ANNUAL REPORT 2012 - TiGenix

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On December 31, 2012, the Company had a cash position of EUR 11.1 million, the net cash used during 2012 was EUR 8.7 million and the monthly cash used in operating activities was approximately EUR 1,5 million. This cash position is not sufficient to continue the operations for the next twelve months (until the next ordinary shareholders’ meeting of April 2014). In order to generate sufficient additional cash to continue the operations for the next twelve months, the Board of Directors developed an action plan, which is reflected in the budget, based on the following key assumptions : - An increase of the projected commercial revenues of ChondroCelect, expected to continue the same trend in units sold as in 2012, based on the expected progressing reimbursement activities in additional countries; - Additonal non-dilutive funding, such as grants (EU 7 th FP) and soft loans already granted (Innpacto, Madrid Network), and others not yet granted; However, at this moment it is uncertain whether the above assumptions will be realized timely. There is a risk that the action plan will not generate sufficient additional cash, as a result of the non-realization or only partly realization of one or more assumptions. There is also a risk that, even if most of the assumptions would be realized, this realization will happen too late, so that the necessary additional cash is not generated timely to continue the Company’s operations for the next twelve months. If the execution of the above action plan would not or not timely generate sufficient additional cash, the Board of Directors intends to explore the option of obtaining additional dilutive funding (i.e. a capital increase) or non-dilutive funding. Even though the Board of Directors is confident that the action plan described above, in combination with, if needed, dilutive funding (i.e. a capital increase), will timely generate sufficient additional cash to continue the Company’s operations for the next twelve months, there can be no assurance that this will indeed be the case. - Partnering of Cx601; and - Monetizing of some assets, such as the Dutch manufacturing facility (which was constructed by the Company in a building leased under a long-term lease contract running until July 2029). According to the budget, the effective and timely realization of the above assumptions of the action plan should generate sufficient additional cash to continue the Company’s operations during the next twelve months. Generally, there can be no assurance that any required additional funding will be available on a timely basis, on favourable terms, or at all, or that such funds, if raised, will be sufficient to enable the Company to continue to implement its business strategy. If TiGenix is unable to raise additional funds through equity or debt financing, it may need to delay, scale back or eliminate expenditures for some of its research, development and commercialisation programmes, or grant rights to develop and market products that it would otherwise prefer to develop and market itself, thereby 6 TiGenix I annual report 2012
educing their ultimate value to the Company. The Company’s inability to obtain additional funds necessary to operate its business could materially and adversely affect the market price of the Company’s shares. In view of the above-mentioned action plan, the Company does not currently expect that it will need to cease certain projects or operations. Finally, the Company may be required to repay part of two subsidies granted to TiGenix SAU in 2006 and 2007. More information on this potential risk is included in section 6.9. TiGenix may fail in successfully commercialising ChondroCelect and future products, resulting in lower than anticipated revenues. There is no guarantee that the Marketing Authorisation that TiGenix received for ChondroCelect from the European Commission will result in a commercial success for this product. The Company may be faced with hurdles in reimbursement, market acceptance, distribution and competition that may delay or even prevent the commercialisation of ChondroCelect and/or of future products. Reference is made to section 6.4.6 for the status of the reimbursement files. Notwithstanding the fact that ChondroCelect is already being commercialised and, as per December 31, 2012, is reimbursed in Belgium and the Netherlands, sales have been rather limited so far due to the fact that Belgium and the Netherlands are rather small markets. If no reimbursement is granted in additional countries and if no further reimbursement can be agreed with private health insurance companies, sales of ChondroCelect may always remain limited. TiGenix’s’s ability to further commercialise ChondroCelect and to commercialise future products will also depend, in part, on market acceptance (including the willingness of medical practitioners to invest in training programs to use the products). This new type of cell therapy products needs to acquire its place in the market over time next to the current standards of care. Recommendations and endorsements by influential physicians will be one of the essential factors for market acceptance of TiGenix’s products. The Company may not be able to obtain or maintain these recommendations and endorsements and the Company’s products may not gain sufficient market recognition in spite of favourable key leader opinions. ChondroCelect will be partially sold through commercialisation and distribution partners. The future performance of the product will depend in part on TiGenix’s ability to attract suitable partners that will be able to market and support ChondroCelect and future products effectively. TiGenix may lose one or more of its distributors or may not be able to recruit additional or replacement distributors. The loss of one or more distributors could have an adverse effect on the business of TiGenix. The public perception of ethical and social issues surrounding the use of tissueengineered products or stem cells may limit or discourage the use of TiGenix’s products. Whilst TiGenix is not involved in embryonic stem cell research, the use of human cells (differentiated cartilage cells, expanded adipose derived stem cells and other adult stem cells) as starting material for the 7
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Page 3 and 4: 9. MAJOR SHAREHOLDERS 103 9.1. OVER
Page 5: There can be no assurance that TiGe
Page 9 and 10: eimbursement in certain instances s
Page 11 and 12: or the relevant manufacturing proce
Page 13 and 14: In recent years, it expanded its op
Page 15 and 16: making this change may be costly an
Page 17 and 18: TiGenix’s development stage produ
Page 19 and 20: qualified employees and consultants
Page 21 and 22: 1. Introduction Annual report 2012
Page 23 and 24: 2. Persons Responsible for the Cont
Page 25 and 26: 4. Selected Financial Information Y
Page 27 and 28: 5.3. ORGANISATIONAL STRUCTURE TiGen
Page 29 and 30: Date Transaction Number and class o
Page 31 and 32: Date Transaction Number and class o
Page 33 and 34: (12) The shares were subscribed to
Page 35 and 36: 5.5. DESCRIPTION OF RIGHTS AND BENE
Page 37 and 38: Formalities to attend the sharehold
Page 39 and 40: amendments to the Articles of Assoc
Page 41 and 42: the existing shareholders have a pr
Page 43 and 44: Issue date Term Number of warrants
Page 45 and 46: 6. Business Overview Most of the in
Page 47 and 48: 6.2. COMPETITIVE STRENGTHS The Comp
Page 49 and 50: 6.3. IMPORTANT EVENTS IN THE DEVELO
Page 51 and 52: 6.3.5. Funding history Since its in
Page 53 and 54: non-weight bearing area of the join
Page 55 and 56: 6.4.5. Commercial launch ChondroCel
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und Behandlungsmethode”) in sever
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Therapeutics (product Hyalograft C)
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Different routes of administration
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Clinical development In January 201
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evenues from this pipeline within t
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that the average cost of treatment
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TiGenix has obtained cGMP status fo
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Biologics for treatment of Rheumato
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of the patents and patent applicati
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- “Marker genes for use in the id
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manufacturing process and therapeut
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Invalidation of US patent US6777231
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7. Corporate Governance 7.1. GENERA
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7.2.3. Independent directors As to
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7.2.4. Composition of the Board of
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of Ravago NV, Vanbreda Risk & Benef
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Litigation statement concerning the
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As proof of the independence and an
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for their healthcare and biotechnol
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7.5. SCIENTIFIC ADVISORY BOARD AND
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As of the date of publication of th
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(rounded down to the nearest intege
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usiness at customary market conditi
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9. Major Shareholders 9.1. OVERVIEW
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10. Financial Statements : General
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11. Consolidated Financial Statemen
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11.3. CONSOLIDATED STATEMENT OF CAS
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The consolidated financial statemen
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11.5.2.2. Basis of consolidation Th
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are provided and costs are incurred
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of interest on the remaining balanc
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Deferred tax assets and liabilities
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- Partnering of Cx601 (i.e. finding
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The Group is mainly exposed to the
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fiscal year 2010, reference is made
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Sales and marketing expenses Years
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The number of employees in the R&D
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Analysis of profit/(loss) for the p
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(8) Disposal group held for sale Th
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(10) Property, plant and equipment
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The decrease of stock in 2012 compa
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dividends will be based upon the Co
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alance. As a consequence, the Compa
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(23) Other current liabilities The
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TiGenix SAU - Stock options Prior t
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(25) Business combination Descripti
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(26) Related party transactions Tra
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(28) Commitments and contingencies
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(30) Consolidation scope Name Subsi
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We believe that the audit evidence
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assets and liabilities, its financi
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the results of its operations and c
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12.2. STATUTORY BALANCE SHEET 2010-
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The value of receivables is reduced
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13. Annual Report of the Board of D
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2013. The facility will provide the
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year ended December 31, 2011, and T
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Operating result (EBIT) and net res
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Statement of financial position The
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- The total personnel costs of EUR
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- TiGenix may fail in successfully
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continue as a going concern and to
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Functioning of the Board of Directo
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The nomination and remuneration com
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Apart from the above remuneration f
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Shares and warrants held by indepen
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- Long-term incentive plan : warran
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Shares and warrants held by executi
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- identifying and implementing busi
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actual bonus equal to 78 % of her p
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was reduced to a half-time role com
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14. Business and Financial Update a
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Financial results for the full year
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15. Available Documents The Company
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Title Country Application number Ce
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Title Country Application number Is
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Country Trademark Classes USA CELLE
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ANNUAL REPORT 2012 - TiGenix

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