ANNUAL FINANCIAL REPORT 2010 2010 - TiGenix

commercialisation of ChondroCelect, ChondroMimetic and/or of future products. Reference is made to section 6.5.1 for thestatus of the reimbursement files.TiGenix’ ability to commercialise ChondroCelect,ChondroMimetic and future products will depend, in part,on market acceptance (including the willingness of medicalpractitioners to invest in training programs to use the products).This new type of tissue-engineered products needs toacquire its place in the market over time next to the currentstandard of care, being microfracture for cartilage defects.Recommendations and endorsements by influential physicianswill be one of the essential factors for market acceptance ofTiGenix’ products. The Company may not be able to obtain ormaintain these recommendations and endorsements and theCompany’s products may not gain sufficient market recognitionin spite of favourable key leader opinions.ChondroCelect and ChondroMimetic will be partially soldthrough commercialisation and distribution partners. Thefuture performance of both products will depend in part onTiGenix’ ability to attract suitable partners that will be ableto market and support ChondroCelect and ChondroMimeticand future products effectively. TiGenix may lose one or moreof its distributors or may not be able to recruit additional orreplacement distributors. The loss of one or more distributorscould have an adverse effect on the business of TiGenix.The public perception of ethical and social issues surroundingthe use of tissue-engineered products or stem cells may limitor discourage the use of TiGenix’ products. Whilst TiGenixis not involved in embryonic stem cell research, the use ofhuman cells (differentiated cartilage and meniscus cells,expanded adipose derived stem cells and other adult stemcells) as starting material for the development of its cell-basedmedicinal products could generate negative public perceptionfor the Company and public expressions of concern could resultin stricter governmental regulation, which may, in turn, increasethe cost of manufacturing and marketing the product and/orimpede market acceptance of the products.The Company has a limited product portfolioand faces, and will continue to face, significantcompetition and technological change whichcould limit or eliminate the market opportunityfor its products and future productsTiGenix’ ability to commercialise ChondroCelect,ChondroMimetic and future products depends, in part, on theextent to which competition will react. TiGenix may be unableto compete effectively against existing or new technologiesor competitors that are developing or could develop productsthat may be cheaper to the end users, more effective orsafer than TiGenix’ products. The biomedical industry ischaracterised by significant and rapid technological change.Research and discoveries by others may render the Company’sproducts obsolete. The Company may experience competitionfor ChondroCelect, ChondroMimetic and its other productscurrently under development. It is uncertain whether TiGenixwill be able to successfully develop new products and gainregulatory approval or otherwise expand its currently limitedregulatory approved product portfolio. Competition may comefrom companies which have greater research, development,marketing, financial and personnel resources than TiGenix,and can, therefore, more quickly adapt to changes in themarketplace. Competitors may precede TiGenix in developingproducts or may succeed in developing products that are moreeffective, safe or economically viable than those developedby TiGenix. Such successes by its competitors or technologicalchanges could render TiGenix’ technology and productsobsolete and/or otherwise non-competitive.There may be uncertainty over reimbursementfrom third parties for newly approvedhealthcare products or such reimbursementmay be refused.TiGenix’ ability to commercialise ChondroCelect,ChondroMimetic and future products will depend, in part,on the availability of reimbursement for the products fromgovernment and health administration authorities, privatehealth insurers, managed care programmes and otherthird-party payers. Significant uncertainty exists as to thereimbursement status of newly approved healthcare products.In many countries, medicinal products and devices aresubject to a regime of reimbursement by government healthauthorities, private health insurers or other organisations.There is increasing pressure from these organisations to limithealthcare costs by restricting the availability and level ofreimbursement. TiGenix has been successful in obtainingcertain forms of reimbursement in certain instances and hasbeen unsuccessful in other instances. It cannot be excludedthat the negative decisions by certain authorities or thirdparty payers will have an unfavourable spill over effect onreimbursement applications that are currently pending orthat the Company intends to file in the future. There can beno assurance that adequate public health service or healthinsurance coverage will be available to enable the Companyto obtain or maintain prices for its products sufficient to realisean appropriate return on investment. In addition, changes to25 •