TiGenix Gives Business Update & Reports Financial Highlights for the First Half of 2011

Leuven (BELGIUM) - August 25, 2011 - TiGenix NV (NYSE Euronext: TIG) gives an update of its business activities and provides the financial highlights for the half year ending June 30, 2011.

Business highlights

• Successful integration of Cellerix reinforces leadership position in cell therapy
• Commercial roll-out ChondroCelect® progressing
• Agreement with European Medicines Agency (EMA) on timing for post-approval study of ChondroCelect
• Construction of commercial production facility completed
• ChondroMimeticTM distribution network rapidly expanding
• Phase III in perianal fistula (Cx601) ready to start
• Phase IIa in rheumatoid arthritis (Cx611) patient enrolment progressing on plan
• Phase I (Cx621, candidate autoimmune disorders) ready to start
• Preclinical development in osteoarthritis progressing 

Financial highlights

• Group revenues of EUR 0.5 million
• Net loss significantly impacted by extraordinary expenses
• EUR 33.4 million secured, including EUR 15.2 million through a rights issue
• EUR 24.9 million cash and reduced cash burn 

"We are very proud of our achievements in the first half year of 2011," says Eduardo Bravo, CEO of TiGenix. "We quickly and successfully completed the merger between TiGenix and Cellerix, creating a fully integrated cell therapy company. We raised substantial funds in challenging market conditions from specialised healthcare investors across Europe who fully support our ambition to forge a true leader in advanced cell therapy. With focus and dedication our new team has advanced all key programs on plan, meeting our aggressive targets, while keeping costs under control."

Business Update

Successful integration of Cellerix reinforces leadership position in cell therapy

In May of this year, TiGenix closed the business combination with the stem cell therapy company Cellerix, creating the European leader in cell therapy. Over the past months, the company focused primarily on the integration of both entities. A new operational structure was put in place to support the company, which now combines top line revenues from two commercial products (ChondroCelect and ChondroMimetic) with an advanced pipeline of clinical stage regenerative and immuno-modulatory products. TiGenix' operations are supported by a unique commercial and manufacturing infrastructure for advanced cell therapies, an experienced international management team and a solid cash position.

The Company's development focus has shifted from early stage preclinical programs towards a number of highly promising clinical stage products for inflammatory and autoimmune disorders of high unmet medical need, each addressing markets in excess of EUR 1 billion. This shift will ensure the mid- to long-term upside potential and has been realised while keeping cash burn under control.

Through a combination of restructuring, synergies and cost control, the combined company's cost basis has been significantly reduced. At the end of June 2011, total staff of the combined group was equal to 80 people, compared to 118 people at the end of June 2010 for the (pro forma) combined group.

Commercial roll-out ChondroCelect progressing

In the first half of this year, TiGenix reached an important commercial milestone by obtaining national reimbursement for ChondroCelect in Belgium. ChondroCelect is not only the first cell-based product to have obtained centralised European Marketing Authorisation, but also the first Advanced Therapy Medicinal Product to obtain national reimbursement. Since May 1, ChondroCelect is available in specialised treatment centres in Belgium and the first implantation under the reimbursement convention was performed in August.

TiGenix is also progressing with reimbursement discussions in other European countries, including France and Spain. In the Netherlands, following the advice from the Healthcare Insurance Board (CVZ), the Dutch Healthcare Authorities (Nederlandse Zorgautoriteit or NZA) have decided for the time being not to reimburse ChondroCelect. In collaboration with Dutch orthopaedic, professional and patient organisations, TiGenix is evaluating options to continue to make the product available to patients in the Netherlands.

Twenty-one reference centres are now qualified to use ChondroCelect to treat patients. A list of the centres that have been trained to use the product is available on TiGenix website (www.tigenix.com/en/index.php?id=230). Since the beginning of the year, a total of 53 biopsies were taken and 45 implantations have been performed.

The company has made good progress in its negotiations to extend the territories in which the product will be available through distributors or licensees.

Agreement with EMA on timing post-approval study ChondroCelect

In conjunction with the European marketing approval for ChondroCelect, TiGenix and EMA have now agreed to a post-approval pivotal study in 2013. Since this trial was initially slated to start in 2011, the new start date will effectively result in a substantial cost reduction in the period 2011-2013.

Construction of European commercial production facility completed

In 2009, TiGenix started with the construction and installation of its centralised European cell expansion facility in an existing building on the Chemelot Campus in Sittard-Geleen, the Netherlands. The construction of the facility has now been completed. The validation and inspection of the facility are expected to start in the fourth quarter of this year with the objective to have the site operational for commercial production in the second half of 2012. The facility will provide the extra cell expansion capacity required to support the growing demand for ChondroCelect and the commercial production of TiGenix' future stem cell products.

ChondroMimetic distribution network rapidly expanding

TiGenix has rapidly expanded its network of independent distributors for ChondroMimetic. Since the launch in September 2010, TiGenix has signed distribution agreements for Greece, Italy, Spain, Poland, Turkey, South Korea and Mexico.

Phase III in perianal fistula (Cx601) ready to start

TiGenix product pipeline is based on a proprietary stem cell platform that exploits expanded allogeneic (donor-derived) adult stem cells derived from human adipose (fat) tissue ('eASCs'). The platform has been extensively characterized in line with EMA requirements and is supported by exhaustive preclinical and CMC packages. The product candidates are based on the eASC's proven immunomodulatory and anti-inflammatory properties to treat immune-mediated inflammatory diseases.

Cx601 is TiGenix' most advanced clinical stage product and has completed a phase II study for the treatment of complex perianal fistulas in patients suffering from Crohn's Disease. Based on the phase II clinical trial report, scientific advice was sought from the EMA. In a final clarification letter, the Committee for Medicinal Products for Human Use (CHMP) stated that the presented preclinical data package was considered sufficient for a MAA (Marketing Authorization Application) submission so no further preclinical work will be required. CHMP also indicated that the proposed single phase III study should suffice to demonstrate the efficacy required to support the MAA.

Preparation of the phase III program is currently ongoing and recruitment is expected to start in the first half of 2012.

The company regained worldwide rights to the product after termination of the option agreement with Axcan Pharmaceuticals. The reacquisition of these rights will strengthen TiGenix position for entering into a (co-)development and worldwide commercialisation partnership.

Phase IIa in rheumatoid arthritis (Cx611) patient enrolment progressing on plan

Cx611 is an allogeneic eASC product candidate for the treatment of rheumatoid arthritis. In the first quarter of 2011, the company started the enrolment of patients for a phase IIa study. The objective of the trial is to determine safety, feasibility, tolerance, and optimal dosing. This multicentre, placebo-controlled study will involve approximately 53 patients, divided in 3 cohorts with different dosing regimens. There are more than 20 centres open and the company still expects the final results to be available first half of 2013.

Phase I (Cx621, candidate in autoimmune disorders) ready to start

Cx621 is an allogeneic eASC product candidate for the treatment of autoimmune diseases via a proprietary technique of lymphatic administration. Based on positive preclinical data on toxicology, biodistribution and efficacy, the ethical committee of Clínica Universitaria de Navarra (Spain) approved a phase I protocol to assess safety, tolerability and pharmacodynamics of intranodal injected allogeneic eASC's in healthy volunteers. TiGenix plans to start recruitment for this study in the fourth quarter of this year.

Preclinical development in osteoarthritis progressing

In addition to the three clinical stage programs described above, TiGenix is investigating the potential of allogeneic stem cells for the treatment of osteoarthritis. A preclinical study was started to compare the eASC platform with mesenchymal stem cells (MSCs) derived from the synovial membrane in view of selecting the most suitable product to bring into the clinic.

Financial results for the first half of 2011

Group revenues of EUR 0.5 million

Revenues for the first half of 2011 amounted to EUR 0.5 million. The revenues comprised EUR 0.4 million in product sales and EUR 0.1 million of other revenues. The total billed sales for ChondroCelect in the first half of 2011 amounted to EUR 0.7 million, including EUR 0.4 million in deferred product sales, to be recognized once ChondroCelect is reimbursed under the policy rule of expensive medical products in the Netherlands. This represents a 139% increase compared to the same period of last year. These sales figures do not show any effect yet of the positive reimbursement decision in Belgium. ChondroMimetic sales in the first half of 2011 were EUR 0.1 million.

Net loss significantly impacted by extraordinary expenses

Net loss for the first half of 2011 amounted to EUR 13.0 million compared to EUR 7.0 million in H1 2010. This increase is primarily related to several non-recurrent items:

• EUR 2.8 million of extraordinary charges for the acquisition of 100% of Cellerix shares;
• EUR 1.9 million of unrealised negative exchange rate differences;
• EUR 0.4 million of positive deferred taxes on the amortisation of the intangible assets acquired through the business combination with Orthomimetics and Cellerix.

For the comparison between the first half of 2010 and the same period of 2011, it is also necessary to consider that Cellerix net loss for the months May and June, amounting to EUR 1.8 million net of the cost of the transaction, is included in the period figures as a result of the business combination of TiGenix with Cellerix.

Operating expenses, excluding extraordinary items and impact of the Cellerix consolidation, are consistent with the same period of last year as a direct consequence of the restructuring plan:

• Research and Development costs amounted to EUR 4.7 million, compared to EUR 5.1 million for the same period in 2010. This decrease is partially explained by the reclassification of EUR 0.8 million of some of the development costs, booked under R&D expenses in 2010, to "cost of goods sold" in 2011, offset by EUR 0.6 million of research and development expenses for the month of May and June 2011 related to development of the proprietary stem cell platform at Cellerix. At the end of June 2011, total R&D staff of the combined group was equal to 29 people, compared to 55 at the end of June 2010 (combined pro-forma).
• Selling, General and Administrative expenses amounted to EUR 7.8 million compared to EUR 4.0 million for the same period in 2010. The increase is primarily due to the EUR 2.8 million of extraordinary expenses incurred in connection with the acquisition of Cellerix and EUR 1.1 million related to the business combination with Cellerix during the months of May and June 2011. Excluding the non-recurrent items and the SG&A of Cellerix for the months of May and June, the SG&A for TiGenix amounted to EUR 3.9 million, which is in line with EUR 4 million for the same period of last year, and a direct result of strict cost control, while continuing to strengthen the sales and marketing efforts.

EUR 33.4 million secured, including EUR 15.2 through a rights issue

In the first half of 2011, and under challenging market conditions, TiGenix secured more than EUR 33 million in financing. EUR 18.2 million was raised through a private placement in Cellerix, in conjunction with the combination with TiGenix. EUR 15.2 million was raised through a public rights issue. Both the private placement and rights issue showed strong support from existing shareholders from both companies and new institutional and specialised health care investors across Europe.

EUR 24.9 million cash and reduced cash burn

At the end of June 2011 the Company had a solid financial position of EUR 24.9 million, compared to EUR 5.6 million at the beginning of 2011.

The net cash used in operating activities during the period amounted to EUR 9.7 million, of which EUR 2.8 million was a non-recurrent expenditure for the acquisition of Cellerix. Excluding extraordinary items, the cash used to finance day to day operations amounted to EUR 6.9 million, representing a 23% decrease compared to the operating cash burn in the first half of 2010, and in line with the company effort to increase efficiency and to carefully manage cash used in operations.

Outlook for the next 12 months

• ChondroCelect reimbursement updates and decisions
• Safety data from the three patient cohorts of the Phase IIa study for Cx611
• Phase I study results for Cx621
• Preclinical data in osteoarthritis, comparing eASCs and synovial MSCs
• Start of Phase III clinical study for complex perianal fistula's
• European production facility in Sittard-Geleen validated for commercial production
• Partnering of ChondroCelect in selected countries
• Strengthen financial position with various sources of non-dilutive funding 

Auditor's limited review

The statutory auditors BDO Bedrijfsrevisoren BCV, have confirmed that their limited review procedures, which have been substantially completed, have not revealed material adjustments which would have to be made to the accounting information included in this press release. 

Complete financial interim statements

The 2011 financial interim statements can be found in the investor section on our website www.tigenix.com

For more information, please contact

Eduardo Bravo - Chief Executive Officer
Gil Beyen - Chief Business Officer  
Claudia D'Augusta -Chief Financial Officer

+32 16 39 60 60
investor@tigenix.com

About TiGenix

TiGenix NV (NYSE Euronext Brussels: TIG) is a leading European cell therapy company with two marketed products, ChondroCelect and ChondroMimetic, and a strong pipeline with clinical stage adult stem cell programs for the treatment of autoimmune and inflammatory diseases. TiGenix is based out of Leuven (Belgium), and Madrid (Spain), and has facilities in Cambridge (UK) and Sittard-Geleen (the Netherlands). For more information please visit www.tigenix.com.

Forward-looking information
This document may contain forward-looking statements and estimates with respect to the anticipated future performance of TiGenix and the market in which it operates. Certain of these statements, forecasts and estimates can be recognised by the use of words such as, without limitation, "believes", "anticipates", "expects", "intends", "plans", "seeks", "estimates", "may", "will" and "continue" and similar expressions. They include all matters that are not historical facts. Such statements, forecasts and estimates are based on various assumptions and assessments of known and unknown risks, uncertainties and other factors, which were deemed reasonable when made but may or may not prove to be correct. Actual events are difficult to predict and may depend upon factors that are beyond the Company's control. Therefore, actual results, the financial condition, performance or achievements of TiGenix, or industry results, may turn out to be materially different from any future results, performance or achievements expressed or implied by such statements, forecasts and estimates. Given these uncertainties, no representations are made as to the accuracy or fairness of such forward-looking statements, forecasts and estimates. Furthermore, forward-looking statements, forecasts and estimates only speak as of the date of the publication of this document. TiGenix disclaims any obligation to update any such forward-looking statement, forecast or estimates to reflect any change in the Company's expectations with regard thereto, or any change in events, conditions or circumstances on which any such statement, forecast or estimate is based, except to the extent required by Belgian law.