ANNUAL FINANCIAL REPORT 2010 2010 - TiGenix

In view of the results of the FATT 1 Phase III clinical trials ofOntaril, which did not satisfy the expectations of effectivenesscompared with the treatment used in the control arm ofthe study, and the results of the Cx-501 project, Cellerix’board of directors decided not to go ahead with the clinicaldevelopment of these products.This decision has prompted Cellerix’ management to adoptvarious measures, including the implementation of a workforceadjustment plan (ERE) in early 2010. Cellerix’ management hasalso adapted the expense budget for financial year 2011, whichno longer includes the development of the aforementionedproducts and now indicates that, after the capital increaseas described below is completed, the necessary financialresources will be available in order to continue with thedevelopment projects in progress, for an additional period of atleast twelve months. Cellerix’ directors have opted to preparethese stand-alone financial statements on a going concernbasis since, at the date of preparation of these stand-alonefinancial statements, a transaction is in progress whereby, ifit is performed, the outstanding disbursement of €18 millionrelating to the round of the capital increase involving Class Cshares will be carried out. This contribution would be made, ifnecessary, in April 2011.Segment informationGiven the long maturation periods involved in the research anddevelopment activities currently being carried out by Cellerix,at the present date no drug has entered the marketing stage,and it is not therefore possible to provide information brokendown by business segments.Recognition of revenues and expensesIncome and expenses are recognised on an accruals basis, thatis, when the actual goods and services occurs, irrespective ofthe timing of the related financial or monetary flow. Accordingto the principles set out in the conceptual framework of theIFRSs, Cellerix records revenues that accrue and all of thenecessary associated expenses.As a general rule, licence up-front fees received by Cellerix aretaken to income in the financial year in which the agreement ismade, provided:• the fee is not refundable,• said fee is in consideration of costs incurred by Cellerix priorto the signing of the contract,• the risks and benefits inherent in the asset are substantiallytransferred.If these circumstances are not satisfied, the revenues derivedfrom these up-front fees are recorded as deferred income inthe effective period of the future assumed commitments, theremaining life of the product or the period deemed applicableaccording to the circumstances of each agreement.Furthermore, as a general rule, those monetary considerationstied to the fulfilment of determined technical or regulatoryrequirements (milestone fees), within the framework ofcollaboration agreements signed with third parties, arerecognised as income, following the guidelines detailed in thecriteria for the recognition of income from up-front fees set outabove.Royalties received from the licensee arising from the sale of theproducts in the market covered by the agreement are recordedas income in the financial year in which the sales occur.Interest revenue accrues according to a financial time conditionreflecting principal pending payment and the applicableeffective interest rate.Deferred revenueGrants received are recognised according to the followingpolicy:• Non-repayable capital grants (related to capitalised assets)are valued at the amount granted, and are recorded asdeferred revenues and released to income once all ofthe conditions have been fulfilled, in proportion to thedepreciation undergone during the year by the assetsfinanced with those grants.• Operating grants received for research and developmentactivities pursued by Cellerix are recorded as revenues, onceall of their conditions have been fulfilled, in the same year asthe research and development costs incurred by Cellerix areexpensed.Research & development costsThe costs of new drugs research are recorded as expenditureduring the financial year in which they are incurred.Expenditure incurred by Cellerix on the clinical developmentof new drugs is only recorded as assets if all of the conditionsspecified in IAS 38 have been satisfied.• there are no future material obligations to be assumed byCellerix,204 • TiGenix • Rights Offering