TiGenix Reports Full Year 2011 Financial Results

Business highlights

* Successful integration of Cellerix reinforces leadership position in cell therapy

* ChondroCelect® commercial roll-out progressing with first national reimbursement

* Phase III in perianal fistula (Cx601) on track for recruitment in mid-2012

* Phase IIa in rheumatoid arthritis (Cx611) opened 3rd and last cohort

* Phase I initiated for Cx621 to assess intra-lymphatic administration for autoimmune disorders

Financial highlights

* Net sales up 85%

* Net loss significantly impacted by extraordinary charges

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

* Substantial non-dilutive financing through grants and soft loans

* EUR 20 million cash at year-end

"TiGenix has created a new and strong basis in 2011 on which we can build going forward and we have strengthened our position as the European leader in cell therapy," says Eduardo Bravo, CEO of TiGenix. "We have delivered on our promises: we have obtained national reimbursement for ChondroCelect in Belgium and made progress in other European markets. We advanced all clinical stem cell programs on plan, and raised substantial funds from specialized healthcare investors and through non-dilutive financing. Today, TiGenix is well-positioned to reach the next value-enhancing inflection points."

Business Update

Successful integration of Cellerix reinforces leadership position in cell therapy

In May 2011, TiGenix closed the business combination with the stem cell therapy company Cellerix, creating the European leader in cell therapy. During 2011 the Company succeeded in rapidly integrating both entities. The Company now combines top line revenues with an advanced pipeline of clinical stage regenerative and immuno-modulatory products. TiGenix's operations are supported by a strong commercial and manufacturing infrastructure for advanced cell therapies, an experienced international management team and a solid cash position.

As a result of the merger, 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. 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 requirements of the European Medicines Agency (EMA) and is supported by exhaustive preclinical and CMC packages.

Given its focus on cell therapy, TiGenix is in the process of divesting its ChondroMimetic franchise, which is based on a biomaterial platform. To be able to concentrate on its core business and move forward with a clean slate, TiGenix has decided to write-off the intellectual property related to the OrthoMimetics acquisition. 

ChondroCelect® commercial roll-out progressing with first national reimbursement

ChondroCelect obtained reimbursement in Belgium in May 2011, and is today available in 22 specialized treatment centers.

TiGenix is selling ChondroCelect in the UK, the Netherlands, Germany, and Spain under managed access and private insurance schemes, while pursuing national reimbursement in these countries and France.

In October 2011, TiGenix closed a distribution agreement for Finland with the Finnish Red Cross Blood Service, as a first important step in its strategic initiative to broaden access to ChondroCelect outside TiGenix's core commercial countries.

In 2011, a total of 111 biopsies were taken and 85 implantations have been performed.

In September, the publication entitled "Five-year outcome of characterized chondrocyte implantation versus microfracture for symptomatic cartilage defects of the knee," by J. Vanlauwe, D. Saris et al. was published in the American Journal of Sports Medicine, the official journal of the American Orthopaedic Society for Sports Medicine. The publication further underpins the long-term benefit of the ChondroCelect procedure over microfracture. ChondroCelect remains to date the only cartilage repair therapy that has been validated in a randomized controlled clinical trial, which was the basis of the product's approval by the European Commission in October 2009. The efficacy and safety of the product has been further supported with the publication of the ChondroCelect Compassionate Use Program study with 370 patients published in December 2011, in Cartilage, the journal of the International Cartilage Repair Society.

The construction of the Company's centralized European cell expansion facility in Sittard-Geleen has been completed. The site will be operational for commercial production in late 2012. The facility will provide the extra cell expansion capacity required to support the expected growing demand for ChondroCelect from 2013 onward, and the commercial production of TiGenix's stem cell products.

Phase III in perianal fistula (Cx601) on track to start recruitment in mid-2012

Cx601 is TiGenix's 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 can be considered sufficient for an MAA (Marketing Authorisation Application) submission so no further preclinical work will be required. The CHMP also indicated that the proposed single phase III study should suffice to demonstrate the efficacy required to support the MAA.

The protocol of the phase III program has been submitted to the ethics committees and regulatory agencies of several participating countries, and recruitment is expected to start mid-2012. Cx601 has been granted orphan designation by the EMA.

Partnership discussions are on-going for (co-)development and worldwide commercialization of Cx601.

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

Cx611 is an allogeneic eASC product candidate for the treatment of rheumatoid arthritis. The phase IIa study has recently opened the third and last cohort, and is on track. The objective of the trial is to determine safety, feasibility, tolerance, and optimal dosing. This multicenter, placebo-controlled study will enrol 53 patients, divided in 3 cohorts with different dosing regimens.  There are more than 20 centers open and the Company expects to report the final results in the first half of 2013.

Phase I initiated for Cx621 to assess intra-lymphatic administration for autoimmune disorders

Cx621 is an allogeneic eASC product candidate for the treatment of autoimmune diseases via a proprietary technique of intra-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 eASCs in healthy volunteers. TiGenix has started recruitment for this study in the fourth quarter of 2011 and final results are expected mid-2012.

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 first preclinical study yielded promising results. If the follow-up studies currently underway confirm these results, TiGenix will seek partners to take the program forward.

Financial results for the full year 2011

Key figures (Thousands of Euro, except number of employees)

Years ended December 31

Thousands of Euro (€)

2011(*)

2010(*)

CONTINUING OPERATIONS

Sales

1,146

621

Gross sales

1,804

982

Deferred sales and discounts

-657

-361

Cost of sales

-455

-310

Gross profit

691

311

Research and development expenses

-10,837

-10,595

Sales and marketing expenses

-2,726

-2,707

General and administrative expenses

-6,593

-5,473

Other operating expenses

-2,974

0

Other operating income

393

1,802

Operating Result

-22,046

-16,662

Interest income

708

141

Interest expenses

-408

-62

Foreign exchange differences

434

500

Profit/(Loss) before taxes

-21,313

-16,083

Income taxes

0

368

Profit/(Loss) for the period from continuing operations

-21,313

-15,716

DISCONTINUED OPERATIONS

Profit/(Loss) for the period from discontinued operations

-16,234

0

Profit/(Loss) for the period

-37,547

-15,716

Cash and cash equivalents

19,771

5,555

Number of employees combined group (pro-forma)

75

109

*2011 figures include TiGenix SA since May 1, 2011; TiGenix Ltd is presented in a separate line as discontinued operations

*2010 figures do not include TiGenix SA, and present TiGenix Ltd as continued operations

Group net sales of EUR 1.1 million

Group net sales in 2011 amounted to EUR 1.1 million, which over 2010 represents an increase of 85%. Sales comprised EUR 1.8 million of gross sales and include EUR 0.7 million in sales discount related to the sales of ChondroCelect in the Netherlands during 2010 and 2011 under a risk-sharing scheme (sales discount was previously booked as deferred product sales). 

Operational expenses after business combination in line with previous year

In 2011, through a combination of restructuring, focus and cost control, the combined companies' cost basis has been kept under strict control. At the end of 2011, total staff of the combined group was 75 employees, compared to 105 employees at the end of 2010 for the pro forma combined group.

Excluding extraordinary charges, group operating expenses amounted to EUR 20.6 million compared to EUR 19.1 million in 2010. The slight increase is primarily related to the restructuring plan implemented after the business combination.

Net loss significantly impacted by extraordinary non-cash charges

The net loss for 2011 amounted to EUR 37.5 million compared to EUR 15.7 million in 2010 primarily as result of extraordinary non-cash charges due to the following non-recurrent items:

* EUR 16.2 million of non-cash charges from discontinued operations (TiGenix Ltd). The Company has concluded that to develop ChondroMimetic into a viable commercial product, substantial funding, resources and time would still be required. Because the Company is now exclusively focused on cell therapy, management and board have agreed that it is in the best interest of the Company and shareholders to divest this biomaterial business and recognize a complete write-off of EUR 16.2 million in 2011 to be able to continue with a clean balance sheet going forward. 

* EUR 3.0 million of extraordinary charges for the acquisition of 100% of Cellerix shares. 

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

In the first half of 2011, and under challenging market conditions, TiGenix secured EUR 33.4 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 the rights issue showed strong support from existing shareholders from both companies and new institutional and specialised health care investors across Europe.

Substantial non-dilutive financing through grants and soft loans

Throughout 2011, TiGenix has been very successful in obtaining substantial grants and soft loans. In September 2011, through its wholly owned subsidiary Cellerix SA, TiGenix announced it is to receive a EUR 4.95 million innovation credit from the "Madrid Network" to finance the Company's phase III study for complex perianal fistulas in Crohn's disease patients. The soft loan, which was concluded under very favourable terms for the Company, will cover a significant part of the Cx601 program.

In December 2011, as the coordinator of an international consortium, TiGenix obtained a substantial grant from the European Seventh Framework Programme (FP7) to support its Cx611 program for the treatment of rheumatoid arthritis. The total grant amounts to EUR 5.9 million, of which EUR 2.9 million is allocated to TiGenix. This amount will be paid out in several tranches in 2012-2014. Including the cost of the preclinical studies conducted by some members of the consortium, the grant will effectively lower TiGenix's cash outlay to finance the development of Cx611 by EUR 3.3 million.

EUR 20 million cash and reduced cash burn

At the end of December 2011 the Company had EUR 19.7 million cash on its balance sheet, compared to EUR 5.6 million at the end of 2010.

The net cash used in operating activities, excluding the cash used for ChondroMimetic business, during the period amounted to EUR 18.0 million, of which EUR 3.0 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 15.0 million, representing a 11% decrease compared to the operating cash burn in 2010, and in line with the Company's effort to increase efficiency and to carefully manage its operational cash flow.

Outlook for the next 12 months

* Distribution agreements for ChondroCelect in additional countries 

* ChondroCelect reimbursement updates and decisions 

* Last patient treated in Phase IIa study for Cx611

* Phase I study results for Cx621

* Preclinical data in osteoarthritis

* Start of Phase III clinical study for complex perianal fistula's

* GMP approval of European production facility in Sittard-Geleen

Complete financial statements

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

Conference call webcast

On March 15, at 14:00 CET/8a.m. EDT, TiGenix will conduct a conference call webcast.

International dial-in numbers are:

+32 2 620 0138      Belgium

+34 91 791 7146     Spain    

+31 20 721 9158     Netherlands

+44 20 3106 4822   UK

+1 646 254 3388     USA

The online live webcast can be followed via the link:

http://www.tigenix.com/en/page/165/webcast

Following the update of the business activities and presentation of the financial results, the participants will be able to ask questions. The press release and the presentation will be made available in the newsroom section on our website. A replay of the webcast will be available shortly after the conference call.

For more information
Eduardo Bravo        
Chief Executive Officer
Gil Beyen
Chief Business Officer

Claudia D'Augusta
Chief Financial Officer
+32 16 39 60 97
investor@tigenix.com

About TiGenix

TiGenix NV (NYSE Euronext Brussels: TIG) is a leading European cell therapy company with a marketed product for cartilage repair, ChondroCelect ®, and a strong pipeline with clinical stage allogeneic adult stem cell programs for the treatment of autoimmune and inflammatory diseases. TiGenix is based out of Leuven (Belgium) and has operations in Madrid (Spain), 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.