.

**Tabular disclosure of contractual obligations**

Futureminimum payments for all contractual obligations for years subsequent to December 31,2006 are as follows:

| ** **                                                        | ** ** | **Total**  | ** ** | **Less than  one year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **More than  5 years** | ** ** |
|-------------------------------------------------------------------|------------|------------|------------|-----------------------------------|------------|--------------------|------------|--------------------|------------|----------------------------------|------------|
| ***Contractual  Obligations***                                    | * *   | * *   | * *   |                              | * *   | * *           |       |               | * *   | * *                         |       |   | * * | * * |   |   | * * | * * |   |
| Long-term debt  obligations (excluding finance lease obligations) |       | 41,146     |       |                              | 1,792      | * *           |       |               | 21,870     | * *                         |       |   | 2,246 | * * |   |   | 15,238 | * * |   |
| Finance lease  obligations(1)                                     |       | 6,967      |       |                              | 1,139      | * *           |       |               | 1,645      | * *                         |       |   | 2,046 | * * |   |   | 2,137 | * * |   |
| Operating lease  obligations(2)                                   |       | 11,100     |       |                              | 3,897      | * *           |       |               | 4,597      | * *                         |       |   | 2,495 | * * |   |   | 111 | * * |   |
| Capital  expenditure commitments(3)                               |       | 11,693     |       |                              | 11,693     | * *           |       |               | —     | * *                         |       |   | — | * * |   |   | — | * * |   |
| **Total**                                                         | ** ** | **70,906** | ** ** | ** **                        | **18,521** | * *           | ** ** | ** **         | **28,112** | * *                         | ** ** | ** ** | **6,787** | * * | ** ** | ** ** | **17,486** | * * |   |

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*(1)**          Financelease obligations*

Certain of the Company’s fixtures and equipment arefinance leases. The finance leases mainly relate to equipment for the newproduction facility in Leiden, the Netherlands. Interest rates are fixed at thecontract date. All leases are on a fixed repayment basis and no arrangementshave been entered into for contingent rental payments. The fair value of thecompany’s lease obligations approximates their carrying amount.

*(2)**          Operatinglease obligations*

Crucell leases certain motor vehicles and items ofmachinery and equipment.

*(3)**          Capitalexpenditure commitments*

The remaining contractualcommitments for purchases of property, plant and equipment amount toapproximately € 11,693.These commitments mainlyrelate to the new production facility in Leiden, the Netherlands.

**Item 6.**                        Directors,Senior Management and Employees

**Directors, SeniorManagement and Board Practices**

We have a two-tier boardstructure consisting of a Management Board (*raad van bestuur*),which manages our business, and a Supervisory Board (*raad vancommissarissen*), which supervises and advises our Management Board.

***Supervisory Board***

Our Supervisory Board must approve certain resolutionsof our Management Board, which are specified in our articles of association. Inaddition, our Supervisory Board may give our Management Board written notice ofother corporate actions that it wishes to approve. In fulfilling their duties,all members of our Supervisory Board must serve our best interests.

Our articles of association provide that at leastthree Supervisory Board members must serve on our Supervisory Board. We mustfill any vacancies on the Supervisory Board as soon as possible, but until theyare filled the remaining members of our Supervisory Board constitute acompetent board. Under Dutch law, Supervisory Board members cannot serve asmembers of our Management Board.

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The members of ourSupervisory Board are appointed for terms ending on the date of the firstannual meeting of shareholders that is held four years after the date of theirappointment. They may be reappointed for two consecutive terms of four years.Our Supervisory Board nominates its members. To be binding, there must be atleast two nominees for each vacancy on the Supervisory Board. The generalmeeting of shareholders can override these binding nominations by a vote of anabsolute majority of the votes cast. This vote must represent more than onethird of our issued share capital. If the Supervisory Board does not make anynominations within three months after the vacancy has occurred, our generalmeeting of shareholders can fill Supervisory Board vacancies. If theSupervisory Board made a non binding nomination, then an appointment indeviation with the nomination is only possible by a resolution of the generalmeeting of shareholders taken by an absolute majority of the votes cast,representing at least one third of our issued capital. The Supervisory Boardmembers retire according to a rotation plan that the Supervisory Boardestablishes.

Our Supervisory Boardappoints its own chairman and must adopt rules for its own internalgovernance and establish committees. The Supervisory Board must, in any event,establish an audit committee, a remuneration committee and a nominationcommittee. Passing Supervisory Board decisions requires a majority of the votescast at a meeting of our Supervisory Board, unless otherwise provided for inthe articles of association or the by-laws of the Supervisory Board. TheSupervisory Board is assisted by a company secretary.

A Supervisory Board membercan be suspended or dismissed at any time by a resolution of our general meetingof shareholders passed by an absolute majority of the votes cast. This votemust represent more than one third of our issued share capital if theresolution to suspend or dismiss a Supervisory Board member is not proposed byour Supervisory Board. Within three months after a suspension, our generalmeeting of shareholders must either dismiss the Supervisory Board member,terminate the suspension or extend it. The total suspension may not exceedthree months.

The general meeting ofshareholders determines the Supervisory Board members’ compensation. Incontrast to the provisions of the Dutch corporate governance code, until theend of our 2004 fiscal year we  paid ourSupervisory Board members in options on our ordinary shares as well as cash,and as of the beginning of our 2005 fiscal year in ordinary shares and cash, orcash only, at the member’s discretion and reimburse them for their expenses.See “Remuneration of the Management Board and Supervisory Board”.

The business address ofeach Supervisory Board member is the address of our principal executive officein Leiden, The Netherlands. As of April 30, 2007 our Supervisory Boardmembers held an aggregate of 0.14% of our ordinary shares. See “ShareOwnership.”

Thefollowing table sets forth the name, age and position of the members of ourSupervisory Board:

| **Name**            | ** ** | ** ** | ** ** | **Age** | ** ** | **Position** | ** ** | **Service period  according to  rotation scheme** | ** ** |
|---------------------|------------|------------|------------|---------|------------|--------------|------------|------------------------------------------------------------------|------------|
| Pieter Strijkert(1) |       |       | 71         |    |       |         |       |                                                             |       |   |   |
| Jan Oosterveld(2)   |       |       | 63         |    |       | Chairman     |       |                                                             | 2008       |   |   |
| Phillip Satow       |       |       | 65         |    |       | Member       |       |                                                             | 2009       |   |   |
| Claes Wilhelmsson   |       |       | 68         |    |       | Member       |       |                                                             | 2011       |   |   |
| Seán Lance     |       |       | 59         |    |       | Member       |       |                                                             | 2011       |   |   |
| Arnold Hoevenaars   |       |       | 58         |    |       | Member       |       |                                                             | 2009       |   |   |
| Dominik Koechlin    |       |       | 48         |    |       | Member       |       |                                                             | 2010       |   |   |
| Jürg Witmer(3) |       |       | 58         |    |       |         |       |                                                             |       |   |   |
| Claude Thomann(3)   |       |       | 55         |    |       |         |       |                                                             |       |   |   |

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(1)          Mr. Strijkertresigned from the Supervisory Board on June 2, 2006.

(2)          Mr. Oosterveldwas appointed Chairman on June 2, 2006.

(3)          Mr. Witmer and Mr.Thomann resigned from the Supervisory Board on June 1, 2007.

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At the extraordinary general meeting of shareholders,scheduled in relation to the exchange offer for the Berna Biotech shares, heldon January 10, 2006, the proposal to appoint 3 new members of theSupervisory Board, upon the exchange offer becoming or being declaredunconditional, was adopted. Subsequent to the declaration in February 2006that the exchange offer was unconditional, Mr. Koechlin, Mr. Witmerand Mr. Thomann, all former members of the supervisory board of BernaBiotech, joined our Supervisory Board.

The following paragraphs contain brief biographies ofeach of our Supervisory Board members:

*JanOosterveld*has served as chairman of our SupervisoryBoard since June 2006. He retired from Royal Philips Electronics N.V. on April 1,2004, after an international career of 32 years. At his retirement he wasresponsible for Corporate Strategy, Corporate Alliances and the joint ventureswith LGE on Cathode Ray Tubes (CRTs) and Liquid Cristal Displays (LCDs). In thelatter responsibility he was the chairman of the board of LG. Philips Ltd, whichwent public in April 2004, and vice-hairman of the board of LG. PhilipsDisplays BV. He was also the CEO of Philips Asia Pacific.

He graduated as a mechanical engineer from theTechnical University Eindhoven, and holds an MBA from the Instituto de EstudiosSuperiores de la Empresa (IESE) in Barcelona. He was appointed Professor atIESE in 2003. Mr. Oosterveld has served as a member of our SupervisoryBoard since May 2004. He was appointed as member during the annual generalmeeting of shareholders on June 3, 2004. Alternately he is also a memberof the board of Barco, Kortrijk, Belgium, Atos Origin, Paris, France, CooksonElectronics Group, London, UK and Continental, Hannover, Germany.

*PhillipSatow*has served as a member of our Supervisory Boardsince our incorporation. He spent 14 years at Pfizer, Inc. where hislast position was vice president, Pfizer Europe. From 1985 to 1997, he wasexecutive vice president of marketing at Forest Laboratories, Inc. From1998 to 1999 he was president of Forest Pharmaceuticals, and executive vicepresident of Forest Laboratories Inc. In addition to the Forest LaboratoriesBoard which he served on from 1999 to 2005, Mr. Satow was formerly amember of the board of Eyetech Pharmaceuticals Inc. Mr. Satow is currentlyChairman of the board of directors and CEO of JDS Pharmaceuticals LLC, aprivately held pharmaceutical company. Mr. Satow received a Masters inEconomics from Georgetown University and a B.A. degree from Columbia College.

*ClaesWilhelmsson*has served as a member of our SupervisoryBoard since May 2003. He was previously the executive director of researchand development of AstraZeneca PLC from 1999 to July 2002, where he wasresponsible for AstraZeneca’s global R&D. He joined Astra in 1985 and heldvarious positions until the company merged with Zeneca in 1999. Prior toworking for Astra, he was a lecturer and researcher at the University ofGöteborg in Sweden, where he also completed his medical education and PhD. Hecurrently serves on the boards of a number of biotechnology and start-upcompanies. Dr. Wilhelmsson previously served on the board of AstraZenecaPLC.

*SeánLance*has served as a member of our Supervisory Boardsince January 2004. Mr. Lance is the past chairman of ChironCorporation. He joined Chiron as president and chief executive officer in 1998.From 1985 to 1998 he was employed at Glaxo Holdings where his last position wasgroup chief operating officer and CEO designate. He is a past president of theInternational Federation of Pharmaceutical Manufacturers Association. Mr. Lanceis a chartered company secretary and administrator and he also holds apost-graduate qualification in Advanced Financial Management.

*ArnoldHoevenaars*has served as a member of our SupervisoryBoard since June 2005 and has been attending our Supervisory Boardmeetings as an observer since July 2004. Mr. Hoevenaars is achartered accountant in the Netherlands, and his previous positions include,among others, chairman of the management board of the Achmea Group, chairman ofthe board of directors and chairman/CEO of the Executive Board of Eureko B.V.and member of the management board and CFO of Royal Boskalis Westminster N.V.

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*DominikKoechlin*has served as a member of our SupervisoryBoard since February 2006 upon settlement of Crucell’s exchange offer forBerna Biotech AG, where he was a member of the Board of Directors. His careerbegan in 1986 as a financial analyst at Bank Sarasin & Cie in Basel.In 1990 he was a founding partner of Ellipson AG, a consultancy specialized instrategy, corporate finance and sustainability. In 1996 he became a member ofthe executive board of Telecom PTT, now known as Swisscom AG. In 1999 he tookover responsibility for all of Swisscom’s international participations. He hasserved on the boards of Debitel AG (Stuttgart), Bluewin AG, Swisscom USA, SAMand was chairman of the board of UTA (Vienna) and a member of the supervisoryboard of Cesky Telecom (Prague). He is currently a member of the supervisoryboards and audit committees of LGT Bank (Liechtenstein), EGL AG andSwissmetal AG, and a board member at M2, Corris AG, Avaloq and the Universityof Basel.

*JürgWitmer*has served as a member of our Supervisory Boardsince February 2006 upon settlement of Crucell’s exchange offer for BernaBiotech AG, where he was a member of the board of directors. Dr Witmerstarted his professional career in 1978 as legal counsel of Hoffmann-La RocheAG in Basel. In 1982 he was appointed as personal assistant to the CEO of theRoche Group and in 1984 became regional manager of Roche Far East, based inHong Kong. He was promoted to general manager in 1988 before returning toSwitzerland as head of corporate communications and public affairs at Roche. In1994 he took over as general manager of Roche’s operations in Austria and partsof Eastern Europe, before becoming CEO at Givaudan Group in Geneva. In thisfunction he lead the spin-off of Givaudan from the Roche Group and its Swissstock exchange listing. In April 2005 he took over the chair of the boardof directors of Givaudan. Dr Witmer is also a member of the board of directorsof Bank Sal. Oppenheim Jr. & Cie (Schweiz) AG, Syngenta AG andClariant AG.

*Claude Thomann*hasserved as a member of our Supervisory Board since February 2006 uponsettlement of Crucell’s exchange offer for Berna Biotech AG, where he was amember of the board of directors. He began his career as a lawyer in 1979 atthe Kellerhals firm in Berne where he became a partner in 1985 and managingpartner from 1989 to 2000. He is a member of the board of directors ofSecuritas AG (Bern), Keymile Holding AG (Freienbach SZ), Keymile AG (Bern) andBonotec AG (Konolfingen BE) and former chairman of the Medicinal-Cluster Berneand of the Compensation Fund of the Bernese Entrepreneurs. Dr Thomann is alsomanaging director of various employers’ associations and legal advisor to theSwiss Cancer League and the Swiss Institute for Applied Cancer Research.

***Remuneration Committee***

Our Supervisory Board hasestablished a remuneration committee. The remuneration committee determines ourpolicy on remuneration of all members of our Management Board and managementcommittee. See “Remuneration of the Management Board and Supervisory Board—RemunerationPolicy”. The members of our remuneration committee are Phillip Satow(chairman), Claes Wilhelmsson, Jan Oosterveld and Jürg Witmer*.*

***Audit Committee***

Our Supervisory Board hasestablished an audit committee. The audit committee consists of threeSupervisory Board members who are independent within the meaning of the Nasdaqlisting rules. This committee is responsible for, among other things, reviewingour annual and interim reports and accounts and monitoring our auditors’involvement in that process. The ultimate responsibility for reviewing ourannual and interim accounts lies with our Supervisory Board. The members of ouraudit committee are Arnold Hoevenaars (chairman), Seán Lance and DominikKoechlin.

***Nomination Committee***

Our Supervisory Board hasestablished a nomination committee. The nomination committee consists of allSupervisory Board members. This committee (a) draws up selection criteriaand appointment 

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proceduresfor members of the Supervisory Board and the Management Board, (b) periodicallyassesses the size and composition of the Supervisory Board and the ManagementBoard and makes a proposal for a composition profile of the Supervisory Board, (c) periodicallyassesses the functioning of individual members of the Supervisory Board and theManagement Board, and reports on this to the Supervisory Board and (d) supervisesthe policy of the Management Board on the selection criteria and appointmentprocedures for senior management. The committee also makes proposals forappointments of Management Board members to the Supervisory Board and for appointmentsof members to the Supervisory Board.

***Scientific Committee***

Our Supervisory Board hasestablished a scientific committee. The scientific committee consists of oneSupervisory Board member who is independent within the meaning of the Nasdaqlisting rules. This committee is responsible for, among other things, reviewingprogress in our research and development activities. The chairman and solemember of our scientific committee is Claes Wilhelmsson.

***Management Board***

Our ManagementBoard manages our general affairs and business, under the supervision of ourSupervisory Board. Under our articles of association, the Management Boardrequires prior approval of the Supervisory Board for resolutions to:

·       expandinto a new, or cease an existing, line of business;

·       participatein, sell an interest in, or change its participation in, or otherwise take aninterest in, or assume the management of another business enterprise;

·       enterinto, terminate or amend any joint venture or pooling arrangement;

**·****     **acquirefixed assets exceeding price limits set by the Supervisory Board; and

·       enterinto financial commitments exceeding price limits set by the Supervisory Boardor for longer than a year.

Under Dutch law, in certain circumstances, ManagementBoard actions may require the approval of the general meeting of shareholders.

Our Supervisory Board determines the size of ourManagement Board after consultation with our chief executive officer. Ourgeneral meeting of shareholders appoints the members of our Management Boardfrom nominations made by our Supervisory Board. A member of the ManagementBoard may be appointed or reappointed for a term of not more than four years ata time. To be binding, there must be at least two nominees for each vacancy onour Management Board. The general meeting of shareholders can override thesebinding nominations by a vote of an absolute majority of the votes cast. Thisvote must represent more than one third of our issued share capital. If ourSupervisory Board does not nominate anyone for a specific position within threemonths after the vacancy has occurred, our general meeting of shareholders canappoint a replacement by an absolute majority of votes. If the SupervisoryBoard makes a non-binding nomination, then an appointment contrary to thenomination is only possible by a resolution of the general meeting ofshareholders taken by an absolute majority of the votes cast, representing atleast one third of our issued capital.

Our Management Board may establish rules governingits internal organization. Our Supervisory Board must approve the adoption ofand any changes to these rules. Our Management Board may charge each member ofthe Management Board with particular duties. The allocation of duties requiresthe approval of the Supervisory Board. Resolutions of our Management Boardrequire a majority of votes cast, unless provided otherwise in the by-laws ofthe Management Board. The Management Board may appoint 

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a company secretary whowill assist the Management Board. The appointment and removal of the companysecretary requires the prior approval of the Supervisory Board.

A Management Board member can be suspended ordismissed and a suspension can be lifted by a resolution of an absolutemajority of the votes cast at a shareholders meeting. This vote must representmore than one third of the issued share capital if the resolution to suspend ordismiss a Management Board member is not proposed by our Supervisory Board. OurSupervisory Board may also suspend (but not dismiss) a member of our ManagementBoard. We must hold a general meeting of shareholders within three months aftera suspension to either terminate or extend it. The total suspension may notexceed three months.

Our Supervisory Board determines the compensation andbenefits of the members of our Management Board, on a proposal by theremuneration committee, within the scope of the remuneration policy adopted bythe general meeting of shareholders. The business address of the members of ourManagement Board is the same as the address of our principal executive officein Leiden, The Netherlands.

Thename, date of appointment and position of the members of our Management Boardare:

| **Name**         | ** ** | ** **             | ** ** | **Date of appointment**                                                  | ** ** | **Position** |
|------------------|------------|------------------------|------------|--------------------------------------------------------------------------|------------|--------------|
| Ronald H.P. Brus |       | January 26,  2004 |       | Chairman of the Management  Board, president and chief executive officer |
| Leonard Kruimer  |       | January 1,  2005  |       | Chief financial officer                                                  |
| Jaap Goudsmit    |       | January 26, 2004  |       | Chief scientific officer                                                 |

 

***Management Board Service Contracts***

The contracts for the Management Board members havebeen entered into for an indefinite period and provide for a notice period ofup to six months upon termination by us and a notice period of three monthsupon termination by the individual. A dismissal arising from an unwanted changeof control will result in a severance arrangement limited to two years’ worthof base salaries for the Management Board members.

The contracts of theManagement Board members contain non-compete provisions that would apply for aperiod of one year after the end of their employment with us.

***Management committee***

We have a management committee that advises theManagement Board on strategic, general managerial and executive matters andassists the Management Board in implementing these matters. The ManagementBoard determines the number of members of the management committee. Members ofthe management committee are appointed and dismissed by the Management Board,with the approval of our Supervisory Board. The management committee generallymeets once a month, and works closely with other members of our managementteam. Our Management Board may establish rules governing its relationshipwith our management committee. Our Supervisory Board must approve the adoptionof and any changes to these rules.

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As aresult of the acquisition of Berna Biotech, Kuno Sommer and Simon Rothen joinedour management committee in March 2006. The following table sets forth thename, age and position of each of the members of our management committee:

| **Name**             | ** ** | ** ** | ** ** | **Age**                                                                                    | ** ** | **Position** |
|----------------------|------------|------------|------------|--------------------------------------------------------------------------------------------|------------|--------------|
| Ronald H.P. Brus     |       | 43         |       | Chairman of Management  Board, president and chief executive officer                       |
| Leonard Kruimer      |       | 48         |       | Chief financial officer                                                                    |
| Jaap Goudsmit        |       | 55         |       | Chief scientific officer                                                                   |
| Simon Rothen         |       | 44         |       | Chief operations officer                                                                   |
| Kuno Sommer          |       | 50         |       | Chief business officer                                                                     |
| René K. Beukema |       | 43         |       | General counsel and  corporate secretary                                                   |
| Arthur Lahr          |       | 38         |       | Chief strategy officer and executive vice president  sales & business development |

 

The following paragraphs contain brief biographies ofthe members of our Management Board and the members of our managementcommittee:

*RonaldH.P. Brus*is chairman of the Management Board andpresident and chief executive officer since January 2004, and has been amember of our management committee since our incorporation. He was executivevice president, business development at IntroGene from 1997 to 2000 and chiefoperating officer at Crucell from March 2003 until his appointment aspresident and chief executive officer. From 1994 to 1996, he wasproduct-planning physician at Forest Laboratories (New York) and from 1990 to1994 he was medical director for Zambon B.V. He holds a medical degree (M.D.)from the University of Groningen.

*LeonardKruimer*became a member of the Management Board on January 2005.He has been our chief financial officer and a member of our managementcommittee since our incorporation. He held the same position at IntroGene from1998 to 2000. From 1996 to 1998 he was an independent consultant with companiessuch as Pepsico and Royal Boskalis Westminster N.V. From 1988 to 1995, he heldsenior executive positions at Continental Can Europe, GE Capital/TIP Europe andKwik-Fit Europe B.V. He was a consultant at McKinsey & Co. and hasworked with Price Waterhouse. He holds a Masters in Business Administrationfrom Harvard Graduate School of Business Administration, a degree from theUniversity of Massachusetts, Amherst, and is a CPA in New York State.

*JaapGoudsmit*is a member of the Management Board since January 2004.He was our senior vice president vaccine research from September 2001until July 2002 and member of our management committee from July 2002as executive vice president vaccine R&D. In September 2002 he wasappointed chief scientific officer and head of research and development. Hechaired the Academic Medical Center of the University of Amsterdam the ResearchInstitute for Infectious Diseases and the Institute for Science Education. Hewas the founding chair of the Scientific Advisory Committee of theInternational AIDS Vaccine Initiative (IAVI) and the founding co-chair of theEuropean Vaccine Effort against HIV/AIDS (EuroVac). Since 1989 he has been aprofessor at the University of Amsterdam and the Academic Medical Center. Heholds a medical degree (MD) and a PhD from the University of Amsterdam and is aboard certified medical microbiologist.

*SimonRothen,*served as chief operations officer of BernaBiotech since 2004. He joined Berna Biotech in 1998 where he fulfilled severalpositions in production, quality, IT/IS, supply chain and operations. He studiedat and worked for Novartis biotechnology at ETH Zurich where he earned hisPh.D. in bioprocess engineering in 1997, before joining Berna Biotech PharmaBiotechnology Development & Production (Technical Cell Biology).

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*KunoSommer*was chief executive officer of Berna Biotechfrom 2000 until 2006. He studied economic science at Basel University andearned a doctorate in political science. Before 1990, he held various positionswith Roche AG Vitamin Marketing. From 1990 to 1994, he served as head of the NorthAmerican branch of the Roche animal feed and health division. From 1995 heserved as manager of Roche global marketing for the vitamin and specialitychemicals division in Basel. Mr. Sommer was CEO of Givaudan-Roure inGeneva and member of the executive committee of Roche AG in 1998/99.

*RenéK. Beukema*has been our general counsel and corporatesecretary since our incorporation. He held the same position at IntroGene from1999 to 2000. From 1994 to 1999 Mr. Beukema was senior legal counsel forGE Capital/TIP Europe. From 1991 to 1994, he was legal counsel for TNT ExpressWorldwide N.V. He has a Masters in Law from the University of Amsterdam.

*Arthur Lahr*isCrucell’s chief strategy officer and executive vice president sales &business development. He joined Crucell in April 2001 as executivedirector business development, was appointed vice president businessdevelopment in December 2003, a member of the management committee in January 2004,executive vice president in January 2006 and assumed responsibility forEuropean marketing & sales and company strategy in the summer of 2006.From 1994 to 2001 he was a consultant with McKinsey & Co. in theNetherlands and New York. Prior to that he worked with Unilever. He holds aMasters in Business Administration from INSEAD and a Masters in Science,Applied Physics, from the University of Delft, the Netherlands.

***Disclosure Committee***

The disclosure committee is designed to help seniormanagement, particularly the chief executive officer and chief financialofficer, in the maintenance and evaluation of our disclosure controls andprocedures. The disclosure committee gathers all relevant financial andnon-financial information and assesses materiality, timeliness and necessityfor disclosure of such information. The disclosure committee is comprised ofthe members of the management committee and selected senior managers. Membersof the disclosure committee have direct access to our external legal counseland our external auditor. The disclosure committee reports to the chiefexecutive officer and chief financial officer.

The disclosure committeeis an integrated part of our organization and is an essential to our internalcontrols over financial reporting. The disclosure committee and additionalactions taken for further improvement of disclosure and internal controls areintended to help us comply with the requirements of the Sarbanes-OxleyAct of 2002 and regulations promulgated by the Securities and ExchangeCommission under that Act.

**Remuneration of theManagement Board and Supervisory Board**

***Remuneration Policy***

The remuneration committee is charged by theSupervisory Board to review and recommend specific compensation and benefitlevels for the members of the Management Board and the members of themanagement committee in consultation with the Management Board. In addition,the remuneration committee reviews the general compensation and benefitpolicies for our employees.

The remuneration committee advises on policies andreviews and determines objectives relevant to the compensation of the membersof the Management Board and members of the management committee. Remunerationconsists of a fixed salary portion and a variable bonus portion that is linkedto our overall performance and the achievement of set objectives. Theremuneration committee evaluates the performance of members of the ManagementBoard and management committee in view of those objectives and advises on thefixed and variable compensation of members of the Management Board and themanagement committee. In advising on short and long term incentive compensationfor members of the Management Board and management committee, the remunerationcommittee considers among other 

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factors our financial andcommercial performance, scientific performance and progress, and the accrual ofour value. External compensation survey data available for the biotechnologyindustry are also used as another factor to benchmark the compensation levels.It is the aim of the remuneration committee to position the remunerationpackages for members of the Management Board and management committee atcompetitive levels. The bonus paid to the Management Board is paid inconnection with achievement of certain objectives set by the Supervisory Board.

The remunerationcommittee has advised the Supervisory Board on the remuneration policy andstructure for the Management Board. The Supervisory Board reviewed theremuneration policy. The annual general meeting of shareholders has approvedthe current remuneration policy. The remuneration policy is based on thefollowing key principles:

·       overallremuneration levels need to be sufficient to attract, retain and motivate topmanagement given the dynamic business environment in which we compete fortalent;

·       basesalaries should be broadly in line with average market levels, whereas short-and long-term incentive levels should reflect an upside potential in case ofoutstanding performance;

·       toenhance the effectiveness of the short-term incentive, clearly measurable andchallenging targets are set, which reflect our strategic focus in theshort-term; and

·       thelong-term incentive plan should ensure a focus on longer-term strategicperformance targets, which aim for shareholder alignment and motivation andretention of qualified executives.

*Remunerationstructure 2006.*   The balance in fixed andvariable pay for at target performance for the CEO amounts to 48% fixed and 52%variable compensation. For the other two Management Board members, the balanceequals 54% fixed and 46% variable compensation.

*BaseSalary.*   In 2006, base salary levels of theManagement Board have been increased by 2% in order to account for an inflationcorrection. Each consecutive year the Supervisory Board considers whether basesalary levels should be adjusted by taking account of our external and internalbusiness environment.

*Short-termincentive.*   At the annual general meeting ofshareholders in 2005, our shareholders approved the short-term share-basedincentive plans, which has not been changed since. The short-term incentive islinked to the achievement of predetermined collective milestones in combinationwith a budget hurdle and individual milestones. The collective milestones arebased on pre-determined annual milestones for research, development, businessdevelopment, finance, intellectual property and corporate legal affairs. Thespecific details of the milestones are not disclosed as these qualify ascommercially sensitive information. All predetermined collective milestones arecontingent upon achievement of our annual pre-determined cash burn rate, whichwe define as the amount of net cash spent as a result of our operations.

In addition, part of the short-term incentive award isbased on individual milestones, assessed on the basis of predefined measurablemilestones set for each executive. These milestones depend on the specificresponsibilities of the individual and are approved by our Supervisory Board.All milestones linked to the short-term incentive plan are revised annually andapproved by our Supervisory Board to ensure that they remain challenging butrealistic.

Thetable below shows the relative weight of the collective and individualmilestones:

| **Management Board** | ** ** | **Collective milestones** | ** ** | **Individual milestones** | ** ** |
|---------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| CEO, CFO, CSO             |       |                           | 70         | %                              |       |   | 30 | % |   |
|                           |            |                                |            |                                |            |  |  |  |  |

 

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The target bonus of the CEO amounts to 75%of base salary and for the chief financial officer and chief scientific officera target bonus of 60% of base salary is applicable. In the event performanceexceeds expectations to a considerable extent, up to 125% of the target bonuscould be rewarded as a maximum bonus.

The bonus is payable in restricted sharesor cash, at the option of the participant. Our Management Board members areencouraged to opt for restricted shares to maximize alignment of shareholders’interest. Therefore when opted for cash, a penalty of up to 25% reduction willbe applied.

*Long-term incentive.****  ***At theannual general meeting of shareholders in 2005, our shareholders approved thelong-term share-based incentive plan, which has not been changed since.

Target long-term incentive levels amount to34% of base salary for the CEO and 26% for the chief scientific officer and thechief financial officer. When achieving maximum performance, a maximum of 200%of the target award can be awarded. Overall, no vesting takes place for belowmedian performance.

The performance shares will beconditionally****granted and vest if pre-setperformance targets have been met at the end of a three-year performanceperiod. The performance targets are based on a combination of absolute shareprice growth on the stock markets, and our Total Shareholder Return (“TSR”).TSR reflects the return received by a shareholder, taking into account both thechange in share price and dividends received, while assuming dividends arere-invested in us.

The absoluteshare price growth serves as a hurdle which****must beovercome to qualify for any possible vesting of the shares. After the shareprice hurdle is met, the TSR performance measurement is twofold: relative to apeer group consisting of 26 constituents of the Goldman Sachs European BiotechIndex and relative to the NASDAQ Biotech Index. Fifty percent of theconditionally awarded shares vest subject to our ranking within the GoldmanSachs European Biotech Index on the date of vesting. The table below shows thevesting scheme:

**Goldman Sachs European Biotech Index Vesting Scheme**

| **Ranking** | ** ** | ** ** | ** ** | **Vesting as % of 50%  of target award** | ** ** |
|-------------|------------|------------|------------|------------------------------------------------------------------------|------------|
| 1           |       |       | 200        | %                                                                      |       |
| 2           |       |       | 183        | %                                                                      |       |
| 3           |       |       | 167        | %                                                                      |       |
| 4           |       |       | 150        | %                                                                      |       |
| 5           |       |       | 133        | %                                                                      |       |
| 6           |       |       | 117        | %                                                                      |       |
| 7           |       |       | 100        | %                                                                      |       |
| 8           |       |       | 89         | %                                                                      |       |
| 9           |       |       | 79         | %                                                                      |       |
| 10          |       |       | 68         | %                                                                      |       |
| 11          |       |       | 57         | %                                                                      |       |
| 12          |       |       | 46         | %                                                                      |       |
| 13          |       |       | 36         | %                                                                      |       |
| 14          |       |       | 25         | %                                                                      |       |
| 15–27  |       |       | 0          | %                                                                      |       |

 

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Theremaining fifty percent of the conditionally granted performance shares vestbased on the positive difference in percentage-points between Crucell’s AmericanDepository Shares (ADS), TSR performance and the NASDAQ Biotech Index. Thefollowing table shows the vesting scheme:

NASDAQ Biotech Index Vesting Scheme

| **Positive difference in Crucell’s TSR performance  and the NASDAQ Biotech Index** | ** ** | ** ** | ** ** | **Vesting as %  of 50% in %  points of target award** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------------------------|------------|
| 3  50                                                                                                                           |       |       | 200        | %                                                                                   |       |
| 3  35 and < 50                                                                                                               |       |       | 150        | %                                                                                   |       |
| 3  20 and < 35                                                                                                               |       |       | 100        | %                                                                                   |       |
| 3  10 and < 20                                                                                                               |       |       | 50         | %                                                                                   |       |
| 3  0 and < 10                                                                                                                |       |       | 25         | %                                                                                   |       |
| < 0                                                                                                                               |       |       | 0          | %                                                                                   |       |

 

In December 2005, 36,842 LTI Planshares were granted to selected executives, of which 28,582 were granted tomembers of the Management Board. There were no forfeitures of the LTI Plangrants through 31 December 2006 and all shares granted were unvested as ofyear-end. No LTI plan shares were granted in 2006.

*Pension.*   At the beginning of our 2005 fiscal year a new pension planfor our Management Board was introduced. The new plan is still a definedcontribution plan, with a pensionable age of 65 years. Both the employer andthe employee contribution are adjusted with regard to the fiscal requirements.The employee contribution is set at 7% of the pensionable salary (base payminus an offset). The table below outlines the annual contribution rates,including the employee contribution. The risk premium for the survivor’s pensionis financed separately by the employer.

**Total contribution rates for our Boardmembers**

| **Age**   | ** ** | ** ** | ** ** | **Contribution  rate** | ** ** |
|-----------|------------|------------|------------|------------------------|------------|
| 25 to  30 |       |       | 8.4        | %                      |       |
| 30 to  35 |       |       | 10.2       | %                      |       |
| 35 to  40 |       |       | 12.5       | %                      |       |
| 40 to  45 |       |       | 15.2       | %                      |       |
| 45 to  50 |       |       | 18.7       | %                      |       |
| 50 to  55 |       |       | 23.0       | %                      |       |
| 55 to 60  |       |       | 28.6       | %                      |       |
| 60 to 65  |       |       | 36.1       | %                      |       |

 

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***ManagementBoard***

The total remuneration and related costs of the members of theManagement Board over the past three years, excluding stock options, is asfollows:

| ** **          | ** ** | **2006**                                  | ** ** | **2005**  | ** ** | **2004**  | ** ** |
|---------------------|------------|-------------------------------------------|------------|-----------|------------|-----------|------------|
| ** **          | ** ** | **(In thousands of Euro)** | ** ** |
| Salaries            |       | 1,005                                     |       | 874       |       | 598       |       |
| Bonuses             |       | 893                                       |       | 1,058     |       | 494       |       |
| Pension  costs      |       | 205                                       |       | 189       |       | 215       |       |
| Severance  costs(1) |       | —                                    |       | —    |       | 454       |       |
| Other               |       | 37                                        |       | 58        |       | 170       |       |
|                | ** ** | **2,140**                                 | ** ** | **2,179** | ** ** | **1,931** | ** ** |

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(1)          In connection with his stepping down as our chief executive officer,president and chairman of our Management Board, we agreed to pay Mr. Valerioan amount equal to € 454in severance and up to € 19as partial compensation for advisory costs. On January 26, 2004, we alsoentered into an advisory agreement with Mr. Valerio under which he receivedan advisory fee totaling € 227through the end of 2004.

The remuneration of the individual members of our Management Boardduring 2006, excluding stock options, was as follows:

| ** **    | ** ** | **2006**                                  | ** ** |
|---------------|------------|-------------------------------------------|------------|
| **Name**      | ** ** | ** **                                | ** ** | **Salaries** | ** ** | **Bonuses(1)** | ** ** | **Pension  Costs(2)** | ** ** | **Other  Costs(3)** | ** ** | **Total** | ** ** |
| ** **    | ** ** | **(In thousands of Euro)** | ** ** |
| R.  H.P. Brus |       |                                      | 400        |   |   |   | 391 |   |   |   | 28 |   |   |   | — |   |   | 819 |   |
| J.  Goudsmit  |       |                                      | 330        |   |   |   | 260 |   |   |   | 152 |   |   |   | 21 |   |   | 763 |   |
| L.  Kruimer   |       |                                      | 275        |   |   |   | 242 |   |   |   | 25 |   |   |   | 16 |   |   | 558 |   |
| Total         | ** ** | ** **                                | **1,005**  |   | ** ** | ** ** | **893** |   | ** ** | ** ** | **205** |   | ** ** | ** ** | **37** |   | ** ** | **2,140** | ** ** |
|               |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          Bonus expense includes the grant date fair value of the short-termincentive plan, including compensation for wage taxes.

(2)          “Pension Costs” include pensions, social security costs anddisability insurance. Disability insurance costs represent 19.3% of the pensioncost.

(3)          “Other costs” include company cars.

For details regarding share and optionownership by our Management Board members, see “Share and Option Ownership”.

Pension,retirement and similar arrangements for our Management Board members consist ofthe defined contribution plan, and we do not have further pension obligationsbeyond the annual premium contribution.

***Supervisory Board***

In 2005 and 2006, compensation ofSupervisory Board members consists of a fixed fee in cash and an annual sharegrant. The fixed fee in cash amounts to € 25 per Supervisory Board member. The chairman receives a fixed feeof € 40. The annual sharegrant awarded to each member of the Supervisory Board is equal to 2,500ordinary shares. This amount will be revised every 3 years. The shares shouldbe held for as long as an individual is a member of the Supervisory Board.Instead of the share grant, a Supervisory 

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Board membermay also choose to receive a cash amount equaling the value of 2,500 shares atthe date of grant minus 25%. An allowance of € 10 is awarded annually to the chairman of the Supervisory Board.

In 2004 the remuneration was based on afixed amount of € 5per member, an additional payment of € 5 for each chairmanship of a committee, and payments based on theactual number of Supervisory Board meetings attended, as well as an additionalpayment of € 4.9to cover expenses for the chairman. We reimburse our Supervisory Board membersfor their travel and associated expenses incurred in connection withSupervisory Board meetings. The remuneration for the members of the SupervisoryBoard is determined by the general meeting of shareholders.

The individual members of the Supervisory Board received the followingremuneration, excluding stock options.

| ** **              | ** ** | **2006**  | ** ** | **2005**  | ** ** | **2004**  | ** ** |
|-------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
| Pieter  Strijkert       |       | 16.7      |       | 44.9      |       | 24.9      |       |
| Jan  Oosterveld         |       | 38.7      |       | 25.0      |       | 22.5      |       |
| Arnold  Hoevenaars      |       | 25.0      |       | 25.0      |       | N/A       |       |
| Seán  Lance        |       | 25.0      |       | 25.0      |       | 22.5      |       |
| Phillip  Satow          |       | 25.0      |       | 25.0      |       | 20.0      |       |
| Claes  Wilhelmsson      |       | 25.0      |       | 25.0      |       | 20.0      |       |
| Dominik  Koechlin(1)    |       | 25.0      |       | N/A       |       | N/A       |       |
| Jürg  Witmer(1)    |       | 25.0      |       | N/A       |       | N/A       |       |
| Claude  Thomann(1)      |       | 25.0      |       | N/A       |       | N/A       |       |
| Jean  Deleage(2)        |       | N/A       |       | N/A       |       | 5.0       |       |
| Patrick  van Beneden(3) |       | N/A       |       | N/A       |       | 5.0       |       |
| **Total**               | ** ** | **230.4** | ** ** | **169.9** | ** ** | **119.9** | ** ** |

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(1)          Mr Koechlin, Mr. Witmer and Mr. Thomann were appointedmember of the Supervisory Board on June 2, 2006, but have attendedmeetings since January 2006.

(2)          Mr. Deleage resigned from the Supervisory Board in June 2004.

(3)          Mr. van Beneden resigned from the Supervisory Board in June 2004.

Fordetails regarding share and option ownership by our Supervisory Board members,see “Share and Option Ownership”.

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**Shareand Option Ownership**

As of December 31,2005 and 2006 and April 30, 2007, members of our Management Board andSupervisory Board held the following options and the following ordinary sharesas of April 30, 2007. 

| Name of holder | ** ** | ** ** | ** **  | **Numbers of  ordinary  shares held as  of April 30,  2007** | ** ** | **% of  total  ordinary  shares** | ** ** | **Options held  as of  December 31,  2005** | ** ** | **Year of  expiration** | ** **    | **Exercise  price(s)  in Euros** | ** ** | **Granted  2006** | ** ** | **Exercised  2006** | ** ** | **Forfeited  2006** | ** ** | **Options  held as of  December 31,  2006** | ** ** | **Options  held as of  April 30,  2007** | ** **         |
|--------------------------|------------|------------|-------------|---------------------------------------------------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------------|------------|------------------------------|---------------|---------------------------------------|------------|-------------------|------------|---------------------|------------|---------------------|------------|------------------------------------------------------------|------------|---------------------------------------------------------|--------------------|
| **Management  Board:**   | ** ** |       | ** **  | ** **                                                                            |       |                                   | ** ** | ** **                                                 |       |                         | ** **    | ** **                            |       |              | ** ** | ** **          |       |                | ** ** | ** **                                                 |       |                                                    | ** **         | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Ronald H.P. Brus         |       |       | 142,699     | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 250,000       | ** **                            |       |              | 2009       | ** **          |       |                | 9.40       | ** **                                                 |       |                                                    | —   | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 250,000 | ** ** |   |   | 250,000 | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 225,000       | ** **                            |       |              | 2011       | ** **          |       |                | 3.49       | ** **                                                 |       |                                                    | —             | ** ** |   |   | 25,000 | ** ** |   |   | — | ** ** |   |   | 200,000 | ** ** |   |   | 200,000 | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 90,000        | ** **                            |       |              | 2011       | ** **          |       |                | 2.64       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 90,000 | ** ** |   |   | 90,000 | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 125,000       | ** **                            |       |              | 2011       | ** **          |       |                | 5.94       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 125,000 | ** ** |   |   | 125,000 | ** ** |   |
| Jaap Goudsmit            |       |       | 151,240     | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 100,000       | ** **                            |       |              | 2006       | ** **          |       |                | 5.92       | ** **                                                 |       |                                                    | —             | ** ** |   |   | 100,000 | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 100,000       | ** **                            |       |              | 2006       | ** **          |       |                | 3.66       | ** **                                                 |       |                                                    | —             | ** ** |   |   | 100,000 | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 85,000        | ** **                            |       |              | 2009       | ** **          |       |                | 9.40       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 85,000 | ** ** |   |   | 85,000 | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 60,000        | ** **                            |       |              | 2011       | ** **          |       |                | 2.64       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 60,000 | ** ** |   |   | 60,000 | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 125,000       | ** **                            |       |              | 2011       | ** **          |       |                | 5.94       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 125,000 | ** ** |   |   | 125,000 | ** ** |   |
| Leon Kruimer             |       |       | 22,084      | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 85,000        | ** **                            |       |              | 2009       | ** **          |       |                | 9.40       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 85,000 | ** ** |   |   | 85,000 | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 105,000       | ** **                            |       |              | 2011       | ** **          |       |                | 3.49       | ** **                                                 |       |                                                    | —             | ** ** |   |   | 40,000 | ** ** |   |   | — | ** ** |   |   | 65,000 | ** ** |   |   | 65,000 | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 125,000       | ** **                            |       |              | 2011       | ** **          |       |                | 5.94       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 125,000 | ** ** |   |   | 125,000 | ** ** |   |
| Subtotal                 |       |       | 316,023     | ** **                                                                            |       |                                   | 0.49       | ** **                                                 |       |                         | 1,475,000     | ** **                            |       |              |       | ** **          |       |                |       | ** **                                                 |       |                                                    | —             | ** ** |   |   | 265,000 | ** ** |   |   | — | ** ** |   |   | 1,210,000 | ** ** |   |   | 1,210,000 | ** ** |   |
| **Supervisory Board:**   | ** ** |       | ** **  | ** **                                                                            |       |                                   | ** ** | ** **                                                 |       |                         | ** **    | ** **                            |       |              | ** ** | ** **          |       |                | ** ** | ** **                                                 |       |                                                    | ** **         | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Jan Oosterveld           |       |       | 7,000       | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2009       | ** **          |       |                | 8.81       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2009       | ** **          |       |                | 11.55      | ** **                                                 |       |                                                    | —             | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
| Phillip Satow            |       |       | 61,300      | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2009       | ** **          |       |                | 11.55      | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 22,000        | ** **                            |       |              | 2011       | ** **          |       |                | 3.49       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 22,000 | ** ** |   |   | 22,000 | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2011       | ** **          |       |                | 6.48       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
| Claes Wilhelmsson        |       |       | 5,000       | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2009       | ** **          |       |                | 11.55      | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2011       | ** **          |       |                | 6.48       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
| Seán Lance          |       |       | —      | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2009       | ** **          |       |                | 11.55      | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2011       | ** **          |       |                | 8.81       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
| Arnold Hoevenaars        |       |       | 5,000       | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 5,000         | ** **                            |       |              | 2009       | ** **          |       |                | 8.81       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 5,000 | ** ** |   |   | 5,000 | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | 10,000        | ** **                            |       |              | 2009       | ** **          |       |                | 11.55      | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 10,000 | ** ** |   |   | 10,000 | ** ** |   |
| Dominik Koechlin         |       |       | 6,341       | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | —        | ** **                            |       |              | —     | ** **          |       |                | —     | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | —        | ** **                            |       |              | —     | ** **          |       |                | —     | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |
| Jürg Witmer         |       |       | 17,160      | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | —        | ** **                            |       |              | —     | ** **          |       |                | —     | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |
|                     |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | —        | ** **                            |       |              | —     | ** **          |       |                | —     | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |
| Claude Thomann           |       |       | 5,001       | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | —        | ** **                            |       |              | —     | ** **          |       |                | —     | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |
|                          |       |       |        | ** **                                                                            |       |                                   |       | ** **                                                 |       |                         | —        | ** **                            |       |              | —     | ** **          |       |                | —     | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |
| Subtotal                 |       |       | 106,802     | ** **                                                                            |       |                                   | 0.16       | ** **                                                 |       |                         | 117,000       | ** **                            |       |              |       | ** **          |       |                |       | ** **                                                 |       |                                                    | —             | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 117,000 | ** ** |   |   | 117,000 | ** ** |   |
| **Total**                | ** ** |       | **422,825** | ** **                                                                            |       |                                   | **0.65**   | ** **                                                 |       |                         | **1,592,000** | ** **                            |       |              | ** ** | ** **          |       |                | ** ** | ** **                                                 |       |                                                    | —             | ** ** |   |   | **265,000** | ** ** |   |   | — | ** ** |   |   | **1,327,000** | ** ** |   |   | **1,327,000** | ** ** |   |

 

Options generally expire in December orJanuary of the relevant year.

We account forstock-based compensation in accordance with the provisions of IFRS 2Share based payment. The fair market value of a stock option is determined atthe time of grant and recorded on our balance sheet as deferred compensation,which we then amortize over the vesting period. Further reference is made tothe notes to the financial statements.

**CorporateGovernance Developments**

We continuously monitor and assessapplicable corporate governance rules, including recommendations andinitiatives regarding principles of corporate governance. These include thosethat have been developed in the United States both by the NASDAQ NationalMarket (“Nasdaq”) and by the SEC pursuant to the Sarbanes-Oxley Act of 2002 andthe Dutch corporate governance code (the “Code”), which came into effect as ofthe financial year starting on or after January 1, 2004. According toDutch law, a public company should include in its annual report a statementabout the compliance with the principles and best practice provisions of theCode that are aimed at the Management Board or Supervisory Board. Thegovernmental decree requires that a company states in its annual report if itdid not comply with the principles or best practice provisions of the Code, orif it does not have the intention to do so during current or followingfinancial years.

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Importantprinciples of the Code are:

·       strengtheningthe role of the Supervisory Board and its committees and to increase itsindependence, quality and expertise;

·       strengtheningthe role of the shareholders with respect to control on the functioning of theManagement Board and the Supervisory Board, as well as with respect tonomination and remuneration of members of the Management Board and the SupervisoryBoard;

·       facilitatingand stimulating shareholders to use their voting power and to activelyparticipate in the general meeting of shareholders;

·       definingthe role of the external auditor vis-à-vis the Supervisory Board as itsprincipal contact; and

·       maintainingan appropriate internal risk and control system.

We refer toitem 15, “Controls and Procedures’’ for our management’s report on internalcontrol over financial reporting as required by section 404 of theSarbanes-Oxley Act of 2002.

**Exemptionsfrom Certain Nasdaq Corporate Governance Rules**

Nasdaq rules providethat Nasdaq may provide exemptions from the Nasdaq corporate governancestandards to a foreign issuer when those standards are contrary to a law, rule orregulation of any public authority exercising jurisdiction over such issuer orcontrary to generally accepted business practices in the issuer’s country ofdomicile. We have received from Nasdaq exemptions from certain Nasdaq corporategovernance standards that are contrary to the laws, rules, regulations orgenerally accepted business practices of The Netherlands. These exemptions andthe practices followed by our company are described below:

·       We areexempt from Nasdaq’s quorum requirements applicable to meetings ofshareholders. In keeping with Dutch law and Netherlands generally acceptedbusiness practice, our articles of association provide that there are no quorumrequirements generally applicable to general meetings of shareholders.

·       We areexempt from Nasdaq’s requirements regarding the solicitation of proxies andprovision of proxy statements for meetings of shareholders. We informshareholders of meetings in a public notice, but we do not solicit proxies forgeneral meetings of shareholders. Dutch law does not have a regulatory regimefor the solicitation of proxies and the solicitation of proxies is not agenerally accepted business practice in The Netherlands. In connection with ourAmerican Depositary Shares (“ADSs”), the Bank of New York, as depositary underour depositary agreement relating to our ADSs, distributes proxy materials toholders of our ADSs.

·       We areexempt from Nasdaq’s requirements regarding shareholder approval. In keepingwith Dutch law and Netherlands generally accepted business practices, ourarticles of association do not include a shareholder approval requirement. Ourarticles of association provide that the general meeting of shareholders mayresolve to amend our articles of association, or dissolve, merge or demerge theCompany, if our Supervisory Board first proposes the measure.

·       We do not distribute annual reports to all of our shareholders inaccordance with Nasdaq rules. As our shares are bearer shares according toDutch law, we are not able to distribute to shareholders copies of annual andinterim reports. Copies of such reports are available to shareholders at ourcorporate headquarters, and are filed with Nasdaq and the Bank of New York asdepositary under our depositary agreement relating to our ADSs. Under the termsof the depositary agreement, the Bank of New York distributes our annualreports to holders of our ADSs.

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**Limitationof Liability and Indemnification Matters**

Pursuant to Dutch law, each member of ourSupervisory and Management Boards is responsible to the Company for the properperformance of his or her assigned duties. They are also responsible for takingmeasures to prevent the consequences of any improper performance of duties byanother member of our supervisory or Management Board. Our articles ofassociation provide that our Supervisory and Management Board members aredischarged from liability for their actions as board members, if our generalmeeting of shareholders adopts a resolution to that effect. This dischargeextends only to actions or omissions disclosed in or apparent from the adoptedannual accounts or otherwise communicated to our general meeting ofshareholders.

This discharge of liability may be limitedby mandatory provisions of Dutch law, such as in the case of bankruptcy. UnderDutch law, our Supervisory Board members and the members of our ManagementBoard generally cannot be held personally liable for decisions made exercisingtheir reasonable business judgment.

Our articles of association provide that weshall generally indemnify any person who is or was a member of our SupervisoryBoard or our Management Board or one of our employees, officers or agents, andsuffers any loss as a result of any action in connection with their service tous, provided they acted in good faith in carrying out their duties.

Thisindemnification generally will not be available if the person seekingindemnification acted with gross negligence or willful misconduct in theperformance of their duties to the Company. A court in which an action isbrought may, however, determine that indemnification is appropriatenonetheless.

**Employees**

As of December 31, 2006, we had 1,073 employees.

| ** **                  | ** ** | **2006**  | ** ** | **2005**   | ** ** | **2004** | ** ** |
|-----------------------------|------------|-----------|------------|------------|------------|----------|------------|
| Research  and Development   |       | 313       |       |       | 240        |     |       |   | 171 |   |   |
| General  and administrative |       | 125       |       |       | 42         | (*)      |       |   | 39 | (*) |   |
| Operations                  |       | 539       |       |       | —     |     |       |   | — |   |   |
| Marketing  and sales        |       | 96        |       |       | —     |     |       |   | — |   |   |
| **Total**                   | ** ** | **1,073** | ** ** | ** ** | **282**    |     | ** ** | ** ** | **210** |   |   |

----

*       The2004 and 2005 figures for general and administrative also include businessdevelopment positions.

The Group employs personnel in the Netherlands, Switzerland, Spain,Italy, Korea, Sweden, the United States. The split per geographical area is asfollows:

| ** **     | ** ** | **2006**  | ** ** | **2005**   | ** ** | **2004** | ** ** |
|----------------|------------|-----------|------------|------------|------------|----------|------------|
| Europe         |       | 902       |       |       | 282        |     |       |   | 210 |   |   |
| North  America |       | 17        |       |       | —     |     |       |   | — |   |   |
| Asia           |       | 154       |       |       | —     |     |       |   | — |   |   |
| **Total**      | ** ** | **1,073** | ** ** | ** ** | **282**    |     | ** ** | ** ** | **210** |   |   |

 

In compliancewith Dutch legal requirements, Crucell has a workers council for our employeesin the Netherlands. The workers council is a representative body that consistsof seven elected employees. The Management Board is required to seek thenon-binding advice of the workers council before making certain majordecisions, such as those relating to a major acquisition, a change of controlor the appointment or dismissal of a Management Board member. The workerscouncil must also be consulted in connection with any material change affectingall employees or certain groups of employees, including with 

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respectto any changes to our employee benefits programs. No collective bargainingagreements are applicable to our employees. We believe that our relations withour employees are generally good.

**Item 7.**                        Major Shareholders and Related Party Transactions

**MajorShareholders**

Thefollowing table sets forth certain information concerning the beneficialownership of our ordinary shares as of April 30, 2007 by:

·       eachshareholder who is known by us to beneficially own (approximately) 5% or moreof our outstanding ordinary shares; and

·       ourSupervisory Board members and Management Board members, each as a group.

Percentage of beneficial ownership is based on an aggregate of64,802,325****ordinary shares outstanding at April 30,2007 except as otherwise noted:

| ** **                                               | ** ** | **Ordinary Shares  Beneficially Owned(1)** | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------------|------------|
| **Beneficial Owner**                                | ** ** | ** **                                           | ** ** | **Number of  Ordinary Shares** | ** ** | **Holding (%)** | ** ** |
| A. van  Herk B.V.                                        |       |                                                 | 6,967,956  |   |   |   | 11.8 | (2) |   |
| Global  Opportunities (GO) Capital Asset Management B.V. |       |                                                 | 4,716,106  |   |   |   | 8.0 | (3) |   |
| Aviva  plc                                               |       |                                                 | 3,514,230  |   |   |   | 5.9 | (4) |   |
| Ordinary  shares held by our Management Board members    |       |                                                 | 316,023    |   |   |   | 0.49 |   |   |
| Ordinary  shares held by our Supervisory Board members   |       |                                                 | 106,802    |   |   |   | 0.16 |   |   |
|                                                          |            |                                                      |            |  |  |  |  |  |  |  |  |

----

(1)          Under Rule 13d-3 of the Exchange Act, more than oneperson may be deemed to beneficially own certain ordinary shares (if, forexample, persons share the power to vote or the power to dispose of theordinary shares). In addition, a person is deemed to beneficially own ordinaryshares if the person has the right to acquire the ordinary shares (for example,upon exercise of an option) within 60 days of the date as of which theinformation is provided. As a result, the percentage of outstanding ordinaryshares of any person as shown in this table does not necessarily reflect theperson’s actual ownership or voting power with respect to the number ofordinary shares actually outstanding. In addition, filings with The NetherlandsAuthority for the Financial Markets (*Autoriteit FinanciëleMarkten*) with respect to shareholdings in public companies do notspecify the number of shares held by the filing party.

(2)          Percentage holding is derived from a filing made by A. van Herk B.V.with The Netherlands Authority for the Financial Markets (*AutoriteitFinanciële Markten*).

(3)          Percentage holding is derived from a filing made by GlobalOpportunities (GO) Capital Asset Management B.V.with the Netherlands Authority for the Financial Markets (*Autoriteit Financiële Markten*).

(4)          Percentage holding is derived from a filing made by Aviva plc. withThe Netherlands Authority for the Financial Markets (*AutoriteitFinanciële Markten*).

As of April 30,2007 there were 10,919,295****ADSs, eachrepresenting one ordinary share, all of which were held of record by nineregistered holders in the United States (including The Depository TrustCompany). The number of ADSs at April 30, 2007 represent 16.9% of ourordinary shares that were issued and outstanding on that date.

To the best ofour knowledge, we are not directly or indirectly controlled by any othercorporation, foreign government or other entity.

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***Obligations of Shareholders to DiscloseHoldings under Dutch law***

On 1 October 2006, the Act onDisclosure of Voting and Capital Interest in Listed Companies (the “Act onDisclosure”) came into force in the Netherlands. As part of the introduction ofthe new Act on Disclosure, listed companies were obliged to notify theircapital interest and voting rights as at October 1, 2006 to the AFM beforeOctober 27, 2006 and investors with a substantial shareholding or priorityshares as at November 1, 2006 had to notify the AFM before November 29,2006.

As of January 1, 2007, the Act onDisclosure is incorporated in the new Financial Supervision Act. Under the Acton Disclosure and, since January 1, 2007, the Financial Supervision Actand the decree regarding disclosure of holding, partly implementing theTransparency Directive, any person who, directly or indirectly, acquires ordisposes of an interest in the capital and/or the voting rights of a publiclimited liability company incorporated under Dutch law with an official listingon a stock exchange within the European Economic Area must immediately givewritten notice to the Dutch securities regulator AFM by means of a standardform, of such acquisition or disposal if, as a result of such acquisition ordisposal, the percentage of capital interest and/or voting rights held by suchperson meets, exceeds or falls below the following thresholds: 5%, 10%, 15%,20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%.

The notification requirement also appliesif a person’s capital interest or voting right meets, exceeds or falls belowthe above mentioned thresholds as a result of a change in the share capital orvoting rights, and the notification must be made no later than the fourth tradingday after the AFM has published our notification as described in the followingsentence. We are required to notify the AFM immediately if our share capital orvoting rights change by 1% or more since the previous notification. Otherchanges must be notified periodically.

In addition,the members of our Management and Supervisory Boards are required toimmediately notify the AFM of any change in our shares or options they hold orvoting rights in respect of these shares. The AFM will disclose this informationin a public register on its website. Noncompliance with the obligations of theFinancial Supervision Act can lead to criminal prosecution. In addition, acivil court can issue orders against any person who fails to notify orincorrectly notifies in accordance with the Financial Supervision Act,including suspension of the voting rights in respect of such person’s ordinaryshares.

**Related Party Transactions**

***Transactions Involving Our Senior Management***

The following table describes all loans made to members of ourManagement Board and senior management since January 1, 2001. We have notmade any loans to any of our Supervisory Board members. The interest rate onall loans is 3.5% per annum since 2004. We set these interest rates in relationto Dutch income tax law, which changes on an annual basis. These loans becomepayable at the time shares received on exercise of related options are sold or,if the employee ceases to work for us before this time, immediately. Weextended these loans prior to July 30, 2002, the date legislation waspassed in the United States, prohibiting the grant of additional loans tocompany officers, and no loans or our senior management have been extendedsince that date. The loans to the persons listed below were extended inconnection with options granted to them on our ordinary shares, and relatedtaxes. 

| **Name**              | ** ** | ** ** | ** ** | **Largest amount of loan  outstanding since  January 1, 2001** | ** ** | **Amount of loan  outstanding at  April 30, 2007** | ** ** | **Current  Interest Rate** | ** ** |
|-----------------------|------------|------------|------------|----------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|---------------------------------|------------|
| Ronald  H.P. Brus     |       |       | €     |   132                                                                                   |       |                                                                        |       | €                          |   99  |   |   |   | 3.5 | % |   |
| Jaap  Goudsmit        |       |       | €     | 25                                                                                           |       |                                                                        |       | €                          |  8    |   |   |   | 3.5 | % |   |
| René K.  Beukema |       |       | €     | 59                                                                                           |       |                                                                        |       | €                          |  52   |   |   |   | 3.5 | % |   |

 

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Loans to Ronald H.P. Brus for an amount of € 13 provide that he will not owe us interest with respect to theentire principal of these loans. In each case, we cancel a certain portion ofthe interest owed to us and the associated income tax, and attribute suchcancelled amounts to salary for income tax purposes.

Neither we norany of our subsidiaries was a party to any material transactions, or proposedtransactions, in which any director, any executive officer, any spouse orrelative of any of the foregoing, or any relative of any such spouse had or wasto have a direct or indirect material interest.

**Item 8.**                        Financial Information

See Item 17, “FinancialStatements.”

**LegalProceedings**

In the ordinarycourse of business, we have been involved in certain disputes. Neither we, norany of our subsidiaries, has been party to any legal or arbitration proceedingsthat may have, or have had during the 12 months preceding the date of thisdocument, a significant effect on our financial position or any of oursubsidiaries nor, as far as we are aware, are any such legal proceedingspending or threatened, except for those disclosed in Item 4.

**Dividendsand Dividend Policy**

Neither we orour principal subsidiaries have paid any paid dividens in 2006. We do notintend to pay dividends on our ordinary shares for the coming years, andthereafter only on the condition that our financial performance is adequate andit is in the shareholders’ interest to pay dividends instead of investing theproceeds into the company. Any payment of future dividends and the amountsthereof will depend upon earnings, statutory and financial requirements andother factors deemed relevant by our management board, and will be subject towithholding tax in The Netherlands. In the event that we pay dividends in thefuture, holders of our ADSs will be entitled to receive payments in U.S.dollars in respect of dividends on the underlying ordinary shares in accordancewith a deposit agreement dated October 26, 2000, between The Bank of NewYork and us.

**SignificantChanges**

Other than asdisclosed in this annual report, no significant change has occurred since December 31,2006, the date of our most recent audited financial statements.

**Item 9.**                        The Offer and Listing

Our ordinary shares are traded in theUnited States solely in the form of ADSs, each ADS representing one ordinaryshare. Each ADS is evidenced by an American Depositary Receipt issued by TheBank of New York acting as Depositary in respect thereof.

As of April 30, 2007, 64,984,325ordinary shares were issued and outstanding. On the same date, there were 10,919,295ADSs, each representing one ordinary share.

Our ordinary shares have been listed onEurolist by Euronext Amsterdam N.V. (formerly Amsterdam Exchanges N.V.) since October 25,2000 and the ADSs have been quoted on the Nasdaq National Market since October 27,2000, both under the symbol “CRXL”. Since 22 February 2006, ourshares have been listed on the SWX Swiss Exchange in Zürich, under the symbol “CRX”as a result of our acquisition of Berna Biotech.

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The following table sets forth the range of high and low closingprices, in U.S. dollars, for our ADSs on the Nasdaq National Market for theperiods indicated.

| ** **                                             | ** ** | **ADSs**   | ** ** |
|--------------------------------------------------------|------------|------------|------------|
| ** **                                             | ** ** | **High**   | ** ** | **Low** | ** ** |
| **Annual information for  the past five years**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| 2002                                                   |       | 6.40       |       | 2.45 |   |
| 2003                                                   |       | 6.16       |       | 1.54 |   |
| 2004                                                   |       | 13.77      |       | 6.38 |   |
| 2005                                                   |       | 29.95      |       | 12.30 |   |
| 2006                                                   |       | 28.82      |       | 17.27 |   |
| **Quarterly information for the past two years**       | ** ** | ** ** | ** ** | ** ** | ** ** |
| **2005**                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| First  Quarter                                         |       | 15.29      |       | 12.30 |   |
| Second  Quarter                                        |       | 24.64      |       | 14.20 |   |
| Third  Quarter                                         |       | 26.81      |       | 20.00 |   |
| Fourth  Quarter                                        |       | 29.95      |       | 23.85 |   |
| **2006**                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| First  Quarter                                         |       | 28.62      |       | 23.92 |   |
| Second  Quarter                                        |       | 28.82      |       | 17.27 |   |
| Third  Quarter                                         |       | 24.40      |       | 17.75 |   |
| Fourth  Quarter                                        |       | 25.63      |       | 22.83 |   |
| **2007**                                               |       |       |       |   |   |
| First  Quarter                                         |       | 28.96      |       | 23.85 |   |
| **Monthly information for the most recent six months** | ** ** | ** ** | ** ** | ** ** | ** ** |
| December 2006                                     |       | 25.63      |       | 24.24 |   |
| January 2007                                      |       | 27.63      |       | 26.00 |   |
| February 2007                                     |       | 28.96      |       | 25.27 |   |
| March 2007                                        |       | 26.73      |       | 23,85 |   |
| April 2007                                        |       | 26.01      |       | 25.34 |   |
| May 2007                                               |       | 25.97      |       | 22.70 |   |

 

Our ordinary shares trade on Eurolist byEuronext Amsterdam N.V. through the book-entry facilities of NEGICEF, Euroclearand Clearstream Luxembourg. For the ordinary shares the InternationalSecurities Identification Number (ISIN) code is NL0000358562, the AmsterdamSecurity Number is 35856 and the Common Code is 11907164.

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Thefollowing table sets forth the range of high and low closing prices, in Euros,for our ordinary shares in The Netherlands for the periods indicated.

| ** **                                              | ** ** | **Ordinary Shares** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|
| ** **                                              | ** ** | **High**                 | ** ** | **Low** | ** ** |
| **Annual information for the past  five years**         | ** ** | ** **               | ** ** | ** ** | ** ** |
| 2002                                                    |       | 7.29                     |       | 2.50 |   |
| 2003                                                    |       | 4.92                     |       | 1.40 |   |
| 2004                                                    |       | 10.10                    |       | 4.83 |   |
| 2005                                                    |       | 24.77                    |       | 9.50 |   |
| 2006                                                    |       | 23.49                    |       | 14.04 |   |
| **Quarterly  information for the past two years**       | ** ** | ** **               | ** ** | ** ** | ** ** |
| **2005**                                                | ** ** | ** **               | ** ** | ** ** | ** ** |
| First Quarter                                           |       | 11.67                    |       | 9.50 |   |
| Second Quarter                                          |       | 20.39                    |       | 10.29 |   |
| Third Quarter                                           |       | 22.01                    |       | 16.30 |   |
| Fourth Quarter                                          |       | 24.77                    |       | 19.72 |   |
| **2006**                                                | ** ** | ** **               | ** ** | ** ** | ** ** |
| First Quarter                                           |       | 23.49                    |       | 20.07 |   |
| Second Quarter                                          |       | 23.29                    |       | 14.04 |   |
| Third Quarter                                           |       | 19.29                    |       | 14.58 |   |
| Fourth Quarter                                          |       | 19.61                    |       | 17.53 |   |
| **2007**                                                |       |                     |       |   |   |
| First Quarter                                           |       | 22.27                    |       | 18.30 |   |
| **Monthly  information for the most recent six months** | ** ** | ** **               | ** ** | ** ** | ** ** |
| December 2006                                      |       | 19.50                    |       | 18.16 |   |
| January 2007                                       |       | 21.15                    |       | 19.92 |   |
| February 2007                                      |       | 22.27                    |       | 19.28 |   |
| March 2007                                         |       | 19.90                    |       | 18.30 |   |
| April 2007                                         |       | 19.35                    |       | 18.72 |   |
| May 2007                                                |       | 19.15                    |       | 16.87 |   |

 

**Item10.**                 Additional Information

**Memorandum and Articles of Association**

Set out below is a summaryof material information concerning our shares, which are our ordinary sharestogether with our preference shares, and related material provisions of ourarticles of association and of Book 2 of the Dutch Civil Code (*Boek 2 van het Burgerlijk Wetboek*). This summary is notcomplete and is qualified in its entirety by reference to our articles ofassociation and to Dutch law.

***General***

We were incorporated as alimited liability company (*naamloze vennootschap*)on October 9, 2000 by deed executed before Mr. R.J.J. Lijdsman, civillaw notary. Our corporate seat is in Leiden, The Netherlands, and we haveoffices at Archimedesweg 4-6, 2333 CN Leiden, The Netherlands. We areregistered in the trade register of the Chamber of Commerce and Industry forLeiden under number 28087740. The statement of no objection of the Minister ofJustice in respect of our deed of incorporation was issued on October 9,2000 under number N.V. 1133178. Our agent in the United States is CT Corporation,111 Eighth Avenue, New York, New York 10011.

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***Corporate Purpose***

Our objects includeacquiring, establishing and managing companies in our field, controlling andusing intellectual property, and funding our operations.

***Limitation ofLiability and Indemnification Matters***

Pursuant to Dutch law,each member of our Supervisory and Management Boards is responsible to us forthe proper performance of his or her assigned duties. They are also responsiblefor taking measures to prevent the consequences of any improper performance ofduties by another member of our Supervisory Board or our Management Board. Ourarticles of association provide that our managing board members and ourSupervisory Board members are discharged from liability for their actions as boardmembers, if our general meeting of shareholders adopts a resolution to thateffect. This discharge extends only to actions or omissions disclosed in orapparent from the adopted annual accounts or otherwise communicated to ourgeneral meeting of shareholders.

This discharge ofliability may be limited by mandatory provisions of Dutch law, such as in thecase of bankruptcy. Under Dutch law, our Supervisory Board members and membersof our Management Board generally cannot be held personally liable for decisionsmade exercising their reasonable business judgment.

Our articles ofassociation provide that we shall generally indemnify any person who is or wasa member of our Supervisory Board or our Management Board or one of ouremployees, officers or agents, and suffers any loss as a result of any actionin connection with their service to us, provided they acted in good faith incarrying out their duties.

This indemnificationgenerally will not be available if the person seeking indemnification actedwith gross negligence or willful misconduct in the performance of their dutiesto us. A court in which an action is brought may, however, determine thatindemnification is appropriate nonetheless.

***Share Capital***

Our authorized sharecapital amounts to € 40,800 divided into:85,000,000 ordinary shares and 85,000,000 preference shares, each with a parvalue of € 0.24.

At December 31, 2006,there were 64,802,325 ordinary shares issued and outstanding. No preferenceshares are currently issued and outstanding. The ordinary shares can be issuedin bearer or registered form. The preference shares can only be issued inregistered form. No share certificates will be issued for shares in registeredform.

***Ordinary Shares***

Our ordinary shares may bein registered or bearer form and will be in bearer form unless the shareholderindicates otherwise in writing. Only bearer ordinary shares can trade onEuronext Amsterdam.

***Bearer OrdinaryShares***

All of our bearer ordinaryshares are embodied in a single global share certificate which will not beexchanged for single or multiple physical securities and which we will depositwith NECIGEF for safekeeping on behalf of the parties entitled to the ordinaryshares in bearer form.

The ordinary sharesrepresented by the single global share certificate may only be transferredthrough the book-entry system maintained by NECIGEF. A participant in thecollective deposit (verzameldepot) of a securities institution admitted toNECIGEF may, at his own expense, require conversion of one or more of hisbearer ordinary shares into ordinary shares in registered form.

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***Registered OrdinaryShares***

We enter holders ofregistered ordinary shares in the register of shareholders. We do not issueshare certificates. However, the shareholder may request an extract from theshareholders’ register regarding the ordinary shares registered in his name. Weare required to provide this free of charge. Dutch law requires that transfersof registered ordinary shares be recorded in a written instrument to which weare a party or which is served on us, or that the transaction be acknowledgedby us.

***Preference Shares***

As of the date of thisannual report, we have not issued any preference shares. On October 25,2000, we established a foundation called Stichting Preferente Aandelen Crucell,also referred to as the Preferred Foundation. The Preferred Foundation’sobjective is to safeguard the interests of us, our business and partiesconnected therewith by blocking any influences that may threaten theseinterests, which interests may include the continuity, indentity or identity ofus, our business and the parties connected therewith. The preferred foundationcan safeguard these interests through acquiring and managing our preferenceshares and by exercising the rights attaching to these shares, in particular,the voting rights.

The agreement between usand the Preferred Foundation was amended to grant an option to the PreferredFoundation to acquire a number of preference shares equal to the number of ouroutstanding shares, necessary to match the total number of statutory votes onall of the ordinary shares then outstanding. The amendment allows the PreferredFoundation to acquire a number of shares equal to 100% of our then outstandingshares; prior to the amendment, it could only acquire a number of shares equalto 50% of our then outstanding shares. The new agreement was explained to ourshareholders at the annual general meeting of shareholders in 2005. ThePreferred Foundation must pay at least 25% of the nominal value of thepreference shares it acquires from us. If we acquire any preference shares,they may be cancelled.

A board of governors of upto five persons directs the Preferred Foundation. Jan Oosterveld, in hiscapacity as chairman of our Supervisory Board, and Pieter Bouw, Mick W. denBoogert, Sweder van Wijnbergen and Gerard P. Krans, have been appointed to theboard of governors. A majority of these members may not be members or formermembers of our Management or Supervisory Board, or an employee of any of ouradvisers, any of our banks or us. These independent members are appointed bythe board of governors. The non-independent members are appointed by ourSupervisory Board after consultation with our Management Board.

Membershipof the board of governors of the Preferred Foundation terminates upon:

·       voluntaryretirement, reaching the age of 72, death or bankruptcy;

·       forour non-independent members, resignation, or dismissal by the members ofour Supervisory Board;

·       forour independent members, if they cease to be independent;

·       dismissalby the complete board of the Preferred Foundation; or

·       periodic retirement inaccordance with a rotation plan to be drawn up by the Preferred Foundation’sboard of governors, however, these members may be reappointed.

***Issue of Shares andPre-emptive Rights***

Our general meeting ofshareholders, or our Management Board if the general meeting of shareholdershas delegated the power to it, has the authority to decide on any furtherissuance of shares or rights to subscribe for shares and on the terms andconditions of such issuance. Our Management Board is the authorized corporatebody (*orgaan*) for this purpose until June 1,2010 and this authorization may at 

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any timebe extended for periods of up to five years. Our Management Board’s authorityto issue shares is limited to our authorized share capital.

Our Management Board canissue shares of any class if it has the approval of our Supervisory Board.Without specific authorization from our general meeting of shareholders ourManagement Board may not issue preference shares or grant options for suchshares if, as a result, more preference shares than other shares will or couldbecome outstanding.

Each holder of ordinaryshares has pre-emptive rights to subscribe for any ordinary shares that weissue and has pre-emptive rights to subscribe if we grant rights to subscribefor ordinary shares. Pre-emptive rights are in proportion to thepercentage of our outstanding ordinary shares that the holder owns. Pre-emptiverights do not apply to ordinary shares issued for a non-cash contribution, toordinary shares issued to our employees or ordinary shares issued to a personwho exercises a previously-acquired right to subscribe for ordinaryshares. Holders of preference shares do not have pre-emptive rights if we issueordinary shares, and holders of ordinary shares have no pre-emptive rights topurchase preference shares if we issue preference shares.

If our Management Boardhas been delegated the authority to issue shares, it can limit or exclude anypre-emptive rights as long as the general meeting of shareholders has grantedit that power and our Supervisory Board approves. At present, our ManagementBoard is authorized to do this. This authorization is valid until June 1,2010 and the general meeting of shareholders may at any time extend thisauthorization for periods of up to five years.

Our shares cannot beissued below par. The ordinary shares must be fully paid up upon issue.Preference shares may be issued without being fully paid up, but at leastone-quarter of the nominal amount must be paid up upon subscription, and eachissue of preference shares must have the same amount paid up. Our ManagementBoard may determine the day and the amount of a further call for payment on preferenceshares.

***Acquisition by Usof Shares in Our Own Capital***

We mayacquire our own shares if the following conditions are met:

·       ourgeneral meeting of shareholders has authorized our Management Board to acquirethe shares;

·       theauthorization specifies the number of shares which we may acquire, the mannerin which they may be acquired and the limits within which the price must beset;

·       ourshareholders’ equity, after deduction of the price of acquisition, is not lessthan the sum of the paid and called up portion of the share capital and thereserves that provisions of Dutch law or our articles of association require usto maintain; and

·       theaggregate par value of the shares to be acquired, together with the shares inour share capital that we already hold directly, indirectly or as pledgee, doesnot equal more than one-tenth the aggregate par value of our total issued sharecapital.

We may not acquire our ownshares if they have not been fully paid-up. The authorization by the generalmeeting of shareholders may be for a term of up to 18 months.

We and our subsidiariesmay not vote shares which we or they hold. We may acquire shares to transferthem to our employees or the employees of our group companies under designatedstock option plans without authorization.

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***Capital Reduction***

If our Management Boardproposes, our Supervisory Board approves and Dutch law permits, the generalmeeting of shareholders can reduce our issued share capital by cancellation ofshares or reduction of the nominal value of shares.

**Other Key Provisions of our Articles of Association**

***Voting Rights andShareholders’ Meetings***

We must hold annualgeneral meetings of shareholders within six months of the end of our fiscalyear. The annual meeting is held, among other things, to adopt our annualaccounts. We must hold extraordinary general meetings of shareholders whenever:

·       shareholders and holders ofdepositary receipts for shares together representing at least one-tenth of ouroutstanding share capital request it in writing, listing the topics to bediscussed; and

·       our Management Board or ourSupervisory Board deems appropriate.

General meetings ofshareholders may only be held in the municipalities of Leiden, Amsterdam,Haarlemmermeer (including Schiphol Airport and Schiphol-Rijk), Utrecht,Rotterdam and The Hague.

Each shareholder canattend general meetings in person or by proxy, address the meeting and vote.Each share, whether ordinary or preference, confers one vote on theshareholder. The Management Board must be notified in writing of a registeredshareholder’s intention to attend the general meeting of shareholders. Theholders of bearer ordinary shares can vote if a NECIGEF participant sends awritten statement as to their shareholdings to our offices. Resolutions arepassed by absolute majority of votes cast unless stated otherwise in Dutch lawand our articles of association.

The general meeting ofshareholders can amend our articles of association, dissolve us, merge us ordemerge us only if proposed by the Supervisory Board.

Dutch law and our articlesof association do not impose any limitations on non-Dutch ownership orvoting of our ordinary shares.

***Annual Report***

We have a calendar fiscalyear. Dutch law requires that within five months after the end of our fiscal year,unless the general meeting of shareholders has extended this period for amaximum of six months, our Management Board must make available to theshareholders a report with respect to that fiscal year. This report mustinclude the financial statements and a report of an independent accountant. Theannual report is submitted to the annual general meeting of shareholders foradoption. See “Management—Limitation of Liability and Indemnification Matters”.

***Dividends***

Annual dividends may onlybe paid out of profits as shown in the adopted annual financial statements. Wemay not make distributions if the distribution would reduce our shareholders’equity below certain reserves required by Dutch law or our articles ofassociation. The profits must first be used to set up and maintain reservesrequired by Dutch law and must then be set off against certain financiallosses. The preference shares will be paid their dividends, which will be acertain percentage of their nominal value, first. With Supervisory Board approval,our Management Board then decides whether and how much of the remaining profitthey will reserve. Any profits remaining can be paid as a dividend on theordinary shares. With the approval of our Supervisory Board and subject toDutch law, our Management Board can pay an interim dividend. The payment of aninterim dividend in our or another entity’s shares requires the additionalapproval of our general meeting of shareholders.

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We can make distributionsto shareholders at the charge of one or more of our reserves. Holders of sharesare entitled to the full dividend for the fiscal year 2000 and subsequentfiscal years. Any dividends that are not claimed within five years of theirdeclaration revert to us.

***Amendment of OurArticles of Association and Liquidation Rights***

The general meeting ofshareholders may only resolve to amend our articles of association or todissolve, merge or demerge us on the proposal of our Supervisory Board. Theclass of shareholders affected must approve a resolution to amend the articlesof association to change the rights of the class. If we are dissolved andliquidated, after we pay all debts and liquidation expenses, the holders ofpreference shares have first rights to payment of any dividends not fully paidto them in previous years and of the nominal value of their preference shares.Any remaining assets will be distributed to the holders of ordinary shares.

**Enforcement of Civil Liabilities**

We are incorporated underthe laws of The Netherlands, and the majority of the members of our SupervisoryBoard, all of the members of our Management Board and management team and allof the experts named in this document are residents of, and most of our andtheir assets are in, jurisdictions outside the United States. As a result, it maynot be possible for you to effect service of process within the United Statesupon us or these persons, or to enforce against us or these persons in courtsin the United States, judgments of these courts predicated upon the civilliability provisions of United States securities laws. In addition, it is notclear whether a Dutch court would impose civil liability on us, members of ourManagement Board or Supervisory Board or management team or any of the expertsnamed in this document in an original action based solely upon the federalsecurities laws of the United States brought in a court of competentjurisdiction in The Netherlands. Dutch law, furthermore, does not recognize ashareholder’s right to bring a derivative action on behalf of a corporation.

Ourlegal counsel in The Netherlands, Allen & Overy, has advised us thatbecause there is no treaty on the reciprocal recognition and enforcement ofjudgments in civil and commercial matters between the United States and TheNetherlands, courts in The Netherlands will not automatically enforce a finaljudgment rendered by a United States court. In order to obtain a judgmentenforceable in The Netherlands, claimants must litigate the relevant claimagain before a Dutch court of competent jurisdiction. Under current practice,however, a Dutch court will recognize a final and conclusive judgment renderedby a United States court if the Dutch court finds that:

·       theUnited States court assumed jurisdiction on grounds which are acceptable froman international law perspective;

·       thefinal judgment results from proceedings compatible with Dutch concepts of dueprocess; and

·       thefinal judgment does not contravene public policy of The Netherlands.

If the Dutch courtrecognizes the final judgment, that court generally will grant the samejudgment without litigating again on the merits.

**Material Contracts**

On December 31, 2003,we entered into a collaboration and license agreement with Aventis Pasteur S.A.(now sanofi pasteur) to develop and commercialize influenza vaccine productsbased on our PER.C6 technology. Under the terms of the agreement, we grantedsanofi pasteur an exclusive license to research, develop, manufacture andcommercialize influenza vaccine products based on our PER.C6 technology. Wereceived an up-front payment and will receive milestone payments, annualpayments, research and development funding totaling € 30million, and high single- up to double-digit royalties on 

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futurePER.C6-based influenza vaccine sales. We retain commercialization rightsfor Japan, where sanofi pasteur will supply finished vaccine products to us andwe will pay a royalty on sales to sanofi pasteur.

On April 13, 2005 weentered into a manufacturing contract with the Vaccine Research Center (VRC),part of the National Institute of Allergy and Infectious Diseases (NIAID) ofthe National Institutes of Health (NIH), to manufacture up to ten batches ofclinical material of the PER.C6-based Ebola vaccine in its ownmanufacturing facility. These materials will be used for Phase I and earlyPhase II clinical studies in humans. We will receive up to € 21.4million (US$ 27.6 million) from the VRC for the manufacturing of theseclinical lots, over a period of 5 years, commencing April 15, 2005.

**Exchange Controls**

There are currently noDutch laws, decrees or regulations that restrict the export or import ofcapital, including, but not limited to, foreign exchange controls, or thataffect the remittance of dividends or other payments to non-Dutch residents orto U.S. holders of our securities except as otherwise set forth inItem 10, “Additional information—Taxation”.

**Taxation**

The following is a summaryof the material Dutch and U.S. tax consequences of an investment in ordinaryshares or ADSs. This summary does not discuss every aspect of taxation that maybe relevant to a particular investor who is subject to special treatment underany applicable law, and is not intended to be applicable in all respects to allcategories of investors. This summary also assumes that our business will beconducted in the manner outlined in this document. Changes in ourorganizational structure or the manner in which we conduct our business mayinvalidate this summary. The laws upon which this summary is based are subjectto change, perhaps with retroactive effect. A change to these laws mayinvalidate the contents of this summary, which will not be updated to reflectchanges in the laws. Prospective investors should consult their professionaltax advisors regarding their particular personal tax consequences of acquiring,owning and disposing of our ordinary shares or ADSs.

**Certain Dutch Tax Consequences for Holders of OrdinaryShares or ADSs**

This summary describes theprincipal tax consequences that will generally apply in the case of aninvestment in the ordinary shares or ADSs under Dutch tax laws in force and ineffect as of the date hereof, and is subject to changes in Dutch law, includingchanges that could have retroactive effect. Not every potential tax consequenceof such investment under the laws of the Netherlands will be addressed.

***Dutch Taxation ofResident Shareholders***

Thesummary of certain Dutch taxes set out in this section “Dutch Taxation ofResident Shareholders” is only intended for the following investors:

·       individualswho are resident or deemed to be resident or who have opted to be resident inthe Netherlands for purposes of Dutch taxation and who invest in the ordinaryshares or ADSs, excluding individuals who invest in the ordinary shares or ADSsthat form part of a substantial interest in us and excluding individuals whoare our employees or who are deemed to be our employees or employees of anyentity related to us (the “Dutch Individuals”); and

·       corporateentities (including associations which are taxable as corporate entities) thatare resident or deemed to be resident in The Netherlands for purposes of Dutchtaxation and who invest in the ordinary shares or ADSs, excluding:

·        corporateentities that are not subject to Dutch corporate income tax;

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·        pensionfunds (pensioenfondsen) and other entities that are wholly or partly exemptfrom Dutch corporate income tax;

·        corporateentities that hold ordinary shares or ADSs that qualify for application of theparticipation exemption (as laid down in the Dutch Corporate Income Tax Act1969); and

·        investmentinstitutions (beleggingsinstellingen) as defined in the Dutch Corporate IncomeTax Act 1969; (the “Dutch Corporate Entities”).

Generally, a holder ofordinary shares or ADSs will not have a substantial interest if he, his spouse,certain other relatives (including foster children) or certain persons sharinghis household, do not hold, alone or together, whether directly or indirectly,the ownership of, or certain other rights over, ordinary shares representing 5%or more of our total issued and outstanding capital (or the issued andoutstanding capital of any class of shares), or rights to acquire ordinaryshares, whether or not already issued, that represent at any time 5% or more ofour total issued and outstanding capital (or the issued and outstanding capitalof any class of shares) or the ownership of certain profit participatingcertificates that relate to 5% or more of our annual profit and/or to 5% ormore of our liquidation proceeds. A deemed substantial interest is present if(part of) a substantial interest has been disposed of, or is deemed to havebeen disposed of, on a non-recognition basis, unless, in the case of an actualdisposal, the consideration received forms part of a substantial interest.

***Individual andCorporate Income Tax.***

Dutch Individuals notengaged or deemed to be engaged in an enterprise and Dutch Individuals for whomthe benefits derived from the ordinary shares or ADSs are not treated as “resultsfrom other activities.”

Under current legislation,the taxable benefit from a Dutch (private) Individual’s “savings andinvestments” (*sparen en beleggen*) is set annuallyat 4% of the average of the so-called “yield basis” (*rendementsgrondslag*)at the beginning and at the end of a year, insofar as the average exceeds the “exemptnet asset amount” (*heffingvrij vermogen*).Such taxable benefit is reduced by such portion of the personal allowance ashas not been taken into account in respect of certain other types of income.This benefit shall be taxed at the rate of 30%. For Dutch Individuals whoinvest in the ordinary shares or ADSs, the ordinary shares or ADSs will formpart of the yield basis. The ordinary shares or ADSs will be taken into accountin the yield basis at their fair market value. If the actual benefits from theordinary shares or ADSs exceed 4% of the yield basis, these benefits (capitalgains and income) are not taxable.

Dutch Individuals engagedor deemed to be engaged in an enterprise, Dutch Individuals for whom thebenefits derived from the ordinary shares or ADSs are treated as results fromother activities, and Dutch Corporate Entities.

Any benefits derived ordeemed to be derived from the ordinary shares or ADSs (including any capitalgains realized on the disposal thereof) that are attributable to an enterprisecarried on in the Netherlands by a Dutch Individual or to an enterpriseeffectively managed in the Netherlands in which he has an interest, aregenerally subject to income tax charged at progressive rates in his hands. Thesame applies to a Dutch Individual for whom the benefits derived from theordinary shares or ADSs are treated as results from other activities. Anybenefits derived or deemed to be derived from the ordinary shares or ADSs(including any capital gains realized on the disposal thereof) that are held bya Dutch Corporate Entity are generally subject to corporate income tax in itshands.

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***Withholding Tax.***

Dividendswe distribute generally are subject to a withholding tax imposed by TheNetherlands at a rate of 15%. The concept “dividends we distribute” used inthis section includes, but is not limited to:

·       distributionsin cash or in kind, deemed and constructive distributions and repayments ofpaid-in capital not recognized for Dutch dividend withholding tax purposes;

·       liquidationproceeds, proceeds of redemption of the ordinary shares or ADSs or, as a rule,consideration for the repurchase of the ordinary shares or ADSs by us in excessof the average paid-in capital recognized for Dutch dividend withholding taxpurposes;

·       thepar value of the ordinary shares or ADSs issued to a holder of the ordinaryshares or ADSs or an increase of the par value of the ordinary shares or ADSs,as the case may be, to the extent that it does not appear that a contribution,recognized for Dutch dividend withholding tax purposes, has been made or willbe made; and

·       partialrepayment of paid-in capital, recognized for Dutch dividend withholding taxpurposes, if and to the extent that there are net profits (*zuiverewinst*), unless:

·        thegeneral meeting of our shareholders has resolved in advance to make suchrepayment; and

·        thepar value of the ordinary shares or ADSs concerned has been reduced by an equalamount by way of an amendment of the articles of association.

Dutch Individuals andDutch Corporate Entities generally can credit the dividend withholding taxagainst their income tax or corporate income tax liability and will be entitledto a refund of dividend withholding tax insofar as such tax, together with anyother creditable domestic and/or foreign taxes, exceeds their aggregate incometax or corporate income tax liability. A condition to avoid “dividendstripping” is that the recipient of proceeds from the ordinary shares or ADSsqualifies as the beneficial owner thereof. A recipient of proceeds from theordinary shares or ADSs is not considered to be the beneficial owner thereof ifthe amount of dividend, following a set of transactions, is ultimately whollyor partly received by another person, if this other person also retains,directly or indirectly, an interest in the ordinary shares or ADSs and therecipient is entitled to a (partial) refund or exemption to which the otherperson is not entitled to.

***Gift and Inheritance Taxes.***

A gift tax liability will arise in The Netherlandswith respect to an acquisition of the ordinary shares or ADSs by way of a giftmade by a Dutch Individual or a Dutch Corporate Entity. An inheritance taxliability will arise in The Netherlands with respect to an acquisition ordeemed acquisition of the ordinary shares or ADSs on the death of a DutchIndividual.

For purposes of Dutch giftand inheritance taxes, an individual who holds Dutch nationality will be deemedto be resident in The Netherlands if he has been resident in The Netherlands atany time during the ten years preceding the date of the gift or his death. Forpurposes of the Dutch gift tax, an individual not holding Dutch nationalitywill be deemed to be resident in The Netherlands if he has been resident in TheNetherlands at any time during the twelve months preceding the date of thegift.

***Dutch Taxation of Non-Resident Shareholders***

This section “DutchTaxation of Non-Resident Shareholders” describes certain Dutch tax consequencesfor a holder of the ordinary shares or ADSs who is neither resident, nor deemedto be resident, and who has not opted to be treated as a resident in TheNetherlands for purposes of Dutch taxation (a “Non-Resident Shareholder”).

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***Withholding Tax***

Dividends we distribute generally are subject to awithholding tax imposed by The Netherlands at a rate of 15%. Reference is madeto the section “Dutch Taxation of Resident Shareholders—Withholding Tax” for adescription of the concept “dividends we distributed.”

If a double taxation convention is in effect betweenThe Netherlands and the country of residence of a Non-Resident Shareholder,such Non-Resident Shareholder may, depending on the terms of that doubletaxation convention, be eligible for a full or partial exemption from, orrefund of, Dutch dividend withholding tax. See “ Taxation of Dividends” for adiscussion of the partial exemption available under the convention with theUnited States.

A further condition toavoid “dividend stripping” is that the Non-Resident Shareholder qualifies asthe beneficial owner of the dividend. A Non-Resident Shareholder is notconsidered to be the beneficial owner of the dividend, if the amount of this dividend,following a set of transactions, is ultimately wholly or partly received byanother person and this other person also maintains, directly or indirectly, aninterest in the ordinary shares or ADSs and the recipient is entitled to a(partial) refund or exemption to which the other person is not entitled to.

***Taxes on Income and Capital Gains***

A Non-ResidentShareholder will not be subject to any Dutch taxes on income or capital gainsin respect of dividends we distribute (other than the withholding tax describedabove) or in respect of any gain realized on the disposal of the ordinaryshares or ADSs, provided that:

·       suchNon-Resident Shareholder does not have an enterprise or an interest in anenterprise that is, in whole or in part, carried on through a permanentestablishment or a permanent representative in the Netherlands and to whichenterprise or part of an enterprise, as the case may be, the ordinary shares orADSs are attributable;

·       suchNon-Resident Shareholder does not have a substantial interest or a deemedsubstantial interest in us (for as far a double tax convention does not refrainthe Netherlands from taxation of income or capital gains from the substantialinterest);

If such Non-Resident Shareholder is an individual, thebenefits derived from the ordinary shares or ADSs are not taxable in the handsof such holder as a benefit from other activities in the Netherlands; suchNon-Resident Shareholder is not entitled to a share in the profits of anenterprise effectively managed in the Netherlands, other than by way of theholding of securities or through an employment contract, to which enterprisethe ordinary shares or ADSs or payments in respect of the ordinary shares orADSs are attributable; such Non-Resident Shareholder does not carry out and hasnot carried out employment activities in the Netherlands with which the holdingof or income derived from the ordinary shares or ADSs is connected; and if theNon-Resident Shareholder is an individual, he or she does not opt to be taxedas a resident of the Netherlands for purposes of Dutch taxation.

Reference is made to thesection “Dutch Taxation of Resident Shareholders” for a description of theconcepts “substantial interest” and “deemed substantial interest.”

***Gift and Inheritance Taxes***

No liability forgift or inheritance taxes will arise in The Netherlands with respect to anacquisition of the ordinary shares or ADSs by way of a gift made by, or on thedeath of, a Non-Resident Shareholder, unless:

·       suchNon-Resident Shareholder at the time of the gift has or at the time of hisdeath had an enterprise or an interest in an enterprise that is or was, inwhole or in part, carried on through a 

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permanentestablishment or a permanent representative in The Netherlands and to whichenterprise or part of an enterprise, as the case may be, the ordinary shares orADSs are or were attributable; or

·       inthe case of a gift of the ordinary shares or ADSs by an individual who at thetime of the gift was a Non-Resident Shareholder, such individual dies within 180days after the date of the gift, while (at the time of his death) beingresident or deemed to be resident in The Netherlands.

For purposes of Dutch giftand inheritance tax, an individual who holds Dutch nationality will be deemedto be resident in The Netherlands if he has been resident in The Netherlands atany time during the ten years preceding the date of the gift or his death. Forpurposes of the Dutch gift tax, an individual not holding Dutch nationalitywill be deemed to be resident in The Netherlands if he has been resident in TheNetherlands at any time during the twelve months preceding the date of thegift.

***Other Taxes andDuties***

No Dutch registration tax,transfer tax, stamp duty or any other similar documentary tax or duty will bepayable in The Netherlands in respect of or in connection with thesubscription, issue, placement, allotment or delivery of the ordinary shares orADSs.

**Taxation of U.S. Investors**

Thefollowing is a summary of the material U.S. federal income tax considerationsregarding the purchase, ownership and disposition of ordinary shares or ADSs toan eligible U.S. holder. You are an eligible U.S. holder if you are a residentof the United States for purposes of the tax treaty between The Netherlands andthe United States (the “tax treaty”) and are fully eligible for benefits underthe tax treaty. You generally will be entitled to the benefits of the taxtreaty if you are:

·       thebeneficial owner of ordinary shares or ADSs (and of the dividends paid withrespect to such ordinary shares or ADSs);

·       anindividual resident of the United States, a U.S. corporation, or a partnership,estate or trust to the extent your income is subject to taxation in the UnitedStates as the income of a resident, in your hands or in the hands of yourpartners or beneficiaries;

·       notresident in The Netherlands for Dutch tax purposes; and

·       notsubject to an anti-treaty shopping rule.

You generally will not beeligible for the benefits of the tax treaty, and therefore will not be aneligible U.S. holder, if you hold ordinary shares or ADSs in connection withthe conduct of business through a permanent establishment, or the performanceof services through a fixed base in The Netherlands, or you are not resident inthe United States for U.S. tax purposes.

The summary does notpurport to be a comprehensive description of all of the tax considerations thatmay be relevant to your decision to purchase ordinary shares or ADSs. Inparticular, the summary does not address considerations that may be applicableto you if you will not hold ordinary shares or ADSs as capital assets, or ifyou are a taxpayer subject to special tax rules, such as a bank, tax-exemptentity, insurance company, a regulated investment company, a pension fund, areal estate investment trust, a dealer in securities or currencies, a personthat holds ordinary shares or ADSs as part of an integrated investment(including a “straddle”) comprised of ordinary shares or ADSs and one or moreother positions, and a person who owns or is deemed to own 10% or more of anyclass of our stock. The summary is based on laws, treaties and regulatoryinterpretations in effect on the date of this document, all of which aresubject to change. You should consult your own advisers regarding the taxconsequences of an investment in the 

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ordinaryshares or ADSs in light of your particular circumstances, including the U.S.tax considerations discussed below and the effect of any state, local or othernational laws.

**Based on our audited financial statements and relevantmarket data, we believe that we were not treated as a “passive foreigninvestment company” or “PFIC” for U.S. federal income tax purposes with respectto the year 2006. In addition, based on our current expectations regarding thevalue and nature of our assets, the sources and nature of our income, andrelevant market data, we do not anticipate becoming a PFIC in the year 2007 orthereafter. We believe, however, that we were or may have been a PFIC for U.S.federal income tax purposes with respect to the years before 2005. In order toavoid being subject to unfavorable U.S. federal income taxrules applicable to PFICs (the “PFIC rules”) with respect to our ordinaryshares or ADSs in the future, U.S. holders that held our ordinary shares orADSs at any time before 2005 may wish to make a deemed sale election withrespect to their ordinary shares or ADSs. See “Passive Foreign InvestmentCompany Rules.”**

For U.S. federal incometax purposes and for purposes of the tax treaty between The Netherlands and theUnited States, beneficial owners of ADSs will be treated as the owners of theunderlying ordinary shares represented by those ADSs.

***Taxation ofDividends***

Subject to the discussionbelow under “Passive Foreign Investment Company Rules,” the gross amount ofdividends distributed by us (including amounts withheld in respect of Dutchwithholding tax) generally will be subject to U.S. federal income taxation asforeign source dividend income, and will not be eligible for the dividendsreceived deduction. Subject to certain exceptions for positions that are hedgedor held for less than 60 days, an individual U.S. holder generally will besubject to U.S. taxation at a maximum rate of 15% in respect of dividendsreceived after 2002 and before 2011, unless we were in the year prior to theyear in which the dividend was paid, and are, in the year in which the dividendis paid, a PFIC. As described above, we believe that we were not a PFIC forU.S. tax purposes with respect to the year 2006, and also do not anticipatebecoming a PFIC with respect to the year 2007. Dividends paid in Euros will beincluded in income in a U.S. dollar amount calculated by reference to theexchange rate in effect on the date of receipt by you (or by the depositary inthe case of ADSs). If such dividends are converted into U.S. dollars onthe date of receipt, you generally should not be required to recognize foreigncurrency gain or loss in respect of the dividend income. If you receive arefund of Dutch withholding tax under the tax treaty between The Netherlandsand the United States, you may be required to recognize foreign currency gainor loss to the extent the amount of the tax treaty refund (in dollars) receivedby you differs from the U.S. dollar equivalent of the refund amount on the datethe dividends were received.

You may claim the benefitof the reduced withholding rate of 15 percent that is available under the taxtreaty between The Netherlands and the United States by submitting a dulycompleted Form IB 92 USA that has been certified by a financialinstitution (typically the entity that holds the ordinary shares or ADSs ascustodian for the holder). If we receive the required documentation prior tothe relevant dividend payment date, we may apply the reduced withholding rateat source. If you fail to satisfy these requirements prior to the payment of adividend, you may claim a refund of the excess of the amount withheld over thetax treaty rate by filing Form IB 92 USA together with a supplementalstatement with the Dutch tax authorities. Pension funds and tax-exemptorganizations qualifying for a complete exemption from tax are not entitled toclaim tax treaty benefits at source, and instead must file claims for refund byfiling Form IB 95 USA.

Subject to applicablelimitations and to the special considerations discussed below, Dutchwithholding tax at the 15% tax treaty rate will be treated as a foreign incometax that is eligible for credit against your U.S. federal income tax liabilityor, at your election, may be deducted in computing taxable income. Foreign taxcredits will not be allowed for withholding taxes imposed in respect of certainshort-term or hedged positions and may not be allowed in respect ofarrangements in which your expected economic 

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profit,after non-U.S. taxes, is insubstantial. You should consult your own advisersconcerning the implications of these rules in light of your particularcircumstances.

***Taxation of CapitalGains***

Subject to the discussionbelow under “Passive Foreign Investment Company Rules,” gain or loss realizedby you on the sale or other disposition of ordinary shares or ADSs will becapital gain or loss in an amount equal to the difference between your basis inthe ordinary shares or ADSs and the amount realized on the disposition (or itsdollar equivalent, determined at the spot rate on the date of disposition, ifthe amount realized is denominated in a foreign currency). The gain or losswill be long-term gain or loss if the ordinary shares or ADSs were held formore than one year. The net amount of long-term capital gain recognized by anindividual U.S. holder generally is subject to taxation at a maximum rate of20%; however, net long-term capital gain recognized by an individual U.S.holder after May 5, 2003 and before January 1, 2011 generally issubject to taxation at a maximum rate of 15%.

***Passive ForeignInvestment Company Rules***

UnfavorableU.S. tax rules (the “PFIC rules”) apply to companies that are consideredpassive foreign investment companies (“PFICs”). We will be classified as a PFICin a particular taxable year if either:

·       75%or more of our gross income is treated as passive income for purposes of thePFIC rules; or

·       theaverage percentage of the value of our assets that produce or are held for theproduction of passive income is at least 50%.

Based on our auditedfinancial statements and relevant market data, we believe that we were nottreated as a PFIC for U.S. federal income tax purposes with respect to the year2006. In addition, based on our current expectations regarding the value andnature of our assets, the sources and nature of our income, and relevant marketdata, we do not anticipate becoming a PFIC in the year 2007 or thereafter. Webelieve, however, that we were or may have been a PFIC for U.S. federal incometax purposes with respect to the years before 2005.

If we are classified as aPFIC in any year, then a U.S. holder who holds shares during that year and doesnot make a mark-to-market election or a qualified electing fund (“QEF”)election will be subject to a special tax at ordinary income tax rates oncertain dividends that we pay and on gains realized on the sale of ordinaryshares or ADSs (“excess distributions”) in all subsequent years, without regardto whether we were a PFIC in the year the excess distribution was received. Theamount of this tax will be increased by an interest charge to compensate fortax deferral, calculated as if the excess distributions had been earned ratablyover the period the U.S. holder held its ordinary shares or ADSs. Classificationas a PFIC may also have other adverse tax consequences, including the denial ofa step-up in the basis of ordinary shares and ADSs at death.

If we were a PFIC in thepast, U.S. holders that held our ordinary shares or ADSs at any time during theyears when we were a PFIC and did not make a mark-to-market election or a QEFelection will generally continue to be subject to the PFIC rules describedabove, even though we later ceased to qualify as a PFIC. You can generallyavoid the future application of the PFIC rules by making a deemed saleelection with respect to your ordinary shares or ADSs for your taxable yearthat includes the last day of our last taxable year during which we qualifiedas a PFIC (the “termination date”). If you make the deemed sale election withrespect to our ordinary shares or ADSs, you generally will be treated as havingsold all your ordinary shares or ADSs for their fair market value on thetermination date. The deemed sale generally will be taxed to you as an excessdistribution. Any loss realized on the deemed sale will not be recognized. Ifyou made a mark-to-market election or a QEF election with respect to yourordinary shares or ADSs in the past, you will not be required to include anymark-to-market gain or loss with respect to our ordinary shares or ADSs (in thecase of the mark-to-market election) or to include your pro rata share of 

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ourordinary earnings and net capital gain (in the case of the QEF election) forthe years during which we do not qualify as a PFIC.

**The PFIC rules are extremely complex, and youshould consult your own tax advisers regarding the U.S. federal income taxconsiderations discussed above and the desirability of making a deemed saleelection.**

***U.S. BackupWithholding Tax and Information Reporting***

Paymentsin respect of the ordinary shares or ADSs that are made in the United States orby a U.S.-related financial intermediary will be subject to informationreporting and may be subject to backup withholding unless you:

·       area corporation or other exempt recipient; or

·       providean IRS Form W-9 or an acceptable substitute form, certifying yourtaxpayer identification number and that no loss of exemption from backupwithholding has occurred.

If you are not a U.S.person, you generally are not subject to these rules, but may be required toprovide certification of non-U.S. status in order to establish that you areexempt.

**Dividends and Paying Agents**

Not applicable.

**Statement by Experts**

Not applicable.

**Documents on Display**

We are subject to theinformational requirements of the Securities Exchange Act of 1934, as amended,and in accordance therewith file information with the U.S. Securities andExchange Commission (“SEC”). You may read and copy this information at thefollowing location:

Public Reference Room100 F Street, N.E.Washington, D.C. 20549

Please call the SEC at 1-800-SEC-0330for further information on the public reference room. Copies of these materialscan also be obtained by mail at prescribed rates from the Public ReferenceSection of the Securities and Exchange Commission, 100 F Street, N.E.,Washington, D.C. 20549. Our ADSs are quoted on the Nasdaq National Market, andconsequently, the periodic reports and other information filed by us with theCommission can be inspected at the offices of the Nasdaq National Market, 1735K Street, N.W., Washington, D.C. 20006. The primary market for our ordinaryshares is Euronext Amsterdam. We make our filings with the SEC by electronicmeans. Any filings we make electronically are available to the public over theinternet at the Commission’s website at *http://www.sec.gov*and at our website at *http://www.crucell.com.*

**Item11.**                 Quantitative andQualitative Disclosures about Market Risk

For quantitative andqualitative disclosures about market risk see Item 5 “Operating and FinancialReview and Prospects—Quantitative and Qualitative Disclosures about MarketRisk”.

**Item 12.**                 Descriptionof Securities Other than Equity Securities

This item is not applicable.

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**PART II**

**Item13.**                 Defaults,Dividend Arrearages and Delinquencies

None.

**Item14.**                 MaterialModifications to the Rights of Security Holders

None.

**Item15.**                 Controls andProcedures

*Evaluation of Disclosure Controls and Procedures*

We have evaluated, withthe participation of our chief executive officer and chief financial officer,the effectiveness of our disclosure controls and procedures as of December 31,2006. There are inherent limitations to the effectiveness of any system ofdisclosure controls and procedures, including the possibility of human errorand the circumvention or overriding of the controls and procedures.Accordingly, even effective disclosure controls and procedures can only providereasonable assurance of achieving their control objectives. Based upon ourevaluation, our chief executive officer and chief financial officer concludedthat the disclosure controls and procedures as of December 31, 2006 wereeffective to provide reasonable assurance that information required to bedisclosed in the reports we file or submit under the Securities Exchange Act of1934, as amended, is recorded, processed, summarized and reported, within thetime periods specified in the applicable rules and forms, and that it isaccumulated and communicated to our management, including our chief executiveofficer and chief financial officer, as appropriate to allow timely decisionsregarding required disclosure.

*Management’s Report on Internal Control Over FinancialReporting*

Managementof the Company is responsible for establishing and maintaining adequateinternal control over financial reporting as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act. The Company’s internal controlover financial reporting is designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples. The Company’s internal control over financial reporting includesthose policies and procedures that:

·       pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and disposition of the assets of the Company;

·       providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the Company arebeing made only in accordance with authorizations of managements and directorsof the Company; and

·       providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the Company’s assets that could have amaterial effect on the financial statements.

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

As required by Section 404of the Sarbanes-Oxley Act of 2002, management assessed the effectiveness of theCompany’s internal control over financial reporting as of December 31, 2006.In making this assessment, management used the criteria set forth by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control-Integrated Framework.

Based on our assessmentand those criteria, management concluded that the Company maintained effectiveinternal control over financial reporting as of December 31, 2006.

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Crucellcompleted 3 acquisitions in 2006. In the first quarter of 2006 the Companyacquired approximately 98.4% percent of the outstanding common shares of BernaBiotech. In October 2006 the Company completed the acquisition of the businessof BPC by its subsidiary Crucell Vaccines Inc. In November 2006 theCompany completed the acquisition of 100% of the outstanding shares of SBL. TheCompany has excluded Berna Biotech’s, Crucell Vaccines Inc’s and SBL’s internalcontrol over financial reporting from its assessment of and conclusion on theeffectiveness of internal control over financial reporting.

·       BernaBiotech constituted 47% and 51% of the Company’s consolidated net and totalassets respectively, 76% of total consolidated revenues and 60% of the consolidatednet loss as of and for the year ended December 31, 2006;

·       CrucellVaccines Inc. constituted 0% and 1% of the Company’s consolidated net and totalassets respectively, 1% of the total consolidated revenues and 0% of the consolidatednet loss as of and for the year ended December 31, 2006; and

·       SBLconstituted 8% and 9% of the Company’s consolidated net and total assetsrespectively, 3% of the total consolidated revenues and 0% of the consolidated netloss as of and for the year ended December 31, 2006.

As of the date of eachacquisition, the Company began implementing procedures at each of BernaBiotech, Crucell Vaccines Inc. and SBL whereby internal controls over financialreporting are documented and regularly evaluated to ensure the effective designand operation of those controls. The Group performed these procedures to ensurecompliance with the rules under Section 404 of the Sarbanes-Oxley Act of2002 in 2007.

*Attestation Report of the Independent RegisteredPublic Accounting firm*

DeloitteAccountants B.V., an independent registered public accounting firm, has auditedManagement’s assessment of the effectiveness of internal control over financialreporting, as stated on their report below.

To the Supervisory Boardand Shareholders of Crucell N.V.:

Wehave audited management’s assessment, included in the accompanying Management’s Report on Internal Control OverFinancial Reporting, that Crucell N.V. and subsidiaries (the “Company”)maintained effective internal control over financial reporting as ofDecember 31, 2006, based on criteria established in *Internal Control**—IntegratedFramework*issued by the Committee of Sponsoring Organizations of theTreadway Commission. As described in management’sreport on Internal Control Over Financial Reporting, management excludedfrom its assessment the internal control over financial reporting at BernaBiotech AG, which was acquired on February 22, 2006 and whose financialstatements constitute 47% and 51% of the Company’s consolidated net and totalassets respectively, 76% of total consolidated revenues and 60% of theconsolidated net loss as of and for the year ended December 31, 2006.Furthermore, as described in management’sreport on Internal Control Over Financial Reporting, management excludedfrom its assessment the internal control over financial reporting at CrucellVaccines Inc., which business was acquired from Berna Products Corporation inOctober 2006 and whose financial statements constitute 0% and 1% of theCompany’s consolidated net and total assets respectively, 1% of the totalconsolidated revenues and 0% of the consolidated net loss amounts as of and forthe year ended December 31, 2006. Furthermore, as described in management’s report on Internal Control OverFinancial Reporting, management excluded from its assessment theinternal control over financial reporting at SBL Vaccin Holding AB, which whichwas acquired on November 23, 2006 and whose financial statementsconstitute 8% and 9% of the Company’s consolidated net and total assetsrespectively, 3% of the consolidated revenues and 0% of the consolidated netloss as of and for the year ended December 31, 2006. Accordingly, ouraudit did not include the internal control over financial reporting at BernaBiotech AG, Crucell Vaccines Inc. and SBL Vaccin Holding AB. The Company’smanagement is responsible for 

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maintaining effective internal control over financialreporting and for its assessment of the effectiveness of internal control overfinancial reporting. Our responsibility is to express an opinion onmanagement’s assessment and an opinion on the effectiveness of the Company’sinternal control over financial reporting based on our audit.

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control overfinancial reporting was maintained in all material respects. Our audit includedobtaining an understanding of internal control over financial reporting,evaluating management’s assessment, testing and evaluating the design andoperating effectiveness of internal control, and performing such other proceduresas we considered necessary in the circumstances. We believe that our auditprovides a reasonable basis for our opinions.

A company’s internalcontrol over financial reporting is a process designed by, or under thesupervision of, the company’s principal executive and principal financialofficers, or persons performing similar functions, and effected by thecompany’s board of directors, management, and other personnel to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that(1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assetsof the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordancewith generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.

Because of the inherentlimitations of internal control over financial reporting, including thepossibility of collusion or improper management override of controls, materialmisstatements due to error or fraud may not be prevented or detected on atimely basis. Also, projections of any evaluation of the effectiveness of theinternal control over financial reporting to future periods are subject to therisk that the controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

In our opinion,management’s assessment that the Company maintained effective internal controlover financial reporting as of December 31, 2006, is fairly stated, in allmaterial respects, based on the criteria established in *Internal Control**—IntegratedFramework*issued by the Committee of Sponsoring Organizations of theTreadway Commission. Also in our opinion, the Company maintained, in allmaterial respects, effective internal control over financial reporting as ofDecember 31, 2006, based on the criteria established in *Internal Control**—Integrated Framework*issued by theCommittee of Sponsoring Organizations of the Treadway Commission.

We have also audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated financial statements as of and for the year ended December 31, 2006 of the Company andour report dated June 11, 2007 expressed an unqualified opinion on thosefinancial statements and included an explanatory paragraph relating toInternational Financial Reporting Standards as adopted by the European Union,which varies in certain significant respects from accounting principlesgenerally accepted in the United States of America. The information relating tothe nature and effect of such differences is presented in Note 6 to the consolidatedfinancial statements of the Company.

Deloitte Accountants B.V.Amsterdam, The Netherlands

June 11, 2007

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*Changein Internal Control Over Financial Reporting*

During 2006, we madeimprovements to our internal controls over financial reporting to ensurecompliance with the rules under Section 404 of the Sarbanes-Oxley Act of2002. We have not made any material changes in internal control over financialreporting in 2006.

**Item16.**                 Reserved

**Item 16A.**         AuditCommittee Financial Expert

The members of our auditcommittee are all independent, non-executive members of the supervisory board.Our audit committee is in compliance with all of the relevant rules andregulations of The Netherlands. We believe that the members of our auditcommittee have sufficient financial and other experience to perform theirresponsibilities on the committee. Mr. A. Hoevenaars is a “financial expert’’as defined in the rules promulgated under the Sarbanes-Oxley Act of2002.

**Item 16B.**        Codeof Ethics

During 2003, we adopted acode of business conduct and ethics that applies to all employees of theCompany, including our principal executive officer and principal financialofficer. The code of business conduct and ethics was filed as an exhibit to ourForm 20-F for the fiscal year ended December 31, 2003 and canalso be accessed on our website at *http://www.crucell.com.*Noamendments or waivers of the code of ethics were made or granted during 2006.

**Item 16C.**        PrincipalAccountant Fees and Services

Ernst & Young Accountants have been Crucell’sexternal auditors since the incorporation of the company. The Supervisory Boardand the Management Board of Crucell reached the conclusion—after many years ofgood cooperation—that it is prudent to appoint a new auditor and proposed tohave Ernst & Young Accountants dismissed as the external auditors ofthe company and to have Deloitte Accountants B.V. (Deloitte) appointed asauditors starting with the financial year 2006. In January 2006, theGeneral Meeting of Shareholders approved the corresponding proposals of theSupervisory Board. The performance of Deloitte will be measured and judged bythe Audit Committee, which will present its findings to the full Board.

Deloitte has audited the accompanying consolidatedbalance sheets of Crucell N.V. and subsidiaries (the “Company’’) as ofDecember 31, 2006 and the related consolidated Income Statement, shareholders’equity, and cash flows for the year ended December 31, 2006. Theconsolidated financial statements of the Company as of December 31, 2005and the related consolidated Income Statement, stockholders’ equity, and cashflows for each of the last two years in the period ended December 31,2005, were audited by Ernst & Young Accountants.

The Sarbanes-Oxley Act of 2002 requires thataudit committees pre-approve all services provided by the Company’s independentauditor. This process is critical to the auditor maintaining independence. Ourprocess requires that all services provided by the independent auditor bepre-approved by the audit committee.

117

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During2005 and 2006 we paid the following amounts to our auditors for audit services,audit-related services and tax services.

| ** **         | ** ** | **Year ended  December 31,** | ** **    |
|--------------------|------------|----------------------------------------|---------------|
| ** **         | ** ** | **2005***                              | ** **    | **2006**** | ** ** |
| Audit fees         |       | €                                 |  636     |   |   | 1,178 |   |   |
| Audit-related fees |       | 12                                     |          |   | 58 |   |   |
| Tax fees           |       | 31                                     |          |   | — |   |   |
| Total              |       | €                                 |  679 679 |   |   | 1,236 |   |   |

----

*                    Paidto Ernst & Young.

**             Paidto Deloitte.

Audit fees include feesassociated with the annual audit, interim reviews, required statutory auditsand services that only the independent auditor can reasonably provide, such asservices associated with documents issued in connection with securitiesofferings.

**Audit-related fees**

Audit-related fees includeaccounting consultations on financial and accounting reporting standards.

**Tax fees**

Tax fees primarilyrepresent services provided related to miscellaneous consultations on taxmatters.

**Item 16D.**       Exemptionsfrom the Listing Standards for Audit Committees

Not applicable.

**Item 16E.**        Purchasesof Equity Securities by the Issuer and Affiliated Purchasers

Neither we nor anyaffiliated purchaser have purchased any of our equity securities during theyear ended December 31, 2006.

118

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**PART III**

**Item 17.      Financial Statements**

See the pages beginning onF-1 of this Form 20-F, included herein.

**Item 18.      Financial Statements**

The registrant hasresponded to Item 17 in lieu of responding to this item.

**Item19.**      Exhibits
| Exhibit   Number | ** ** | ** **                                                                                                                                                                                                                                           | ** ** | **Description** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
| 1.1              |       | Deed of Incorporation of  the Company*                                                                                                                                                                                                               |
| 1.2              |       | Amended Articles  of Association                                                                                                                                                                                                                     |
| 4.1              |       | Summary and Lease  Agreement dated November 18, 1998, between IntroGene B.V. and Amboz  B.V.**                                                                                                                                                  |
| 4.2              |       | Summary and Lease  Agreement dated November 27, 1997, between IntroGene B.V. and CAM  Implants B.V.**                                                                                                                                      |
| 4.3              |       | Lease Agreement  dated July 1, 2002 between Crucell Holland B.V. and Oppenheim Property  Services B.V. (English translation)***                                                                                                                 |
| 4.4              |       | Collaboration  Agreement dated December 18, 2002 by and between Crucell N.V. and  Crucell Holland B.V., and DSM Biologics Holding, Inc., DSM Biologics  Company, Inc., and DSM Biologics Company, B.V. (English translation)***† |
| 4.5              |       | Employment  contract between Crucell Holland B.V. and R.H.P. Brus—dated June 30, 2006                                                                                                                                                      |
| 4.6              |       | Employment  contract between Crucell Holland B.V. and Prof. Dr. J. Goudsmit—dated  June 30, 2006                                                                                                                                      |
| 4.7              |       | Employment  contract between Crucell Holland B.V. and L. Kruimer—dated June 30, 2006                                                                                                                                                       |
| 4.8              |       | Collaboration and  License Agreement dated December 31, 2003 by and between Crucell Holland  B.V. and Aventis Pasteur S.A. (now sanofi pasteur)†****                                                                                       |
| 4.9              |       | Transaction  Agreement dated December 1, 2005 by and between Crucell N.V. and Berna  Biotech AG******                                                                                                                                      |
| 4.10             |       | Supply Agreement  dated November 12, 2001 and the Letter of Amendment to the same  Agreement, dated June 24, 2004 between CSL Limited and Berna Biotech  Limited******                                                                     |
| 4.11             |       | Collaboration  Agreement, dated December 1, 2000, between Chiron Behring  GmbH & Co. and Rhein Biotech N.V. and Green Cross Vaccine  Corporation*****                                                                                  |
| 8.1              |       | List of  Subsidiaries of Crucell N.V.—See item 4 “Information on the Company”                                                                                                                                                         |
| 12.1             |       | Certification of  CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—dated  June 11, 2007                                                                                                                                  |
| 12.2             |       | Certification of  CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—dated  June 11, 2007                                                                                                                                  |
| 13.1             |       | Certification of  CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of  2002—dated June 11, 2007                                                                                                                          |
| 99.1             |       | Crucell Code of  Ethics****                                                                                                                                                                                                                          |

 

Confidential treatment has been granted with respect toportions of the exhibit indicated by a dagger (†). The omitted portionshave been filed separately with the Securities and Exchange Commission.

----

*                As previously filed with the Securities and Exchange Commission on October 24,2000 by Crucell N.V. in an Exhibit to the Form F-1.

**              Aspreviously filed with the Securities and Exchange Commission on June 28,2001 by Crucell N.V. in an exhibit to the Form 20-F.

***            Aspreviously filed with the Securities and Exchange Commission on April 18,2003 by Crucell N.V. in an exhibit to the Form 20-F.

119

----

****          Aspreviously filed with the Securities and Exchange Commission on February 27,2004 in an exhibit to the Form 20-F.

*****        Aspreviously filed with the Securities and Exchange Commission on April 14,2005 in an exhibit to the Form 20-F.

******      Aspreviously filed with the Securities and Exchange Commission on July 6,2006 in an exhibit to the Form 20-F.

120

----

**SIGNATURE**

The registrant herebycertifies that it meets all of the requirements for filing on Form 20-Fand that it has duly caused and authorized the undersigned to sign this annualreport on its behalf.

**CRUCELLN.V**.
| By:    | /s/ RONALD H.P. BRUS    |   |   |                    | By: | /s/ LEONARD KRUIMER |   |   |
|--------|-------------------------|--------|--------|-------------------------|-----|---------------------|--------|--------|
|   | Ronald H.P. Brus        |   |   | Leonard Kruimer         |
|   | Chief executive Officer |   |   | Chief Financial Officer |

 

June 11,2007

121

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**Index to consolidated financial statements**

| Reports of Independent Registered Public  Accounting Firms | F-2 |
|------------------------------------------------------------|-----|
| Consolidated Income Statements                             | F-4 |
| Consolidated Balance Sheets                                | F-5 |
| Consolidated Statements of Changes in Equity               | F-6 |
| Consolidated Cash Flow Statements                          | F-7 |
| Notes to the Consolidated Financial Statements             | F-8 |

 

F-1

----

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

To the Supervisory Board and Shareholders of CrucellN.V.:

We have audited the accompanying consolidated balancesheet of Crucell N.V. and subsidiaries (the “Company”) as of December 31,2006 and the related consolidated statement of income, stockholders’ equity,and cash flows for the year ended December 31, 2006. These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audit. The consolidated financial statements of the Company, for the yearended December 31, 2005 were audited by other auditors whose reports datedApril 18, 2006 expressed an unqualified opinion on these statements.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of Crucell N.V. and subsidiaries as of December 31, 2006, and theresults of their operations and their cash flows for the year endedDecember 31, 2006, in accordance with International Financial ReportingStandards as adopted by the European Union.

International Financial Reporting Standards as adoptedby the European Union vary in certain significant respects from accountingprinciples generally accepted in the United States of America. Informationrelating to the nature and effect of such differences is presented in Note 6 tothe consolidated financial statements.

We have also audited, in accordance with the standardsof the Public Company Accounting Oversight Board (United States), theeffectiveness of the Company’s internal control over financial reporting as ofDecember 31, 2006, based on the criteria established in *Internal Control**—IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission and our report dated June 11, 2007 expressed anunqualified opinion on management’s assessment of the effectiveness of theCompany’s internal control over financial reporting and an unqualified opinionon the effectiveness of the Company’s internal control over financial reporting.

Deloitte Accountants B.V.Amsterdam, The Netherlands

June 11, 2007

F-2

----

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

To the Board of Supervisory Directors and Shareholdersof Crucell N.V.

We have audited the accompanying consolidated balancesheet of Crucell N.V. as of December 31, 2005, and the relatedconsolidated statements of income, changes in equity and cash flows for each ofthe two years in the period ended December 31, 2005. These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States ofAmerica). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement. We were not engaged to perform an audit of the Company’sinternal control over financial reporting. Our audit included consideration ofinternal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal controlover financial reporting. Accordingly, we express no such opinion. An auditalso includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, and evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the financial statements referred toabove present fairly, in all material respects, the consolidated financialposition of Crucell N.V. at December 31, 2005, and the consolidatedresults of its operations and its cash flows for each of the two years in theperiod ended December 31, 2005, in conformity with International FinancialReporting Standards as endorsed by the European Union.

InternationalFinancial Reporting Standards as endorsed by the European Union vary in certainsignificant respects from accounting principles generally accepted in theUnited States of America. Information relating to the nature and effect of suchdifferences is presented in Note 6 to the consolidated financial statements.

|                             | /s/ Ernst & Young Accountants |
|-----------------------------|----------------------------------------|
| Amsterdam, The  Netherlands |                                   |
| April 18, 2006              |                                   |

 

F-3

----

**Consolidated Income Statements(amounts in thousands of Euro, except per share data)**

| ** **                                             | ** ** | ** ** | ** ** | **Year ended December 31,** | ** ** |
|--------------------------------------------------------|------------|------------|------------|--------------------------------------------|------------|
| ** **                                             | ** ** | **Notes**  | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Product sales                                          |       |       |       | 103,918                                    |       | — |   | — |   |
| Licence revenues                                       |       |       |       | 16,955                                     |       | 20,848 |   | 12,429 |   |
| Service fees                                           |       |       |       | 10,694                                     |       | 11,881 |   | 5,712 |   |
| **Total  revenues**                                    |       | 4          | ** ** | **131,567**                                | ** ** | **32,729** | ** ** | **18,141** | ** ** |
| Cost of product sales                                  |       |       |       | (83,518                                    | )          | — |   | — |   |
| Cost of service  fees                                  |       |       |       | (6,971                                     | )          | (7,156 | ) | (5,644 | ) |
| **Total  cost of goods sold**                          |       | 5.1        | ** ** | **(90,489**                                | **)**      | **(7,156** | **)** | **(5,644** | **)** |
| **Gross margin**                                       | ** ** | ** ** | ** ** | **41,078**                                 | ** ** | **25,573** | ** ** | **12,497** | ** ** |
| Government grants                                      |       |       |       | 6,901                                      |       | 4,137 |   | 3,441 |   |
| Other income                                           |       |       |       | 2,455                                      |       | 703 |   | 1,040 |   |
| **Total  other operating income**                      | ** ** | ** ** | ** ** | **9,356**                                  | ** ** | **4,840** | ** ** | **4,481** | ** ** |
| Research and development                               |       | 5.1        |       | (67,606                                    | )          | (34,048 | ) | (23,676 | ) |
| Selling, general  and administrative                   |       | 5.1        |       | (47,199                                    | )          | (13,689 | ) | (16,819 | ) |
| Restructuring                                          |       | 5.19       |       | (3,120                                     | )          | — |   | — |   |
| Impairment                                             |       | 5.6/5.7    |       | (30,416                                    | )          | — |   | — |   |
| **Total  other operating expenses**                    | ** ** | ** ** | ** ** | **(148,341**                               | **)**      | **(47,737** | **)** | **(40,495** | **)** |
| **Operating loss**                                     | ** ** | ** ** | ** ** | **(97,907**                                | **)**      | **(17,324** | **)** | **(23,517** | **)** |
| Financial income                                       |       | 5.2        |       | 13,453                                     |       | 2,332 |   | 1,789 |   |
| Financial  expenses                                    |       | 5.3        |       | (11,706                                    | )          | (131 | ) | (394 | ) |
| **Results  investments associates and joint ventures** |       | 5.9        |       | (1,956                                     | )          | (455 | ) | (704 | ) |
| **Loss  before tax**                                   | ** ** | ** ** | ** ** | **(98,116**                                | **)**      | **(15,578** | **)** | **(22,826** | **)** |
| Income tax                                             |       | 5.4        |       | 10,551                                     |       | — |   | — |   |
| **Loss  for the year**                                 | ** ** | ** ** | ** ** | **(87,565**                                | **)**      | **(15,578** | **)** | **(22,826** | **)** |
| Attributable to:                                       |       |       |       |                                       |       |   |   |   |   |
| Equity holders of  the parent                          |       |       |       | (87,313                                    | )          | (15,578 | ) | (22,826 | ) |
| Minority interest                                      |       |       |       | (252                                       | )          | — |   | — |   |
|                                                   | ** ** | ** ** | ** ** | **(87,565**                                | **)**      | **(15,578** | **)** | **(22,826** | **)** |
| Net loss per  share—basic and diluted             |       | 5.5        |       | €                                     | (1.53      | ) | € | (0.39 | ) | € | (0.63 | ) |
|                                                        |            |            |            |                                            |            |  |  |  |  |  |  |  |

 

The accompanying notes are an integral part of these financial statements.

F-4

----

**Consolidated Balance Sheets(amounts in thousands of Euro)**

| ** **                                               | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                               | ** ** | **Notes**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| **ASSETS**                                               |       |                                       |       |   |   |   |   |   |   |
| **Non-current assets**                                   |       |                                       |       |   |   |   |   |   |   |
| Property, plant and  equipment                           |       |                                       | 5.6        |   |   | 138,018 |   | 24,629 |   |
| Intangible assets                                        |       |                                       | 5.7        |   |   | 113,077 |   | 2,577 |   |
| Goodwill                                                 |       |                                       | 5.8        |   |   | 47,419 |   | — |   |
| Investments in  associates and joint ventures            |       |                                       | 5.9        |   |   | 5,998 |   | — |   |
| Pension asset                                            |       |                                       | 5.10       |   |   | 2,555 |   | — |   |
| Available-for-sale  investments                          |       |                                       | 5.11       |   |   | 12,339 |   | 11,299 |   |
| Other financial assets                                   |       |                                       | 5.12       |   |   | 16,430 |   | 194 |   |
| Deferred tax asset                                       |       |                                       | 5.4        |   |   | 308 |   | — |   |
|                                                     |       |                                       |       |   | * * | 336,144 |   | 38,699 | * * |
| **Current assets**                                       |       |                                       |       |   |   |   |   |   |   |
| Cash and cash  equivalents                               |       |                                       | 5.13       |   |   | 157,837 |   | 111,734 |   |
| Trade accounts  receivable                               |       |                                       | 5.14       |   |   | 58,563 |   | 1,824 |   |
| Inventories                                              |       |                                       | 5.15       |   |   | 75,519 |   | — |   |
| Other current assets                                     |       |                                       | 5.16       |   |   | 25,152 |   | 17,480 |   |
|                                                     |       |                                       |       |   | * * | 317,071 |   | 131,038 | * * |
| **TOTAL  ASSETS**                                        |       |                                       |       |   | ** ** | **653,215** | ** ** | **169,737** | ** ** |
| **LIABILITIES AND EQUITY**                               |       |                                       |       |   |   |   |   |   |   |
| **Equity attributable to equity holders of the  parent** |       |                                       |       |   |   |   |   |   |   |
| Share capital                                            |       |                                       |       |   |   | 15,553 |   | 9,946 |   |
| Other reserves                                           |       |                                       |       |   |   | 737,539 |   | 288,222 |   |
| Translation reserve                                      |       |                                       |       |   |   | (7,920 | ) | — |   |
| Accumulated deficit                                      |       |                                       |       |   |   | (247,872 | ) | (160,559 | ) |
|                                                     |       |                                       |       |   |   | 497,300 |   | 137,609 |   |
| Minority interests                                       |       |                                       |       |   |   | — |   | — |   |
| Total equity                                             |       |                                       | 5.17       |   | * * | 497,300 |   | 137,609 | * * |
| **Non-current liabilities**                              |       |                                       |       |   |   |   |   |   |   |
| Long-term provisions                                     |       |                                       | 5.19       |   |   | 5,132 |   | — |   |
| Long-term financial  liabilities                         |       |                                       | 5.20       |   |   | 26,945 |   | 9,380 |   |
| Deferred tax liability                                   |       |                                       | 5.4        |   |   | 33,586 |   | — |   |
|                                                     |       |                                       |       |   |   | 65,663 |   | 9,380 |   |
| **Current liabilities**                                  |       |                                       |       |   |   |   |   |   |   |
| Trade accounts payable                                   |       |                                       | 5.21       |   |   | 38,512 |   | 8,770 |   |
| Short-term financial  liabilities                        |       |                                       | 5.20       |   |   | 19,468 |   | 898 |   |
| Other current  liabilities                               |       |                                       |       |   |   | 29,132 |   | 13,080 |   |
| Income tax payable                                       |       |                                       |       |   |   | 266 |   | — |   |
| Short-term provisions                                    |       |                                       | 5.19       |   |   | 2,874 |   | — |   |
|                                                     |       |                                       |       |   |   | 90,252 |   | 22,748 |   |
| Total liabilities                                        |       |                                       |       |   | * * | 155,915 |   | 32,128 | * * |
| **TOTAL LIABILITIES AND EQUITY**                         |       |                                       |       |   | ** ** | **653,215** | ** ** | **169,737** | ** ** |

 

The accompanying notes are an integral part of these financial statements.

F-5

----

**Consolidated Statements of Changes in Equity (amounts in thousands of Euro)**

| ** **                                                                                             | ** ** | **Attributable to equity holders of the parent** | ** ** | ** **               | ** ** | ** **                                            | ** **  |
|--------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|--------------------------|------------|-------------------------------------------------------|-------------|
| ** **                                                                                             | ** ** | **Issued   capital**                                                      | ** ** | **Share   premium** | ** ** | **Net   unrealized   gains   reserve** | ** **  | **Translation   reserve** | ** ** | **Accumulated   deficit** | ** ** | **Total** | ** ** | **Minority   interests** | ** ** | **Total   equity** | ** ** |
| **At  January 1, 2004**                                                                                | ** ** |                                                                           | **8,642**  | ** **               |       |                                                  | **207,986** | ** ** |   |   | **—** | ** ** |   |   | **—** | ** ** |   |   | **(122,155** | **)** |   | **94,473** | ** ** |   | **—** | ** ** |   | **94,473** | ** ** |
| **Total  income and expense for the year recognized directly  in equity**                              | ** ** |                                                                           | **—** | ** **               |       |                                                  | **—**  | ** ** |   |   | **—** | ** ** |   |   | **—** | ** ** |   |   | **—** | ** ** |   | **—** | ** ** |   | **—** | ** ** |   | **—** | ** ** |
| Loss for the year                                                                                      |       |                                                                           | —     | ** **               |       |                                                  | —      | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | (22,826 | ) |   | (22,826 | ) |   | — | ** ** |   | (22,826 | ) |
| **Total  income and expense for the year**                                                             | ** ** |                                                                           | **—** | ** **               |       |                                                  | **—**  | ** ** |   |   | **—** | ** ** |   |   | **—** | ** ** |   |   | **(22,826** | **)** |   | **(22,826** | **)** |   | — | ** ** |   | **(22,826** | **)** |
| Issue of shares                                                                                        |       |                                                                           | 208        | ** **               |       |                                                  | 1,201       | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — |   |   | 1,409 | ** ** |   | **—** | ** ** |   | 1,409 |   |
| Costs share based  payment transactions                                                                |       |                                                                           | —     | ** **               |       |                                                  | 3,357       | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — |   |   | 3,357 |   |   | — | ** ** |   | 3,357 |   |
| Issue of warrants  and non-employee stock options to acquire ordinary shares in exchange for  services |       |                                                                           | —     | ** **               |       |                                                  | 4,246       | ** ** |   |   |   | ** ** |   |   | — | ** ** |   |   | — |   |   | 4,246 |   |   | — | ** ** |   | 4,246 |   |
| **At  December 31, 2004**                                                                              | ** ** |                                                                           | **8,850**  | ** **               |       |                                                  | **216,790** | ** ** |   |   | **—** | ** ** |   |   | **—** | ** ** |   |   | **(144,981** | **)** |   | **80,659** |   |   | — | ** ** |   | **80,659** | ** ** |
| Unrealized gain on  available for  sale securities                                                     |       |                                                                           | —     | ** **               |       |                                                  | —      | ** ** |   |   | 9,630 | ** ** |   |   | — | ** ** |   |   | — |   |   | 9,630 |   |   | — | ** ** |   | 9,630 |   |
| **Total  income and expense for the year recognized directly  in equity**                              | ** ** |                                                                           | **—** | ** **               |       |                                                  | **—**  | ** ** |   |   | **9,630** | ** ** |   |   | — | ** ** |   |   | — | ** ** |   | **9,630** |   |   | — | ** ** |   | **9,630** | ** ** |
| Loss for the year                                                                                      |       |                                                                           | —     | ** **               |       |                                                  | —      | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | (15,578 | ) |   | (15,578 | ) |   | — | ** ** |   | (15,578 | ) |
| **Total  income and expense for the year**                                                             | ** ** |                                                                           | **—** | ** **               |       |                                                  | **—**  | ** ** |   |   | **9,630** | ** ** |   |   | — | ** ** |   |   | **(15,578** | **)** |   | **(5,948** | **)** |   | — | ** ** |   | **(5,948** | **)** |
| Issue of shares                                                                                        |       |                                                                           | 1,096      | ** **               |       |                                                  | 56,439      | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — |   |   | 57,535 |   |   | — | ** ** |   | 57,535 |   |
| Costs share based  payment transactions                                                                |       |                                                                           | —     | ** **               |       |                                                  | 2,349       | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — |   |   | 2,349 |   |   | — | ** ** |   | 2,349 |   |
| Issue of warrants  and non-employee stock options to acquire ordinary shares in exchange for  services |       |                                                                           | —     | ** **               |       |                                                  | 2,992       | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — |   |   | 2,992 |   |   | — | ** ** |   | 2,992 |   |
| Stockbased  incentive plan                                                                             |       |                                                                           | —     | ** **               |       |                                                  | 22          | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — |   |   | 22 |   |   | — | ** ** |   | 22 |   |
| **At December 31, 2005**                                                                               | ** ** |                                                                           | **9,946**  | ** **               |       |                                                  | **278,592** | ** ** |   |   | **9,630** | ** ** |   |   | — | ** ** |   |   | **(160,559** | **)** |   | **137,609** |   |   | — | ** ** |   | **137,609** | ** ** |

 

| Foreign currency translation                                                                           |       |   | —     | ** ** |   |   | —      | ** ** |   |   | —     |   |       |       | (7,920     | )      |   |   | —       |       |   | (7,920      | )      |       | (814       | )          |   | (8,734      | )          |
|--------------------------------------------------------------------------------------------------------|------------|--------|------------|------------|--------|--------|-------------|------------|--------|--------|------------|--------|------------|------------|------------|--------|--------|--------|--------------|------------|--------|-------------|--------|------------|------------|------------|--------|-------------|------------|
| Net unrealized gain on available  for sale securities                                                  |       |   | —     | ** ** |   |   | —      | ** ** |   |   | 1,040      |   |       |       | —     |   |   |   | —       |       |   | 1,040       |   |       | —     |       |   | 1,040       |       |
| **Total income and expense for the year recognized  directly  in equity**                              |       |   | —     | ** ** |   |   | **—**  | ** ** |   |   | **1,040**  |   | ** ** | ** ** | **(7,920** | **)**  |   |   | **—**   | ** ** |   | **(6,880**  | **)**  | ** ** | **(814**   | **)**      |   | **(7,694**  | **)**      |
| Loss for the year                                                                                      |       |   | —     | ** ** |   |   | —      | ** ** |   |   | —     |   |       |       | —     |   |   |   | (87,313      | )          |   | (87,313     | )      |       | (252       | )          |   | (87,565     | )          |
| **Total income and expense for the year**                                                              |       |   | —     | ** ** |   |   | —      | ** ** |   |   | **1,040**  |   | ** ** | ** ** | **(7,920** | **)**  |   |   | **(87,313**  | **)**      |   | **(94,193** | **)**  | ** ** | **(1,066** | **)**      |   | **(95,259** | **)**      |
| Issue of shares                                                                                        |       |   | 5,458      | ** ** |   |   | 433,104     | ** ** |   |   | —     |   |       |       | —     |   |   |   | —       |       |   | 438,562     |   |       | 12,093     |       |   | 450,655     |       |
| Costs share based  payment transactions                                                                |       |   | —     | ** ** |   |   | 4,000       | ** ** |   |   | —     |   |       |       | —     |   |   |   | —       |       |   | 4,000       |   |       | —     |       |   | 4,000       |       |
| Acquisition of minority interest                                                                       |       |   | 149        | ** ** |   |   | 10,878      | ** ** |   |   | —     |   |       |       | —     |   |   |   | —       |       |   | 11,027      |   |       | (11,027    | )          |   | —      |       |
| Issue of warrants and  non-employee stock options to acquire ordinary shares in exchange for  services |       |   | —     | ** ** |   |   | 295         | ** ** |   |   | —     |   |       |       | —     |   |   |   | —       |       |   | 295         |   |       | —     |       |   | 295         |       |
| **At  December 31, 2006**                                                                         | ** ** |   | **15,553** | ** ** |   |   | **726,869** | ** ** |   |   | **10,670** |   | ** ** | ** ** | **(7,920** | **)**  |   |   | **(247,872** | **)**      |   | **497,300** |   |       | —     | ** ** |   | **497,300** | ** ** |

 

The accompanying notes are an integral part of these financial statements.

F-6

----

**Consolidated Cash Flow Statements**

| ** **                                                       | ** ** | ** ** | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|--------------------------------------------|------------|
| ** **                                                       | ** ** | **Notes**  | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| *Cash flows from (used in) operating activities*                 | * *   | * *   | * *   | * *                                   | * *   | * * | * * | * * | * * |
| Loss of the year                                                 |       |       |       | (87,565                                    | )          | (15,578 | ) | (22,826 | ) |
| Reversal of non-cash items                                       |       |       |       |                                       |       |   |   |   |   |
| Income tax                                                       |       | 5.4        |       | (10,551                                    | )          | — |   | — |   |
| Results investments  associates and joint ventures               |       | 5.9        |       | 1,956                                      |       | 455 |   | 704 |   |
| Financial income                                                 |       | 5.2        |       | (13,453                                    | )          | (2,332 | ) | (1,789 | ) |
| Financial costs                                                  |       | 5.3        |       | 11,706                                     |       | 131 |   | 394 |   |
| Depreciation                                                     |       | 5.6        |       | 14,275                                     |       | 2,973 |   | 2,982 |   |
| Amortization                                                     |       | 5.7        |       | 7,560                                      |       | 1,470 |   | 1,966 |   |
| Impairment                                                       |       | 5.6/5.7    |       | 30,416                                     |       | — |   | — |   |
| Fair value adjustments on  inventory                             |       | 5.15       |       | 11,272                                     |       | — |   | — |   |
| Change in long-term  provisions                                  |       | 5.19       |       | 180                                        |       | — |   | — |   |
| Gain on disposal of  assets                                      |       | 5.7        |       | (176                                       | )          | — |   | — |   |
| Stock based compensation                                         |       | 5.18       |       | 5,687                                      |       | 6,919 |   | 7,603 |   |
| Changes in net working capital                                   |       |       |       |                                       |       |   |   |   |   |
| Trade accounts receivable                                        |       |       |       | (25,755                                    | )          | 196 |   | 7,527 |   |
| Inventories                                                      |       |       |       | (15,674                                    | )          | — |   | — |   |
| Other current assets                                             |       |       |       | 1,136                                      |       | (11,557 | ) | (1,330 | ) |
| Trade accounts payable                                           |       |       |       | 18,509                                     |       | 6,662 |   | 21 |   |
| Other current liabilities                                        |       |       |       | (3,211                                     | )          | (4,216 | ) | (2,034 | ) |
| Short-term provisions                                            |       |       |       | 1,821                                      |       | — |   | — |   |
| Interest paid                                                    |       |       |       | (2,211                                     | )          | (132 | ) | (212 | ) |
| Income taxes paid                                                |       |       |       | 124                                        |       | — |   | — |   |
| **Net cash  flows from (used in) operating activities**          | ** ** | ** ** | ** ** | **(53,954**                                | **)**      | **(15,009** | **)** | **(6,994** | **)** |
| *Cash flows from (used in) investing activities*                 | * *   | * *   | * *   | * *                                   | * *   | * * | * * | * * | * * |
| Purchase of property,  plant and equipment                       |       | 5.6        |       | (20,337                                    | )          | (17,137 | ) | (2,114 | ) |
| Proceeds from sale of  equipment                                 |       | 5.6        |       | 197                                        |       | — |   | 741 |   |
| Acquisition of intangible  assets                                |       | 5.7        |       | (12,371                                    | )          | — |   | (4,017 | ) |
| Proceeds from sale  intangible assets                            |       | 5.7        |       | 225                                        |       | — |   | — |   |
| Acquisition of Berna  Biotech, Switzerland, net of cash acquired |       | 3.1        |       | 67,784                                     |       | — |   | — |   |
| Acquisition of SBL,  Sweden, net of cash acquired                |       | 3.3        |       | (33,386                                    | )          | — |   | — |   |
| Investments/capital  increase in joint ventures                  |       | 5.9        |       | (1,427                                     | )          | — |   | — |   |
| Assets classified as held  for sale                              |       | 3.1        |       | 11,772                                     |       | — |   | — |   |
| Proceeds from financial  assets                                  |       |       |       | 7,627                                      |       | — |   | — |   |
| Interest received                                                |       | 5.2        |       | 3,075                                      |       | 1,864 |   | 1,608 |   |
| **Net cash  flows from (used in) investing activities**          | ** ** | ** ** | ** ** | **23,159**                                 | ** ** | **(15,273** | **)** | **(3,782** | **)** |
| *Cash flows from financing activities*                           | * *   | * *   | * *   | * *                                   | * *   | * * | * * | * * | * * |
| Proceeds from issue of  share capital                            |       | 5.17       |       | 82,797                                     |       | 57,535 |   | 1,409 |   |
| Proceeds from financial  liabilities                             |       | 5.20       |       | 14,703                                     |       | 8,982 |   | — |   |
| Repayment of financial  liabilities                              |       | 5.20       |       | (18,769                                    | )          | (1,212 | ) | (1,132 | ) |
| **Net cash  flows from financing activities**                    | ** ** | ** ** | ** ** | **78,731**                                 | ** ** | **65,305** | ** ** | **277** | ** ** |
| Effects of exchange rate  on cash and cash equivalents           |       |       |       | (1,833                                     | )          | — |   | — |   |
| **Net  increase (decrease) in cash and cash equivalents**        |       |       | ** ** | **46,103**                                 | ** ** | **35,023** | ** ** | **(10,499** | **)** |
| Cash and cash  equivalents at beginning of the year              |       | 5.13       |       | 111,734                                    |       | 76,711 |   | 87,210 |   |
| **Cash and  cash equivalents at end of the year**                |       | 5.13       | ** ** | **157,837**                                | ** ** | **111,734** | ** ** | **76,711** | ** ** |

 

The accompanying notes are an integral part of these financial statements.

F-7

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data)**

**1**                    Generalinformation

**1.1 Corporate information**

*General*

Crucell N.V. (the “Company” or “Crucell”) isincorporated and domiciled in Leiden, the Netherlands. Its shares are publiclytraded at Euronext Amsterdam (CRXL), NASDAQ New York (CRXL) and SWX Swiss ExchangeZurich (CRX). The Company and its subsidiaries together constitute the CrucellGroup (the “Group”). The Group has subsidiaries in the Netherlands,Switzerland, Spain, Italy, Sweden, Korea and the United States. Crucellemployed 1,073 people at December 31, 2006.

Crucell is a fullyintegrated biopharmaceutical company, focused on developing, producing andmarketing products to combat infectious diseases. Its core vaccine portfolioincludes Inflexal, a vaccine against influenza, Paediatric vaccines Hepavax-Geneand Quinvaxem and travel vaccines Vivotif, Dukoral, and Epaxal.In addition to these portfolio vaccines, the Group has a broad pipeline ofnew potential vaccines, antibodies and a blood clotting protein. The Group hasdeveloped various proprietary technologies such as the PER.C6, MAbstract,AdVac, STAR and virosome-adjuvanted technologies. Crucell licenses theseproprietary technologies to others in the biopharmaceutical industry.

*Changes in thescope of consolidation*

The mostsignificant changes in the scope of consolidation were due to:

·       theacquisition of the shares of Berna Biotech AG (February 2006);

·       theestablishment of Crucell Vaccines Inc. followed by the acquisition of theassets and liabilities of Berna Products Corporation (October 2006) and

·       theacquisition of the shares of SBL Vaccin Holding AB (November 2006).

The consolidated financialstatements include the results of the acquired companies for the period fromthe date of acquisition unless mentioned otherwise. Further details on theseacquisitions are provided in Note 3.

F-8

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*List ofconsolidated companies*

The most significant subsidiaries, which were part ofthe Group as of December 31, 2006:

***Subsidiaries****(fully consolidated)*

| ** **                    | ** ** | ** **     | ** ** | ** **          | ** ** | **2006**    | ** ** | **2005**         | ** ** |
|-------------------------------|------------|----------------|------------|---------------------|------------|-------------|------------|------------------|------------|
| **Name**                      | ** ** | ** **     | ** ** | **Legal Seat** | ** ** | **Country** | ** ** | **Ownership  %** | ** ** | **Ownership  %** | ** ** |
| Crucell Holland  B.V.         |       | Leiden         |       | the Netherlands     |       |        | 100        | %                |       |   | 100 | % |   |
| U-BiSys B.V.                  |       | Utrecht        |       | the Netherlands     |       |        | 100        | %                |       |   | 100 | % |   |
| ChromaGenics B.V.             |       | Amsterdam      |       | the Netherlands     |       |        | 100        | %                |       |   | 100 | % |   |
| Berna Biotech AG              |       | Bern           |       | Switzerland         |       |        | 100        | %                |       |   | 0 | % |   |
| Berna Biotech  España SA |       | Madrid         |       | Spain               |       |        | 100        | %                |       |   | 0 | % |   |
| Berna Biotech  Italia Srl     |       | Milano         |       | Italy               |       |        | 100        | %                |       |   | 0 | % |   |
| Etna Biotech Srl              |       | Catania        |       | Italy               |       |        | 100        | %                |       |   | 0 | % |   |
| Berna Rhein B.V.              |       | Leiden         |       | the Netherlands     |       |        | 100        | %                |       |   | 0 | % |   |
| Rhein Vaccines  B.V.          |       | Maastricht     |       | the Netherlands     |       |        | 100        | %                |       |   | 0 | % |   |
| Berna Biotech  Korea corp.    |       | Seoul          |       | Korea               |       |        | 100        | %                |       |   | 0 | % |   |
| Crucell Holding  Inc.         |       | Wilmington, DE |       | United States       |       |        | 100        | %                |       |   | 0 | % |   |
| Crucell Vaccines  Inc.        |       | Wilmington, DE |       | United States       |       |        | 100        | %                |       |   | 0 | % |   |
| Crucell Biologics  Inc.       |       | Wilmington, DE |       | United States       |       |        | 100        | %                |       |   | 0 | % |   |
| SBL Vaccin  Holding AB        |       | Stockholm      |       | Sweden              |       |        | 100        | %                |       |   | 0 | % |   |
| SBL Vaccin AB                 |       | Stockholm      |       | Sweden              |       |        | 100        | %                |       |   | 0 | % |   |
| Vitec AB                      |       | Stockholm      |       | Sweden              |       |        | 100        | %                |       |   | 0 | % |   |
|                               |            |                |            |                     |            |             |            |                  |            |  |  |  |  |  |  |

 

***Joint Ventures and Associated companies****(not consolidated)*

| ** **        | ** ** | ** **         | ** ** | ** **    | ** ** | ** **          | ** ** | **2006**    | ** ** | **2005**         | ** ** |
|-------------------|------------|--------------------|------------|---------------|------------|---------------------|------------|-------------|------------|------------------|------------|
| **Name**          | ** ** | ** **         | ** ** | ** **    | ** ** | **Legal Seat** | ** ** | **Country** | ** ** | **Ownership  %** | ** ** | **Ownership  %** | ** ** |
| Pevion Biotech AG |       | Joint venture      |       | Bern          |       | Switzerland         |       |        | 50         | %                |       |   | 0 | % |   |
| Kenta Biotech AG  |       | Associated company |       | Bern          |       | Switzerland         |       |        | 37         | %                |       |   | 0 | % |   |
| Percivia LLC      |       | Joint venture      |       | Cambridge, MA |       | United States       |       |        | 50         | %                |       |   | 0 | % |   |
|                   |            |                    |            |               |            |                     |            |             |            |                  |            |  |  |  |  |  |  |

 

**1.2 Basis ofpreparation**

The consolidated financial statements of the Grouphave been prepared in accordance with International Financial ReportingStandards (IFRS) as endorsed by the EU and are prepared on a historical costbasis unless stated otherwise. There are no differences between IFRS applied bythe Group and IFRS as issued by the International Accounting Standards Board.

The consolidated financial statements of the Companyfor the year ended December 31, 2006 on form 20-F wereauthorized for issue in accordance with a director’s resolution on June 6,2007.

In conformity with article402, Book 2 of the Dutch Civil Code, the Company income statement is presentedin abbreviated form.

F-9

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*Foreign currencytranslation*

The functional and presentation currency of theCompany is the Euro. All values are rounded to the nearest thousand (€ 000) unless indicated otherwise.

Each entity in the group determines its own functionalcurrency based on the primary economic environment in which the entityoperates. Items included in the financial statements of each entity aremeasured using that functional currency. Transactions in foreign currencies areinitially recorded in the functional currency rate ruling at the date of thetransaction. Monetary assets and liabilities denominated in foreign currenciesare retranslated at the functional currency rate of exchange ruling at thebalance sheet date. All differences are taken to the income statement. Non-monetaryitems that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rates as at the dates of the initialtransactions. Non-monetary items measured at fair value in a foreign currencyare translated using the exchange rates at the date when the fair value wasdetermined.

At the reporting date, theassets and liabilities of subsidiaries with different functional currencies aretranslated into Euro at the rate of exchange ruling at the balance sheet dateand their income statements and cash flow statements are translated into Euroat the weighted average exchange rates for the year. The exchange differencesarising on the translation are taken directly to the translation reserve, aseparate component of equity.

**1.3 Use ofestimates and judgments**

The preparation of financial statements requiresmanagement to make judgements, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets,liabilities, income and expenses. Actual results may differ from theseestimates.

Estimates andunderlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognized in the period in which the estimate isrevised and in any future periods affected. In particular, information aboutsignificant areas of estimation uncertainty and use of critical judgements inapplying accounting policies that have the most significant effect on theamount recognized in the financial statements are described in the followingnotes:

·       Note2.1 Revenue recognition

·       Note3 Accounting for business combinations

·       Note5.4 Utilization of tax carry forward losses

·       Note5.6/5.7/5.8 Impairment reviews of property, plant and equipment, intangibleassets and goodwill

·       Note5.10 Valuation of defined benefit plans

·       Note5.15 Valuation of inventories

·       Note5.18 Valuation of share-based-payments

·       Note 5.19 Recognition ofprovisions for litigations and claims

F-10

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**1.4 Basis ofconsolidation**

The consolidated financialstatements comprise the financial statements of the Company and itssubsidiaries per December 31 and for the period then ended. The financialstatements of the subsidiaries are prepared for the same reporting year as theCompany, using consistent accounting policies. All intra-group balances andtransactions are eliminated in full.

*Subsidiaries*

Subsidiaries are entities controlled by the Company.Control is achieved where the Company has the power to govern the financial andoperational policies of an enterprise so as to obtain benefits from itsactivities. Subsidiaries are fully consolidated from the date of acquisition,which is the date on which the Group obtains control and continue to beconsolidated until the date such control ceases.

Minority interestsrepresent the portion of profit or loss for the year and net assets at the endof the year not held by the Group and are presented separately in theconsolidated income statement and within equity in the consolidated balancesheet, separately from the equity attributable to equity holders of the parent.

*Joint ventures*

A joint venture is a contractual arrangement wherebytwo or more parties undertake an economic activity that is subject to jointcontrol. A jointly controlled entity is a joint venture that involves the establishmentof a separate entity in which each venturer has an interest. The Grouprecognizes its interest in joint ventures using the equity method. Under theequity method, the investment in the joint venture is carried in the balancesheet at cost plus post-acquisition changes in the Group’s share of net assetsof the associate. The income statement reflects the share of the results ofoperations of the associate. Periodically the Group determines whether it isnecessary to recognize an impairment loss with respect to the Group’s netinvestment in the joint venture.

The reporting dates of thejoint ventures are the same as those of the Group and the accounting policiesof the joint ventures conform to those used by the Group.

*Associates*

The Group’s investments inassociates are accounted for under the equity method of accounting. Anassociate is an entity in which the Group has significant influence and whichis neither a subsidiary nor a joint venture. The reporting dates of theassociates are the same as those of the Group and the associates’ accountingpolicies conform to those used by the Group.

**1.5 Changes inaccounting policies**

**1.5.1 New adoptedaccounting policies in the financial year 2006**

The Group hasadopted the following new and amended IFRS and IFRIC interpretations during theyear. Adoption of these revised standards and interpretations did not have anysignificant effect on the financial statements of the Group. They did howevergive rise to additional disclosures.

·       IAS19 Amendment Employee Benefits

·       IAS21 Amendment The Effect of Changes in Foreign Exchange Rates

F-11

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

·       IAS39 Amendments Financial Instruments Recognition and Measurement

·       IFRIC4 Determining whether an Arrangement contains a Lease

·       IFRIC5 Rights to Interests Arising from Decommissioning Restoration andEnvironmental Rehabilitation Funds

·       IFRIC6 Liabilities arising from Participations in a Specific Market—Waste Electricaland Electronic Equipment

TheGroup did not early adopt any IFRS or IFRIC Interpretations. The principal effectsof these changes in policies are discussed below.

*IAS 19 EmployeeBenefits*

As of January 1, 2006, the Group adopted theamendments to IAS 19, although the Group did not operate any defined benefitplans prior to the acquisition of the subsidiaries as described in Note 3.

The amended IAS 19:

·       Allowsan option for recognition of actuarial gains and losses in full in the periodin which they occurred outside the profit and loss in a statement of recognizedincome and expense.

·       Requiresadditional disclosures concerning the reconciliations showing the changes inplan assets and defined benefit obligations; information about trends in theassets and liabilities in the defined benefit plans; future contributions tothe plan and assumptions used in the determination of the defined benefitobligation.

The Group chose not toapply the new option offered to recognize actuarial gains and losses in thestatement of recognized income and expense. The required disclosures have beenincluded in the consolidated financial statements.

*IAS 21 The Effectsof Changes in Foreign Exchange Rates*

As of January 1,2006, the Group adopted the amendments to IAS 21. As a result, all exchangedifferences arising from a monetary item that forms part of the Group’s netinvestment in a foreign operation are recognized in a separate component ofequity in the consolidated financial statements regardless of the currency inwhich the monetary item is denominated. This change has no significant impacton the financial statements of the Group.

*IAS 39 FinancialInstruments: Recognition and Measurement*

Amendment for financial guarantee contracts (issuedAugust 2005)—amended the scope of IAS 39 to require financial guaranteecontracts that are not considered to be insurance contracts to be recognizedinitially at fair value and to be remeasured at the higher of the amountdetermined in accordance with IAS 37 Provisions, Contingent Liabilitiesand Contingent Assets and the amount initially recognized less, whenappropriate, cumulative amortization recognized in accordance with IAS 18Revenue. This amendment did not have an effect on the financial statements.

Amendment for hedges of forecast intragrouptransactions (issued April 2005)—amended IAS 39 to permit the foreigncurrency risk of a forecast intragroup transaction to qualify as the hedgeditem in a cash 

F-12

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

flow hedge, provided thatthe transaction is denominated in a currency other than the functional currencyof the entity entering into that transaction and that the foreign currency riskwill affect the consolidated income statement. As the Group currently has nosuch transactions, the amendment did not have an effect on the financialstatements.

Amendment for the fairvalue option (issued June 2005)—amended IAS 39 to restrict the use of theoption to designate any financial asset or any financial liability to bemeasured at fair value through the income statement. The Group had notpreviously used this option; hence the amendment did not have an effect on thefinancial statements.

*IFRIC 4 DeterminingWhether an Arrangement contains a Lease*

The Group adopted IFRICInterpretation 4 as of January 1, 2006, which provides guidance indetermining whether arrangements contain a lease to which lease accounting mustbe applied. This change in accounting policy has no significant impact on thefinancial statements of the Group.

*IFRIC 5 Rights to Interests Arising fromDecommissioning, Restoration and Environmental Rehabilitation Funds*

The Group adopted IFRICInterpretation 5 as of January 1, 2006, which establishes the accountingtreatment for funds established to help finance decommissioning for companiesassets. This interpretation has no impact on the financial statements.

*IFRIC 6 Liabilitiesarising from Participating in a Specific Market—Waste Electrical and ElectronicEquipment*

The Group adopted IFRICInterpretation 6 as of January 1, 2006, which established the recognitiondate for liabilities arising from the EU Directive relating to the disposal ofWaste Electrical and Electronic Equipment. As the directive only came intoeffect towards the end of 2005, there was no impact on the financial positionas at December 31, 2005. No additional provision of has been recognizedfor the period ended December 31, 2006.

**1.5.2 Futurechanges in accounting policies**

*IAS 1 Presentationto financial statements*

The standard becomeseffective for annual periods beginning on or January 1, 2007 andintroduces new disclosures to enable users of the financial statements toevaluate the capital of the Group and how its capital is managed. The amendmentdoes not have impact on the financial position of Group. The Group is inprocess of embedding the additional required information as part of itsreporting procedures.

*IFRIC 8 Scope ofIFRS 2*

The interpretation becomeseffective for annual periods beginning on or after May 1, 2006 andrequires IFRS 2 to be applied for transactions in which an entity cannotidentify specifically some or all of the goods or services received asconsideration for equity instruments. In particular, if the identifiableconsideration received (if any) appears to be less then the fair value of theequity instruments granted or liability incurred, typically this circumstanceindicates that other consideration has been received. Crucell is currentlyinvestigating the impact of the Standard.

F-13

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*IFRIC 9Reassessment of Embedded Derivatives*

The interpretation becomeseffective for financial years beginning on or after June 1, 2006. Thisinterpretation establishes that the date to assess the existence of an embeddedderivative is the date that an entity first becomes party to the contract withreassessment only if there is a change to the contract that significantlymodifies the cash flows. The interpretation is not expected to have asignificant impact on the financial statements.

*IFRS 7 FinancialInstruments Disclosures*

The Standard becomeseffective for annual periods beginning on or after January 1, 2007. IFRS 7introduces new disclosures to enable users of the financial statements toevaluate the significance of financial instruments and to determine the natureand extent of risks arising from financial instruments, including how theserisks are managed. The Group is in process of embedding the additional requiredinformation as part of its reporting procedures.

*IFRS 8 OperatingSegments*

The Standard becomeseffective for annual periods beginning on or after January 1, 2009. IFRS 8replaces IAS 14 and aligns segment reporting with the requirements of the USstandard SFAS 131 “Disclosures about Segments of an Enterprise and RelatedInformation” The interpretation is not expected to have an impact on thefinancial statements.

**2**                    Summaryof significant accounting policies

**2.1 Revenuerecognition**

*General*

Revenue is recognized to the extent that it isprobable that the economic benefits will flow to the Group and the revenue canbe measured reliably. Revenue is measured at the fair value of theconsideration received excluding discounts, rebates, value added taxes andduties.

Revenues are recognized on a gross basis when theGroup acts as the principal in an arrangement. Revenues are recognized on a netbasis when the Group acts as agent.

Goods or services tradedfor items of a similar nature are not regarded as transactions that generaterevenue. Goods or services traded for dissimilar items are regarded astransactions that generate revenue.

*Product sales*

Revenue from product salesis recognized when the significant risks and rewards of ownership of theproducts have passed to the buyer. In addition the Group does not retainmanagerial involvement to the degree usually associated with ownership noreffective control over the goods sold and the cost of the transaction can bemeasured reliably.

*License revenues*

The Group recognizesinitial fees to the licensing of our technology as revenues over the period ofour significant continuing performance obligations, if any, and upon transferof the significant risks and rewards to the buyer.

F-14

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Under certain arrangements, the Group has nocontinuing performance obligations after delivery of the associated technologyunder the license agreement or any other arrangement with the licensee. In sucharrangements, initial license fees are recognized as revenue when significantrisks and rewards pass to the buyer, which is the moment, the transfer ofdeveloped technology is completed. The Group’s arrangements provide forcontinuing support of its technology at standard consulting rates. Revenuesderived from consulting services, that are not essential to licensee’s abilityto use the Group’s technology, are recognized as earned during the period thatthe consulting services are performed.

In certain arrangements, the Group collaborates withthird parties to develop novel products or processes using the Group’sproprietary technology. These arrangements generally include an initial licensefee upon the delivery of the Company’s proprietary technology and incrementalfees for the Group providing ongoing research and development activities. Theresearch and development activities performed by the Group are substantive andcritical to the licensees’ exploitation of the delivered technology. Whensignificant risks and rewards pass to the buyer, initial fees from thesearrangements are recognized as revenues over the period of continuingperformance obligations. Incremental fees from research and developmentactivities are recognized as revenues earned over the period of the developmentcollaboration or the manufacturing obligation.

Certain license arrangements provide for additionalnon-refundable license fees to be paid upon the achievement of milestones. Suchadditional license fees are recognized as revenue when the amounts become dueand payable upon achievement of the milestone.

In addition to the initialfee, the Group’s arrangements generally provide that the licensee makesemi-annual or annual payments (“license maintenance fees”) to maintain thelicense for a subsequent term. Generally, licensees may terminate the licenseand related maintenance fees upon 30 to 90 days’ notice. License maintenancefees are recognized as revenues when the amounts become fixed and payable. Theaggregate of license maintenance fees paid will generally reduce any royaltypayments which may be based on future product sales of the licensee, if any,under the license agreement.

*Service fees*

As part of variouscollaboration agreements, the Group receives service fees for work performedunder such agreements. Revenues, and related costs, associated with completingperformance services are recognized when the service is completed and thecollectibility of the receivable is deemed probable. Revenues associated withtime and material performance contracts are recognized when the costs incurredand the costs to complete the transaction can be measured reliably.

**2.2 Cost of productsales and cost of service fees**

Cost of product sales andcost of service fees both comprise direct labour, materials, and overheadcosts, incurred in performing work under various collaboration agreements thatdirectly relate to revenues earned.

**2.3 Other operatingincome**

*Government grants*

The Group receives certaingovernment grants that support the Group’s research effort in defined researchand development projects. These grants generally provide for reimbursement ofapproved costs 

F-15

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

incurredas defined in various grants. Income associated with these grants is recognizedwhen costs under each grant are incurred in accordance with the terms andconditions of the grant and the collectibility of the receivable is deemedprobable and all attaching conditions will be achieved. Where the grant relatesto an expense item, it is recognized as income over the period necessary tomatch the grant on a systematic basis to the costs that it is intended tocompensate.

*Other Income*

Other income results fromnone-core business transactions and mainly consists of the sale of tangible andintangible assets incidental to the business, reimbursement of developmentcosts and sublet of premises.

**2.4 Research andDevelopment Expenses**

Expenditure on research activities is recognized as anexpense in the period in which it is incurred. Internally generated intangibleassets arising from the Group’s development activities are recognized if all ofthe recognition criteria for internally generated intangible assets are met.This also includes the following conditions:

·       anasset is created that can be identified;

·       itis probable that the asset created will generate future economic benefits; and

·       thedevelopment cost of the asset can be measured reliably.

Product registration feeswill in principle meet these recognition requirements. Where no internallygenerated intangible asset can be recognized, development expenditure isrecognized as an expense in the period in which it is incurred. Research anddevelopment expenses are comprised of the following types of costs incurred inperforming research and development activities: salaries and benefits,allocated overhead and facility costs, preclinical study costs, clinicaltrials, amortization of developed technology, contract services and otheroutside costs.

**2.5 Taxes**

*Current tax*

Current tax assets andliabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the tax authorities. The tax rates andtax laws used to compute the amount are those that are enacted at the balancesheet date. Current income tax relating to items recognized directly in equityis recognized in equity and not in the income statement. Current tax assets andcurrent tax liabilities are offset, if a legally enforceable right exists tooffset the recognized amounts and the Group intends either to settle on a netbasis, or to realize the asset and settle the liability simultaneously.

F-16

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*Deferred tax*

Deferred income taxis provided using the asset and liability method on temporary differences atthe balance sheet date between the tax bases of assets and liabilities andtheir carrying amounts under IFRS. Deferred tax liabilities are recognized forall taxable temporary differences, except:

·       wherethe deferred tax liability arises from the initial recognition of goodwill orof an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting profit nortaxable profit or loss; and

·       inrespect of taxable temporary differences associated with investments insubsidiaries, associates and interests in joint ventures, where the timing ofthe reversal of the temporary differences can be controlled and it is probablethat the temporary differences will not reverse in the foreseeable future.

Deferred income tax assetsare recognized for all deductible temporary differences and carry-forwards ofunused tax credits and unused tax losses, to the extent that it is probablethat taxable profit will be available against which the deductible temporarydifferences, and the carry-forwards of unused tax credits and unused tax lossescan be utilised.

The unrecognized deferred income tax assets arereassessed at each balance sheet date and are recognized to the extent that ithas become probable that future taxable profit will allow the deferred taxasset to be recovered. Deferred income tax assets and liabilities are measuredat the tax rates that are expected to apply to the year when the asset isrealised or the liability is settled, based on tax rates (and tax laws) thathave been enacted at the balance sheet date.

Income tax relating toitems recognized directly in equity is recognized in equity and not in theincome statement. Deferred tax assets and deferred tax liabilities are offset,if a legally enforceable right exists to set off current tax assets againstcurrent tax liabilities and the deferred taxes relate to the same taxableentity and the same taxation authority.

**2.6 Net Loss perShare**

Basic net loss per shareis computed based on the weighted average number of ordinary shares outstandingduring the period. Diluted net loss per share is computed based on the weightedaverage number of ordinary shares outstanding, including the dilutive effect ofstock options, if any.

**2.7 Cash and cashequivalents**

The Group considers allhighly liquid investments with maturities of three months or less, which areconvertible to a known amount of cash and bear an insignificant risk of changein value, to be cash equivalent.

**2.8 Financialassets**

***Trade accounts receivable***

Trade receivables do notcarry any interest and are recognized and carried at original nominal invoiceamount less an allowance for any uncollectible amounts. Allowance is made whenthere is objective evidence that the Group will not be able to collect thedebts. Bad debts are written off when identified.

F-17

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*Available-for-saleinvestments*

Available-for-saleinvestments are those non-derivative financial assets that are designated asavailable-for-sale. After initial measurement, available for sale financialassets are measured at fair value with unrealized gains or losses beingrecognized directly in equity in the net unrealized gains reserve. When theinvestment is disposed of, the cumulative gain or loss previously recorded inequity is recognized in the income statement.

*Other financialassets*

Other financial assets are valued at their nominalvalue.

Derecognition of financial assets

A financial assetis derecognized when:

·       therights to receive cash flows from the asset have expired;

·       theGroup retains the right to receive cash flows from the asset, but has assumedan obligation to pay them in full without material delay to a third party undera ‘pass through’ arrangement; or

·       the Group has transferredits rights to receive cash flows from the asset and either has transferredsubstantially all the risks and rewards of the asset, or has neithertransferred nor retained substantially all the risks and rewards of the asset,but has transferred control of the asset.

**2.9 Inventories**

Inventories are stated atthe lower of cost or net realisable value. The cost of inventories includesexpenditures for materials acquired, directly attributable costs and relatedproduction overhead expenses. Net realisable value is determined as theestimated selling price in the ordinary course of business, less estimatedcosts of completion and the estimated costs necessary to make the sale. Allowancesare made for obsolete inventory.

**2.10 Other currentassets**

Other curent assets arestated at amortized cost, which generally corresponds with face value, less anadjustment for bad debts.

**2.11 Property,plant and equipment**

Property, plant andequipment is stated at cost, excluding the costs of day-to-day servicing, lessaccumulated depreciation and accumulated impairment in value. The cost ofreplacing a part of a plant or equipment is capitalized if the recognitioncriteria for property, plant and equipment are met. Where an item of property,plant and equipment comprises major components having different useful lives,they are accounted for as separate items of property, plant and equipment.Depreciation is charged to the income statement on a straight-line basis overthe estimated useful life of the assets:

·       freeholdland is not depreciated;

·       buildings:twenty years to fifty years;

·       computerequipment: three years;

F-18

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

·       furnitureand laboratory equipment: five years;

·       leaseholdimprovements: the shorter of the lease term and ten years.

An item of property, plantand equipment is derecognized upon disposal or when no future economic benefitsare expected from its use. Any gain or loss arising on derecognition of theasset is included in the income statement. The asset’s residual values, usefullives and methods are reviewed, and adjusted if appropriate, at each financialyear-end.

*Borrowing costs*

Borrowing costs directlyattributable to the acquisition, construction or production of qualifyingassets are added to the cost of these assets until they are substantially readyfor their intended use. Qualifying assets are those assets that necessarilytake a substantial period of time to be completed for their intended use. Allother borrowing costs are recognized as an expense in the income statement whenincurred.

**2.12 Intangibleassets**

Intangible assets acquired are measured at cost oninitial recognition. The cost of intangible assets acquired in a businesscombination is the fair value at the date of acquisition. Following initialrecognition, intangible assets are carried at cost less any accumulatedamortization and accumulated impairment losses. Internally generated intangibleassets are not capitalised if the recognition requirements are not met, rather,expenses are recognized in the income statement. The useful lives if intangibleassets are assessed to be either finite or indefinite. Intangible assets withfinite lives are amortised over the useful life. The amortization period andthe amortization method are reviewed at least at each financial year-end.Changes in the expected useful life or the expected pattern of consumption offuture economic benefits embodied in the asset are accounted for by changingthe amortization period or method, and treated as changes in accountingestimates. The amortization expense on intangible assets with finite lives isrecognized in the income statement consistent with the function of theintangible asset.

The estimateduseful life of the assets is as follows:

·       Patentsand licenses: one year to twenty years;

·       Customerlists: three years;

·       Developedtechnology: five years to twenty years;

·       In process R&D is notdepreciated until completion of the asset.

**2.13 Goodwill andbusiness combinations**

Business combinations are accounted for using thepurchase method. This involves recognising identifiable assets (includingpreviously unrecognized intangible assets) and liabilities (includingcontingent liabilities, but excluding future restructuring) of the acquiredbusiness at fair value. Goodwill acquired in a business combination isinitially measured at cost being the excess of the cost of the businesscombination over the Group’s interest in the net fair value of the acquiree’sidentifiable assets, liabilities and contingent liabilities. Following initialrecognition, goodwill is measured at cost less accumulated impairment losses.

F-19

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Goodwill includes intangible assets that wereidentified in a business combination, but not valued separately as the assetswere either not separable or could not be measured reliably. Assets identifiedand included as part of goodwill can be specific customer relationships orsupply contracts not meeting the requirements and the workforce acquired.

Assigning fair values to the assets and liabilitiesacquired in a business combination inherently requires the use of estimates.Under IFRS 3 Business Combinations, these fair values can be adjusted up to oneyear after the acquisition date, which can affect the amount recognized asgoodwill.

For the purpose ofimpairment testing, goodwill acquired in a business combination is, from theacquisition date, allocated to each of the Group’s cash generating units thatare expected to benefit from the synergies of the combination, irrespective ofwhether other assets or liabilities of the Group are assigned to those units orgroups of units.

**2.14 Impairment ofnon-financial assets**

For non-financial assets the Group assesses at eachreporting date whether there is an indication that an asset may be impaired. Ifany such indication exists, or when annual impairment testing for an asset isrequired, the Group makes an estimate of the asset’s recoverable amount. Anasset’s recoverable amount is the higher of an asset’s or cash-generating unit’sfair value less costs to sell and its value in use. The recoverable amount isdetermined for an individual asset, unless the asset does not generate cashinflows that are largely independent of those from other assets or groups ofassets. Where the carrying amount of an asset exceeds its recoverable amount,the asset is considered impaired and is written down to its recoverable amount.The impact of the impairment calculations is discussed in Note 5.6 and 5.7.

Goodwill is reviewed forimpairment, annually or more frequently if events or changes in circumstancesindicate that the carrying value may be impaired. Impairment is determined forgoodwill by assessing the recoverable amount of the cash-generating unit, towhich the goodwill has been allocated. Where the recoverable amount of thecash-generating unit is less than the carrying amount of the cash-generatingunit to which goodwill has been allocated an impairment loss is recognized.Impairment losses relating to Goodwill cannot be reversed in future periods. Theimpact of the impairment calculations is discussed in Note 5.8.

**2.15 Employeebenefits**

**Pensions**

The Group operates both defined benefit plans anddefined contribution plans. For defined contribution plans obligations forcontributions are recognized as an expense when they are due. The Group has nolegal or constructive obligations to pay further contributions if the fund doesnot hold sufficient assets to pay all employees the benefits relating toemployee service in the current and prior periods.

Under defined benefit plans the pension entitlementsare calculated using the projected unit credit actuarial method. The pensionliability as recognized in the balance sheet is the present value of thedefined benefit obligation at the balance sheet date, less the fair value ofthe plan assets after adding or subtracting unrecognized actuarial gains orlosses and past-service costs.

F-20

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

The defined benefitobligation is calculated separately for each plan by estimating the amount offuture benefit that employees have earned in return for their service in thecurrent and prior periods. That benefit is discounted to determine its present valueand any unrecognized past service costs and the fair value of any plan assetsare deducted. For each plan the recognized assets are limited to the net totalof any cumulative unrecognized net actuarial losses and past service costs andthe present value of any future refunds from the plan or reductions in futurecontributions to the plan (the “asset ceiling”). Actuarial gains and losses inexcess of a threshold of the higher of 10% of the pension liabilities and 10%of the fair value of the plan assets are charged or credited to the incomestatement over the employees’ expected average remaining working lives.

**Share-based paymenttransactions**

*Option plans*

Employees of the Group receive remuneration in theform of share-based payment transactions, whereby employees render services asconsideration for equity instruments (“equity-settled transactions”).

The cost of equity-settled transactions with employeesis measured by reference to the fair value at the date on which the equityinstruments are granted. The fair value is determined using a stock optionpricing model. Further reference is made to Note 5.18. In valuingequity-settled transactions, no account is taken of any performance conditions,other than conditions linked to the price of the shares of Crucell (“marketconditions”), if applicable.

The cost of equity-settledtransactions is recognized, together with a corresponding increase in equity,over the period in which the performance and/or service conditions arefulfilled, ending on the date on which the relevant employees become fullyentitled to the award (“the vesting date”). The cumulative expense recognizedfor equity-settled transactions at each reporting date until the vesting datereflects the extent to which the vesting period has expired and the Group’sbest estimate of the number of equity instruments that will ultimately vest.The income statement charge or credit for a period represents the movement incumulative expense recognized as at the beginning and end of that period with theoff setting entry recorded in share premium in equity.

*Short-termincentive plans*

The fair value of sharegrants under these plans is estimated on the date of grant by multiplying thenumber of shares available to be granted by the fair value of the Company’sshares on the grant date. Management assumes any performance goals required bythe short term incentive plan will be achieved and the award will vest in full.

*Long-term incentiveplans*

The fair value of sharegrants under these plans is estimated on the date of grant using alattice-based option valuation model. The model calculates the likelihood ofachievement of the market-based measures at various levels and once a value isdetermined for the shares, compensation cost is recognized over the measurementperiod of three years regardless of whether those market-based targets areachieved. Key input assumptions for the lattice-based option valuation modelinclude expected volatilities, expected term, dividend yield and risk freeinterest rates. Expected volatilities are based on historical volatilities ofthe Company’s stock measured over a period commensurate with the expected termof the grants. The expected term used is the three-year measurement period.Dividend yields used were based on historical 

F-21

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

informationas to dividends declared by the Company. Risk-free interest rates used wereequal to the implied yield currently available on zero-coupon government issuesin countries whose currency the share price is expressed for Crucell with aremaining term equal to the expected term of the share-based instrument beingvalued.

**2.16 Interest-bearingloans and borrowings**

Short-term financialliabilities consist of all liabilities with maturities up to one year.Long-term financial liabilities are liabilities with maturities over one year.All loans and borrowings are initially recognized at the fair value of theconsideration received less directly attributable transaction costs. Afterinitial recognition, interest-bearing loans and borrowings are subsequentlymeasured at amortised cost using the effective interest method. Gains andlosses are recognized in the income statement when the liabilities arederecognized as well as through the amortization process. A financial liabilityis derecognized when the obligation underlying the liability is discharged,cancelled or expired.

**2.17 Derivativefinancial instruments and hedging**

In principle the Group does not engage in derivativetransactions to hedge its currency exposure. At year-end a limited number offorward contracts were outstanding. The Group is currently in the process ofdetermining the most optimal manner to mitigate the effects of its structuralcurrency exposures.

Derivative financial instruments are initiallyrecognized at fair value on the date a derivative contract is entered into andare subsequently remeasured at fair value. Derivatives are carried as assetswhen the fair value is positive and as liabilities when the fair value isnegative.

The Group does not applyformal hedge accounting and consequently any gains or losses arising fromchanges in fair value on derivatives are taken directly to net profit or lossfor the year.

**2.18 Provisions**

Provisions are recognizedwhen the Group has a present obligation (legal or constructive) as a result ofa past event, it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation and a reliable estimate ofthe obligation can be made. The expense relating to any provision is presentedin the income statement net of any reimbursement. If the effect of the timevalue of money is significant, provisions are discounted. Where discounting isused, the increase in the provision due to the passage of time is recognized asa financial expense.

**2.19 Leases**

Leases of property, plant and equipment where theGroup assumes substantially all the risks and rewards of ownership of theleased asset are classified as finance leases. Finance leases are capitalisedat the inception of the lease at the fair value of the leased property or, iflower, at the present value of the minimum lease payments. Lease payments areapportioned between the finance charges and reduction of the lease liability soas to achieve a constant rate of interest on the remaining balance of theliability. Finance charges are charged directly against income. Capitalisedleased assets are depreciated over the shorter of the estimated useful life ofthe asset or, over the lease term, if there is no reasonable certainty that theGroup will obtain ownership by the end of the lease term.

F-22

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Leases where the Group does not assume substantiallyall the risks and rewards of ownership are classified as operating leases.Operating lease payments are recognized as an expense in the income statementon a straight-line basis over the lease term.

The determination ofwhether an arrangement is, or contains a lease is based on the substance of thearrangement and requires an assessment of whether the fulfilment of thearrangement is dependent on the use of a specific asset or assets and thearrangement conveys a right to use the asset.

**3**                    Businesscombinations

**3.1 Acquisition ofBerna Biotech AG**

On February 22, 2006, Crucell acquiredapproximately 97.0% percent of the outstanding common shares of Berna BiotechAG (“Berna Biotech”). The Company issued 16,691,492 ordinary shares with a fairvalue of € 20.90 each, being thepublished price of the shares of Crucell at the date of exchange to acquireBerna. On March 31, 2006 the Company purchased an additional 1.4% of theissued shares of Berna Biotech, for which the Company issued 239,270 ordinaryshares with a fair value of €23.25. The consolidated financial statements include the results of BernaBiotech since March 1, 2006. There were no significant transactionsbetween February 22, 2006 and March 1, 2006.

InSeptember 2006 the Company was able to squeeze-out the remaining 1.6%minority interest of Berna Biotech. With the squeeze-out, the delisting ofBerna Biotech shares was approved and effected by the SWX Swiss Exchange onSeptember 18, 2006.

| ** **                                            | ** ** | **Recognized  on  acquisition** | ** **  | **Carrying  value** | ** ** |
|-------------------------------------------------------|------------|---------------------------------|-------------|---------------------|------------|
| Property, plant and  equipment                        |       |                            | 119,072     |                |       | 101,544 |   |
| Intangible assets                                     |       |                            | 118,717     |                |       | — |   |
| Investments                                           |       |                            | 6,716       |                |       | 2,949 |   |
| Other long term and  financial assets                 |       |                            | 8,348       |                |       | 7,528 |   |
| Cash and cash  equivalents                            |       |                            | 77,859      |                |       | 77,859 |   |
| Trade and other  receivables                          |       |                            | 28,995      |                |       | 28,733 |   |
| Inventory                                             |       |                            | 55,417      |                |       | 34,468 |   |
| Prepayments and other  current assets                 |       |                            | 23,185      |                |       | 21,892 |   |
| Assets of disposal group  classified as held for sale |       |                            | 11,811      | * *            | * *   | *—* | * * |
| Minority interests                                    |       |                            | (6,763      | )                   |       | (2,735 | ) |
| Long-term financial  liabilities                      |       |                            | (28,765     | )                   |       | (28,765 | ) |
| Long-term provisions and  other long-term liabilities |       |                            | (2,107      | )                   |       | (2,185 | ) |
| Deferred tax liability                                |       |                            | (42,915     | )                   |       | (10,269 | ) |
| Trade and other payables                              |       |                            | (7,664      | )                   |       | (7,664 | ) |
| Short-term financial  liabilities                     |       |                            | (12,995     | )                   |       | (12,995 | ) |
| Other short-term  liabilities                         |       |                            | (15,763     | )                   |       | (15,145 | ) |
| **Fair value of net assets  recognized**              | ** ** | ** **                      | **333,148** | ** **          | ** ** | ** ** | ** ** |
| **1.6% minorities**                                   | ** ** | ** **                      | **(5,330**  | **)**               | ** ** | ** ** | ** ** |
| **Fair value of net assets  acquired**                | ** ** | ** **                      | **327,818** | ** **          | ** ** | ** ** | ** ** |
| **Purchase price**                                    | ** ** | ** **                      | **364,490** | ** **          | ** ** | ** ** | ** ** |
| **Goodwill**                                          | ** ** | ** **                      | **36,672**  | ** **          | ** ** | ** ** | ** ** |

 

F-23

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

 

| Cost:                                  | ** ** | ** **  | ** ** |
|----------------------------------------|------------|-------------|------------|
| Shares issued, at fair value           |       | 354,415     |       |
| Costs associated  with the acquisition |       | 10,075      |       |
| Total                                  | ** ** | **364,490** | ** ** |
| Cash outflow on acquisition:           | ** ** | ** **  | ** ** |
| Net cash acquired  with the subsidiary |       | 77,859      |       |
| Cash paid                              |       | (10,075     | )          |
| Net of cash acquired                   | ** ** | **67,784**  | ** ** |

 

From the date of acquisition Berna Biotech hascontributed € 52,742 to the net lossof the Group. If the combination had taken place on January 1, 2006, theloss for the period from January, 2006 to the date of acquisition would havebeen approximately € 11,900 (unaudited) and the complementaryrevenue from continuing operations would have been approximately € 8,600 (unaudited).

During 2006, the Companyacquired Rhein Biotech GmbH and Dr. E. Graub AG. These were subsidiarycompanies of Berna Biotech and were acquired solely with a view to beingdivested after completion of the acquisition of Berna Biotech. OnMarch 27, 2006 Rhein Biotech GmbH was sold for € 6,341. As of April 5, 2006Dr. E. Graub AG was sold for €5,390. The net result of these disposals amounts to € 716,which was already taken into consideration in the acquisition of the BernaBiotech Group as a part of the fair value adjustments made.

**3.2 Acquisition ofthe assets and liabilities of Berna Products Corp.**

InOctober 2006, the Group purchased, via its subsidiary Crucell VaccinesInc. the assets and liabilities of the Florida-based Berna Products Corp.(“BPC”) from Acambis plc for an amount of € 13,806, excluding acquisition costs. BPC was originallyestablished in 1990 by Berna Biotech to market Vivotif, Berna’s oral typhoidfever vaccine, in the United States and Canada and was acquired by Acambis plcin 2003.

| ** **                            | ** ** | **Recognized  on  acquisition** | ** ** | **Carrying  value** | ** ** |
|---------------------------------------|------------|---------------------------------|------------|---------------------|------------|
| Property, plant  and equipment        |       |                            | 90         |                |       |   | 90 |   |   |
| Intangible assets                     |       |                            | 8,543      |                | * *   | * * | *—* |   |   |
| Other long term  assets               |       |                            | 49         |                |       |   | 49 |   |   |
| Cash and cash  equivalents            |       |                            | 142        |                |       |   | 142 |   |   |
| Trade and other  receivables          |       |                            | 926        |                |       |   | 926 |   |   |
| Inventory                             |       |                            | 924        |                |       |   | 379 |   |   |
| Current  liabilities                  |       |                            | (782       | )                   |       |   | (782 | ) |   |
| **Fair value of net assets acquired** | ** ** | ** **                      | **9,892**  |                | ** ** | ** ** | ** ** |   |   |
| **Purchase  price**                   | ** ** | ** **                      | **14,057** |                | ** ** | ** ** | ** ** |   |   |
| **Goodwill**                          | ** ** | ** **                      | **4,165**  |                | ** ** | ** ** | ** ** |   |   |

 

F-24

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

 

| Cost:                                  |       |        |       |
|----------------------------------------|------------|-------------|------------|
| Cash payment                           |       | 13,806      |       |
| Costs associated  with the acquisition |       | 251         |       |
| Total                                  | ** ** | **14,057**  | ** ** |
| Cash outflow on acquisition:           |       |        |       |
| Net cash acquired with the subsidiary  |       | 142         |       |
| Cash paid                              |       | (14,057     | )          |
| Net cash outflow                       | ** ** | **(13,915** | **)**      |

 

From the date ofacquisition BPC has contributed € 92 tothe net loss of the Group. From January 1, 2006 through the date ofacquisition BPC’s net result according to US GAAP approximately amounts to € 2,400 (unaudited) and the revenue amounts to € 6,400 (unaudited).

**3.3 Acquisition ofSBL Vaccin Holding AB**

On November 23, 2006 Crucell acquired the sharesof Stockholm-based SBL Vaccin Holding AB (SBL) from 3i and SEB for a totalconsideration of €39,341 in cash, excluding acquisition costs.

SBL is a fully integrated independent Swedishbiotechnology company employing 120 people. SBL’s main product is Dukoral, anoral vaccine that offers protection against cholera and is registered in morethan 50 countries excluding the US. In addition SBL has a sales anddistribution organization for vaccines in Scandinavia. SBL markets a broadrange of vaccines sourced from global vaccine companies.

Theacquisition of SBL has been accounted for on a provisional basis as theacquisition was only completed late in the year.

| ** **                                      | ** ** | **Recognized  on  acquisition** | ** ** | **Carrying  value** | ** ** |
|-------------------------------------------------|------------|---------------------------------|------------|---------------------|------------|
| Property, plant  and equipment                  |       |                            | 11,098     |                |       | 5,800 |   |
| Intangible assets                               |       |                            | 6,001      |                |       | 1,149 |   |
| Cash and cash  equivalents                      |       |                            | 7,130      |                |       | 7,130 |   |
| Trade and other  receivables                    |       |                            | 10,565     |                |       | 10,564 |   |
| Inventory                                       |       |                            | 16,228     |                |       | 10,520 |   |
| Long-term  provisions and financial liabilities |       |                            | (4,007     | )                   |       | (10,029 | ) |
| Deferred tax (liability)/asset                  |       |                            | (2,584     | )                   |       | 1,969 |   |
| Trade and other  payables                       |       |                            | (10,497    | )                   |       | (10,497 | ) |
| **Fair value of net assets acquired**           | ** ** | ** **                      | **33,934** |                | ** ** | ** ** | ** ** |
| **Purchase  price**                             | ** ** | ** **                      | **40,516** |                | ** ** | ** ** | ** ** |
| **Goodwill**                                    | ** ** | ** **                      | **6,582**  |                | ** ** | ** ** | ** ** |

 

F-25

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

 

| Cost:                                  |       |        |       |
|----------------------------------------|------------|-------------|------------|
| Cash payment                           |       | 39,341      |       |
| Costs associated  with the acquisition |       | 1,175       |       |
| Total                                  | ** ** | **40,516**  | ** ** |
| Cash outflow on acquisition:           |       |        |       |
| Net cash acquired with the subsidiary  |       | 7,130       |       |
| Cash paid                              |       | (40,516     | )          |
| Net cash outflow                       | ** ** | **(33,386** | **)**      |

 

From the date of acquisitionSBL has contributed € 209to the net loss of the Group. From January 1, 2006 through the date ofacquisition SBL’s net result according to Swedish GAAP approximately amounts to€ 6,000 (unaudited) and the revenue amountsto € 32,700 (unaudited).

**4   Segmentreporting**

**4.1 General**

Segment information ispresented in respect of the Group’s business and geographical segments. Theprimary segment reporting format is determined to be business segments as theGroup’s risks and rates of return are affected predominantly by differences inthe products and services produced. Secondary information is reportedgeographically.

**4.2 Businesssegments**

TheGroup is managed as one business segment. Following the acquisitions made in2006, management reporting includes further segmentation of the product salesalong the different types of vaccines:

| ** **                   | ** ** | **Year ended December 31,** | ** ** |
|------------------------------|------------|--------------------------------------------|------------|
| ** **                   | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Paediatric  vaccines         |       | 35,933                                     |       |   | — |   |   |   | — |   |   |
| Respiratory  vaccines        |       | 40,386                                     |       |   | — |   |   |   | — |   |   |
| Travel vaccines              |       | 23,072                                     |       |   | — |   |   |   | — |   |   |
| Other vaccines               |       | 2,998                                      |       |   | — |   |   |   | — |   |   |
| Proteins and  other business |       | 1,529                                      |       |   | — |   |   |   | — |   |   |
|                         | ** ** | **103,918**                                |       |   | — |   |   |   | — |   |   |

 

Management iscurrently in the process of redefining the primary business segments. Goingforward the Group will be reporting in two separate segments:

·       Vaccines:the development, production and marketing of vaccines worldwide to combatinfectious diseases;

·       Proteins:leverage Crucell’s novel, proprietary technologies to develop monoclonalantibodies and therapeutic protein products.

F-26

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

The operating businessesshall be organised and managed separately according to the nature of theseproducts and services provided, with each segment representing a strategicbusiness unit that offers different products and serves different markets. Thissegmentation was not applicable throughout 2006 and cannot be made withoutsignificant arbitrary allocations. Providing this information would havelimited added value to users of the financal statements.

**4.3 Geographicalsegments**

TheGroup principally operates in three geographical areas, Europe, North Americaand Asia. Segment revenue is based on the geographical location of thecustomers, which is the billing location of the customers. Segmentation of theassets is based on the geographical location of the assets.

| ** **    | ** ** | **Year ended December 31,** | ** ** |
|---------------|------------|--------------------------------------------|------------|
| ** **    | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenue**   |       |                                       |       |   |   |   |   |
| Europe        |       | 80,401                                     |       | 9,382 |   | 6,601 |   |
| North America |       | 3,469                                      |       | 22,871 |   | 11,495 |   |
| Asian         |       | 16,506                                     |       | 476 |   | 45 |   |
| Other*        |       | 31,191                                     |       | — |   | — |   |
| **Total**     | ** ** | **131,567**                                | ** ** | **32,729** | ** ** | **18,141** | ** ** |

----

*                    Thismainly includes the sales to supranational organizations.

| ** **                                                          | ** ** | **2006**    | ** ** | **2005**    | ** ** | **2004**    | ** ** |
|---------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
| **Assets  (excluding investment in associates and joint ventures)** |       |        |       |        |       |        |       |
| Europe                                                              |       | 502,054     |       | 169,737     |       | 101,015     |       |
| North America                                                       |       | 7,235       |       | —      |       | —      |       |
| Asia                                                                |       | 137,928     |       | —      |       | —      |       |
| Other                                                               |       | —      |       | —      |       | —      |       |
| **Total**                                                           | ** ** | **647,217** | ** ** | **169,737** | ** ** | **101,015** | ** ** |
| **Investment  in associates and joint ventures**                    |       |        |       |        |       |        |       |
| Europe                                                              |       | 5,741       |       | —      |       | —      |       |
| North America                                                       |       | 257         |       | —      |       | —      |       |
| Asia                                                                |       | —      |       | —      |       | —      |       |
| Other                                                               |       | —      |       | —      |       | —      |       |
| **Total**                                                           | ** ** | **5,998**   | ** ** | **—**  | ** ** | **—**  | ** ** |
| **Total  assets**                                                   |       |        | ** ** | ** **  | ** ** | ** **  | ** ** |
| Europe                                                              |       | 507,795     |       | 169,737     |       | 101,015     |       |
| North America                                                       |       | 7,492       |       | —      |       | —      |       |
| Asia                                                                |       | 137,928     |       | —      |       | —      |       |
| Other                                                               |       | —      |       | —      |       | —      |       |
| **Total**                                                           | ** ** | **653,215** | ** ** | **169,737** | ** ** | **101,015** | ** ** |

 

F-27

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

 

| ** **                                                      | ** ** | **Year ended December 31,** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                      | ** ** | **2006**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Capital expenditure tangible fixed assets**                   |       |                        |       |   |   |   |   |
| Europe                                                          |       | 120,652                     |       | 17,137 |   | 2,114 |   |
| North America                                                   |       | 101                         |       | — |   | — |   |
| Asia                                                            |       | 28,237                      |       | — |   | — |   |
| Other                                                           |       | —                      |       | — |   | — |   |
| **Total**                                                       | ** ** | **148,990**                 | ** ** | **17,137** | ** ** | **2,114** | ** ** |
| **Capital expenditure intangible assets (including  goodwill)** |       |                        |       |   |   |   |   |
| Europe                                                          |       | 110,761                     |       | — |   | 4,017 |   |
| North America                                                   |       | 4,165                       |       | — |   | — |   |
| Asia                                                            |       | 63,097                      |       | — |   | — |   |
| Other                                                           |       | —                      |       | — |   | — |   |
| **Total**                                                       | ** ** | **178,023**                 | ** ** | **—** | ** ** | **4,017** | ** ** |

 

**5**                    Notes to thespecific items of the consolidated financial statements

**5.1 Personnel expenses**

| ** **                                     | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                     | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Wages and salaries                             |       | 48,841                                     |       | 18,666 |   | 13,449 |   |
| Social security costs                          |       | 4,469                                      |       | 1,124 |   | 935 |   |
| Pension defined benefit  plans                 |       | 2,179                                      |       | — |   | — |   |
| Pension defined  contribution plans            |       | 1,770                                      |       | 867 |   | 1,032 |   |
| Expenses for employee  shares and option plans |       | 4,296                                      |       | 3,927 |   | 3,357 |   |
| Other personnel expenses                       |       | 6,464                                      |       | — |   | — |   |
|                                           | ** ** | **68,019**                                 | ** ** | **24,584** | ** ** | **18,773** | ** ** |

 

The Group employed 1,073people at December 31, 2006 compared to 282 at December 31, 2005.

**5.2 Financial income**

| ** **                      | ** ** | **Year ended December 31,** | ** ** |
|---------------------------------|------------|--------------------------------------------|------------|
| ** **                      | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Currency gains                  |       | 9,461                                      |       | 295 |   | 74 |   |
| Interest income,  third parties |       | 3,718                                      |       | 1,965 |   | 1,715 |   |
| Other financial  income         |       | 274                                        |       | 72 |   | — |   |
|                            | ** ** | **13,453**                                 | ** ** | **2,332** | ** ** | **1,789** | ** ** |

 

**5.3 Financial expenses**

| ** **                       | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------|------------|--------------------------------------------|------------|
| ** **                       | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Currency losses                  |       | (9,625                                     | )          | (61 | ) | (182 | ) |
| Interest expense,  third parties |       | (1,737                                     | )          | — |   | (212 | ) |
| Other financial  expenses        |       | (344                                       | )          | (70 | ) | — |   |
|                             | ** ** | **(11,706**                                | **)**      | **(131** | **)** | **(394** | **)** |

 

F-28

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**5.4 Income tax**

| ** **                                        | ** ** | **Year ended December 31,** | ** ** |
|---------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                        | ** ** | **2006**                                   | ** ** | **  2005  ** | ** ** | **  2004  ** | ** ** |
| Current income  tax                               |       | (258                                       | )          |   |  — |   |   |   |  — |   |   |
| Adjustments  current income tax of previous years |       | (213                                       | )          |   | — |   |   |   | — |   |   |
| Deferred taxation                                 |       | 11,022                                     |       |   | — |   |   |   | — |   |   |
| **Income tax**                                    | ** ** | **10,551**                                 | ** ** | ** ** | **—** |   | ** ** | ** ** | **—** |   |   |

 

Thereconciliation between the loss for the year multiplied by the applicable taxrate and the actual taxation is as follows:

| ** **                                                          | ** **   | **Year ended December 31,** | ** ** |
|---------------------------------------------------------------------|--------------|-----------------------------|------------|
| ** **                                                          | ** **   | **2006**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Loss for the year  before income tax                                | *** *** | **(98,116**                 | **)**      | **(15,578** | **)** | **(22,826** | ***)*** |
| At gross weighted average income tax rate                           |         | 21,437                      |       | 4,908 |   | 7,876 |   |
| Adjustments in respect of current income tax of  previous years     |         | (213                        | )          | — |   | — |   |
| Stock option  compensation expense                                  |         | (220                        | )          | (1,409 | ) | (2,567 | ) |
| Timing difference  revenue recognition                              |         | —                      |       | 1,716 |   | 1,466 |   |
| Timing difference  amortisation expense                             |         | —                      |       | (463 | ) | (678 | ) |
| Permanent  differences                                              |         | 1,096                       |       | — |   | — |   |
| Effect of tax  rate changes                                         |         | 3,894                       |       | — |   | — |   |
| Other effects                                                       |         | 395                         |       | (143 | ) | (243 | ) |
| Effect of current  tax losses not recognized as deferred tax assets |         | (15,838                     | )          | (4,609 | ) | (5,854 | ) |
| Effective income tax  rate 10.8%, (2005: nil, 2004: nil)            | ** **   | **10,551**                  | ** ** | **—** | ** ** | **—** | ** ** |

 

Nocurrent or deferred tax charges were recognized in equity. In 2005 and 2004 theGroup did not have temporary differences. In 2006 the changes in deferredincome tax assets and liabilities were as follows:

| ** **                                                 | ** ** | **2006**    | ** ** |
|------------------------------------------------------------|------------|-------------|------------|
| January 1,                                            |       | —      |       |
| Acquisition of  subsidiaries                               |       | (44,300     | )          |
| Changes in  deferred tax liabilities during the year       |       | 11,006      |       |
| Losses available  for offset against future taxable income |       | 16          |       |
| **December 31,**                                      | ** ** | **(33,278** | **)**      |

 

F-29

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Thecomposition of the temporary differences and tax loss carry forwards in thebalance sheet is as follows:

| ** **                                                 | ** ** | **December 31,**                                    | ** **  |
|------------------------------------------------------------|------------|----------------------------------------------------------|-------------|
| ** **                                                 | ** ** | **    2006    ** | ** **  | **    2005    ** | ** ** |
| **Deferred income tax liability**                          | ** ** |                                                     | ** **  |   |   |   |   |   |   |
| Valuation differences  attributable to:                    |       |                                                     |        |   |   |   |   |   |   |
| Inventories                                                |       |                                                     | (3,318      | ) |   |   |  — |   |   |
| Other assets                                               |       |                                                     | (867        | ) |   |   | — |   |   |
| Property, plant  and equipment                             |       |                                                     | (8,261      | ) |   |   | — |   |   |
| Intangible assets                                          |       |                                                     | (21,634     | ) |   |   | — |   |   |
| Liabilities                                                |       |                                                     | (255        | ) |   |   | — |   |   |
|                                                       | ** ** |                                                     | **(34,335** | **)** |   |   | — |   |   |
| **Deferred  income tax assets**                            | ** ** |                                                     | ** **  | ** ** |   |   |   |   |   |
| Losses available  for offset against future taxable income |       |                                                     | 288         |   |   |   | — |   |   |
| Valuation  differences assets and liabilities              |       |                                                     | 769         |   |   |   | — |   |   |
| ** **                                                 | ** ** |                                                     | **1,057**   |   |   |   | — |   |   |
| Offset of deferred tax balances                            |       |                                                     | 749         |   |   |   | — |   |   |
| Reflected in the  balance sheet as follows:                |       |                                                     |        |   |   |   |   |   |   |
| Deferred tax  assets                                       |       |                                                     | 308         |   |   |   | — |   |   |
| Deferred tax  liability                                    |       |                                                     | (33,586     | ) |   |   | — |   |   |
| **Deferred tax liabilities, net**                          | ** ** |                                                     | **(33,278** | **)** |   |   | — |   |   |

 

The Group has tax carry forward losses for an amountof € 222,238 (2005: €103,714, 2004: € 85,766) that are available, with certainrestrictions in time, for offset against future taxable profits of thecompanies in which the losses arose.

The unrecognized carry forward losses expire asfollows:

| **Before 2011** | ** ** | **2011** | ** ** | **After 2011** | ** ** | **Unlimited** | ** ** | **Total** | ** ** |
|----------------------|------------|----------|------------|---------------------|------------|---------------|------------|-----------|------------|
| € 16,504        |       | €   | 98,202     |                | €     | 88,902        |       | €    | 18,630     |   | € | 222,238 |   |
|                      |            |          |            |                     |            |               |            |           |            |  |  |  |  |

 

The Group has evaluatedevidence impacting the recoverability of its deferred tax assets, which consistprincipally of tax loss carry forwards. Management has considered the Group’shistory of net losses and concluded that it is probable that the full benefitsof these tax loss carry forwards will not be realized in the near term.Accordingly, the Group did not recognize any deferred tax assets relating tothe carry forward losses.

***Tax rate changes***

The Netherlands domestic statutory corporate incometax rate is 29.6% for 2006 (a lower tax rate of 25.5% applies to the first € 22,689 of profits), 31.5% for 2005 and 34.5% for 2004. Asof January 1, 2007, the statutory corporate income tax rate has beenreduced to 25.5%.

In Korea the tax holiday granted by the government isdecreasing over time. In financial year 2006, Crucell’s Korean subsidiary wasnot yet subject to income tax. From financial year 2007 to financial year 2009the applicable tax rate will be 16.5%. As of 2010 the tax rate will be 27.5%.

F-30

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

The Spanish domesticstatutory income tax rate amounts to 35% in 2006 and will be decreased to 32.5%in 2007 and 30% in 2008.

***Exposures***

In Italy the fiscal years2001 and 2002 of Berna Biotech Italia Srl. are subject to a tax audit. Thecorporate income tax returns for 2001 and 2002 as filed by Berna Biotech ItaliaSrl. are currently under discussion with the Italian tax authorities.

**5.5 Net loss per share**

| ** **                                                       | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                       | ** ** | **2006**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Profit attributable to ordinary shareholders |       |                        |       |   |   |   |   |
| Net loss  attributable to ordinary shareholders                  |       | (87,565                     | )          | (15,578 | ) | (22,826 | ) |
| ***Weighted  average number of ordinary shares***                |       |                        |       |   |   |   |   |
| Weighted average number of ordinary shares for the year     |       | 57,064,034                  |       | 39,852,064 |   | 36,382,662 |   |
| Net loss per share—basic                                    | ** ** | **(1.53**                   | **)**      | **(0.39** | **)** | **(0.63** | **)** |
| Net loss per  share—diluted                                 | ** ** | **(1.53**                   | **)**      | **(0.39** | **)** | **(0.63** | **)** |

 

Because the effect ofissuing potential ordinary shares under stock options plas, stock plans andwarrants is anti-dilutive, these shares do not have an impact on thecalculation of diluted net loss per share.

F-31

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**5.6 Property, plant and equipment**

| ** **                             | ** **   | **Freehold  Land and  buildings** | ** **  | **Plant and  equipment** | ** ** | **Assets  under  construction** | ** **  | **Total**  | ** ** |
|----------------------------------------|--------------|----------------------------------------|-------------|-------------------------------|------------|---------------------------------|-------------|------------|------------|
| ***Cost***                             |         |                                   |        |                          |       |                            |        |       |       |   |   |   |   |   |   |
| ***At  January 1, 2005***         | *** *** | *** ***                           | **4,204**   | ** **                    | ** ** | ** **                      | **14,757**  | ** ** | ** ** | ** ** | **318** |   | ** ** | **19,279** | *** *** |
| Additions                              |         |                                   | 1,500       |                          |       |                            | 1,167       |       |       |   | 14,470 |   |   | 17,137 |   |
| Reclassifications                      |         |                                   | —      |                          |       |                            | 310         |       |       |   | (310 | ) |   | — |   |
| Disposals                              |         |                                   | —      |                          |       |                            | (116        | )          |       |   | — |   |   | (116 | ) |
| ***At  December 31, 2005***       | *** *** | *** ***                           | **5,704**   | ** **                    | ** ** | ** **                      | **16,118**  | ** ** | ** ** | ** ** | **14,478** |   | ** ** | **36,300** | *** *** |
| Additions                              |         |                                   | 1,902       |                          |       |                            | 6,318       |       |       |   | 12,117 |   |   | 20,337 |   |
| Acquisition of  subsidiaries           |         |                                   | 63,753      |                          |       |                            | 55,639      |       |       |   | 9,261 |   |   | 128,653 |   |
| Disposals                              |         |                                   | (149        | )                             |       |                            | (2,188      | )          |       |   | — |   |   | (2,337 | ) |
| Reclassifications                      |         |                                   | 417         |                          |       |                            | 939         |       |       |   | (1,356 | ) |   | — |   |
| Effect of  movements in exchange rates |         |                                   | (1,880      | )                             |       |                            | (1,736      | )          |       |   | (202 | ) |   | (3,818 | ) |
| **At  December 31, 2006**         | ** **   | ** **                             | **69,747**  | ** **                    | ** ** | ** **                      | **75,090**  | ** ** | ** ** | ** ** | **34,298** |   | ** ** | **179,135** | ** ** |
| ***Depreciation  and impairment***     |         |                                   |        |                          |       |                            |        |       |       |   |   |   |   |   |   |
| ***At January 1, 2005***          | ** **   | ** **                             | **(1,368**  | **)**                         | ** ** | ** **                      | **(7,446**  | **)**      | ** ** | ** ** | **—** |   | ** ** | **(8,814** | **)** |
| Depreciation  charge for the year      |         |                                   | (405        | )                             |       |                            | (2,568      | )          |       |   | — |   |   | (2,973 | ) |
| Disposals                              |         |                                   | —      |                          |       |                            | 116         |       |       |   | — |   |   | 116 |   |
| ***At  December 31, 2005***       | ** **   | ** **                             | **(1,773**  | **)**                         | ** ** | ** **                      | **(9,898**  | **)**      | ** ** | ** ** | **—** |   | ** ** | **(11,671** | **)** |
| Depreciation charge for the year       |         |                                   | (3,836      | )                             |       |                            | (10,439     | )          |       |   | — |   |   | (14,275 | ) |
| Impairment                             |         |                                   | (7,746      | )                             |       |                            | (11,822     | )          |       |   | — |   |   | (19,568 | ) |
| Disposals                              |         |                                   | 33          |                          |       |                            | 2,060       |       |       |   | — |   |   | 2,093 |   |
| Effect of  movements in exchange rates |         |                                   | 956         |                          |       |                            | 1,348       |       |       |   | — |   |   | 2,304 |   |
| **At  December 31, 2006**         | ** **   | ** **                             | **(12,366** | **)**                         | ** ** | ** **                      | **(28,751** | **)**      | ** ** | ** ** | **—** |   | ** ** | **(41,117** | **)** |
| **Net book  value**                    |         |                                   |        |                          |       |                            |        |       |       |   |   |   |   |   |   |
| **At December 31, 2006**          | ** **   | ** **                             | **57,381**  | ** **                    | ** ** | ** **                      | **46,339**  | ** ** | ** ** | ** ** | **34,298** |   | ** ** | **138,018** | ** ** |
| **At December 31, 2005**          | ** **   | ** **                             | **3,931**   | ** **                    | ** ** | ** **                      | **6,220**   | ** ** | ** ** | ** ** | **14,478** |   | ** ** | **24,629** | ** ** |

 

Depreciation is includedin the cost of goods sold for €8,995, research and development costs for € 4,448and selling, general and administrative costs for € 832.

***Impairment***

An impairment loss of € 19,568 was recognized relating to two buildings inSwitzerland. The buildings are specially set up for biotechnology purposes andit is impractible to separate the buildings and the equipment. These premiseswere used to manufacture products of which the production was stopped or phasedout during 2006. As there is no direct use for these buildings in any of theother activities of the Group and it is not likely this will change in the nearfuture, the carrying value has been impaired for the total amount of € 19,568.

F-32

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

***Lease and borrowing costs***

At December 31, 2006 and 2005, the Group heldlaboratory equipment under capital leases with a cost of € 10,912 and €4,021, respectively and a net book value of € 7,291and € 1,186. These leases are secured by thevalue of the underlying assets and a compensating cash balance. The capitallease equipment is amortized over the useful life of the equipment, or thelease term, whichever is shorter.

At December 31, 2006an amount of € 744 of borrowing costsrelated to the construction of a new production facility in the Netherlandshave been capitalised (2005: nil). The borrowing costs are capitalised at acapitalisation rate of 4.55%.

***Commitments***

The remaining contractualcommitments amount to €11,693 (2005: € 10,500) for purchases of property, plantand equipment.

**5.7 Intangible assets**

| ** **                                                   | ** **   | **Customer  lists** | ** **   | **Patents and  licenses** | ** **   | **Developed  technologies** | ** **   | **In process  R&D** | ** **   | **Total**    | ** **  |
|--------------------------------------------------------------|--------------|---------------------|--------------|--------------------------------|--------------|-----------------------------|--------------|------------------------------|--------------|--------------|-------------|
| ***Cost***                                                   |         |                |         |                           |         |                        |         |                         |         |         |        |   |   |   |   |   |   |   |   |
| ***At  January 1, 2005 and at December 31, 2005*** | *** *** | *** ***        | ***—*** | *** ***                   | *** *** | *** ***                | ***—*** | *** ***                 | *** *** | *** *** | **10,669**  | ** ** | ** ** | ** ** | **—** | ** ** | ** ** | **10,669** | *** *** |
| Additions                                                    |         |                | 8,316        |                           |         |                        | —       |                         |         |         | —      |   |   |   | — |   |   | 8,316 |   |
| Disposals                                                    |         |                | —       |                           |         |                        | (19          | )                            |         |         | —      |   |   |   | — |   |   | (19 | ) |
| Acquisition of  subsidiaries                                 |         |                | —       |                           |         |                        | 26,771       |                         |         |         | 34,729      |   |   |   | 60,788 |   |   | 122,288 |   |
| Transfer in  process R&D                                 |         |                | —       |                           |         |                        | —       |                         |         |         | 42,838      |   |   |   | (42,838 | ) |   | — |   |
| Effect of  movements in exchange rates                       |         |                | (104         | )                              |         |                        | (613         | )                            |         |         | (1,022      | ) |   |   | (257 | ) |   | (1,996 | ) |
| **At  December 31, 2006**                               | ** **   | ** **          | **8,212**    | ** **                     | ** **   | ** **                  | **26,139**   | ** **                   | ** **   | ** **   | **87,214**  | ** ** | ** ** | ** ** | **17,693** | ** ** | ** ** | **139,258** | ** ** |
| ***Amortization  and impairment***                           |         |                |         |                           |         |                        |         |                         |         |         |        |   |   |   |   |   |   |   |   |
| ***At January 1, 2005***                                |         |                | —       | ** **                     | ** **   | ** **                  | **—**   | ** **                   | ** **   | ** **   | **(6,622**  | **)** | ** ** | ** ** | **—** | ** ** | ** ** | **(6,622** | **)** |
| Amortization                                                 |         |                | —       |                           |         |                        | —       |                         |         |         | (1,470      | ) |   |   | — |   |   | (1,470 | ) |
| ***At December 31, 2005***                              | *** *** | ** **          | ** **   | ** **                     | ** **   | ** **                  | **—**   | ** **                   | ** **   | ** **   | **(8,092**  | **)** | ** ** | ** ** | **—** | ** ** | ** ** | **(8,092** | **)** |
| Amortization                                                 |         |                | (693         | )                              |         |                        | (3,704       | )                            |         |         | (3,163      | ) |   |   | — |   |   | (7,560 | ) |
| Impairment                                                   |         |                | —       |                           |         |                        | —       |                         |         |         | —      |   |   |   | (10,848 | ) |   | (10,848 | ) |
| Disposals                                                    |         |                | —       |                           |         |                        | 19           |                         |         |         | —      |   |   |   | — |   |   | 19 |   |
| Effect of  movements in exchange rates                       |         |                | 6            |                           |         |                        | 139          |                         |         |         | 38          |   |   |   | 117 |   |   | 300 |   |
| **At  December 31, 2006**                               | ** **   | ** **          | **(687**     | **)**                          | ** **   | ** **                  | **(3,546**   | **)**                        | ** **   | ** **   | **(11,217** | **)** | ** ** | ** ** | **(10,731** | **)** | ** ** | **(26,181** | **)** |
| **Net  book value**                                          | ** **   | ** **          | ** **   | ** **                     | ** **   | ** **                  | ** **   | ** **                   | ** **   | ** **   | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **At December 31, 2006**                                | ** **   | ** **          | **7,525**    | ** **                     | ** **   | ** **                  | **22,593**   | ** **                   | ** **   | ** **   | **75,997**  | ** ** | ** ** | ** ** | **6,962** | ** ** | ** ** | **113,077** | ** ** |
| **At December 31, 2005**                                | ** **   | ** **          | **—**   | ** **                     | ** **   | ** **                  | **—**   | ** **                   | ** **   | ** **   | **2,577**   | ** ** | ** ** | ** ** | **—** | ** ** | ** ** | **2,577** | ** ** |

 

Amortization of intangibleassets is included in research and development costs.

F-33

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

***Impairment***

The impairment loss of € 10,848 relates to the in process research and developmentof the Tetra vaccine. In February 2006 Crucell acquired BernaBiotech, including rights to the Tetra vaccine. Management decided to stop thedevelopment of Tetra after Quinvaxem received approval by the WHO. Consequentlythe carrying value of Tetra has been impaired for the total amount of € 10,848.

**5.8 Goodwill**

| ** **                                                | ** **   | **Goodwill** | ** **   |
|-----------------------------------------------------------|--------------|--------------|--------------|
| ***Cost***                                                |         |         |         |   |   |
| ***At  January 1, 2005 and December 31, 2005*** | *** *** | *** *** | ***—*** |   |   |
| Additions                                                 |         |         | 4,165        |   |   |
| Effect of  movements in exchange rates                    |         |         | 43,254       |   |   |
| **At  December 31, 2006**                            | ** **   | ** **   | **47,419**   |   |   |
| **Net  book value**                                       | ** **   | ** **   | ** **   |   |   |
| **At December 31, 2006**                             | ** **   | ** **   | **47,419**   |   |   |
| **At December 31, 2005**                             | ** **   | ** **   | **—**   |   |   |

 

Noimpairment losses were recognized on the acquired goodwill. Goodwill acquiredthrough business combinations have been allocated the following individual cash-generatingunits:

| ** **                 | ** ** | **     2006     ** | ** ** | **     2005     ** | ** ** |
|----------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| Berna Biotech AG           |       |                                                                 | 29,970     |                                                                 |       |   |  — |   |   |
| Berna Biotech  Korea Corp. |       |                                                                 | 6,702      |                                                                 |       |   | — |   |   |
| Crucell Vaccines  Inc.     |       |                                                                 | 4,165      |                                                                 |       |   | — |   |   |
| SBL Vaccin AB              |       |                                                                 | 6,582      |                                                                 |       |   | — |   |   |
| Total goodwill             | ** ** | ** **                                                           | **47,419** |                                                                 |       |   | — |   |   |

 

***Berna Biotech AG***

The recoverable amount ofthe Berna Biotech has been determined based on a value in use calculation usingthe traditional discounted cash flow model with a terminal value after the lastplanning year in 2017. The Group uses a planning period longer than 5 years,which is a commonly used approach for biotechnology companies as thedevelopment and lifecycle of a single product can be substantially longer thanthe aforementioned period. Using a period of only 5 years would not lead to afair valuation of Berna Biotech and its products. Berna Biotech is a solidproduction and distribution company, which was the main reason for theacquisition and therefore the terminal value is considered to be fullysustainable.

***Berna Biotech Korea Corp.***

The recoverable amount of the Berna Biotech KoreaCorp. has been determined based on a value in use calculation using thetraditional discounted cash flow model. The valuation was made by adding thediscounted cash flows until 2017, as management did not see the terminal valueas sustainable.

The Korean site maypossibly be relocated over the next five years, which could have an impact onthe recoverable amount. Refer to the sensitivity analysis below.

F-34

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

***Other entities***

Goodwill related to theacquisition of SBL, the acquisition of the assets of Berna Products Inc. byCrucell Vaccines Inc. and the share exchange for the Rhein N.V. minority shareshas not been explicitly tested as these individual cash-generating units havebeen acquired recently. In these situations the consideration paid to acquirethese individual cash-generating units in an arm’s length transaction providesthe best evidence of the individual cash-generating units fair values. Sincethe respective acquisition dates of these companies there have not been anyevents or circumstances that are indicators that would trigger an impairmentreview.

***Sensitivity to changes inassumptions***

Management believesthat any reasonable possible change in the key assumptions would not decreasethe value in use to the extent that the related goodwill would exceed therecoverable amount. Reference is made to the key assumptions below as thesehave a significant impact on the calculated recoverable amount. The recoverableamount for the goodwill of Berna and Berna Biotech Korea Corp. exceeds itscarrying amount by €58,600 and € 2,600 respectively. The implicationsof the key assumptions on the recoverable amount are discussed below:

·       Therecoverable goodwill amounts of Berna Biotech and Berna Biotech Korea Corp.were determined based on a pre-tax weighted average cost of capital (“WACC”) of11.0% and 14.8% respectively. A higher WACC percentage would reduce therecoverable amount of the goodwill;

·       In determining the goodwillof Berna Biotech Korea Corp. calculations were made with a 50% chance of apossible relocation of the site. If calculations were made with an estimatedchance of relocation between the 50% and 100% this would lead to a reduction ofthe recoverable amount of the goodwill.

**5.9 Investments inassociates and joint ventures**

**5.9.1 Associatedcompanies**

***Kenta Biotech AG, Switzerland***

On February 9, 2006, Kenta Biotech AG was foundedwith a capital of € 9,061(CHF 14,290). Berna Biotech contributed investments in kind of € 3,329 (CHF 5,250) in exchange for shares equal to 36.74%of Kenta Biotech’s share capital. Kenta Biotech AG is focusing on the discoveryand development of innovative, fully human monoclonal antibodies for the life-savingtreatment of patients with serious infectious diseases.

F-35

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Summaryfinancial information for Kenta Biotech AG from February 9, 2006 through December 31,2006 is represented below:

| ** **                            | ** ** | **2006**   | ** ** |
|---------------------------------------|------------|------------|------------|
| **Associate’s balance sheet:**   |       |       |       |   |   |
| Current assets                        |       |       | 3,386      |   |   |
| Non-current  assets                   |       |       | 3,293      |   |   |
| Current  liabilities                  |       |       | (349       | ) |   |
| Non-current  liabilities              |       |       | —     |   |   |
| Net assets                            | ** ** | ** ** | **6,330**  | ** ** | ** ** |
| **Associate  revenues and expenses:** |       |       |       |   |   |
| Revenues                              |       |       | 59         |   |   |
| Expenses                              |       |       | (2,664     | ) |   |
| Loss for the period                   | ** ** | ** ** | **(2,605** | **)** | ** ** |

 

**5.9.2 Jointventures**

***Pevion Biotech AG, Switzerland***

Pevion Biotech AG is a joint venture between BernaBiotech and Bachem AG, Switzerland. Both companies hold 50% of the shares. In2006 the capital of the joint venture was increased by € 2,536 (CHF 4,000) of which CHF 2 million wascontributed by the Group. It is planned that the Group will contribute anadditional € 1,268 (CHF 2,000) in a capital increase in2007.

Pevion Biotech AG developsvaccines based on its proprietary technology platforms PeviPRO and PeviTER.By combining established technological processes with innovative concepts,Pevion Biotech AG promotes novel vaccine candidates from research into clinicaltesting.

***Percivia LLC, United States***

In August 2006 DSM Pharmaceutical Products Inc.and the Group established the joint venture Percivia LLC (Percivia) to operatethe PERCIVIA PER.C6 Development Center in Cambridge, Mass, USA. Both companieshold 50% of the shares. The initial contribution amounts to € 158 (US$ 200). The joint venture will further develop thePER.C6 cell line and provide a unique solution for the production ofpharmaceutical proteins to licensees utilizing the PER.C6 human cell line inthe biotech industry. Percivia recharges the costs incurred to the venturers.No additional fundings are planned.

F-36

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Summaryfinancial information for these joint ventures, not adjusted for the percentageownership held by the Group:

| ** **                               | ** ** | **Pevion  January 1-  December 31** | ** ** | **Percivia  August 1-  December 31** | ** ** | **Total  2006** | ** ** |
|------------------------------------------|------------|-----------------------------------------------|------------|------------------------------------------------|------------|-----------------|------------|
| **Joint  venture balance sheet:**        |       |                                          |       |                                           |       |            |       |   |   |   |   |
| Current assets                           |       |                                          | 1,958      |                                           |       |            | 3,206      |   |   | 5,164 |   |
| Non-current  assets                      |       |                                          | 396        |                                           |       |            | —     |   |   | 396 |   |
| Current  liabilities                     |       |                                          | (154       | )                                              |       |            | (2,887     | ) |   | (3,041 | ) |
| Non-current  liabilities                 |       |                                          | (156       | )                                              |       |            | —     |   |   | (156 | ) |
| Net assets                               | ** ** | ** **                                    | **2,044**  | ** **                                     | ** ** | ** **      | **319**    |   | ** ** | **2,363** | ** ** |
| **Joint venture revenues and expenses:** |       |                                          |       |                                           |       |            |       |   |   |   |   |
| Revenues                                 |       |                                          | 274        |                                           |       |            | 2,454      |   |   | 2,728 |   |
| Expenses                                 |       |                                          | (2,833     | )                                              |       |            | (2,231     | ) |   | (5,064 | ) |
| Profit/(loss) for the  period            | ** ** | ** **                                    | **(2,559** | **)**                                          | ** ** | ** **      | **223**    |   | ** ** | **(2,336** | **)** |

 

The Group accrued anamount of € 1.2 million for expensesthat will be recharged by Percivia.

**5.10 Retirementbenefit obligations**

The Group provides employee benefit plans to most ofits employees by means of various pension plans. These plans comply with localregulations and practices in the countries in which they operate and differbased on legal requirements, tax legislation, local customs and economicconditions in the countries in which the Group operates. Consequently itfollows that the nature of the plans varies by country. In general the benefitsprovided depend on remuneration and years of service. Most of these benefitsare administrated by insurance companies or pension funds.

Recognitionof pension expenses in the income statement:

| ** **                  | ** **   | **Year ended  December 31** | ** **   |
|-----------------------------|--------------|---------------------------------------|--------------|
| ** **                  | ** **   | **2006**                              | ** **   | **2005** | ** ** |
| ***Income  statement***     | *** *** | *** ***                          | *** *** |   | *** *** | *** *** |   |
| Defined benefit  plans      |         | 2,179                                 | *** *** |   | — | *** *** |   |
| Defined  contribution plans |         | 1,770                                 | *** *** |   | 867 | *** *** |   |
| Total                       | ** **   | **3,949**                             | *** *** |   | **867** | *** *** |   |

 

Definedbenefit plan

| ** **              | ** **   | **December 31,** | ** **   |
|-------------------------|--------------|-----------------------|--------------|
| ** **              | ** **   | **2006**              | ** **   | **2006** | ** ** |
| ***Balance  sheet***    | *** *** | *** ***          | *** *** |   | *** *** | *** *** |   |
| *Defined benefit plans* | * *     | * *              | * *     |   | * * | *** *** |   |
| Pension assets          |         | 2,555                 |         |   |  — | *** *** |   |
| Pension liability       |         | (3,919                | )            |   | — | *** *** |   |
| Net pension liability   | ** **   | **(1,364**            | **)**        |   | — | *** *** |   |

 

F-37

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Prior to the acquisition of Berna Biotech and SBL theGroup did not operate any defined benefit plans. As a result of theacquisitions, the Group now operates defined benefit plans in Switzerland,Korea and Sweden. The pension asset of € 2,555 relates to the Swiss pension fund while the pensionliability of € 3,919 relates to the Swedish and theKorean pension funds. In total 97% of the plan assets and 89% of the definedbenefit obligation relates to the Swiss pension fund.

Theweighted average of the principal assumptions used in determining the employeebenefit obligations for the defined benefit plans of the Group are shown below:

| ** **                      | ** ** | **2006** | ** ** | **2005** | ** **   |
|---------------------------------|------------|----------|------------|----------|--------------|
| Discount rate                   |       | 3.32     | %          |     |  — |   |   |
| Expected return  on plan assets |       | 4.55     | %          |     | —       |   |   |
| Future salary  increases        |       | 1.19     | %          |     | —       |   |   |
| Future pension increases        |       | 0.66     | %          |     | —       |   |   |

 

Changes in these key assumptions can have asignificant impact on the defined benefit obligations, funding requirements andperiodic costs incurred. The Group consults at least annually with externalactuaries regarding these assumptions.

Changesin the present value of the defined benefit obligation are as follows:

| ** **                          | ** ** | **2006**   | ** ** | **2005** | ** **   |
|-------------------------------------|------------|------------|------------|----------|--------------|
| Opening defined benefit  obligation |       | —     |       |     |  — |   |   |
| Acquisition of  subsidiaries        |       | 72,703     |       |     | —       |   |   |
| Interest cost                       |       | 2,012      |       |     | —       |   |   |
| Current service cost                |       | 3,105      |       |     | —       |   |   |
| Benefits paid                       |       | (2,535     | )          |     | —       |   |   |
| Actuarial (gains)/losses            |       | (834       | )          |     | —       |   |   |
| Exchange differences                |       | (1,772     | )          |     | —       |   |   |
| Closing defined benefit obligation  | ** ** | **72,679** |       |     | —       |   |   |

 

Changesin the fair value of plan assets are as follows:

| ** **                                   | ** ** | **2006**    | ** ** | **2005** | ** **   |
|----------------------------------------------|------------|-------------|------------|----------|--------------|
| Opening fair  value of plan assets           |       | —      |       |     |  — |   |   |
| Acquisition of  subsidiaries                 |       | 100,677     |       |     | —       |   |   |
| Expected return  on plan assets              |       | 3,758       |       |     | —       |   |   |
| Contributions by  employer                   |       | 2,137       |       |     | —       |   |   |
| Contributions by  participants               |       | 981         |       |     | —       |   |   |
| Benefits paid                                |       | (2,355      | )          |     | —       |   |   |
| Actuarial  gains/(losses)                    |       | (211        | )          |     | —       |   |   |
| Exchange  differences                        |       | (2,681      | )          |     | —       |   |   |
| Fair value of plan  assets, December 31 | ** ** | **102,306** |       |     | —       |   |   |

 

In 2007, the Group expects to contribute an amountsimilar to the amount contributed in 2006 to its defined benefit pension plans.The actual return on plan assets for the year ended December 31, 2006amounts to € 3,547.

F-38

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Thecost for defined benefit plans is as follows:

| ** **                                       | ** ** | **Year ended  December 31,** | ** ** |
|--------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                       | ** ** | **2006**                               | ** ** | **2005** | ** ** |
| Current service  cost                            |       | 3,105                                  |       |   |  — |   |   |
| Interest cost                                    |       | 2,012                                  |       |   | — |   |   |
| Expected return  on plan assets                  |       | (3,758                                 | )          |   | — |   |   |
| Additional  pension expense due to asset ceiling |       | 1,865                                  |       |   | — |   |   |
| Employee  contributions                          |       | (981                                   | )          |   | — |   |   |
| Other                                            |       | (64                                    | )          |   | — |   |   |
|                                             | ** ** | **2,179**                              |       |   | — |   |   |

 

| ** **                                           | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Defined benefit  obligation                          |       | (72,679               | )          |   |  — |   |   |
| Fair value of plan  assets                           |       | 102,306               |       |   | — |   |   |
| Funded status                                        | ** ** | **29,627**            |       |   | — |   |   |
| Unrecognized net  actuarial losses                   |       | 8,334                 |       |   | — |   |   |
| Amount not recognized as  asset due to asset ceiling |       | (39,325               | )          |   | — |   |   |
| Net pension liability                                | ** ** | **1,364**             |       |   | — |   |   |

 

| ** **                                            | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|
| ** **                                            | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Defined benefit  obligation                           |       | (72,679               | )          |   |  — |   |   |
| Plan assets                                           |       | 102,306               |       |   | — |   |   |
| Surplus                                               | ** ** | **29,627**            |       |   | — |   |   |
| Experience  adjustments on plan liabilities—gain |       | 834                   |       |   | — |   |   |
| Experience adjustments  on plan assets—loss      |       | (211                  | )          |   | — |   |   |

 

Themajor categories of plan assets as a percentage of the fair value of total planassets are as follows:

| ** ** | ** ** | **Year ended  December 31,** | ** ** |
|------------|------------|------------------------------|------------|
| ** ** | ** ** | **2006**                     | ** ** | **2005** | ** ** |
| Bonds      |       | 36.5                         | %          |   | — |   |   |
| Equity     |       | 26.9                         | %          |   | — |   |   |
| Property   |       | 31.8                         | %          |   | — |   |   |
| Other      |       | 4.8                          | %          |   | — |   |   |
|       | ** ** | **100.0**                    | **%**      |   | — |   |   |

 

The overall expected rateof return on assets is determined based on the market prices prevailing on thatdate, applicable to the period over which the obligation is to be settled andthe relative weight of the separate categories of plan assets.

**5.11 Available-for-sale investments**

TheGroup has an investment in Galapagos N.V. (“Galapagos”), which is a publiclytraded company. The Group’s ownership interest is 6.2% as of December 31,2006, which represents a value of €12,339 (2005: € 11,299).

F-39

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**5.12 Other financial assets (non-current)**

| ** **                         | ** ** | **December 31,** | ** ** |
|------------------------------------|------------|-----------------------|------------|
| ** **                         | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Long-term restricted  cash         |       | 14,396                |       |   | — |   |   |
| Long-term deposits and  guarantees |       | 2,034                 |       |   | — |   |   |
| Director’s loan               |       | —                |       |   | 194 |   |   |
|                               | ** ** | **16,430**            | ** ** | ** ** | **194** |   |   |

 

TheGroup has € 14,396 restricted cash. An amount of € 10,000 is related to the mortgage loan and the remaindermainly relates to leases.

**5.13 Cash and cash equivalents**

| ** **                 | ** ** | **December 31,** | ** ** |
|----------------------------|------------|-----------------------|------------|
| ** **                 | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Cash at banks and in  hand |       | 87,761                |       | 71,559 |   |
| Call deposits              |       | 70,076                |       | 40,175 |   |
|                       | ** ** | **157,837**           | ** ** | **111,734** | ** ** |

 

Cashand cash equivalents include the following main currencies:

| ** **           | ** ** | **December 31,** | ** ** |
|----------------------|------------|-----------------------|------------|
| ** **           | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Euros (€)       |       | 109,465               |       | 109,324 |   |
| Swiss Francs (CHF)   |       | 26,364                |       | — |   |
| US Dollar ($)        |       | 7,363                 |       | 2,410 |   |
| Korean Won (KRW)     |       | 7,268                 |       | — |   |
| Swedish Crowns (SEK) |       | 7,113                 |       | — |   |
| Other currencies     |       | 264                   |       | — |   |
|                 | ** ** | **157,837**           | ** ** | **111,734** | ** ** |

 

 

**5.14 Trade accounts receivable**

| ** **                                            | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|
| ** **                                            | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Trade receivables  from third party customers         |       | 58,550                |       | 1,824 |   |
| Trade receivables  from associates and joint ventures |       | 13                    |       | — |   |
|                                                  | ** ** | **58,563**            | ** ** | **1,824** | ** ** |

 

F-40

----

**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

At December 31,2006 trade receivables are shown net of an allowance for doubtful debts for anamount of € 4,069 (2005: € 176). Receivables are denominated in several currenciesand can be specified as follows:

| ** **            | ** ** | **December 31,** | ** ** |
|-----------------------|------------|-----------------------|------------|
| ** **            | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Euros (€)        |       | 31,153                |       | 1,824 |   |
| US Dollar ($)         |       | 19,644                |       | — |   |
| Swiss Francs  (CHF)   |       | 1,411                 |       | — |   |
| Swedish Crowns  (SEK) |       | 4,595                 |       | — |   |
| Korean Won (KRW)      |       | 1,021                 |       | — |   |
| Other currencies      |       | 739                   |       | — |   |
|                  | ** ** | **58,563**            | ** ** | **1,824** | ** ** |

 

**5.15 Inventories**

| ** **                     | ** ** | **December 31,** | ** ** |
|--------------------------------|------------|-----------------------|------------|
| ** **                     | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Raw materials and  consumables |       | 18,418                |       |   |  — |   |   |
| Work in progress               |       | 45,623                |       |   | — |   |   |
| Finished products              |       | 11,478                |       |   | — |   |   |
|                           | ** ** | **75,519**            |       |   | — |   |   |

 

In order to be able to meet the demand from the market(e.g. in case of outbreak of a disease) the Group stocks certain inventories toa level that they may not be realised in one year. This is in line withpolicies of the Company. Provisions are recognised for obsolete inventory. Theamount of write-down of inventories recognized as an expense is € 4,722.

The amount of inventoriesrecognized as an expense of cost of product sales is € 37,972.

**5.16 Other current assets**

| ** **                    | ** ** | **December 31,** | ** ** |
|-------------------------------|------------|-----------------------|------------|
| ** **                    | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Accrued income                |       | 11,129                |       | 10,330 |   |
| Prepaid expenses              |       | 2,271                 |       | 3,535 |   |
| Other short-term  receivables |       | 11,341                |       | 3,262 |   |
| Director’s loan          |       | 168                   |       | — |   |
| Income tax  receivables       |       | 243                   |       | 353 |   |
|                          | ** ** | **25,152**            | ** ** | **17,480** | ** ** |

 

**5.17 Issued capitaland reserves**

Crucell’s authorized share capital amounts to85,000,000 ordinary shares and 85,000,000 preferent shares, each with a par valueof € 0.24. As of December 31, 2006, therewere 64,802,325 ordinary shares issued and outstanding (2005: 41,440,613).No preference shares are issued and outstanding as of December 31, 2006.

F-41

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

On October 25, 2000, the Company established afoundation called Stichting Preferente Aandelen Crucell, also referred to asthe Preferred Foundation. The Preferred Foundation’s object is to safeguard theinterests of Crucell, its business and parties connected therewith by blockingany influences that may threaten these interests, which interests may includethe continuity, independence or identity of Crucell, its business and partiesconnected therewith. The Preferred Foundation can safeguard the intereststhrough acquiring and managing the preference shares and by exercising therights attaching to these shares, in particular, the voting rights.

The agreement between the Company and the PreferredFoundation grants an option to the Preferred Foundation to acquire preferenceshares up to 100% of the number of our outstanding shares, necessary to matchthe total number of statutory votes on all of the ordinary shares outstandingat the time of the acquisition. The Preferred Foundation must pay at least 25%of the nominal value of the preference shares it acquires from the Company. Ifthe Company acquires any preference shares, they may be cancelled.

Aboard of governors of up to five persons directs the Preferred Foundation. MrJ.P. Oosterveld, in his capacity as chairman of our Supervisory Board, and MrP. Bouw, Mr M.W. den Boogert, Mr S. van Wijnbergen and Mr G.P. Krans,have been appointed to the board of governors. A majority of these members maynot be members or former members of the Management or Supervisory Board of theCompany, or an employee of any of our advisers, any of our banks or us. Theboard of governors appoints these independent members. The Supervisory Boardappoints the non independent members after consultation with the ManagementBoard.

| **Ordinary shares  Issued and fully paid**                        | ** ** | ** **          | ** ** | **Shares**          | ** ** | **Issued  capital** | ** ** |
|---------------------------------------------------------------------------------------|------------|---------------------|------------|---------------------|------------|---------------------|------------|
| ** **                                                                            | ** ** | **€ 000** | ** ** | **€ 000** | ** ** |
| At  January 1, 2005                                                              |       | 36,874              |       |                | 8,850      |                |       |
| Effect of shares issued in May 2005 for cash                                     |       | 3,600               |       |                | 864        |                |       |
| Shares issued relating to share-based payments                                        |       | 967                 |       |                | 232        |                |       |
| At  January 1, 2006                                                              | * *   | 41,441              | * *   | * *            | 9,946      |                |       |
| Issued in February 2006 in exchange for issued  share capital of Berna Biotech   |       | 16,931              |       |                | 4,064      |                |       |
| Shares issued in relating to private placement and  acquisition of minority interests |       | 5,022               |       |                | 1,205      |                |       |
| Shares issued relating to share-based payments                                        |       | 1,408               |       |                | 338        |                |       |
| At December 31 2006                                                              | ** ** | **64,802**          | ** ** | ** **          | **15,553** |                |       |

 

*Net unrealizedgains reserve*

The net unrealized gainsreserve of € 10,670 (2005: € 9,630) records the fair value changes onavailable-for-sale investments.

*Translation reserve*

The translation reserve isused to record exchange differences arising from the translation of thefinancial statements of foreign subsidiaries.

F-42

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**5.18 Share-basedpayment plans**

**Stock-BasedCompensation**

*Stock Option Plans*

The Group maintains stock option plans whereby theremuneration committee of the Supervisory Board may grant options to employees,directors and members of the Supervisory Board, which are described furtherbelow. The compensation cost that has been included in operating expenses forthose plans was € 4,000, €2,349 and €3,357 in 2006, 2005 and 2004 respectively.

In December 2004, the Supervisory Board approveda new option plan (the “2005 Plan”) providing for the grant of stock options tonon-management committee members for a maximum of 1% of issued ordinary shares.Options granted under this stock option plan are exercisable when the optionshave vested. Granted options vest straight line over a period of 4 years.Compensation costs are recognized in accordance with the accelerated method.The options expire 5 years after date of grant. Upon termination of employmentwith Crucell, options must be exercised within 90 days. Options granted underthe stock option plan are granted at exercise prices, which equals the fairvalue of the ordinary shares of the Company at the date of grant.

All options granted under previous stock option plans(the “Prior Plans”) are exercisable immediately upon grant. Upon exercise ofthe options, employees are subject to profit-retribution provisions. Suchprovisions entitle the Group to receive a portion of the profits upon the saleof the shares, calculated as the difference between the total proceeds from thesale of shares and the aggregate exercise price. The portion of the profitspayable to the Group decreases rateably over one to three years. The relevantportion of any profits derived by the employee from the sale of shares receivedon exercise of options must be remitted to the Group if the employee terminatesemployment prior to the end of the relevant period. The options expire four toeight years from the date of grant, or earlier upon termination of employmentwith the Group. Upon termination of employment with the Group, options must beexercised within 90 days. Compensation costs for prior plans are recognized inaccordance with the accelerated method. Generally, options granted under thePrior Plans are granted at exercise prices, which exceed the fair value of theCompany’s ordinary shares at the date of grant. No further grants are to bemade from the Prior Plans.

The Group accounts for itsemployee stock options under the fair value method. The fair value of optionswas estimated at the date of grant using the Black-Scholes option-pricingmodel, with the following weighted average assumptions:

| ** **               | ** ** | **Year ended December 31,** | ** ** |
|--------------------------|------------|--------------------------------------------|------------|
| ** **               | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Risk-free  interest rate |       | 3.6                                        | %          | 4.1 | % | 2.9 | % |
| Expected dividend  yield |       | —                                     |       | — |   | — |   |
| Expected  volatility     |       | 52.6                                       | %          | 52.8 | % | 62.3 | % |
| Expected life (years)    |       | 4.25                                       |       | 4.31 |   | 4.00 |   |

 

The risk free interest rate is based on Dutch treasurysecurities in effect at the time of grant. Expected volatility is based on thehistorical volatility of the Company’s stock. The expected life of the optionsgranted is an estimate based on the contractual term of the options andhistorical behaviour. The weighted average fair value of options granted duringthe years ended December 31, 2006, 2005 and 2004 was €6.96, €9.03 and €3.28, respectively.

F-43

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Asummary of the stock option activity for the plan is as follows:

| ** **                         | ** ** | **Number of  options** | ** ** | **Weighted  average  exercise  price** | ** ** |
|------------------------------------|------------|-----------------------------|------------|----------------------------------------|------------|
| Balance at  January 1, 2004   |       | 4,358,758                   |       |                                   | 4.70       |   |   |
| Granted                            |       | 1,333,500                   |       |                                   | 9.59       |   |   |
| Exercised                          |       | (867,097                    | )          |                                   | 1.62       |   |   |
| Forfeited                          |       | (6,150                      | )          |                                   | 8.48       |   |   |
| Balance at  December 31, 2004 | * *   | 4,819,011                   |       |                                   | 6.42       |   |   |
| Granted                            |       | 123,000                     |       |                                   | 19.45      |   |   |
| Exercised                          |       | (887,182                    | )          |                                   | 8.09       |   |   |
| Forfeited                          |       | (25,325                     | )          |                                   | 9.07       |   |   |
| Balance at  December 31, 2005 | * *   | 4,029,504                   |       |                                   | 6.43       |   |   |
| Granted                            |       | 953,466                     |       |                                   | 18.76      |   |   |
| Exercised                          |       | (1,284,655                  | )          |                                   | 4.16       |   |   |
| Forfeited                          |       | (12,875                     | )          |                                   | 19.40      |   |   |
| Balance at  December 31, 2006 | ** ** | **3,685,440**               |       |                                   | 10.36      |   |   |

 

Included in the options outstanding as of December 31,2006 are options to acquire ordinary shares held by former employees andconsultants. These individuals have been permitted to continue vesting in theseoptions for services rendered.

The following tablesummarizes information about the Company’s stock options outstanding at December 31,2006:

| **Exercise price**             | ** ** | ** ** | ** **    | **Outstanding  Options at  December 31,  2006** | ** ** | **Weighted  average  exercise price** | ** ** | **Weighted  average  remaining  contractual  life (years)** | ** ** | **Exercisable  options** | ** ** | **Weighted  average  exercise price—exercisable  options** | ** ** |
|-------------------------------------|------------|------------|---------------|-----------------------------------------------------------|------------|--------------------------------------------|------------|------------------------------------------------------------------|------------|--------------------------|------------|----------------------------------------------------------------------|------------|
| € 2.35-€ 3.49   |       |       | 715,470       |                                                      |       |                                       | €     | 3.31                                                             |       |                     |       | 4.08                                                                 |       |   | 715,470 |   |   | € | 3.31 |   |   |
| € 3.50-€ 9.99   |       |       | 1,731,104     |                                                      |       |                                       | €     | 8.00                                                             |       |                     |       | 4.00                                                                 |       |   | 1,731,104 |   |   | € | 8.00 |   |   |
| € 10.00-€ 19.99 |       |       | 789,191       |                                                      |       |                                       | €     | 16.03                                                            |       |                     |       | 4.20                                                                 |       |   | 8,750 |   |   | € | 15.51 |   |   |
| € 20.00-€ 22.22 |       |       | 449,675       |                                                      |       |                                       | €     | 20.75                                                            |       |                     |       | 4.15                                                                 |       |   | 18,250 |   |   | € | 22.13 |   |   |
| **Total**                           | ** ** | ** ** | **3,685,440** |                                                      |       |                                       |       |                                                             |       |                     |       |                                                                 | ** ** | **2,473,574** | ** ** |   |   |   |   |

 

As of December 31,2006, a total of 9,720,349 ordinary shares, representing 15% of the issuedshare capital, have been reserved for issuance under the option plan, of which3,785,440 are subject to outstanding options (including 100,000 warrants).

*Warrants*

In 2003, Crucell grantedwarrants to acquire 250,000 ordinary shares with an exercise price of €3.00 per share to a consultant in exchange for services. The consultant earnedthe warrants over the service period that ended in 2004. The warrants expire inJuly 2008. Per December 31, 2006 in total 100,000 warrants areoutstanding.

F-44

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*Share-BasedIncentive Plans*

Under its Short-term Incentive Plan (the “STI Plan”),Crucell granted executives share awards whose vesting was contingent uponmeeting various Group-wide, departmental and individual performance goals infiscal 2006. The employees granted shares under the STI Plan were allowed toelect to receive either cash (at a 25% discount from the total award) or sharesif the performance criteria were met. As such, grants under the STI Plan areaccounted for as liabilities and included in accrued compensation and relatedbenefits in the accompanying balance sheets. In 2007 a total of 23,032 STI Planshares that relate to 2006 were issued to executives. Shares granted under theSTI Plan were issued at the share price of €19.08.

Crucell also has a 2005 Long-term Incentive Plan (the“LTI Plan”), which allowed for the issuance for up to 36,842 shares of commonstock to be granted to executives with vesting contingent upon meeting variousmarket-based goals. Depending on the level of achievement of these marketmeasures, at the end of three years, the number of shares vesting could be 0%-200%.Shares granted in 2005 under the LTI Plan were at the share price at thebeginning of the year at € 10.10, which is lowerthan the fair value of the shares on the date of grant of €21.10, which is the measurement date for the awards. In December 2005 all36,842 LTI Plan shares were granted to executives. There were no forfeitures ofthe LTI Plan grants through December 31, 2006 and all shares granted wereunvested as of year-end.

As of December 31,2006, there was € 532 of total unrecognizedcompensation cost related to non-vested share-based compensation arrangementsgranted under the LTI Plan, which will be recognized in 2007. Compensation costrecognized during the year ended December 31, 2006 related to the LTI Planamounted to €531.

*Stock Option Grantsto Non-Employees*

Crucell has issued stock options to variousnon-employees in connection with consulting agreements over the years. Thesenon-employee stock options included exercise prices greater than or equal tothe fair value of the underlying common stock on the date of grant. Theexercise prices range from € 3.49 to € 21.38per share and expires on dates ranging from May 2010 throughDecember 2011. During 2006, the Company issued stock options to purchase10,000 shares of common stock to a consultant with an exercise price of €18.22 and expiration date in May 2011.

Crucell can terminate the consulting agreements at anytime and only those stock options vested as of the date of termination areexercisable. As of December 31, 2006, total options to purchase 57,604shares of common stock related to consulting agreements were outstanding withan average exercise price of € 13.76 and expirationdates ranging from May 2010 through December 2011.

Stock compensation expense for options granted tonon-employees has been determined as the fair value of the equity instrumentsat the date the goods are received. In connection with these stock optiongrants to non-employees, Crucell is required to record compensation expensebased on a Black-Scholes valuation model and amortized over the consulting orvesting period of the grant. The assumptions used in the Black-Scholesvaluation model for these non-employee grants are based on the same criteria asused for employee grants except that the expected term is equal to thecontractual life of the grant. The Company re-values the unvested portion ofthese stock options at each reporting period as a result of the requirement forvariable accounting for non-employee grants. As of December 31, 2006,assuming the valuation at December 31, 2006 would remain consistent overthe future service periods, the Company would recognize compensation expenserelated to these non-employee grants amounting to €78 over the next 41 months. Crucell recorded compensation expense associatedwith these stock options of € 295, 

F-45

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

€ 2,800and €3,542 for the years ended December 31, 2006, 2005 and 2004, respectively.In 2005 the Company entered into several consulting agreements where theconsultant is considered to be a person providing similar services as anemployee. Compensation expense associated with these options amounted to €192.

Stock option grants tonon-employees are made pursuant to approved stock option plans and activityrelated thereto is included in the tables above with the employee grants of theapproved plans.

**5.19 Provisions, commitments and contingencies**

| ** **                            | ** ** | **Restructuring** | ** ** | **Litigation** | ** ** | **Employee  benefits** | ** ** | **Other** | ** ** | **Total**  | ** ** |
|---------------------------------------|------------|-------------------|------------|----------------|------------|------------------------|------------|-----------|------------|------------|------------|
| At January 1,  2006              |       |              | —     |           |       |                   | —     |      |       |       | —     |   |   | — | ** ** | **—** | ** ** |
| Acquisition of a  subsidiary (Note 3) |       |              | 71         |           |       |                   | 1,180      |      |       |       | 3,918      |   |   | 999 | ** ** | 6,168 |   |
| Arising during  the year              |       |              | 3,120      |           |       |                   | 259        |      |       |       | 71         |   |   | 1,145 | ** ** | 4,595 |   |
| Utilised                              |       |              | (1,147     | )              |       |                   | (212       | )         |       |       | (10        | ) |   | (6 | ) | (1,375 | ) |
| Unused amounts  reversed              |       |              | (393       | )              |       |                   | (215       | )         |       |       | (66        | ) |   | (678 | ) | (1,352 | ) |
| Exchange  adjustment                  |       |              | (5         | )              |       |                   | (12        | )         |       |       | 6          |   |   | (19 | ) | (30 | ) |
| At  December 31, 2006            | ** ** | ** **        | **1,646**  |           | ** ** | ** **             | **1,000**  |      | ** ** | ** ** | **3,919**  |   | ** ** | **1,441** | ** ** | **8,006** | ** ** |
| Current 2006                          |       |              | 1,646      |           |       |                   | 52         |      |       |       | —     |   |   | 1,176 | ** ** | 2,874 | ** ** |
| Non-current 2006                      |       |              | —     |           |       |                   | 948        |      |       |       | 3,919      |   |   | 265 | ** ** | 5,132 | ** ** |

 

*Restructuring*

A restructuring charge for an amount € 2,421is recognized in relation to centralization of R&D functions in Leiden andthe phasing out of R&D projects in Switzerland.

The decision to concentrate R&D in Leiden was madeto increase efficiency in R&D spending and will result in a reduction in thenumber of staff employed, which was effectuated in the first quarter of 2007.

Due to the suspension inJuly 2006 of Aerugen, the candidate vaccine for the prevention ofPseudomonas aeruginosa infection in cystic fibrosis patients, there are fewerprojects requiring development support at Bern.

*Litigations andclaims*

The Group is subjected to (potential) lawsuits andother legal proceedings, resulting from the ordinary course of business. Thecurrent status of any pending proceedings has been reviewed with a legalcounsel. Upon consideration of known relevant facts and circumstances,provisions were recognized for losses that are considered to be probable andthat can be reasonably estimabled as of the balance sheet date.

The Group uses significantjudgement in determining the provision for litigations and exposure tocontingent liabilities related to pending litigation or other outstandingclaims. Judgement is used in assessing the likelihood that a pending claim willsucceed or a liability will arise and to quantify the possible range of thefinal settlement.

F-46

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*Contingent liability STAR*

STAR technology is a geneexpression technology based on epigenetic control mechanisms that blockrepression of gene expression. The Group acquired STAR technology in 2004 throughthe purchase of ChromaGenics B.V., a privately held biotechnology company basedin Amsterdam. In connection with the purchase, we also entered into acontingent payment agreement that could result in an additional payment of €7.0 million upon receipt of revenues generated from the STAR technology androyalties.

*Employee benefits*

Further reference is madeto retirement benefit obligations. See Note 5.10.

*Other*

Other provisions mainlyrelate to warranties.

*Guarantees*

The Group issued a letterof Credit for an amount of $ 1.6 million expiring on April 14, 2013relating to the Percivia Development Center.

**5.20 Short and long-term financial liabilities**

ThisNote provides information about the contractual terms of the Group’s interest-bearingloans and borrowings as at December 31, 2006 and 2005. For moreinformation about the Group’s exposure to interest rate and foreign currencyrisk, see Note 5.24.

| ** **                 | ** ** | **2006**       | ** ** | **2005**      | ** ** |
|----------------------------|------------|----------------|------------|---------------|------------|
| ** **                 | ** ** | **Short-term** | ** ** | **Long-term** | ** ** | **Total** | ** ** | **Short-term** | ** ** | **Long-term** | ** ** | **Total** | ** ** |
| Secured bank  loans        |       |           | 1,793      |          |       |   | 21,117 |   |   | 22,910 |   |   | — |   |   |   | 8,982 |   |   | 8,982 |   |
| Finance lease  liabilities |       |           | 1,139      |          |       |   | 5,828 |   |   | 6,967 |   |   | 898 |   |   |   | 398 |   |   | 1,296 |   |
| Bonds                      |       |           | 16,536     |          |       |   | — |   |   | 16,536 |   |   | — |   |   |   | — |   |   | — |   |
|                       | ** ** | ** **     | **19,468** |          | ** ** | ** ** | **26,945** |   | ** ** | **46,413** | ** ** | ** ** | **898** |   | ** ** | ** ** | **9,380** |   | ** ** | **10,278** | ** ** |

 

Termsand debt repayment schedule at December 31, 2006:

| ** **                                       | ** ** | **Total**  | ** ** | **2007**  | ** ** | **2008**   | ** ** | **2009**  | ** ** | **2010**  | ** ** | **2011**  | ** ** | **More than  5 years** | ** ** |
|--------------------------------------------------|------------|------------|------------|-----------|------------|------------|------------|-----------|------------|-----------|------------|-----------|------------|----------------------------------|------------|
| Mortgage loan*                                   |       | 17,091     |       | 338       |       | 353        |       | 370       |       | 387       |       | 405       |       |                             | 15,238     |   |   |
| Loan Berna  Biotech Korea Corp.                  |       | 5,819      |       | 1,455     |       | 1,455      |       | 1,455     |       | 1,454     |       | —    |       |                             | —     |   |   |
| Equipment lease                                  |       | 6,967      |       | 1,139     |       | 794        |       | 851       |       | 913       |       | 1,133     |       |                             | 2,137      |   |   |
| Privately placed  bond Berna Biotech Korea Corp. |       | 16,536     |       | —    |       | 16,536     |       | —    |       | —    |       | —    |       |                             | —     |   |   |
|                                             | ** ** | **46,413** | ** ** | **2,932** | ** ** | **19,138** | ** ** | **2,676** | ** ** | **2,754** | ** ** | **1,538** | ** ** | ** **                       | **17,375** |   |   |

----

*                    Interest rateuntil December 31, 2010.

F-47

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Termsand debt repayment schedule at December 31, 2005:

| ** **      | ** ** | **Total**  | ** ** | **2006**   | ** ** | **2007** | ** ** | **2008**   | ** ** | **2010** | ** ** | **2011**   | ** ** | **More than  5 years** | ** ** |
|-----------------|------------|------------|------------|------------|------------|----------|------------|------------|------------|----------|------------|------------|------------|----------------------------------|------------|
| Mortgage loan   |       | 8,982      |       |       | —     |     |       |       | 338        |     |       |       | 353        |                             |       |   | 370 |   |   |   | 387 |   |   |   | 7,534 |   |   |
| Equipment lease |       | 1,296      |       |       | 898        |     |       |       | 398        |     |       |       | —     |                             |       |   | — |   |   |   | — |   |   |   | — |   |   |
|            | ** ** | **10,278** | ** ** | ** ** | **898**    |     | ** ** | ** ** | **736**    |     | ** ** | ** ** | **353**    |                             | ** ** | ** ** | **370** |   | ** ** | ** ** | **387** |   | ** ** | ** ** | **7,534** |   |   |

 

*Mortgage loan*

In December 2005, theGroup entered into a mortgage loan for a maximum amount of €17,091 and as of December 31, 2006, the Group has drawn the maximumamount. The loan bears interest at 4.55 percent for the first five years. Afterthis period the rates will be renegotiated. The land, building and acompensating cash balance arrangement secure the loan with a bank in the amountof €10,000. For the first year, interest was accrued to the loan and no payments ofprincipal or interest were required. The loan will be repaid through monthlypayments over 15 years, starting January 1, 2007, with a balloon repaymentof €10,000 after 15 years. The maturity date of the loan is December 31, 2021.

*Loan Berna BiotechKorea Corp.*

Berna Biotech Korea Corp.has entered into the loan that will be repaid within four years and bearsinterest at 2.48%. The maturity date of the loan is August 1, 2010. Theloan is unsecured.

*Finance leaseliabilities*

Crucell leases certain ofits lab equipment in the Netherlands. All leases are on a fixed repayment basisand interest rates are fixed at the contract date. For further information seeNote 5.22.

*Privately placedbond Berna Biotech Korea Corp.*

Berna Biotech Korea Corpissued this bond with an interest percentage of 6.73%. The bond matures June 13,2008, and contains covenants that require Berna Biotech Korea Corp. to maintaincertain profit and liquidity ratios. Berna Biotech Korea Corp. was required tobe in compliance with the covenants as of January 1, 2006. In 2006 thesecovenants were not met, consequently the bond is presented as a short-termbond. The Group does not have any indications that the bond has to be repaidbefore the end of its term. It is expected that Berna Biotech Korea Corp. willbe in compliance with the covenants for 2007.

**5.21 Trade accounts payables**

| ** **                                 | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|-----------------------|------------|
| ** **                                 | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Trade accounts  payables to third parties  |       | 38,360                |       | 8,770 |   |
| Trade accounts  payables to joint ventures |       | 152                   |       | — |   |
|                                       | ** ** | **38,512**            | ** ** | **8,770** | ** ** |

 

Trade accounts payablesare in general paid in line with the payment terms, which vary per company andregion. In our most significant regions general payment terms approximate30 days.

F-48

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**5.22 Operating andfinance leases**

Operating leasecommitments—Group as lessor

TheGroup entered into operating leases for the sub-lease of certain research andcorporate facilities. Future minimal rentals receivable under non-cancellableoperating leases as at December 31, 2006 and 2005 are as follows:

| ** **                                   | ** ** | **2006**   | ** ** | **2005** | ** ** |
|----------------------------------------------|------------|------------|------------|----------|------------|
| Within one year                              |       |       | 86         |     |       |   | 266 |   |   |
| After one year  but not more than five years |       |       | 232        |     |       |   | 318 |   |   |
| More than five  years                        |       |       | —     |     |       |   | — |   |   |
|                                         | ** ** | ** ** | **318**    |     | ** ** | ** ** | **584** |   |   |

 

Operating lease commitments—Groupas lessee

TheGroup leases certain research and corporate facilities, motor vehicles anditems of machinery and equipment. No restrictions are placed upon the lessee byentering into these leases. Future minimum lease payments leases as at December 31,2006 and 2005 are as follows:

| ** **                                   | ** ** | **2006**   | ** ** | **2005**  | ** ** |
|----------------------------------------------|------------|------------|------------|-----------|------------|
| Within one year                              |       | 3,897      |       | 1,742     |       |
| After one year  but not more than five years |       | 7,092      |       | 5,474     |       |
| More than five  years                        |       | 111        |       | 1,319     |       |
|                                         | ** ** | **11,100** | ** ** | **8,535** | ** ** |

 

Most operating leases are increasedannually based on a general price index.

**Finance lease commitments**

Certainof the Group’s fixtures and equipment are finance leases. The finance leasesmainly relate to equipment for the new production facility in Leiden. Interestrates are fixed at the contract date. All leases are on a fixed repayment basisand no arrangements have been entered into for contingent rental payments. Thefair value of the Group’s lease obligations approximates their carrying amount.The Group’s obligations under finance leases are secured by the value of theunderlying assets. Future minimum lease payments under finance leases as at December 31,2005 and 2006 are as follows:

| ** **                                   | ** ** | **2006**              | ** ** | **2005**                             | ** ** |
|----------------------------------------------|------------|-----------------------|------------|--------------------------------------|------------|
| ** **                                   | ** ** | **Minimum  payments** | ** ** | **Present  value of  payments** | ** ** | **Minimum  payments** | ** ** | **Present  value of  payments** | ** ** |
| Within one year                              |       |                  | 1,637      |                                 |       |   | 1,139 |   |   |   | 949 |   |   |   | 898 |   |   |
| After one year  but not more than five years |       |                  | 5,073      |                                 |       |   | 3,691 |   |   |   | 407 |   |   |   | 398 |   |   |
| More than five  years                        |       |                  | 2,319      |                                 |       |   | 2,137 |   |   |   | — |   |   |   | — |   |   |
|                                         | ** ** | ** **            | **9,029**  |                                 | ** ** | ** ** | **6,967** |   | ** ** | ** ** | **1,356** |   | ** ** | ** ** | **1,296** |   |   |

 

Finance leases areincreased annually based on a general price index.

F-49

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**5.23 Related partydisclosures**

**Related party transactions withinthe group**

The Group has related party transactions and/ orbalances with its subsidiaries, joint ventures, associate, directors andexecutive officers. All transactions with related parties were carried outunder normal market conditions (arm’s length principle). There are no relatedparty transactions outside the normal course of business.

Thefollowing table provides the total amount of transactions, which have beenentered into with related parties for the relevant financial year.

| ** **                         | ** **   | **Transaction value  Year ended  December 31,** | ** **   | **Balance  outstanding  as at December 31,** | ** ** |
|------------------------------------|--------------|----------------------------------------------------------------|--------------|-------------------------------------------------------------|------------|
| **Related party**             | ** **   | ** **                                                     | ** **   | **   2006   **                | ** ** | **   2005   ** | ** ** | **   2006   ** | ** ** | **   2005   ** | ** ** |
| ***Sales  of goods and services*** | *** *** |                                                           | *** *** | *** ***                                                |       |   | *** *** | *** *** |   |   | *** *** | *** *** |   |   | *** *** | *** *** |   |
| Pevion Biotech AG                  |         |                                                           | 251          |                                                        |       |   | — | *** *** |   |   | 47 |   |   |   | — | *** *** |   |
| Kenta Biotech AG                   |         |                                                           | 168          |                                                        |       |   | — | *** *** |   |   | 33 |   |   |   | — | *** *** |   |
| ***Expenses***                     | *** *** |                                                           | *** *** | *** ***                                                |       |   | *** *** | *** *** |   |   | *** *** | *** *** |   |   | *** *** | *** *** |   |
| Avv Falaguerra                     |         |                                                           | (12          | )                                                           |       |   | — | *** *** |   |   | (12 | ) |   |   | — | *** *** |   |
| Kellerhals &  Partner AG  |         |                                                           | (134         | )                                                           |       |   | — | *** *** |   |   | (155 | ) |   |   | — | *** *** |   |
| Kenta Biotech AG                   |         |                                                           | (60          | )                                                           |       |   | — | *** *** |   |   | — |   |   |   | — | *** *** |   |
|                                    |              |                                                                |              |                                                             |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Mr Falaguerra, the chairman of the Board of Directorsof the Italian subsidiary is related to Avv. Falaguerra, an Italian firmthat provides taxation services to an Italian subsidiary.

Kellerhals &Partner AG is a Swiss firm that provides legal advice to Berna Biotech. Thiscompany is related the one of the Supervisory Board members of Crucell.

**Terms and conditions oftransactions with related parties**

The sales to and purchases from related parties aremade at normal market prices. Outstanding balances at the year-end areunsecured, interest free and settlement occurs in cash. There have been noguarantees provided by the Group or received in respect of any related partyreceivables or payables. For the year ended December 31, 2006, the Grouphas not made any provision for doubtful debts relating to amounts owned byrelated parties (2005: Nil). This assessment is undertaken each financial yearthrough examining the financial position of the related party and the market inwhich the related party operates.

Transactions between theCompany and its subsidiaries, which are related parties, have been eliminatedon consolidation and are not disclosed in this Note.

F-50

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**Management Board**

Thetotal remuneration and related costs (excluding share based payments—seeinformation below on stock options and performance stock) of the members of theManagement Board over the past three years, is as follows:

| ** **         | ** ** | **Year ended December 31,** | ** ** |
|--------------------|------------|--------------------------------------------|------------|
| ** **         | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Salaries           |       | 1,005                                      |       | 874 |   | 598 |   |
| Bonuses            |       | 893                                        |       | 1,058 |   | 494 |   |
| Pension costs      |       | 205                                        |       | 189 |   | 215 |   |
| Severance costs(1) |       | —                                     |       | — |   | 454 |   |
| Other              |       | 37                                         |       | 58 |   | 170 |   |
|               | ** ** | **2,140**                                  | ** ** | **2,179** | ** ** | **1,931** | ** ** |

----

(1)          In connection with hisstepping down as the chief executive officer, president and chairman of theManagement Board, the Group agreed to pay Mr. Valerio an amount equal to € 454 in severance and up to € 19 aspartial compensation for advisory costs. On January 26, 2004, the Groupalso entered into an advisory agreement with Mr. Valerio under which hereceived an advisory fee totalling € 227through the end of 2004.

The2006 remuneration of the individual members of the Management Board (excludingshare based payments—see information below on stock options and performancestock) was as follows:

| ** **   | ** ** | **2006**   | ** ** |
|--------------|------------|------------|------------|
| **Name**     | ** ** | ** ** | ** ** | **Salaries** | ** ** | **Bonuses(1)** | ** ** | **Pension  Costs(2)** | ** ** | **Other  costs** | ** ** | **Total** | ** ** |
| R. H.P. Brus |       |       | 400        |   |   |   | 391 |   |   |   | 28 |   |   |   | — |   |   | 819 |   |
| J. Goudsmit  |       |       | 330        |   |   |   | 260 |   |   |   | 152 |   |   |   | 21 |   |   | 763 |   |
| L. Kruimer   |       |       | 275        |   |   |   | 242 |   |   |   | 25 |   |   |   | 16 |   |   | 558 |   |
| Totals       | ** ** | ** ** | **1,005**  |   | ** ** | ** ** | **893** |   | ** ** | ** ** | **205** |   | ** ** | ** ** | **37** |   | ** ** | **2,140** | ** ** |
|              |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

(1)          The remunerationcommittee evaluates the performance of members of the Management Board andmanagement committee in view of those objectives and advises on the fixed andvariable compensation of members of the Management Board and the managementcommittee. In advising on short and long term incentive compensation formembers of the Management Board and management committee, the remunerationcommittee considers among other factors the Group’s financial and commercialperformance, scientific performance and progress, and the accrual of value ofthe Group. External compensation survey data available for the biotechnologyindustry are also used as another factor to benchmark the compensation levels.

(2)          Pension costs includedisability insurance costs.

F-51

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

TheCompany’s Management Board members held the following options per December 31,2005 and 2006:

| Name of Holder | ** ** | ** ** | ** **    | **Options  held at  December 31,  2005** | ** ** | **Year of  expiration** | ** ** | **Exercise  Price** | ** ** | **Granted  2006** | ** ** | **Exercised  2006** | ** ** | **Forfeited  2006** | ** ** | **Options  held at  December 31,  2006** | ** ** |
|--------------------------|------------|------------|---------------|----------------------------------------------------|------------|------------------------------|------------|---------------------|------------|-------------------|------------|---------------------|------------|---------------------|------------|----------------------------------------------------|------------|
| R.H.P. Brus              |       |       | 250,000       |                                               |       |                         | 2009       |                |       |              | 9.40       |                |       |                | —     |                                               |       |   | — |   |   |   | — |   |   |   | 250,000 |   |   |
|                          |       |       | 225,000       |                                               |       |                         | 2011       |                |       |              | 3.49       |                |       |                | —     |                                               |       |   | 25,000 |   |   |   | — |   |   |   | 200,000 |   |   |
|                          |       |       | 90,000        |                                               |       |                         | 2011       |                |       |              | 2.64       |                |       |                | —     |                                               |       |   | — |   |   |   | — |   |   |   | 90,000 |   |   |
|                          |       |       | 125,000       |                                               |       |                         | 2011       |                |       |              | 5.94       |                |       |                | —     |                                               |       |   | — |   |   |   | — |   |   |   | 125,000 |   |   |
| J. Goudsmit              |       |       | 100,000       |                                               |       |                         | 2006       |                |       |              | 5.92       |                |       |                | —     |                                               |       |   | 100,000 |   |   |   | — |   |   |   | — |   |   |
|                     |       |       | 100,000       |                                               |       |                         | 2006       |                |       |              | 3.66       |                |       |                | —     |                                               |       |   | 100,000 |   |   |   | — |   |   |   | — |   |   |
|                     |       |       | 85,000        |                                               |       |                         | 2009       |                |       |              | 9.40       |                |       |                | —     |                                               |       |   | — |   |   |   | — |   |   |   | 85,000 |   |   |
|                     |       |       | 60,000        |                                               |       |                         | 2011       |                |       |              | 2.64       |                |       |                | —     |                                               |       |   | — |   |   |   | — |   |   |   | 60,000 |   |   |
|                     |       |       | 125,000       |                                               |       |                         | 2011       |                |       |              | 5.94       |                |       |                | —     |                                               |       |   | — |   |   |   | — |   |   |   | 125,000 |   |   |
| L. Kruimer               |       |       | 85,000        |                                               |       |                         | 2009       |                |       |              | 9.40       |                |       |                | —     |                                               |       |   | — |   |   |   | — |   |   |   | 85,000 |   |   |
|                          |       |       | 105,000       |                                               |       |                         | 2011       |                |       |              | 3.49       |                |       |                | —     |                                               |       |   | 40,000 |   |   |   | — |   |   |   | 65,000 |   |   |
|                          |       |       | 125,000       |                                               |       |                         | 2011       |                |       |              | 5.94       |                |       |                | —     |                                               |       |   | — |   |   |   | — |   |   |   | 125,000 |   |   |
| **Totals**               | ** ** | ** ** | **1,475,000** |                                               |       |                         |       |                |       |              |       |                | ** ** | ** **          | **—** |                                               | ** ** | ** ** | **265,000** |   | ** ** | ** ** | **—** |   | ** ** | ** ** | **1,210,000** |   |   |

 

TheCompany’s Management Board members held the following shares in the Company at December 31,2006:

| **Name of holder** | ** ** | ** ** | ** **  | **Ordinary shares  held at  December 31,  2006** | ** ** | **% of total  ordinary  shares** | ** ** |
|------------------------------|------------|------------|-------------|-----------------------------------------------------------------|------------|--------------------------------------------|------------|
| R.H.P. Brus                  |       |       | 134,249     |                                                            |       |                                       | 0.21       |   |   |
| J. Goudsmit                  |       |       | 146,600     |                                                            |       |                                       | 0.23       |   |   |
| L. Kruimer                   |       |       | 17,952      |                                                            |       |                                       | 0.03       |   |   |
|                         | ** ** | ** ** | **298,801** |                                                            | ** ** | ** **                                 | **0.47**   |   |   |

 

F-52

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Thefollowing table describes loans granted to the members of Crucell’s ManagementBoard and senior management since January 1, 1998. Crucell has not grantedany loans to any Supervisory Board members. The Company sets these interestrates in relation to Dutch income tax law, which changes on an annual basis.Crucell granted loans to the persons listed below in connection with optionsgranted to them on Crucell’s ordinary shares. These loans become payable at thetime shares received on exercise of the related options are sold or, in casethe employee ceases to work for Crucell before this time, immediately. Crucellfunds payments due under the loans prior to July 30, 2002, the datelegislation was passed in The United States prohibiting the granting ofadditional loans to Company officers.

| **Name**        | ** ** | ** ** | ** ** | **Largest amount of loan  outstanding since  January 1, 1998** | ** ** | **Amount of loan  outstanding at  December 31, 2006** | ** ** | **2006  Interest rate** | ** ** |
|-----------------|------------|------------|------------|----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|------------------------------|------------|
| R.H.P. Brus     |       |       | 132        |                                                                                         |       |                                                                           | 99         |                         |       |   | 3.5 | % |   |
| J. Goudsmit     |       |       | 25         |                                                                                         |       |                                                                           | 8          |                         |       |   | 3.5 | % |   |
| Other personnel |       |       | 61         |                                                                                         |       |                                                                           | 61         |                         |       |   | 3.5 | % |   |
|            | ** ** | ** ** | ** ** |                                                                                         |       |                                                                           | **168**    |                         |       |   |   |   |   |

 

The Group is no party toany material transactions, or proposed transactions, in which any director, anyexecutive officer, any spouse or relative of any of the foregoing, or anyrelative of any such spouse had or was to have a direct or indirect materialinterest other than those transactions disclosed in these financial statements.

**Board ofSupervisory Directors**

Due to the fact that Crucell operates on a globalscale with many of its directors used to the international arena, Crucelloffers compensation to its supervisory directors, in accordance with customarypractice in the biotechnology sector. For 2005 and onwards compensation of allSupervisory Board members consists of a fixed fee in cash and an annual sharegrant. The fixed fee in cash amounts to € 25 perSupervisory Board member. The Chairman will receive a fixed fee of €40. The annual share grant awarded to each member of the Supervisory Boardshall equal 2,500 ordinary shares. This amount will be revised on a tri-annualbasis. The shares should be held for as long as an individual is a member ofthe Supervisory Board. Instead of the share grant, a Supervisory Board membermay also choose to receive a cash amount equalling the value of 2,500 shares atthe date of grant minus 25%. The shares (or cash equivalent minus 25%)were awarded in 2006 for the first time, because in December 2004, stockoptions were awarded to the Supervisory Board with respect to the year 2005.Committee fees and Committee Chairmanship fees are no longer granted. Anallowance of €10 is awarded annually to the Chairman of the Supervisory Board.

F-53

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

During 2006 and 2005, theindividual members of the Supervisory Board received the following remuneration(excluding share based payments—see information below on stock options andperformance stock):

| ** **         | ** ** | **2006**  | ** ** | **2005**  | ** ** |
|--------------------|------------|-----------|------------|-----------|------------|
| P. Strijkert(1)    |       | 16.7      |       | 44.9      |       |
| J.P. Oosterveld(2) |       | 38.7      |       | 25.0      |       |
| A. Hoevenaars(3)   |       | 25.0      |       | 25.0      |       |
| S.P. Lance         |       | 25.0      |       | 25.0      |       |
| P.M. Satow         |       | 25.0      |       | 25.0      |       |
| C.E. Wilhelmsson   |       | 25.0      |       | 25.0      |       |
| D. S. Koechlin(4)  |       | 25.0      |       | —    |       |
| J. Witmer(4)       |       | 25.0      |       | —    |       |
| C.E. Thomann(4)    |       | 25.0      |       | —    |       |
| Totals             | ** ** | **230.4** |       | **169.9** |       |

----

(1)          Mr P. Strijkert resignedfrom the Supervisory Board in June 2006.

(2)          Mr J.P. Oosterveld wasappointed Chairman on June 2, 2006.

(3)          Mr A. Hoevenaars becamea member of the Supervisory Board on June 2, 2005.

(4)          Mr D.S. Koechlin, Mr J.Witmer and Mr C.E. Thomann were appointed member of the Supervisory Board on June 2,2006, but have attended meetings since January 2006.

TheCompany’s Supervisory Board members held the following options at December 31,2005 and 2006:

| Name of Holder | ** ** | ** ** | ** **  | **Options  held per  December 31,  2005** | ** ** | **Year of  expiration** | ** ** | **Exercise  Price** | ** ** | **Granted  2006** | ** ** | **Exercised  2006** | ** ** | **Forfeited  2006** | ** ** | **Options  held per  December 31,  2006** | ** ** |
|--------------------------|------------|------------|-------------|-----------------------------------------------------|------------|------------------------------|------------|---------------------|------------|-------------------|------------|---------------------|------------|---------------------|------------|-----------------------------------------------------|------------|
| ** **               | ** ** | ** ** | ** **  | ** **                                          | ** ** | **€**                   | ** ** | ** **          | ** ** | ** **        | ** ** | ** **          | ** ** | ** **          | ** ** |
| J.P. Oosterveld          |       |       | 10,000      |                                                |       |                         | 2009       |                |       |              | 8.81       |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
|                     |       |       | 10,000      |                                                |       |                         | 2009       |                |       |              | 11.55      |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
| S.P. Lance               |       |       | 10,000      |                                                |       |                         | 2009       |                |       |              | 8.81       |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
|                          |       |       | 10,000      |                                                |       |                         | 2009       |                |       |              | 11.55      |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
| P.M. Satow               |       |       | 10,000      |                                                |       |                         | 2009       |                |       |              | 11.55      |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
|                     |       |       | 22,000      |                                                |       |                         | 2011       |                |       |              | 3.49       |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 22,000 |   |   |
|                     |       |       | 10,000      |                                                |       |                         | 2011       |                |       |              | 6.48       |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
| C.E. Wilhelmsson         |       |       | 10,000      |                                                |       |                         | 2009       |                |       |              | 11.55      |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
|                          |       |       | 10,000      |                                                |       |                         | 2011       |                |       |              | 6.48       |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
| A.Hoevenaars             |       |       | 5,000       |                                                |       |                         | 2009       |                |       |              | 8.81       |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 5,000 |   |   |
|                     |       |       | 10,000      |                                                |       |                         | 2009       |                |       |              | 11.55      |                |       |                | —     |                                                |       |   | — |   |   |   | — |   |   |   | 10,000 |   |   |
| **Totals**               | ** ** | ** ** | **117,000** |                                                |       |                         |       |                |       |              |       |                | ** ** | ** **          | **—** |                                                | ** ** | ** ** | **—** |   | ** ** | ** ** | **—** |   | ** ** | ** ** | **117,000** |   |   |

 

F-54

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Crucell’sSupervisory Board members held the following shares in the Company per December 31, 2006:

| **Name of holder** | ** ** | ** ** | ** ** | **Ordinary shares  held per  December 31,  2006** | ** ** | **% of total  ordinary  shares** | ** ** |
|------------------------------|------------|------------|------------|------------------------------------------------------------------|------------|--------------------------------------------|------------|
| J.P. Oosterveld              |       |       | 4,500      |                                                             |       |                                       | 0.01       |   |   |
| A. Hoevenaars                |       |       | 2,500      |                                                             |       |                                       | —     |   |   |
| S.P. Lance                   |       |       | —     |                                                             |       |                                       | —     |   |   |
| P.M. Satow                   |       |       | 58,800     |                                                             |       |                                       | 0.09       |   |   |
| C.E. Wilhelmsson             |       |       | 2,500      |                                                             |       |                                       | —     |   |   |
| D.S. Koechlin                |       |       | 3,841      |                                                             |       |                                       | 0.01       |   |   |
| J Witmer                     |       |       | 15,910     |                                                             |       |                                       | 0.02       |   |   |
| C.E. Thomann                 |       |       | 3,751      |                                                             |       |                                       | 0.01       |   |   |
|                         | ** ** | ** ** | **91,802** |                                                             | ** ** | ** **                                 | **0.14**   |   |   |

 

Pursuant to Dutch law, each member of Crucell’sSupervisory Board and Management Board is responsible to the Company for theproper performance of his or her assigned duties. They are also responsible fortaking measures to prevent the consequences of any improper performance ofduties by another member of Crucell’s Supervisory Board or Crucell’s ManagementBoard. The Company’s Articles of Association provide that Crucell’s ManagementBoard members and Crucell’s Supervisory Board members are discharged fromliability for their actions as board members, if Crucell’s general meeting ofshareholders adopts a resolution to that effect.

This discharge extends only to actions or omissionsdisclosed in or apparent from the adopted annual accounts or otherwisecommunicated to the Company’s general meeting of shareholders.

Mandatory provisions of Dutch law may limit thisdischarge of liability, for example in the case of bankruptcy. Under Dutch law,the Company’s Supervisory Board members and members of the Company’s ManagementBoard generally cannot be held personally liable for decisions made exercisingtheir reasonable business judgement.

The Company’s Articles of Association provide that theCompany shall generally indemnify any person who is or was a member of theCompany’s Supervisory Board or of the Company’s Management Board or one of theGroup’s employees, officers or agents, and suffers any loss as a result of anyaction in connection with their service to the Group, provided they acted ingood faith in carrying out their duties.

This indemnificationgenerally will not be available if the person seeking indemnification actedwith gross negligence or wilful misconduct in the performance of his or herduties to the Group. A court in which an action is brought, may howeverdetermine that indemnification is appropriate nonetheless.

**5.24 Financialinstruments**

**Financial riskmanagement**

The main risks arisingfrom the Group’s financial instruments are foreign currency risk, interest raterisk and credit risk.

F-55

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*Foreign currencyrisk*

The Group has significant transactional currencyexposures. Such exposure arises from sales or purchases by an operating unit incurrencies other than the functional currency of the Group. The majority of theof the Group’s purchases and sales are denominated in currencies other thanEuro, the functional currency of the Group. Movements in the US Dollar/Euroexchange rates can significantly affect the results of the Group as there aresignificant purchases and sales in US Dollar.

As a result of significant operations in Switzerlandand Korea movements in the Swiss Franc and the Korean Won compared to the Eurocan also affect the Group’s balance sheet and income statement significantly asthe balance sheet and the income statement of the Swiss and Korean subsidiariesare translated into Euro, the functional currency of the Group.

In principle the Group does not engage in derivativetransactions to hedge its currency exposure. The Group is currently in theprocess of determining the most optimal manner of mitigating the effects of itsstructural currency exposures. The Group did not apply formal hedge accountingin 2006.

Priorto SBL’s acquisition by the Company, SBL had engaged in four forward exchangecontracts to hedge its currency exposure. At December 31, 2006, the Groupcontinued to hold these exchange contracts. The terms of these contracts are asfollows:

| ** **                                            | ** ** | **Expiry date** | ** ** | **Exchange rate** | ** ** | **Fair value in  Euros** | ** ** |
|-------------------------------------------------------|------------|----------------------|------------|------------------------|------------|------------------------------------|------------|
| Forward contracts to  hedge expected future sales     |       |                 |       |                   |       |                               |       |   |   |
| Sell                                                  |       |                 |       |                   |       |                               |       |   |   |
|  € 1,000                                    |       | February 20, 2007    |       | SEK/€  9,181      |       |                               | €     |  1,016 |   |   |
|  € 1,000                                    |       | February 28, 2007    |       | SEK/€  9,220      |       |                               | €     | 1,021 |   |   |
|  € 1,000                                    |       | April 10, 2007       |       | SEK/€  9,311      |       |                               | €     |  1,031 |   |   |
| Forward contracts  to hedge expected future purchases |       |                 |       |                   |       |                               |       |   |   |
| Buy                                                   |       |                 |       |                   |       |                               |       |   |   |
| CHF 500                                               |       | March 5, 2007        |       | SEK/CHF 5,719          |       |                               | €     | 317 |   |   |

 

The total fair value of theforward exchange contracts as per December 31, 2006 amounts to €57. The Group did not have any additional derivative financial instrumentsas per December 31, 2006.

*Interest rate risk*

The Group runs risks as a result of changes in themarket interest rates compared to loans with fixed rates. The Group has severalloans with fixed interest rates, which total €46,413. Details on the interest rates and maturity of these loans are providedin note 5.20.

In addition the Group hascash balances for an amount of € 172,200 of which €14,396 is restricted. (2005: € 111,700 of which €13,322 is restricted.) There are no other receivables that generate interest.

F-56

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

*Credit risk*

Credit risk represents the risk of financial losscaused by default of the counter party. The principal financial assets of theGroup are cash and cash equivalents, short-term deposits, trade and otherreceivables and securities available for sale. These assets represent the Group’smaximum exposure to credit risk in relation to financial assets. The Group’scredit risk is primarily attributable to its trade and other receivables. TheGroup trades only with recognized, creditworthy third parties. It is the Group’spolicy that all customers who wish to trade on credit terms are subject tocredit verification procedures. In addition, receivable balances are monitoredon an ongoing basis. Allowances are recognized for receivable balances deemeduncollectible upon identification.

The credit risk on cashand cash equivalents, and short-term deposits is limited because the counterparties are banks with high credit ratings assigned by internationalcredit-rating agencies. The credit risk for the securities available for saleis limited as these stocks are traded in an active market.

Price risk

In addition to currencyrisks and interest rate risks the Group is exposed to other market price risksin relation to its financial instruments due to changes in the market prices.The Group has no direct influence on this risk. Specifically the investment inGalapagos, which is valued at fair value, is subjected to this risk.

Liquidity risk

Liquidity risk representsthe risk that an entity will encounter difficulty in meeting obligationsassociated with its financial liabilities. The liquidity risk is considered tobe limited as the Group has sufficient funding to meet its obligations in thenext 12 months. The Group has a total cash balance of € 157,800as per December 31, 2006 (2005: € 111,700).

**Fair values**

The fair values ofthe financial instruments of the Group approximate the carrying amount of theGroup’s financial instruments, except for the following:

·       aloan entered into by Berna Biotech Korea Corp. with an amount of €5,819. The fair value of this loan is estimated to be €6,082.

·       Thetotal fair value of the forward exchange contracts as per December 31,2006 amounts to €57.

The fair values of theloans have been calculated by discounting the face values with the interestrate of financial instruments with a similar risk profile and term. The fairvalues of the forward exchange contracts were calculated making use of the spotrate of the underlying exchange rates as per December 31, 2006.

**6**                    Reconciliationbetween IFRS to US GAAP

TheCompany’s consolidated financial statements have been prepared in accordancewith International Financial Reporting Standards (IFRS) as endorsed by the EU,which as applied by the Group. These consolidated financial statements differin certain significant respects from US GAAP. The principal differences betweenIFRS and US GAAP are presented below, together with explanations of the 

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

adjustments that affect consolidation net loss foreach of the last three years in the period ended December 31, 2006 andtotal shareholders’ equity as of December 31, 2006, 2005 and 2004.

| ** **                                               | ** ** | ** ** | ** ** | **Year ended December 31** | ** ** |
|----------------------------------------------------------|------------|------------|------------|-------------------------------------------|------------|
| ** **                                               | ** ** | **Note**   | ** ** | **2006**                                  | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Loss for  the year in accordance with IFRS**           |       |       |       |                                      |       | **€** | **(87,565** | **)** | **€** | **(15,578** | **)** | **€** | **(22,826** | **)** |
| Minority  interests                                      |       |       | a          |                                      |       | 252 |   | — |   | — |   |
| Share based  compensation                                |       |       | b          |                                      |       | (510 | ) | (402 | ) | 791 |   |
| Results of  investments in associates and joint ventures |       |       | c          |                                      |       | — |   | 455 |   | 704 |   |
| IPR&D Expense  for US GAAP purposes                  |       |       | d          |                                      |       | (59,130 | ) | — |   | — |   |
| Reversal of IFRS  Impairment on IPR&D, net of tax    |       |       | d          |                                      |       | 8,025 |   | — |   | — |   |
| Reversal of IFRS  IPR&D Amortization, net of tax     |       |       | d          |                                      |       | 523 |   | — |   | — |   |
| **Loss for  the year in accordance with US GAAP**        |       |       |       |                                      |       | **€** | **(138,405** | **)** | **€** | **(15,525** | **)** | **€** | **(21,331** | **)** |
| Loss per share (basic  and diluted) under US GAAP        |       |       |       |                                      |       | (2.43 | ) | (0.39 | ) | (0.59 | ) |

 

| ** **                                                | ** ** | ** ** | ** ** | **December 31** | ** ** |
|-----------------------------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                                                | ** ** | **Note**   | ** ** | **2006**             | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Shareholders’  equity in accordance with IFRS**    |       |       |       |                 |       | € | 497,300 |   | € |  137,609 |   | € |  80,659 |   |
| Minority  interests                                       |       |       | a          |                 |       | — |   | — |   | — |   |
| Investments in  associates and joint ventures             |       |       | c          |                 |       | — |   | — |   | (2,124 | ) |
| IPR&D Expense  for US GAAP purposes                   |       |       | d          |                 |       | (59,130 | ) | — |   | — |   |
| Reversal of IFRS  Impairment on IPR&D, net of tax     |       |       | d          |                 |       | 8,025 |   | — |   | — |   |
| Reversal of IFRS  IPR&D Amortization, net of tax      |       |       | d          |                 |       | 523 |   | — |   | — |   |
| Notes receivable  from officers and employees             |       |       | e          |                 |       | (168 | ) | (194 | ) | (224 | ) |
| Business  combinations—purchase price                |       |       | f          |                 |       | 22,853 |   | — |   | — |   |
| Employee  benefits, net of tax of € 40               |       |       | g          |                 |       | 2,625 |   | — |   | — |   |
| Cumulative  Translation Adjustments                       |       |       | h          |                 |       | 1,423 |   | — |   | — |   |
| **Shareholders’ equity in  accordance with US GAAP** |       |       |       |                 |       | **€** | ** 473,451** | ** ** | **€** | ** 137,415** | ** ** | **€** | ** 78,311** | ** ** |

 

**Note a   MinorityInterests**

In contrast to IFRS,minority interests are deducted in the determination of US GAAP net income andexcluded from total equity. The Group purchased Berna Biotech and Rhein Biotechin 2006 resulting in minority interest for a portion of the year. The remainingminority interests of Berna Biotech and Rhein Biotech N.V. were purchased bythe Group by the end of 2006; consequently there is no equity adjustmentnecessary in 2006 or previous years. As a result of the minority interestoutstanding for part of fiscal 2006, a reconciling item in the amount of € 252 was recorded in 2006 to adjust net loss for thisclassification difference. As a result of the purchase of the remainingminority interests during 2006 there is no net difference in the calculation ofthe minority interests in the consolidated income statement between IFRS andUS GAAP.

**Note b   Share-BasedCompensation**

*General*

For IFRS purposes, share-based compensation isaccounted for under the fair value method in accordance with IFRS 2Share-based Payment.

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

For US GAAP purposes,share-based compensation is accounted for under the fair value method inaccordance with Statement of Financial Accounting Standard 123 Accounting forStock-Based Compensation (FAS 123R). The Group values stock options issuedbased upon the Black-Scholes option pricing model and recognizes this value asan expense over the period in which the options vest.

*Difference betweenUS GAAP and IFRS with respect to Non-employees*

IFRS 2 clarifies that consultants can be consideredpersons providing similar services as an employee, resulting in similaraccounting treatment of share-based payments as employees. During 2004, 2005and 2006 the Group entered into several consulting agreements where for IFRSaccounting purposes, the consultant is considered a person providing similarservices as an employee.

Stock compensation expensefor options granted to non-employees has been determined in accordance withFAS 123R and Emerging Issues Task Force (“EITF”) No. 96-18,Accounting for Equity Instruments that are Issued to Other than Employees forAcquiring, or in Conjunction with Selling, Goods or Services, as the fair valueof the consideration received or the fair value of the equity instrumentissued, whichever is more readily measurable. In accordance with US GAAP theseconsultants are considered to be non-employees and unvested stock optionsgranted to consultants are recorded at fair value, which are re-measured ateach reporting date, until a measurement date occurs (as the consultantagreements of the Group do not define a strict performance target, finalmeasurement date is considered to be the contract-end date). An adjustment todecrease net loss is recorded under US GAAP for € 50 as of December 31, 2006, increase net lossfor € 47 as of December 31, 2005 andnil change to 2004, to account for this difference.

*Difference betweenIFRS and US GAAP with respect to option accounting method*

Prior to 2005, Crucell granted options to employeeswhich are exercisable immediately from date of grant. However, the option plancontains profit retribution clauses which apply when an employee leaves. UnderIFRS and US GAAP the option plan is treated as an option plan with gradedvesting periods. As of 2005 the Group grants options that vest straight line overa period of 4 years.

Graded vesting under IFRSis to be accounted for using the accelerated method for share-basedcompensation. In certain circumstances under US GAAP a choice can be made torecognize share-based compensation in accordance with the accelerated method orstraight-line method. Crucell’s accounting policy under US GAAP for the prioroption plans is the straight-line method. Therefore, there is a differencebetween the expenses recorded under the straight line versus the acceleratedmethod for these options. An adjustment to increase net loss is recorded underUS GAAP for € 560, € 355 and € 791for the periods ended December 31, 2006, 2005 and 2004, respectively, toaccount for this difference.

**Note c   ResultsInvestments associates and joint ventures**

In accordance with IFRS, prior to the Initial PublicOffering (IPO) of Galapagos  in 2005 theCompany’s investment in Galapagos was considered an “associate”. IAS 28Investments in Associates (IAS 28) clarifies that investments in associatesover which the investor has significant influence must be accounted for usingthe equity method. Contrary to US GAAP, which requires the investment to becarried at cost less its proportionate portion Galapagos losses with a minimumof nil, the investment in Galapagos should be reported using the net assetvalue of Galapagos, with a minimum of nil (as Crucell has no obligation to fundthe incurred losses of the investment). As a result under IFRS dilution gains 

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

resulting from capitalincreases of Galapagos resulted in gains for Crucell in the amounts of € 455 and € 704in the years ended December 31, 2005 and 2004, respectively.

As the Group’s shareholding decreased to 11.7%, due tothe IPO of Galapagos, the Group ceased to have significant influence. IAS 28states that an investor shall discontinue the use of the equity method from thedate that it ceases to have significant influence over an associate and shallaccount for the investment in accordance with IAS 39 from that date.

Under IAS 39 FinancialInstruments: Recognition and Measurement (IAS 39) the shareholding in Galapagosis classified as “available for sale”. A gain or loss on an available-for-salefinancial asset shall be recognized directly in equity, through the statementof changes in equity, except for impairment losses, until the financial assetis derecognized, at which time the cumulative gain or loss previouslyrecognized in equity shall be recognized in profit or loss. Dividends on anavailable-for-sale equity instrument is recognized in profit or loss when theentity’s right to receive payment is established. As of the date of dilution,the investment had a carrying value of € 1.7 million, resulting in an unrealized gain of € 9.6 million in accordance with IFRS. For USGAAP purposes, as of the date of dilution the investment had a carrying valueof nil resulting in an unrealised gain of € 11.3 million.The current accounting treatment under IFRS is in line with the US GAAPaccounting treatment as the investment is carried at fair value, hence there isno difference for 2006.

**Note d   AcquiredIn-Process Research and Development Expense**

Under IFRS in accordancewith IAS 38 Intangible Assets, acquired in-process research and development (“IPR&D”)projects are capitalized as intangible assets at fair value, with annualimpairment tested and subsequent amortization when the product receives marketauthorization. Further, under IFRS, deferred tax is provided for IPR&Dassets acquired in a business combination. For US GAAP purposes, in accordancewith FAS 141 Business Combinations (FAS 141), such projects are expensedimmediately following the acquisition as the feasibility of the acquiredresearch and development project has not been fully tested and the technologyhas no alternative future use. US GAAP does not provide for deferred taxon these assets, resulting in an adjustment to deferred tax and goodwill. Thedifferences in the treatment in IPR&D resulted in the following reconcilingitems in the net loss and shareholder’s equity reconciliations:

| ** **                                | ** ** | **Year ended  December 31, 2006** | ** ** |
|-------------------------------------------|------------|--------------------------------------------------|------------|
| IPR&D Expense  for US GAAP purposes   |       |                                             | €     | (59,130 | ) |   |
| Reversal of IFRS  Impairment on IPR&D |       |                                             | 8,025      |   |   |
| Reversal of IFRS  IPR&D Amortization  |       |                                             | 523        |   |   |
| **Total**                                 | ** ** | ** **                                       | **€** | **(50,582** | **)** | ** ** |

 

**Note e   NotesReceivables from Employees**

Under IFRS, director loansissued for financing options are presented as non-current assets. US GAAPrequires director loans issued for financing options to be presented as part ofshareholders’ equity. An adjustment to equity of € 168, € 194and € 224 as of December 31, 2006,2005 and 2004, respectively, was recorded under US GAAP to properly classifythese loans.

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**Note f   BusinessCombinations**

For financial reporting purposes, the cost ofacquiring a business is allocated to the assets acquired and liabilitiesassumed based on their estimated fair values at the date of acquisition for bothIFRS and US GAAP. Any excess of purchase cost over the fair values of theacquired net assets is reported as goodwill.

Under IFRS in accordance with IFRS 3 BusinessCombinations, the date of exchange, which is when the acquirer effectivelyobtains control of the acquiree, is used as the measurement date fordetermining the fair value of shares given as consideration in a businesscombination. Under US GAAP and FAS 141 the announcement date (or the average ofdates within a certain range) is used as the measurement date when securitiesare issued to purchase the acquiree. As a result, there is a difference in thepurchase price to be allocated to the acquired entities under IFRS and US GAAP.The purchase price adjustment between IFRS and US GAAP is due to differentdates used to value the Crucell securities issued for the acquisitions of BernaBiotech and acquisition of the remaining Rhein Biotech shares totaling € 22.9 million. This difference directly effectsgoodwill on the balance sheet.

Under US GAAP the impairment test for intangibleassets subject to amortization is conducted in two steps. The first step is tocompare the carrying amount to undiscounted cash flows. If the carrying amountis higher than the sum of the undiscounted cash flows, the second step is tocalculate the impairment based on discounted cash flows expected from the useand eventual disposition of the asset. For intangible assets not subject toamortization, the impairment test consists of a comparison of the fair value ofintangible asset to its carrying amount. If the carrying amount of theintangible asset exceeds its fair value, an impairment loss is recognized in anamount equity to that excess.

Under US GAAP goodwill is tested for impairmentannually. The impairment test is also comprised of two steps. The initial stepis designed to identify potential goodwill impairment by comparing an estimateof the reporting unit’s fair value of all assets and liabilities, includinggoodwill, to their carrying amounts. If the carrying amount exceeds the fairvalue of the reporting unit, a second step if performed, which compares theimplied fair value to the applicable reporting unit’s goodwill with thecarrying amount of that goodwill, to measure the amount of goodwill impairment,if any.

No differences inimpairment of goodwill between IFRS and US GAAP were noted by the Group.

**Note g   EmployeeBenefits**

Pension Assets and Liabilities Fair Value AdjustmentsIncluded in Equity

The difference recorded in other comprehensive incomeunder US GAAP for an amount of € 2.8 millionrelates to the change in market value on pension assets, which are treateddifferently under US GAAP.

Under IFRS certain pension assets receive off-balancesheet treatment as the recognized assets are limited to the net total of anycumulative unrecognized net actuarial losses and past service costs and thepresent value of any future refunds from the plan or reductions in future contributionsto the plan (the “asset ceiling”). In addition the assets of a specific Swisspension foundation, the “Wellfare foundation” do not qualify for recognitionunder IFRS.

Under US GAAP, theseamounts are required under FAS 87 Employers Accounting for Pensions (FAS 87),FAS 88 Employers’ Accounting for Settlements and Curtailments of DefinedBenefit Pension 

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

Plansand for Termination Benefits (FAS 88) and FAS 158 Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans, an amendment of FASBStatements No. 87, 88, 106 and 132(R) (FAS 158) to be included on thebalance sheet. Adjustments related to deferred taxes were also applied inpurchase accounting relating to these assets. Due to the difference inaccounting for certain assets under US GAAP this resulted in a reduction ofgoodwill in the purchase price allocation.

Adoption of FAS 158

IFRS (IAS 19, EmployeeBenefits) allows deferred recognition, in both the income statement and thebalance sheet, of changes to the plan assets, plan amendments, changes in theactuarial assumptions used to measure the benefit obligation and experiencegains and losses compared to those assumptions. Under US GAAP, these items areall recognized in the balance sheet as they occur, but their recognition in netincome is deferred using the corridor method for actuarial gains and losses,and is amortized over expected future service for plan amendments. In additionFAS 158, Employer’s Accounting for Defined Benefit Pension and OtherPostretirement Plans, requires the funded status of the Group’s plans to berecognized in full as an asset or liability in the employer’s balance sheet.Under US GAAP, shareholder’s equity as of December 31, 2006 is lower, andthe net benefit liability recorded on the balance sheet is higher by thepost-tax amount of actuarial gains and losses and past service costs. See thebelow reconciliation for the impact of adoption in 2006 of FAS 158. No otherdifferences in the accounting for the pension plans are present between IFRS andUS GAAP.

| **US GAAP  equity at December 31, 2006 prior to adoption of FAS 158** | ** ** | **€** | ** ****473,595** |   |
|----------------------------------------------------------------------------|------------|------------|-----------------------|--------|
| Adoption of SFAS  158                                                      |       | (184       | )                     |
| Deferred tax on  above                                                     |       | 40         |                  |
| **US GAAP equity after adoption  of FAS 158 at December 31, 2006**    | ** ** | **€** | **473,451**           |   |

 

**Note h   Differencesin Cumulated Translation Adjustment**

Due to the differencesdiscussed above, such as the difference in the purchase price of acquisitionsand the difference in the treatment of acquired in-process research anddevelopment, there are differences in the related cumulated translationadjustment during re-measurement and translation. The differences in cumulativetranslation adjustments represents differences created as a result of applyingUS GAAP.

**Tax Effect on USGAAP Adjustments**

The tax effect on US GAAPadjustments represent the temporary differences created as a result of applyingUS GAAP. However, as there is a full valuation allowance recorded on the Group’snet deferred tax assets, the results of applying US GAAP does not significantlychange the Group’s deferred tax position.

**Cash Flow Statement**

For IFRS, the Groupprepares and reports financial information on its cash flows using the guidancein IAS 7, Cash Flow Statements. Since the information required under IAS 7 issimilar to the content and presentation of cash flow information prepared underUS GAAP under FASB Statement No. 95, Statement of Cash Flows, Item 17 ofSEC Form 20-F does not require additional information, disclosure ora different presentation of cash flow information for the Group.

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**Notes to the Consolidated Financial Statements (amounts in thousands of Euro, except per share data) (Continued)**

**Recently IssuedAccounting Pronouncements**

In February 2006, the FASB issued FAS 155Accounting for Certain Hybrid Financial Instruments (FAS 155), an amendment ofFASB Statements No. 133 and 140. FAS 155 nullifies the guidance from theFASB’s Derivatives Implementation Group (DIG) in Issue D1, Application ofStatement 133 to Beneficial Interests in Securitized Financial Assets, whichdeferred the application of the bifurcation requirements of FAS 133 for certainbeneficial interests. FAS 155 provides a fair value measurement option forcertain hybrid financial instruments that contain an embedded derivative thatwould otherwise require bifurcation and requires that beneficial interests insecuritized financial assets be analyzed to determine whether they arefreestanding derivatives or whether they are hybrid instruments that containembedded derivatives requiring bifurcation. FAS 155 also provides clarificationon specific points related to derivative accounting. FAS 155 is effective forfiscal years beginning after September 15, 2006. The Group does notcurrently expect FAS 155 to have a material impact on its financial position,results of operations or cash flows.

In July 2006, the FASB issued FAS Interpretation48 Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS 109,Accounting for Income Taxes (FIN 48). FIN 48 prescribes a comprehensive modelfor how a company should recognize, measure, present and disclose in itsfinancial statements uncertain tax positions that the company has taken orexpects to take on a tax return. FIN 48 requires that a tax benefit from anuncertain position may only be recognized if it is more likely than not thatthe position is sustainable based on its technical merits and the amount of thebenefit recognized is the largest amount of the tax benefit that is greaterthan 50 percent likely of being realized upon ultimate settlement with a taxingauthority. The Company will assess all material open positions in all taxjurisdictions as of adoption date and determine the appropriate amount of taxbenefits that are recognizable under FIN 48. Any difference between the amountspreviously recognized and the benefit at the adoption date will be recorded asan adjustment to retained earnings. FIN 48 is effective for annual periodsbeginning after December 15, 2006 and the Group plans to adopt as of January 1,2007. The Group is currently evaluating the potential impact, if any, that theadoption of FIN 48 will have on the Group’s consolidated financial statements.

In September 2006, the FASB issued FAS 157 FairValue Measurements (FAS 157). This Statement defines fair value, establishes aframework for measuring fair value in US GAAP, and expands disclosures aboutfair value measurements. This Statement applies to other accountingpronouncements that require or permit fair value measurements, the FASB havingpreviously concluded in those accounting pronouncements that fair value is therelevant measurement attribute. Accordingly, this Statement does not requireany new fair value measurements. The Group plans to adopt this statementbeginning January 1, 2007.

In February 2007, the FASB issued FAS 159 TheFair Value Option for Financial Assets and Financial Liabilities (FAS 159).This Statement permits entities to choose, at specified election dates, tomeasure eligible financial instruments at fair value. Unrealized gains andlosses on items for which the fair value option has been elected would bereported in net income at each subsequent reporting date, and upfront costs andfees related to those items would be recognized in net income as incurred andnot deferred. The Group is unlikely to elect the Fair Value Option.

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