Statutory financial statements at December 31_ 2007

Document Sample
Statutory financial statements at December 31_ 2007 Powered By Docstoc
					Statutory financial
statements at
December 31, 2007
         Statutory financial
              statements at
         December 31, 2007




Pag. 2
                                                                                               Statutory financial
                                                                                                    statements at
                                                                                               December 31, 2007




Index
General company information ............................................................................... 5
Corporate governance summary ........................................................................... 6
Report on corporate governance ........................................................................... 7
Report on Operations ........................................................................................ 24
       1.      Letter to the shareholders .............................................................. 24
       2.      Main activities ............................................................................... 25
               2.1     Company News ................................................................... 25
               2.2     Research and development activities ...................................... 26
               2.3     GMP facility and GMP services provided to third parties ............. 27
               2.4     Research and development grants ......................................... 27
               2.5     Business development activities............................................. 28
               2.6     Share capital operations ....................................................... 28
               2.7     Investments ....................................................................... 28
       3.      Analysis of income statement and financial results ............................. 29
               3.1     Income Statement at December 31, 2007 ............................... 29
               3.2     Balance Sheet at December 31, 2007 ..................................... 34
       4.      Accounting treatment of research & development costs ...................... 37
       5.      Human resources .......................................................................... 37
       6.      Dealings with related parties ........................................................... 38
       7.      Own shares .................................................................................. 39
       8.      Additional information .................................................................... 39
       9.      Shares held by Directors, General Manager, Statutory Auditors and
               Managers with strategic responsibility (Art. 79 CONSOB regulations
               resolution N. 11971 of 14.05.99) ..................................................... 41
       10.     Significant post balance sheet events ............................................... 41
       11.     Business outlook ........................................................................... 41
       12.     Proposed allocation of the loss for the year ....................................... 41
Financial statements at December 31, 2007.......................................................... 42
       13.     Balance sheet ............................................................................... 42
       14.     Income statement ......................................................................... 43
       15.     Statement of cash flows ................................................................. 44
       16.     Statement of shareholders’ equity ................................................... 45
       17.     Balance sheet in terms od CONSOB resolution N. 15519 of july 27,
               2006 ........................................................................................... 46
       18.     Income statement in terms of CONSOB resolution N. 15519 of July,
               2006 ........................................................................................... 47
Notes to the Financial Statements ....................................................................... 48
       19.     General Information ...................................................................... 48
       20.     Summary of accounting policies and valuation methods ...................... 49
       21.     segmental information ................................................................... 55
       22.     Balance sheet ............................................................................... 56
       23.     Income statement ......................................................................... 65
       24.     Net financial position ..................................................................... 71
       25.     commitments and guarantees ......................................................... 71
       26.     Contingent liabilities ...................................................................... 72
       27.     Share based payments ................................................................... 73
       28.     Dealings with related parties ........................................................... 75
       29.     Significant non recurring events and transactions............................... 76
       30.     Transactions resulting from atypical and/or unusual operations ............ 76
       31.     Other information .......................................................................... 76


                                                       Pag. 3
                                                                                               Statutory financial
                                                                                                    statements at
                                                                                               December 31, 2007




                  31.1Average number of employees by category ............................. 76
                  31.2Emoluments of the Directors, Statutory Auditors, General
                      Managers and Managers with strategic responsibility (Art.78
                      of CONSOB Regulation no 11971/99) ..................................... 77
              31.3 Information in terms of Article 149 (12) of the CONSOB
                      Issuers’ Regulations ............................................................. 78
       32.    Information on financial risks .......................................................... 78
       33.    Significant post balance sheet events ............................................... 79
       34.    Declarations on the statutory financial statements in terms of art.
              81-ter of CONSOB regulation N. 11971 of may 14, 1999 as
              subsequently amended and supplemented ........................................ 80
Appendix:     Transition to International Accounting Standards (IFRS) ..................... 81
       Foreword ............................................................................................... 81
       Balance sheet at january 1, 2006 .............................................................. 83
       Income statement at december 31, 2006 ................................................... 87
       Balance sheet at december 31, 2006 ......................................................... 90
       Reconciliation of shareholders’ equity at january 1, 2006 .............................. 92
       Reconciliation of shareholders’ equity and income statement for 2006 ............ 92
Report of the Board of Statutory Auditors ............................................................. 93
External auditors’report ................................................................................... 100




                                                       Pag. 4
                                                                      Statutory financial
                                                                           statements at
                                                                      December 31, 2007




General company information
Registered office:             Via Olgettina, 58 – 20132 MILAN (MI)
Tax Number:                    11887610159
VAT Number:                    IT 11887610159
Milan Register of Companies:   no 11887610159
REA:                           1506630




                                     Pag. 5
                                                                                             Statutory financial
                                                                                                  statements at
                                                                                             December 31, 2007




Corporate governance summary

Board of Directors

Chairman and Managing Director                       Claudio Bordignon

Directors                                            Francesco M. Bongiovanni
                                                     Renato Botti
                                                     Maurizio Carfagna
                                                     Riccardo Cortese (independent)
                                                     Marina Del Bue
                                                     Alessandro De Nicola (independent)
                                                     Massimiliano Frank
                                                     Sabina Grossi
                                                     Alfredo Messina
                                                     Fabio Scoyni
                                                     Ferdinando Superti Furga (independent)
                                                     Maurizio Tassi
The Board of Directors will remain in office until the date of the General Meeting called to approve the financial
statements as at 31 December, 2009.


Board of Statutory Auditors

Chairman                                             Gianfranco Zanda
Statutory Auditors                                   Luigi Bianchi*
                                                     Enrico Scio
Substitute Statutory Auditor                         Gaia Balp

The Board of Statutory Auditors will remain in office until the date of the General Meeting called to approve the
financial statements as at 31 December, 2009.
(*)Mr Bianchi was appointed as a Statutory Auditor after the resignation of Mr Lori on 22 January, 2008.



Internal Control Committee

Chairman                                             Ferdinando Superti Furga (ind. director)
Members                                              Alessandro De Nicola (independent director)
                                                     Maurizio Tassi (director)

Remuneration Committee

Chairman                                             Alessandro De Nicola (independent director)
Members                                              Riccardo Cortese (independent director)
                                                     Sabina Grossi (director)

External auditors

Deloitte & Touche S.p.A




                                                     Pag. 6
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Report on corporate governance
Introduction
The present report is meant to provide a general overview of the system of corporate
governance utilised by MolMed S.p.A. (hereinafter ‘MolMed’ or the ‘Company’), which, in a
resolution passed by the Board of Directors on 6 November 2007, voted to endorse the
Corporate Governance Code of Listed Companies drawn up by the Committee on
Corporate Governance, as promoted by Borsa Italiana (Italian Stock Exchange) in March
2006 (hereinafter ‘the Code’), based on the procedure and terms illustrated in the
paragraphs that follow.
In accordance with the legislative and regulatory obligations in the sector, the Report
contains information on ownership structures, on compliance with codes of conduct and on
fulfilment of the resulting commitments, highlighting the decisions taken by the Company
with regard to effective application of the principles of corporate governance.
The text of the Report is published on the company’s Internet site (www.molmed.com), in
the “Investors” Section, under Corporate Governance, and it is communicated to Borsa
Italiana following the procedures and within the deadlines contemplated in the applicable
regulations.
By-Laws
In a resolution passed at its Shareholders’ Meeting of 29 October 2007, the Company
approved a new set of by-laws, under the provisions of Legislative Decree no. 58 of 1998
(lo “By-Laws”), stipulating that they shall go into effect once Borsa Italiana issues the
ruling admitting the Company’s shares to listing on the Mercato Telematico Azionario, or
the Italian Electronic Stock Market.
The text of the By-Laws is available on the Company’s Internet site (www.molmed.com),
in the “Investors” Section, under the heading Corporate Governance, and it is
communicated to Borsa Italiana following the procedures and within the deadlines
contemplated in the applicable regulations.
Share Capital and principal shareholders
MolMed’s share capital is 21,638,162.67 Euro (twenty-one million, six hundred and thirty-
eight thousand, one hundred and sixty-two//67), consisting of 104,467,808 ordinary
shares with no nominal value.
The shareholder structure, following the listing operation concluded on 5 March 2008, and
based on the communications made to the Consob, as well as the information in the
Company’s possession, was as follows, as of the date of 31 March 2008:
SHAREHOLDER                                                                    Percentage
Science Park RAF S.p.A.                                                         21.136%
Airain Servicos de Consultodoria e Marketing Lda                                21.120%
Fininvest S.p.A.                                                                16.372%
Delfin s.à.r.l.                                                                  8.435%
H – Equity s.à.r.l.                                                              8.186%
Market                                                                          24.751%
On 14 December 2007 the Company’s current five largest shareholders signed a covenant
whose effectiveness is suspended until such time as trading of the Company’s shares
begins, and which was published in excerpted form in the 12 March 2008 issue of the daily
newspaper “Avvenire”, in addition to being the subject of a notification, in accordance with
the provisions of current legislation and regulations, as per the copy included as appendix
“A”.




                                           Pag. 7
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Members, Role and Functions of the Board of Directors

Members and Appointment
Article 18, paragraph 1 of the By-Laws calls for the Company to be administered by a
Board of Directors consisting of a minimum of 7 (seven) and a maximum of 15 (fifteen)
members.
Under the provisions of art. 18 of the By-Laws, the members of the Board of Directors are
appointed using a slate vote system, to ensure that at least one director comes from the
so-called minority list.
The current MolMed Board of Directors, appointed at the Shareholders’ Meeting of 6
November 2007, has 13 members.
The position of Director is held by Messrs. Claudio Bordignon, Chairman and Managing
Director, Francesco Marco Bongiovanni, Renato Botti, Maurizio Carfagna, Riccardo Cortese,
Marina Del Bue, Alessandro De Nicola, Massimiliano Frank, Sabina Grossi, Alfredo Messina,
Fabio Scoyni, Ferdinando Superti Furga and Maurizio Tassi.
The Chief Executive Officer is Prof. Claudio Bordignon, who was empowered by the
Company’s Board of Directors, on the date of 6 November 2007, to manage the Company,
as specified further below.
The number, prerogatives and prestige of the non-executive directors are sufficient to
ensure that their opinions have significant weight when it comes to reaching decisions on
the issues before the Board.
Of the non-executive directors, Riccardo Cortese, Alessandro De Nicola and Ferdinando
Superti Furga qualify as independent, under the provisions of Legislative Decree no. 58 of
1998. It should be noted that the Board of Directors has determined that the directors
who have declared themselves to be dependent meet the relevant requirements provided
for under the applicable rules and regulations. With regard to the position of the director
Ferdinando Superti Furga, the Board holds that the fact that he previously served as a
member of the Company’s board of auditors, doing so in accordance with the
requirements of independence contemplated under the law, constitutes a point in favour of
classifying him as an independent director. The Board of Auditors has confirmed that the
criteria and procedures for evaluating the independence of the directors were properly
applied.
The Board of Directors has also designated the director Ferdinando Superti Furga as the
Lead Independent Director, and thus the point of liaison and coordination of the
contributions of the non-executive directors, and of the independent directors in particular.
The Board of Directors holds that the size and the composition of the Board, and of the
committees established from within its ranks (of which more shall be said further on),
appear adequate to the Company’s characteristics.
A list of the positions held by the current members of the Company’s Board of Directors in
other companies listed on regulated markets, including foreign ones, or in financial,
banking or insurance companies, or in large-scale enterprises of other types, is found in
the prospectus on the public offering for subscription and admission to listing of the
Company’s shares on the Mercato Telematico Azionario (Electronic Stock Market), in
addition to being published on the Company’s Internet site (www.molmed.com), in the
“IPO” Section.

Policy on the maximum number of directors and auditors positions
During the current year 2008, and in light of the recent listing of the Company’s shares on
the Mercato Telematico Azionario operated by Borsa italiana s.p.a., the Board of Directors
shall announce its policy on the maximum number of positions as a director or auditor of
other listed companies, or of financial or insurance companies, or of large-scale
enterprises of other types, which can          be considered compatible with effective
performance of the position of director of MolMed, establishing criteria that vary,
depending on the commitment tied to a given role and on the nature and size of the
companies in which the positions are held.

                                           Pag. 8
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




Meetings
The Board of Directors meets at least once every quarter, or at more frequent intervals,
depending on the Company’s operating needs, and it possesses the broadest possible
powers, apart from those reserved for the Shareholders’ Meeting by law.
A reasonable amount of time in advance of each meeting, the Directors are provided with
background documentation illustrating the topics to be addressed and the information
needed by the Board to be able reach well grounded decisions.
The directors are fully aware of the tasks and responsibilities attached to their positions;
they are kept constantly informed by the pertinent company departments with respect to
the most significant legislative, regulatory and scientific developments relevant to the
Company and its operations; they act and pass resolutions in a fully responsible and
independent manner, pursuing the objective of creating value for the shareholders.

Role and tasks
Under the By-Laws (art. 23), the Board of Directors is entitled to exercise all powers
regarding the ordinary and extraordinary administration of the Company, in addition to
whatever acts it holds to be appropriate for the implementation and achievement of the
Company’s purposes, with the exception of those that the Law or the by-laws mandatorily
reserve for the Shareholders’ Meeting.
The right to represent the Company is the prerogative of the Chairman. Should the
Chairman be absent or otherwise prevented from exercising the right of representation, it
falls to the Deputy Chairman, a position not, at the moment, filled. Practical exercise of
the power of representation by a Deputy Chairman is confirmation, in and of itself, of the
absence or incapacity of the Chairman, exempting third parties from any corroboration or
liability with respect to the circumstance.
In a resolution passed by the Board on 6 November 2007, the Chairman and the Managing
Director, Claudio Bordignon, were granted the following powers:
     a) to negotiate, conclude, sign, transfer or obtain any agreement regarding supply of
         the Company’s products and services, as well as the purchase of the goods,
         products, services and raw materials needed for the Company’s activities, including
         transactions involving agreements of financial leasing, granting, when appropriate,
         rebates or discounts, though with the explicit exclusion of assets entered in public
         registers, and with the exception of motor vehicles and similar goods; also
         excluded are agreements for the sale en bloc of assets, or for the sale or rental of
         businesses and/or business segments, either as the seller or the purchaser, or as
         the lessor or lessee;
     b) to represent the Company in any and all dealings with suppliers of services, public
         or private, or with shippers, carriers or transporters;
     c) to compete in tenders, auctions, bidding sessions and negotiations organised by
         private enterprises or by national, regional or local government bodies, or by any
         other type of public-sector organisation; to establish and to withdraw the required
         deposits, presenting, modifying or withdrawing the bids and, in general, fulfilling
         every procedure and formality;
     d) to issue and take receipt of invoices, and issue releases and discharges to certify
         them as paid;
     e) to take receipt of receivables, withdraw amounts, valuables, yields, deposits and
         security deposits from any public or private treasury, including the Cassa Depositi e
         Prestiti [Italian State Controlled Bank devoted to Finance Local Entities], issuing
         the necessary receipts, attestations of payment and exemptions from
         responsibility;
     f) to conclude transactions, in general, taking receipt of, or paying, the related
         amounts and issuing receipts of payment;
     g) to carry out short-term finance transactions, such as the opening and closing of
         bank accounts; transactions on such accounts, including overdrafts, within lines of

                                            Pag. 9
                                                                         Statutory financial
                                                                              statements at
                                                                         December 31, 2007




     credit; to issue checks, vouchers of exchange and/or promissory drafts and
     endorse them; to make bank deposits or withdrawals; to arrange for the crediting
     of sums, to conclude agreements on lines of credit, overdrafts, advances and the
     discounting of receivables, as well as banking agreements in general, and to
     request check books and banker checks, in addition to performing all banking
     transactions in general, always short-term, and none excluded or excepted;
h)   to conclude agreements for loans and/or the receipt of other medium/long term
     financing for amounts not exceeding € 300,000.00, to agree to the conditions and
     interest and to perform all other activities related to such agreements;
i)   to carry out, in dealings with factoring companies, banking institutions and financial
     firms, transactions involving the transfer of receivables, the granting of mandates
     for the receipt of sums, discounting transactions and whatever else proves relevant
     to the aforementioned dealings;
j)   to issues warranties or counter guarantees, including those in favour or third
     parties and those provided by banks, for customs transactions, participation in
     tenders, works to be performed, proper execution of supplies and works or
     advances on supplies to be made by the Company in Italy or abroad;
k)   hire or dismiss personnel under subordinate employment relationship, with the
     exception of managerial employees, setting salaries and wages and determining
     functions; to appoint, suspend or revoke representatives, agents or sales
     personnel;
l)   to sign and file any request, petition, demand, appeal or complaint, including
     balance sheet and other company documents, as well as returns on income taxes
     or indirect taxes, plus any declaration, summary or report that the Company is
     required to file under the applicable provisions of the Law;
m)   to appoint or revoke attorneys-in-fact for individual acts or transactions, or for
     categories of acts or transactions;
n)   to bring suits and to defend against suits and, in more general terms, to represent
     the Company in any proceeding before court authorities of any level or order, as
     well as before arbitrators, and to appeal the resulting decrees, decisions,
     arbitration awards and sentences, including those from the highest courts, to
     appoint and revoke attorneys and solicitors for litigation, as well as assessors,
     consultants and experts, electing the Company’s domicile, settling court cases,
     agreeing to arbitration clauses, appointing arbitrators and making promises and
     offers;
o)   to appeal findings, injunctions and/or rulings on taxes in general, regardless of
     what authority issues them, appointing attorneys, special representatives,
     academic experts, accountants, consultants, assessors and surveyors to represent
     and/or defend the Company’s interests in dealings with tax authorities or
     commissions at any level of judgment, and to elect the Company’s domicile;
p)   to take out or to withdraw from any types of insurance policies, agreeing to the
     related terms and conditions;
q)   to sign and take receipt of any type of correspondence, including correspondence
     regarding insurance, plus parcels, valuables, postal vouchers and merchandise,
     from post offices, customs offices or other, transport offices, and to issue receipts;
r)   to file returns, forward petitions and appeals or make declarations to social
     security, welfare or insurance institutes, as well as to all other administrative
     authorities, such as the Provincial Office of Labour and Maximum Employment, the
     Labour Inspector’s Office, the Ministry of Labour, the INAIL, the INPS and the
     INPDAI, and to reach agreements with these institutes, in addition to appealing
     their decisions, reports or findings;
s)   to represent the Company in any dealings with public bodies or authorities, of the
     central, regional, provincial or municipal governments, including, by way of
     example and not limited to, the State Treasury, the foreign exchange control
     authorities, the internal revenue offices of income and indirect taxation, as well as

                                         Pag. 10
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




        customs offices, plus pension and welfare authorities, with the power to represent
        the Company in public contracts and in all agreements with public bodies and
        authorities.
The Chairman has also been given the right of granting the powers referred to under
letters r) and s) to the Company’s Administrative and Financial Director, Mr. Enrico
Cappelli, with such powers to be formalised in a specific power of attorney.
The company by-laws require that the Board of Directors always be kept informed by the
delegated bodies as to the general operating results, expected future developments, the
activities carried out and the transactions of greatest importance, in terms of economics,
finance or equity, performed by the company or by any subsidiary companies.

The establishment and operation of the internal committees of the Board of
Directors
Under the provisions of the By-Laws, the Board of Directors may establish committees,
whose members do not necessarily have to be members of the Board, setting their tasks
and powers, plus retribution, if any, and establishing their composition and mode of
operation, with one potential objective being to bring the Company’s system of corporate
governance in line with the codes of conduct drawn up by the companies that operate
regulated markets. Committees that include members selected from outside the Board of
Directors have only advisory powers.
The Board of Directors, in a resolution passed on 6 November 2007, but to go into effect
only upon admission of the Company’s shares to listing on the Italian Electronic Stock
Market, established the following committees:

Payroll Committee
The members of the Payroll Committee are Directors Alessandro De Nicola, Chairman,
Riccardo Cortese and Sabina Grossi.
The Payroll Committee performs the following tasks: a) it presents the Board of Directors
with proposals for the pay of managing directors and other directors that hold special
positions, monitoring the application of the decisions reached by the Board; b) it
periodically evaluates the criteria followed in setting the pay of managers with strategic
responsibilities, ensuring that these criteria are applied on the basis of the information
provided by the managing directors, in addition to drawing up general recommendations
on the subject for the Board of Directors.
It should be noted that, on the date of 29 October 2007, a Shareholders’ Meeting of the
Company passed a resolution, to go into effect at the time of issue by Borsa Italiana of the
measure admitting the Company’s shares for trading on the Italian Electronic Stock
Market, approving a stock option plan involving the assignment of options, free of charge,
for the subscription, in return for payment, of ordinary shares of the Company, in favour
of persons to be identified, when required under the Law, by a Shareholders’ Meeting, or
by the Board of Directors, from among the Company’s executive directors, its
collaborators or salaried employees, as well as those of any subsidiaries or parent
companies, on the terms, following the procedures for implementation and on the
conditions all to be defined by means of one or more regulations to be drawn up by the
Company’s Board of Directors. The Shareholders’ Meeting then approved an increase in
the Share Capital, in return for payment and in a transaction subject to division, up to a
maximum overall amount of € 772,178.60, through issue of a maximum number of
3,728,034 ordinary shares, to be reserved, under the provisions of Article 2441, last
paragraph, of the Italian Civil Code, for employees of the Company, and of any subsidiary
or parent companies, as part of the shareholder plans intended for them, as well as, in
accordance with the provisions of Article 2441, paragraph 5, of the Italian Civil Code, for
executive directors and managerial staff of the Company, and of any subsidiary or parent
companies, as part of the shareholder plans intended for them.
In exercising the power granted to it by the extraordinary Shareholders’ Meeting, the
Board of Directors, on the date of 7 January 2008, assigned a first portion of shares,

                                          Pag. 11
                                                                               Statutory financial
                                                                                    statements at
                                                                               December 31, 2007




allocating to a number of directors and executives a total of 2,400,000 options, each of
which entitles the recipient to subscribe a share at a price per share equal to the final
placement price of the Company’s shares, determined on the basis of the listings of the
shares on the Italian Electronic Stock Market.
Information on the stock options assigned to the directors is found in the chapter “shared-
based payments” of the Explanatory Note to the Balance sheet closed on 31 December
2007.

The Internal Control Committee and the Internal Control System
By resolution passed by the Board of Directors on 6 November 2007, the Company also
established an Internal Control Committee, designating as its members Ferdinando Superti
Furga, Chairman, Alessandro De Nicola and Maurizio Tassi.
The Board, in accordance with the provisions of art. 8., paragraph 4 of the Code, judged
that board member Ferdinando Superti Furga, Chairman                  of the Internal Control
Committee, possesses adequate experience in the sectors of accounting and finance.
The Internal Control Committee carries out the following tasks:
    a) it assesses, together with the executive responsible for the formulation of the
        Company’s accounting documents, and with the auditors, whether the accounting
        principles have been properly applied, and whether they are consistent with the
        purpose of drawing up the consolidated balance sheet;
    b) at the request of an executive director appointed to the task, it expresses opinions
        on specific considerations regarding the identification of the main corporate risks,
        as well as the design, construction and operation of the internal control system;
    c) it examines the working plan prepared by the managers of internal control, as well
        as the periodic reports drawn up by these managers;
    d) it assesses the proposals formulated by outside auditing firms to obtain the
        assignment as the Company’s external auditor, in addition to the working plan
        prepared for the audit and the results presented in the report and in the letter of
        suggestions, if there is one;
    e) it monitors the effectiveness of the auditing of the accounts;
    f) it carries out whatever additional tasks are assigned to it by the Board of Directors;
    g) it reports to the Board, at least once every six months, on the occasion of approval
        of the balance sheet and of the mid-year report, regarding the activities performed,
        as well as the adequacy of the Internal Control System.
The Internal Control Committee also assists the Board of Directors:
    a) in establishing the guidelines for the internal control system, in such a way that the
        primary risks relating to the issuer and to its subsidiaries are correctly identified, in
        addition to being adequately measured, managed and monitored; it also assists in
        setting the criteria for the compatibility of these risks with a sound and proper
        management of the enterprise;
    b) in selecting an executive director (normally one of the managing directors)
        responsible for supervising the functional efficiency of the internal control system;
    c) in assessing, at least once a year, the adequacy, performance and functional
        effectiveness of the internal control system
    d) in describing, in the report on corporate governance, the key elements of internal
        control, in addition to expressing the Committee’s own evaluation of the overall
        adequacy of the system.
In the interests of fulfilling its assigned tasks, the Internal Control Committee may draw
on the assistance of the Company’s salaried employees, as well as on that of outside
professionals, provided, however, that they are sufficiently bound to observe the
necessary confidentiality. Within the limits of the budget approved by the Board of
Directors, the Company provides the Committee with adequate financial resources for the
performance of its assigned tasks.




                                             Pag. 12
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




The Internal Control Manager, in accordance with the provisions of art. 150, paragraph
4, of the Consolidated Act, as well as art. 8 of the Corporate Governance Code , is the
Manager of the Internal Audit Department, appointed in the person of Mr. Mauro Messina
by the Chairman and the Managing Director, to whom the task was delegated by the
Board of Directors.
The Internal Control Manager has the task of confirming that the internal control system is
always adequate, fully operative and functionally efficient, and he bears no responsibility
for any operating sector. He is given direct access to whatever information might prove to
be of use in the performance of his assigned task. Furthermore, an adequate level of
funding shall be identified by the Board of Directors, based on the recommendations
provided by the Internal Control Committee, for fulfilment of the tasks and functions of
the latter.

During the year 2008, the Board of Directors, with assistance from the Internal Control
Committee and the Internal Audit Manager, shall define the guidelines for the system of
internal control and the information-flow procedures, in such a way as to ensure the
identification, measurement, management and monitoring of the Company’s main risks.

In a resolution passed on 21 January 2008, the Board of Directors selected as the
Executive Director assigned to supervise the functional performance of the
internal control system of MolMed Ms. Marina Del Bue, granting her the related powers
and prerogatives.
On 6 November 2007, the Company’s Board of Directors appointed, pursuant to the
provisions of Article 154-b of the Consolidated Finance Act, Chief Financial Officer Mr.
Enrico Capelli as the Executive responsible for the formulation of accounting and
corporate documents, assigning him the task of preparing adequate administrative and
accounting procedures for the formulation of the year-end balance sheet, as well as any
other communication of a financial nature.
The Board of Directors is to control that this executive possesses adequate powers and
resources, ensuring that the administrative and accounting procedures which he
establishes are complied with.
The executive shall issue, among other statements, a declaration that accompanies the
acts and communications of the Company distributed to the market, along with those
regarding accounting information, including midyear communications, at the same time
confirming the they are supported by documentary evidence, books and accounting
records.

Organizational, management and control Model (Legislative Decree 231/01)
The Company has approved the General Part of the organizational, management and
control Model provided by Legislative Decree 231/2001. The implementation and
supplementing of the model, as well as the final preparation and enactment of the Special
Part (which contains, among other things, the Code of Ethics, the Disciplinary Code, the
map of “sensitive” company activities, the system for the delegation of tasks and powers
and the operating procedures) are currently in progress.
The Monitoring Body, which satisfies the prerequisites of autonomy, independence and
professional integrity, in addition to possessing powers of inspection and control, as well
as the powers and functions contemplated under the model, was appointed by the Board
of Directors in a motion dated 6 November 2007.
The body has two members, in the persons of Mr. Ezio Maria Simonelli, the Chairman, and
Ms. Antonella Lopopolo (Attorney).
With the support of the Monitoring Body and a work team whose members include outside
consultants, the Company has begun the activities involved in assessing and codifying the
procedures/rules of corporate conduct traceable to the model, at the same time adjusting
the model itself in response to organisational changes in the Company and the


                                          Pag. 13
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




evolutionary development of the relevant regulations and legislation, legal literature and
case law.

Price Sensitive Information and Internal Dealing
The Company has implemented the regulation for the management of so-called ‘Price
Sensitive Information’ (meaning ‘information of a specific nature that has not been
rendered public and that regards, directly or indirectly, one or more issuers of financial
instruments, or one or more financial instruments, in cases where such information, were
it to be made public, could have a noteworthy influence on the prices of the financial
instruments in question) and has established a register listing those individuals with
access to Price Sensitive Information (Insiders Register).
At the moment this Register is being managed by an outside firm, Servizio Titoli s.p.a., by
means of a special software that guarantees that the data entered may not be modified,
that they are available for consultation and excerpting, and that all accesses to the data
entered are traceable.
In accordance with the interpretative guidelines of the CONSOB, MolMed has set out to
implement a solution based on the principles of prudence and transparency when it comes
to disciplining the internal management and the communication to the outside of
information on the facts that occur within the sphere of operations of MolMed and any of
its subsidiaries. As part of this effort, the General Manager supervises the communication
to the public and to the authorities of the facts that occur within MolMed’s sphere of
operations. Directors, auditors, employees and external contributors are required to
observe confidentiality regarding the documents and information obtained in the
performance of their tasks.
The Company, in a resolution passed on 6 November 2007, also enacted a Code of
Conduct with regard to Internal Dealing. This Code specifically defines the subjects
required to make communications to the Company, to the general public and to the
Consob, and it stipulates the procedure for fulfilling the related obligations. The Code also
contemplates what are referred to as black-out periods, during which the subjects
identified under the Code, including members of the Board of Directors and the Board of
Auditors, cannot carry out transactions involving the Company’s shares or connected
financial instruments.
In compliance with the provisions of the Code, MolMed, after determining who must be
identified and what obligations they must fulfil, provided the persons in question with the
relevant information.
The Company also introduced the figure of the Information Contact, in the person of the
Board Member Marina Del Bue, responsible for, among other things: (i) keeping the
“relevant persons” informed with regard to measures on corporate information applicable
to themselves; (ii) updating the Register of individuals who have access to Price Sensitive
Information on the Company and/or on companies which it controls; (iii) ensuring proper
fulfilment of the obligations of information with respect to the market and communicating
to Borsa Italiana and to Consob whatever information they request on a given occasion;
(iv) overseeing notification of the Consob with regard to transactions involving shares or
other financial instruments of the Company and performed by “relevant persons” and/or
by “individuals closely related to relevant persons”; plus, in more general terms, (v)
fulfilling and overseeing fulfilment of the provisions of the Code on Price Sensitive
Information and the Code of Internal Dealing. The Company has also selected an alternate
officer for the Information Contact, in the person of Mr. Enrico Cappelli.

Relations with Institutional Investors and other Shareholders – Shareholders’
Meetings
The Company’s organisational structure includes the figure of the Investor Relator,
covered by Mr. Holger Neecke, whose assigned task is to promote a dialogue with the
shareholders and with the institutional investors.


                                           Pag. 14
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




The references, addresses and numbers are indicated on the internet site
(www.molmed.com).
On the occasion of general shareholders’ meetings, all the shareholders are provided with
information on the Company and on its prospects.
Shareholders’ Meetings, when properly convened, represent all the shareholders, and the
resolutions passed by the shareholders in the meeting, when this is done in compliance
with the Law, are binding even on those shareholders who were not presenting attendance
or who dissented. Shareholders’ Meetings are held at the Company’s registered office or
elsewhere, as long as the location is in Italy or in any of the countries of the European
Community or in Switzerland.
MolMed, in a resolution passed on 29 October 2007, established a regulation governing
the holding of the Company’s ordinary and extraordinary Shareholders’ Meetings.
Finally, a special section was established on the Company’s internet site (under the
heading “Investors”): easy to identify and access, it makes available information on the
Company of relevance to its shareholders.

Transactions with related parties and the Interests of the Directors
The Board of Directors has implemented a special procedure that lays down the way in
which transactions with related parties are to be approved and carried out.
Transactions carried out by MolMed with directors, auditors or the General Manager of
MolMed itself, as well as by their close relatives or by companies controlled by such
individuals, in addition to transactions carried out by any companies controlled by MolMed
with the parent company, or with other companies associated with MolMed itself, follow
criteria of substantial and procedural correctness.
The Board of Directors must approve transactions with related parties in advance, when
the object, consideration, procedures or timing of the performance of such transactions
can have an effect on the safeguard of the company’s assets or on the exhaustiveness or
correctness of information, including accounting information, on the Company. The Board
also approves transactions with related parties when such transactions, considered
individually, have an overall value exceeding € 100,000, in addition to transactions: (i)
whose object is entry in a new sector of business or withdrawal from a sector of business;
(ii) whose object is the acquisition or disposal of holdings; (iii) whose object is the
acquisition or disposal of business or business segments; (iv) that are atypical or unusual
(those in which the nature or the object of the transaction, though it can be considered to
fall within the range of the Company’s stated objective, presents new features and/or
potential problems, as compared to the normal course of Company operations) or that are
regulated under conditions that differ from the standard ones (meaning that they are
regulated under conditions, terms and or procedures that differ to a significant extent
from those of the market and/or those that normally apply to relations with subjects not
classifiable as related parties).
Whenever the nature, value or the distinctive characteristics of the transaction make it
necessary, in the interests of avoiding a situation in which the transaction is carried out
under conditions different from those that are likely to be negotiated between parties
which are not related, the Board of Directors requires that: (i) one or more independent
experts be present at the negotiations, so that they can express an opinion on the
economic conditions and/or the legitimacy and/or the technical aspects of the transaction,
and that (ii) a preliminary opinion by expressed by the Internal Control Committee.
Should the relation exist with a director of the Company, or with a party related through a
director, then the director in question must inform the Board of Directors forthwith as to
the nature, the terms, the origin and the extent of his or her own interest, leaving the
meeting at the time of a vote on the matter, assuming this does not jeopardise the
quorum under which the meeting must be held and that the Board does not rule
otherwise.




                                          Pag. 15
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




Board of Auditors
The Board of Auditors was appointed at a Shareholders’ Meeting held on 6 November
2007.
Following the resignation of Auditor Mr. Marco Lori, on the date of 22 January 2008, his
position was filled by Substitute Auditor Luigi Bianchi, who, together with Gianfranco
Zanda, Chairman, and Enrico Scio are the current members of the Board of Auditors. Gaia
Silvia Balp is the Substitute Auditor. Under the provisions of art. 29 of the By-Laws, the
appointment is made on the basis of lists presented by the Shareholders, in order to
ensure that the minority shareholders are able to appoint an Auditor and a Substitute
Auditor. In compliance with the criteria of the Corporate Governance Code, the Board of
Auditors has confirmed that its members meet the requirements of independence.

Outside auditing firm
In a resolution passed on 29 October 2007, but not to go into effect until the issue by
Borsa Italiana of the ruling approving the Company’s shares for listing on the Italian
Electronic Stock Market, the Company, in accordance with the provisions of art. 159 of the
Consolidated Finance Act, has presented to Deloitte & Touche S.p.A. the assignment
consisting of (i) the full accounting audit of the Company’s year-end balance sheet and its
consolidated balance sheet, as well as of those of its subsidiaries, when these have been
formulated, for the years between 31 December 2007 and 31 December 2015, (ii) a
limited accounting audit of the mid-year reports, including consolidated reports, if there
are any, between 30 June 2008 and 30 June 2015, plus (iii) confirmation that the
Company’s accounts have been properly kept and that the facts and events of its
operations have been correctly entered in the accounting records.




                                          Pag. 16
                                                                                               Statutory financial
                                                                                                    statements at
                                                                                               December 31, 2007




TABLE 1: OTHER PROVISIONS OF THE CORPORATE GOVERNANCE CODE
                                                                      Summary of reasons for any discrepancies
                                                        YES      NO   with Code recommendations

System of delegated powers and transactions with
related parties
In delegating powers, the Board of Directors has
set:
a) limits                                                x
b) operating procedures                                  x
c) reporting frequency                                   x
Has the Board of Directors stipulated that               x
transactions of noteworthy economic, equity and
financial importance (including transactions with
related parties) shall be subject to its examination
and approval?
Has the Board of Directors set down guidelines and               x    No specific criteria have been expressly
criteria for determining which transactions are                       formulated for determining which
“significant”?                                                        transactions are “significant”, though, at
                                                                      present, such transactions can be identified
                                                                      on the basis of the distribution of decision-
                                                                      making powers between the Board of
                                                                      directors and the Chairman and the Managing
                                                                      Director, as well as the code governing
                                                                      transactions with related parties.
Are the guidelines and criteria referred to above                x    The distribution of decision-making powers
described in the report?                                              between the Board of Directors and the
                                                                      Chairman and the Managing Director, from
                                                                      which the criteria for distribution can be
                                                                      determined, are illustrated in the report,
                                                                      which also provides a summary of the
                                                                      provisions of the code on transactions with
                                                                      related parties.
Has the Board of Directors established specific          x
procedures for the examination and approval of
transactions with related parties?
Are the procedures for the approval of transactions      x
with related parties described in the report?
Procedures governing the most recent appointment
or directors and auditors
Were the candidacies for the position of director                x    This requirement is not yet applicable, given
filed at least ten days in advance?                                   that the latest appointment of directors
                                                                      occurred before the Company was admitted
Were the candidacies for the position of director                x    to trading on a market organised and
accompanied by thorough information?                                  managed by Borsa Italiana.
Were the candidacies for director accompanied by                 x    This requirement is not yet applicable, given
indications of whether the candidate qualified as an                  that the latest appointment of directors
independent director?                                                 occurred before the Company was admitted
                                                                      to trading on a market organised and
                                                                      managed by Borsa Italiana.
Were the candidacies for the position of auditor                 x    This requirement is not yet applicable, given
filed at least ten days in advance?                                   that the latest appointment of auditors
                                                                      occurred before the Company was admitted
                                                                      to trading on a market organised and
                                                                      managed by Borsa Italiana.
Shareholders’ Meetings
Has the Company approved a set of regulations for        x
Shareholders’ Meetings?
The regulations are included with the report             x




                                                       Pag. 17
                                                                                          Statutory financial
                                                                                               statements at
                                                                                          December 31, 2007




TABLE 1 (continued…..): OTHER PROVISIONS OF THE CORPORATE GOVERNANCE CODE
                                                                   Summary of reasons for any discrepancies
                                                     YES      NO   with Code recommendations

Internal control
Has the company appointed an internal control          x
manager?
Is this manager hierarchically independent of the      x         The Internal Audit Department and the
managers of the operating sectors?                               Internal Control Manager report to the
                                                                 Chairman and the Managing Director, while
                                                                 the Control Manager, in order to maintain his
                                                                 or her independence, also keeps the Internal
                                                                 Control Committee constantly informed.
Position in the organisational structure of the      Manager of the Internal audit Department
internal control manager
Investor relations
Has the Company appointed an Investment                x
Relations Manager?
Contacts (address/telephone/fax/e-mail) for the      Holger Neecke
Investor Relations Manager                           Business Development Director – Investor Relator
                                                     telephone: +39 02212771
                                                     fax: +39 0221277.325
                                                     e-mail: investor.relations@molmed.com




                                                    Pag. 18
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




Appendix “A” to the corporate governance regulations
Extract from shareholders’ pact under Article 122 of Legislative Decree no 58 of
February 24, 1998.

1 Company whose financial instruments are subject to the agreement and type of
agreement
1.1 Introduction
On December 14, 2007, the parties listed below signed a Shareholders’ Pact (the “Pact”)
regarding the shares and financial instruments of Molecular Medicine (MolMed) S.p.A., a
company incorporated under Italian law – registered office Via Olgettina, 58, Milan – and
included in the Milan Register of Companies with no 11887610159 (hereafter, also merely
“MolMed” or the “Company”). The effectiveness of the Pact was made subject to the start
of trading in MolMed Shares on the Electronic Stock Exchange organized and managed by
Borsa Italiana S.p.A. March 5, 2008 saw the start of trading in the ordinary shares of
MolMed on the Electronic Stock Exchange organized and managed by Borsa Italiana S.p.A.
1.2 The provisions of the Pact reflect Articles 122 (1) and (5) a) and b) of the TUF.

2 Parties to the Pact, number of shares transferred and exercise of control
2.1 On the date the Pact was signed, there were 78,350,856 ordinary shares in MolMed,
representing 100% of the MolMed ordinary shares in circulation (hereafter the “Syndicated
Shares”).
At present, MolMed has a subscribed and paid share capital totaling Euro 21,638,162.67,.
This consists of 104,467,808 ordinary shares with no nominal value.
The following table shows the parties to the Pact, the number of Syndicated Shares held
by each of them, the Syndicated Shares of each of them as a percentage of the total
number of Syndicated Shares and the total number of shares that make up the share
capital.
Parties to the Pact                  No of Syndicated      Syndicated           Syndicated
                                              Shares    shares as % of      shares as % of
                                                                  total      total shares in
                                                           Syndicated                  issue
                                                                shares
Science Park Raf S.p.A.                    22,080,684           28.182                21.136
Airain Serviços de Consultadoría           22,063,374           28.160                21.120
e Marketing Lda
Fininvest S.p.A                            17,103,408           21.829                16.372
H-Equity Sarl, SICAR                        8,551,695           10.915                 8.186
Delfin s.à.r.l.                             8,551,695           10.915                 8.186
Total                                      78,350,856              100                75.000

2.2 No parties exercise control over the Company as a result of the Pact.

3 Content of the Pact
Corporate governance and management
3.1 The Pact members agree to meet, when convened by the Pact Secretary, at least 15
days before the deadline under the MolMed company by-laws for the submission of lists
for the appointment of the new corporate governance bodies, so as to draw up
nominations based on the following.
3.2 The Pact members will do everything in their power to ensure that there are thirteen
members of the Board of Directors.
3.3 The Participants undertake to submit and support at the General Meeting a list of
candidates for appointment to the MolMed Board of Directors as follows:



                                          Pag. 19
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




           (i) 2 members – so long as they are managers or consultants of MolMed – in
                    the person of Prof. Claudio Bordignon and Marina Del Bue or other
                    persons agreed upon by the Participants;
           (ii) 3 independent members, jointly approved by the Participants; and
           (iii) The remaining 8 members, as nominated by the Participants.
3.4 The members of the Board of Directors under Paragraph 3.3 (iii) will be appointed as
follows:
           (i) Each Participant with at least a 12.5% stake in the total number of
                Syndicated Shares (this 12.5% stake is hereafter described as a “Significant
                Stake”) shall be entitled to nominate one Director for each Significant Stake
                held (e.g. a Participant that holds 25% of the Syndicated Shares will be
                entitled to appoint two directors in terms of point (i) above).
           (ii) Where, as a result of the procedure under point (i) eight directors have not
                been appointed, the right to appoint the remaining directors will be split by
                granting each Participant the right to appoint a director until all remaining
                Directors have been appointed; the Participants given these rights will
                commence with the one with the highest percentage of the Syndicated
                Shares and proceed in descending order. It is understood that (x), for this
                purpose, the Significant Stake or Significant Stakes already considered for
                the appointment of directors under point (i) above shall be deducted from
                the percentage of Syndicated Shares held by the Participants while (y) if
                more than one Participant has the same percentage of the Syndicated
                Shares, the right of appointment shall lie with the one that has not yet
                appointed any directors or that has appointed the lowest number of
                directors.
The last candidate on the list, possibly destined not to be elected if minority lists are
presented, shall be one of the candidates for a role as an independent director.
3.6 The Parties agree that, if during the period of the Pact, changes in the percentage of
Syndicated Shares held by the Participants mean that the make up of the Board of
Directors – in terms of the Directors that may be appointed by the Participants in terms of
Paragraph 3.4 above – is no longer with the stated appointment rights, the Participant
whose rights of appointment are no longer valid, in full or in part, shall promptly inform
the other Participants and the Pact Secretary and take all possible action to ensure that
the Director or Directors appointed by it submit their resignation. In this case, the
Participants shall ensure that the Company Board of Directors co-opts one or more new
directors as appointed by the Participants with rights of appointment in terms of
Paragraph 3.4 above, as based on the new percentages of Syndicated Shares held, in
place of the resigning Directors, and that these appointments are approved by the next
Shareholders’ General Meeting.
3.7 If a Director leaves office for a reason other than that outlined in Paragraph 3.5
above, the Participants shall ensure that if a replacement is co-opted by the Board of
Directors or appointed through a resolution by the General Meeting, the member of the
Board of Directors appointed shall be nominated by the Participant or Participant that had
previously nominated the Director who has left office.
3.8 The Participants undertake to present and support at the MolMed General Meeting a
list of candidates for appointment to the Board of Statutory Auditors as nominated by
them. If the Participants fail to agree on the choice of candidates, the three Participants
with the smallest percentages of the Syndicated Shares shall each be entitled to appoint a
Statutory Auditor (and these candidates shall be included in the list headed by the
candidate nominated by the Participant with the smallest percentage of Syndicated
Shares, followed by the candidate nominated by the Participant with the second smallest
percentage of Syndicated Shares and then by the candidate nominated by the Participant
with the third smallest percentage of Syndicated Shares). The two Participants with the
largest percentages of Syndicated Shares shall each be entitled to nominate a Substitute
Statutory Auditor (and these candidates shall be included in the last starting with the

                                           Pag. 20
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




candidate nominated by the Participant with the smaller percentage of Syndicated
Shares). If more than one list of candidates for election is submitted, (i) a statutory
auditor and a substitute statutory auditor will be selected from the minority list receiving
the greatest number of votes, as per the corporate by-laws on the appointment of the
Board of Statutory Auditors and (ii) the Board of Statutory Auditors will be chaired by the
first candidate on the said minority list.

4 Pact Secretary
The Participants will unanimously appoint the Pact Secretary. The Pact Secretary shall be
appointed within 10 days of the Pact coming into force. The Secretary shall be called upon
to perform the duties given to them by the Pact, to confirm that the procedures laid down
in the Pact are being complied with and to perform duties jointly entrusted to them by the
Participants.

5 Consultative Committee
5.1 The Participants agree to form a Consultative Committee that will include one
representative of each of them. The Committee shall examine, discuss and decide on
issues to be brought before the Company Ordinary and Extraordinary Shareholders’
Meetings. The Participants agree that the provisions under this point 5 shall not apply
with regard to the appointment of corporate officers; this shall be regulated by point 3
above.
5.2 The Consultative Committee shall pass resolutions with the involvement and votes in
favor of at least three Participants who represent, together, more than half of the
Syndicated Shares. Each Participant shall be required to cast their vote on each matter
covered at General Meetings in a manner consistent with the resolutions passed by the
Consultative Committee. However, if the Consultative Committee fails to achieve the
required quorum for decisions, each of the Participants shall be free to cast their votes at
General Meetings in the manner they see fit.
5.3 Failure by a Participant to take part in the consultation process shall lead to its
acceptance of the decisions made by the other Participants in terms of Paragraph 5.2
above and the Participant in question shall be required to cast its vote at the General
meeting in accordance with these decisions.

6 Preferential rights
6.1 Participants that intend to transfer their Syndicated Shares and/or Rights, in whole or
in part, shall be required to offer these Syndicated Shares and/or Rights to the other
Participants in proportion to the Syndicated Shares held by each of them. They shall be
required to send each of them and the Pact Secretary a notice (the “Offering Notice”)
containing details of the transfer including the number of Syndicated Shares and/or Rights
to be transferred (the “Shares Offered”), the identity of the party interested in buying
them, the price and all other transfer conditions.
6.2 “Transfer” is intended as any sales transaction or other operation inter vivos of any
kind that regards the allocation or transfer to third parties of Syndicated Shares or real
beneficial rights and/or securities relating to the Syndicated Shares and/or other rights
that could be translated into voting rights with regard to the Syndicated Shares or rights
(including those incorporated in financial instruments) to buy Syndicated Shares or
subscribe new shares in the Company (hereafter, the “Rights”). In an exception to the
preferential purchase procedures under this point 6, the Parties agree that the Participants
may pledge all or part of their Syndicated Shares so long as the pledge document
explicitly states that: (i)administrative rights relating to the Syndicated Shares, including
voting rights, shall remain with the Participant owner of the Syndicated Shares that have
been pledged and these rights shall not be transferred to the secured creditor in question
and (ii) in the event of the sale of request for allocation of the Syndicated Shares, the
secured creditor shall offer them to the other Participants on a preferential basis in
accordance with the terms of the Pact. The granting of such a pledge shall be promptly

                                           Pag. 21
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




communicated to the Pact Secretary who must also receive a copy of the pledge
documents.
6.3 Each Participant that receives the Offering Notice shall be entitled to exercise a
preferential right to purchase the Shares Offered and they will be transferred in proportion
to the Syndicated Shares already held, at the same conditions as stated in the Offering
Notice.
6.4 (a) Each Participant may exercise their preferential rights within 10 days of Stock
Market trading from receipt of the Offering Notice. The rights may be exercised by
sending the Participant a notice that the rights are being exercised (“Exercise Notice”).
6.4 (b) The preferential purchase procedure will apply in simplified form to proposed
transfers of Syndicated Shares and/or Rights representing less than 2% of the entire
MolMed share capital.
6.5 Where the preferential purchase rights are not exercised by all of the Participants in
terms of Paragraph 6.4 (a), the Participants that have exercised their preferential rights
(hereafter, the “Buyer Participants”) shall, within five days of stock market trading from
the end of the deadline stated in Paragraph 6.4 (a) above, inform the offering Participant,
by means of the “Increase Notice” copied to the other Participants and the Pact
Secretary, that it intends to exercise its preferential rights also with regard to the portion
of the Offered Shares on which preferential rights have not been exercised by the other
Participants (the “Remaining Shares”). In this case, the Remaining Shares shall be
allocated to the Participants who have sent the Increase Notice in proportion to the
Syndicated Shares respectively held by them. Upon exercising the preferential rights, the
transfer of the Shares Offered and payment of the amount due shall take place within 30
days of the exercise date.
6.6 Where, upon completion of the procedure described in paragraphs 6.4 and 6.5 above,
preferential rights have not been exercised with regard to all of the Shares Offered, the
preferential rights shall be considered as not exercised by the Buyer Participants) and the
offering Participant shall have to inform the other Participants, copying the Pact Secretary.
It may transfer the Shares Offered to the party indicated in the Offering Notice, at the
terms and conditions described therein, within the 30 days following expiry of the
deadlines stated in paragraphs 6.4 or 6.5 above. If this transfer does not take place by the
stated deadline of thirty days, the offering Participant will once again have to comply with
the provisions of this point 6.
6.7 The scope of application of the preferential purchase procedure does not cover the
transfer of Syndicated Shares and/or Rights to parent companies, subsidiary companies or
companies subject to joint control by – in terms of Article 2359 (1) of the Italian Civil
Code – the transferor Participant so long as it gives advance notice to the other
Participants and to the Pact Secretary and the transferee company signs the Pact.
Participants exercising this option shall be jointly responsible with the transferee for
compliance with the Pact requirements and, if the aforementioned control relationship
comes to an end, shall be required to buy back the Syndicated Shares and/or Rights as
transferred above.
6.8 In the case of transfers not involving payment of any monetary consideration, the
preferential rights may be exercised at a price per share equal to the weighted average
listed price on the Borsa Italiana S.p.A. electronic system in the three months before the
Offering Notice. If, for any reason, the Company was no longer listed the price per each
share to be transferred would be determined by an expert appointed in agreement by the
parties or by the President of the Order of Public Accountants in Milan, at the behest of the
more diligent party. The expert shall perform a valuation of the Company in terms of
Articles 1349(1) and 1473 of the Italian Civil Code.
6.9 The preferential purchase procedure under this paragraph 6 will apply in simplified
form to the sale on the stock market of Syndicated Shares and/or Rights.
6.10 Throughout the Pact duration no Participant may enter into operations for the loan of
securities, derivative instruments – including equity swaps – with regard to the Syndicated
Shares.

                                           Pag. 22
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




7 Public Purchase Offer
Each of the Participants undertakes, for itself and for businesses controlled by it under
Article 2359(1) of the Civil Code and Article 93 of the Consolidated Finance Act not to take
action, conduct themselves or enter into agreements, pacts or understanding leading to
joint obligations for the Participants, to promote a public purchase offer for the ordinary
shares of MolMed, in terms of the applicable provisions of the Consolidated Finance Act
and the related CONSOB Regulation no 11971/1999 implementing issuer regulations.
Where this obligation has been breached by one or more of the Participants and a joint
obligation arises for the other Participants to proceed with a public purchase offering for
the MolMed shares, these last Participants shall have a right of redress against those in
breach of the requirements so as to gain compensation for any losses.

8 Duration and effectiveness of the Pact
The effectiveness of the Pact is made conditional to the start of trading in MolMed shares
on the Electronic Stock Market organized and managed by Borsa Italiana S.p.A. The Pact
is effective and lasts until the end of the third year following March 5, 2008, the date
trading in the Company shares began on the Electronic Stock Market organized and
managed by Borsa Italiana S.p.A..

9 Filing
The Pact was filed with the Milan register of companies on March 10, 2008.




                                          Pag. 23
                                                                             Statutory financial
                                                                                  statements at
                                                                             December 31, 2007




Report on Operations

1.     LETTER TO THE SHAREHOLDERS

Dear Shareholders,
The year ended December 31, 2007 was a crucial one for MolMed. The Company
continued to concentrate on the clinical and pre-clinical development of products in its
development pipeline while, at the same time, commencing the process to list the
Company shares on the Electronic Stock Exchange managed by Borsa Italiana. The
process culminated in the start of trading in the Company’s shares on March 5, 2008.
Moving onto product development, in December 2007, the Ethical Committee of the first
clinical research centre involved approved the Phase III protocol for TK (cell-based therapy
enabling bone marrow transplant from partially compatible donors) in patients with high-
risk acute leukaemias. Authorisation from the Italian Drug Agency (AIFA) regarding the
dossier on this sinvestigational new therapy was given in January 2008. The Phase III
study follows the successful completion of Phases I and II as conducted on over 50
patients affected by high risk leukaemia.
The Company has continued to recruit patients for its active clinical trials of ARENEGYR
(vascular targeting agent for solid         tumours) and M3TK (anti-tumour therapeutic
vaccination). After the approval by competent authorities in the second half of 2006 of the
first Phase II clinical trials of ARENEGYR - respectively in colon-rectal carcinoma, small cell
lung cancer and liver cancer - the first few months of 2007 saw the beginning of patient
recruitment. In May 2007, a fourth Phase II trial of ARENEGYR started in malignant
pleural mesothelioma.
The Company’s activities have also included looking for interest from major bio-
pharmaceutical companies in its products ARENEGYR and M3TK, with a view to possible
strategic collaboration agreements that can make the most of the Company’s patent
portfolio.
In terms of intellectual property, MolMed has continued to strengthen and extend its range
of patents in the field of vascular targeting molecules, that are part of the Company
pipeline.
The year 2007 has ended with a loss of Euro 12,696 thousand. The result for the year is in
line with expectations and is due to the typical features of the biotech company business
model during the product development phase when profits are forecast for later years.
So as to raise the finance for its business plans, in April 2007, a paid share capital
increase totaling Euro 10,028 thousand was launched and subscribed in full. Moreover, in
the second half of the year, the Company began the process to have its shares listed on
the Electronic Stock Market managed by Borsa Italiana: a Shareholders’ General Meeting
approved the share capital increase for this operation in October 2007. As stated earlier,
the process was successfully concluded on March 5, 2008 when trading in the Company’s
shares commenced.
The financial resources raised as a result of the listing – a total of Euro 56,151 thousand
before listing costs – appear sufficient to finance the business plans. They are destined to
support and accelerate current and new clinical research and development programs
including research into new clinical applications for existing products and licensing or
acquiring new technology and new intellectual property, where possible and worthwhile,
by exercising the options granted by the San Raffaele Foundation. The Company also
intends to employ further resources from the Stock Market listing to develop new GMP



                                            Pag. 24
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




manufacturing facilities for the pharmaceutical development and future marketing of its
products.
As stated in the Notes to the Financial Statements, the MolMed financial statements at
December 31,2007 were prepared in accordance with International Accounting Standards
(hereafter IAS/IFRS).


2.     MAIN ACTIVITIES

2.1    Company News
MolMed operates in the field of medical biotechnology, mainly with regard to research,
development and clinical validation of innovative therapies to cure tumours. Molmed’s
approach is characterised by an integrated therapeutic strategy, based on products
derived from the application of various innovative biotechnologies, and providing on one
side bio-pharmaceuticals targeting the growing tumour mass in the acute stage, and
highly selective therapies to eliminate residual disease.
MolMed is based in Milano, at the San Raffaele Biomedical Science Park, the biomedical
park managed by Science Park Raf which includes the largest private Italian research
hospital (San Raffaele Hospital), the San Raffaele Scientific Institute (an entity controlled
by the Foundation of the same name) and also hosts six well known autonomous
biotechnological companies. The San Raffaele Biomedical Science Park is one of the most
important in Europe.       Around 4,000 people work in it for various companies and
institutions devoted to medical science and clinical practice. The San Raffaele Scientific
Institute is one of the leading biomedical research institutions in Europe. It counts on
more than 500 scientists, many of them internationally renowned, with more than 600
publications in 2006. Science Park Raf is also very active in the development and transfer
of intellectual property in the field of biotechnology.
MolMed was founded as an academic spin-off of the San Raffaele Institute, based on its
core knowledge in the field of gene and cell therapy applied to rare genetic diseases and
to haematological malignancies, with the first clinical trials on patients suffering from
leukaemia. The strong, ongoing relationship with the San Raffaele Scientific Institute
represents a major resource for the Company, that enjoys preferential access to cutting-
edge technological and clinical resources of the Institute through a number of research
and license agreements: this strategic situation gives the Company a unique chance to
integrate its own internal research and development resources with those of the Institute.
Moreover, the privileged relationship with the San Raffaele Hospital, a clinical centre with
status of Research Hospital of National Interest (Istituto di Ricovero e Cura a Carattere
Scientifico, IRCCS) in Italy, with a total of 1,400 beds and 250 clinical trials underway in
2006, allows MolMed to carry out the clinical validation of its products at a primary level in
a very cost-effective way, while also allowing the Company to directly manage trial
monitoring, and permitting close interaction with clinical investigators.
At international level, since 2003 MolMed has entered into a strategic alliance with Takara
Bio Inc. (“Takara Bio”), an important Japanese biotechnology company listed on the Tokyo
Stock Exchange, through a co-development and out-licensing agreement for MolMed’s TK
and M3TK products in Asia. This partnership was extended in 2005, through a research
collaboration and out-licensing agreement to co-develop the AIDS gene therapy project,
MM-F12.




                                           Pag. 25
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




2.2    Research and development activities
In 2007, the various business divisions were mainly involved in the development of the
products in the Company’s pipeline.         They also evaluated possible collaboration
agreements that could make the most of the Company’s portfolio of intangible assets. A
summary of the main activities undertaken during the year in relation to each of the
products is provided below, together with the outlook for future activities.
TK: is a cell therapy that enables the transplantation of
hematopoietic stem cells (HSCT) from partially compatible
(i.e. “haplo-identical”) donors. This offers a valid means of
identifying a readily available donor for all patients: at
present, patients without a fully compatible donor
represent around 60% of all of those who could benefit
from a HSCT. The Company has started a Phase III trial of
TK for high risk leukaemias, following authorisation by the
AIFA on January 17, 2008. The clinical protocol of the trial
was approved by the Ethical Committee of the first clinical centre involved on December 6,
2007. This study follows the successful completion of a Phase I/II study in Europe on a
total of 53 patients with high risk leukaemia. TK has been granted Orphan Drug status by
both the EMEA and the FDA. Upon marketing authorisation, Orphan Drug status gives a
product exclusive marketing rights for ten years in the European Union, and for seven
years in the United States of America.
ARENEGYR (NGR-hTNF): ARENEGYR (NGR-hTNFα) is a novel vascular targeting agent
(VTA) for the treatment of vascularised solid tumours. In particular, ARENEGYR is a
recombinant fusion protein combining a tumour-homing peptide, NGR, that selectively
binds to a receptor present only on endothelial cells of newly formed tumour blood
vessels, with the human cytokine hTNF-α. The resulting molecule has unique properties
against tumour vessels: it induces both a biological anti-tumour reaction and an increase
in vascular permeability, thus increasing the effectiveness and therapeutic index of the
cytotoxic drugs administeredin combination. These unique properties make ARENEGYR
particularly attractive both as a novel single-agent therapy, and in synergistic combination
with most current chemotherapeutic regimens. ARENEGYR is currently in Phase II for
colorectal cancer, small-cell lung cancer, liver cancer and mesothelioma. As at December
31, 2007, more than 200 patients have been treated in ongoing and completed clinical
trials. The results confirm the excellent safety profile of ARENEGYR, with encouraging
preliminary results in terms of anti-tumour activity.
M3TK: M3TK is a cancer therapeutic vaccine based on a unique in vivo dendritic cell
targeting system. It relies on the use of a patient’s own T-cells, genetically modified to
express a tumour antigen, MAGE-3, acting as antigen carriers for efficient loading of
dendritic cells in vivo, along with the viral antigen HSV-TK, acting as a tracer in order to
monitor the immune status of the patients to be treated. This vaccination strategy has
been shown to induce protective immunity and long-term memory, ultimately correlating
with clinical benefit. In patients affected by tumours expressing MAGE-3, the infusion of
such modified T-cells allows for the loading of dendritic cells with large amounts of the
tumour antigen, thereby mimicking the physiological mechanism that elicits a specific and
effective T-cell-mediated immune response against tumour cells. MolMed is currently
conducting a Phase I/II clinical trial for the treatment of advanced melanoma. In 2007,
activities regarding the M3TK project were focused on the Phase I/II clinical trial (Protocol
IPR002), which involves patients affected by MAGE-3-positive metastatic melanoma, and
pre-treated with chemotherapy. The protocol is being carried out at the Istituto Nazionale
dei Tumori and at the San Raffaele Hospital in Milan. The aim of the study is to evaluate
the feasibility of the treatment, while defining the vaccine’s activity and safety profile.




                                           Pag. 26
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Other ongoing projects
Vascular Targeting Agent (VTA) programme: NGR-IFNγ and NGR-IL12
The Vascular Targeting Agent (VTA) programme includes two more anti-tumour candidate
drugs, consisting of cytokines combined with the NGR peptide. At present, interferon-γ
combined with NGR (NGR-IFNγ) is at the preclinical stage, while interleukin-12, also
combined with NGR (NGR-IL12) is at discovery stage. Like ARENEGYR, the therapeutic
properties of both candidates are based on the therapeutic properties against solid
tumours of the molecules resulting from each specific peptide-cytokine combination.
AIDS gene therapy programme: project MM-F12
                             MM-F12 is MolMed’s second-generation gene therapy project
                             for the treatment of AIDS. MM-F12 is based on the use of
                             lentiviral vectors to introduce genes aimed at interfering with
                             HIV replication into patient’s stem cells, to make the immune
                             system permanently resistant to HIV. The MM-F12 project is
                             being developed with Takara Bio under a research
                             collaboration and licensing agreement, entered into in April
                             2005. A Phase I/II clinical study performed by MolMed on a
first-generation product using retroviral vectors, known as REV, ended in 2003 and
confirmed the feasibility and safety of this approach, while giving crucial insights in
defining the key variables for its optimisation. On the basis of such insights, MolMed has
established a novel vector technology platform based on lentivirus. This project integrates
the most advanced knowledge and know-how in terms of vector systems, therapeutic
genes, and fundamental clinical factors.


2.3    GMP facility and GMP services provided to third parties
MolMed has the status of pharmaceutical company (officina farmaceutica) granted by the
AIFA. It has a Good Manufacturing Practices (“GMP”) facility formally authorised by the
AIFA for the production of cell-based medicinal products for use in clinical trials. The
facility includes six sterile chambers and a dedicated fermentor area, as well as a separate
research laboratory area, for a total surface of approximately 1,400 square meters: it
was completely redesigned in 2006, and successfully audited by the AIFA in July 2007. At
present, the Company also satisfies FDA requirements for the production of clinical-grade
bulk drug substances. Besides manufacturing TK and M3TK for its own clinical trials,
MolMed’s GMP-compliant facility provides revenue-generating gene and cell therapy
services to selected partners: these services are regulated by specific contracts, and often
include assistance for regulatory matters. Service activities enable the Company to
optimise its GMP production capability, and to build and develop strategic partnerships. Of
particular importance is a framework agreement with the Telethon Foundation, entered
into in 2005, for the co-development and manufacture of lentiviral vectors for the
treatment of rare genetic diseases. Another important agreement is with the San Raffaele
Foundation, for which MolMed principally provides retroviral supernatants, peptides and
dendritic cells, as well as clinical-grade genetically modified patient cells, and services
related to cell manipulation.
In the future, the Company also plans to invest in enhancing its production capability by
developing a new GMP facility, mainly in order to upgrade to the production requirements
following the launch of TK therapy.

2.4    Research and development grants
In 2004, MolMed was awarded by the Regional Authority of Lombardy a grant for the
“Study into the therapeutic potential of an IFNy (NGR-IFNy) variant with selective action


                                          Pag. 27
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




on tumours”, a project submitted in the context of the promotion of excellence in the
industrial areas of Lombardy. The project started in January 2005, and will continue until
March 31, 2008. It has been awarded a non refundable grant of Euro 1,373 thousand.
MolMed is is also involved in the “CONSERT” gene therapy project, funded under the EU VI
Research and Development Framework Programme (FP-6). This project started at the end
of 2004, and is scheduled to last around four years. It has received non refundable grants
totalling approximately Euro 690 thousand.
Still under FP-6, the Company has continued its work on the “SKINTHERAPY” project. This
is a three-year project with a total non-refundable grant of around Euro 300 thousand.
MolMed has also taken part, together with several industrial and academic partners, in an
application for funding from the Italian Ministry of Research under the “National Research
Programme (PNR) Project Ideas 2005-2007” in relation to Theme 1 among Major Strategic
Projects, to identify innovative anticancer treatments from genomics to therapy. The
project submitted has passed several approval stages, and started in 2007. It will last
around three years. The Company is waiting for final approval of the funding, which would
involve a low-interest loan of 90% of admissible costs, that amount to Euro 880 thousand.

2.5    Business development activities
During the year, Business Development activities concentrated on identifying an interest in
the Company’s products from major bio-pharmaceutical companies, with the aim of
entering into collaboration agreements capable of making the most of the Company’s
patent portfolio. Contacts with international companies on numerous occasions have led
to the establishment of valuable relations with a number of leading bio-pharmaceutical
companies, that showed concrete interest and asked for further technical details on the
Company’s products during confidential meetings.
Communication activities increased further during the year, with the aim of raising
MolMed’s profile as the leading Italian company in the biotech sector. These activities
included, inter alia, increased participation at biotech business trade fairs and conventions.

2.6    Share capital operations
Information on share capital operations that took place in 2007 is provided in the
paragraph 24, note 11 of the Notes to the Financial Statements.


2.7    Investments
The main investments made by the Company during the year regarded the routine
renewal of laboratory equipment and the purchase of new equipment used in production
processes in accordance with GMP rules.




                                           Pag. 28
                                                                              Statutory financial
                                                                                   statements at
                                                                              December 31, 2007




3.       ANALYSIS OF INCOME STATEMENT AND FINANCIAL RESULTS

The following table shows the Company’s income statement results for the period
analysed:


3.1      Income Statement at December 31, 2007
(amounts in thousands of Euro)                                  31/12/2007      31/12/2006

     Revenues                                                        2.984              1.920
     Other income                                                      830                805
Total operating revenues                                             3.814             2.725

     Purchases of raw and consumable materials                      (1.735)            (1.552)
     Costs for services                                             (7.365)            (5.564)
     Costs for use of assets owned by third parties                 (1.129)            (1.040)
     Personnel costs                                                (4.562)            (3.486)
     Other operating costs                                            (265)              (142)
     Amortization, depreciation & writedowns                        (1.706)            (1.779)
Total operating costs                                              (16.763)         (13.563)
Operating loss                                                     (12.949)         (10.838)

     Financial income                                                  278                164
     Financial charges                                                 (25)               (23)
Net financial income and charges                                       253                141
Loss before taxation                                               (12.696)         (10.697)

  Taxes on income                                                        -                 -
Net loss from continuing activities                                (12.696)         (10.697)
  Result from activities disposed of                                     -                 -
Profit (Loss) for year                                             (12.696)         (10.697)



Loss for the year
The results set out in the above table show a net loss of Euro 12,696 thousand in 2007
and Euro 10,697 thousand in 2006. These results are typical of the business model of
biotech companies during the product development phase, as income statement returns
are expected in future years. This feature of the business leads to a high incidence of costs
for services, personnel costs, purchases of materials and costs directly relating to product
clinical trials and pharmaceutical development; given the current state of development of
the projects, these costs are not directly reflected in higher revenues.
The loss increased in 2007 compared to 2006 due to an increase in the Company’s
research and development activities, mainly regarding clinical trials of TK and ARENEGYR.




                                                      Pag. 29
                                                                                         Statutory financial
                                                                                              statements at
                                                                                         December 31, 2007




Revenues
The following table contains a breakdown of revenues:
(amounts in thousands of Euro)                             31/12/2007 31/12/2006       Change      % Change

Gene therapy services                                               777       412           365        88,8%
Cell therapy services                                               420       138           282       203,6%
Cellular bank and bulk                                               -        391          (391)     (100,0%)
Molecular analysis services                                            9       11            (2)      (21,3%)
Upfront and Milestone revenues                                    1.697       872          825          94,6%
Other consultancy                                                     81       96           (15)      (15,7%)
Total revenues                                                    2.984     1.920        1.064         55,4%

Revenues increased by 55.4% from Euro 1,920 thousand in 2006 to Euro 2,984 thousand
in 2007. The increase was mainly due to a milestone payment under the agreement
signed with Japanese company Takara Bio Inc in 2005 in relation to the AIDS gene
therapy project.
Gene therapy services have increate by 88.8% from Euro 412 thousand in 2006 to Euro
777 thousand in 2007. This reflects growth in cell manipulation services and production of
regulatory support materials for clinical trials, commissioned by the San Raffaele
Foundation. It also regards activities under the collaboration agreement in force since
2005 with the Telethon Foundation and regarding the development and production of
lentiviral vectors.
The increase in revenues from cell therapy – up by 203.6% from Euro 138 thousand in
2006 to Euro 420 thousand in 2007 – is due to the grouping under this heading of services
classified last year as “Cell banks and bulk” in the total amount of Euro 255 thousand. This
grouping was needed so as to better represent the Company’s revenues.
Upfront and milestone revenues relate to upfront payments received under contracts
signed in prior years with the Japanese biotech company Takara Bio Inc. for projects TK,
M3TK and MM-F12. These revenues have been spread over the period between the date of
signature of the out-licensing agreement and the next development milestone, as
estimated by management. The increase compared to prior year is due to the fact that the
milestone worth Euro 825 thousand has been reached in relation to the AIDS gene therapy
project MM-F12. This milestone was recognised in full in 2007, when entitlement to
receive the milestone payment was achieved.
At December 31, 2007, total revenues included Euro 579 thousand from related parties.
Further information is provided in Paragraph 28.


Other income
Other income was analyzed as follows in 2007 and 2006:
(amounts in thousands of Euro)                                 31/12/2007 31/12/2006    Change     % Change

Lombardy Region (Lombardy Industrial areas)                           433       489         (56)     (11,5%)
European Commission (project "Consert")                               169       169           0         0,0%
European Commission(project "Skintherapy")                             92       125         (33)     (26,4%)
Ministry of Universities and Research (FAR GPS DM28936)                44         0          44            na
Ministry of Universities and Research (FIRB GPS DM24528)               15         0          15            na
Istituto Superiore di Sanità (AIDS research project)                   30         0          30            na
Other grants                                                            2         9          (7)     (77,8%)
Other revenue                                                          45        13          32       246,2%
Other income                                                          830       805          25        3,1%

Other income increased by 3.1% from Euro 805 thousand in 2006 to Euro 830 thousand in
2007. The balance mainly consists of public grants awarded to the Company for its
research projects.


                                                     Pag. 30
                                                                                           Statutory financial
                                                                                                statements at
                                                                                           December 31, 2007




The income regards grants awarded by the relevant bodies, as accounted for based on the
costs actually incurred as a percentage of the total costs budgeted for the grant-assisted
research projects.
In 2007, the most significant public grant income included Euro 433 thousand under the
Lombardy Region programme for the promotion of excellence in the industrial areas of
Lombardy, and Euro 261 thousand regarding projects under the EU VI Research and
Development Framework Frogramme (specifically, project “CONSERT” Euro 169 thousand,
and “Skintherapy” Euro 92 thousand).


Operating costs
(amounts in thousands of Euro)
                                                                 31/12/2007 31/12/2006    Change      % Change

Purchases of raw, ancillary and consumable materials                 (1.735)    (1.552)       (183)       11,8%
Costs for services                                                   (7.365)    (5.564)     (1.801)       32,4%
Use of assets owned by third parties                                 (1.129)    (1.040)        (89)        8,6%
Personnel costs                                                      (4.562)    (3.486)     (1.076)       30,9%
Other operating costs                                                  (265)      (142)       (123)       86,8%
Amortization, depreciation & writedowns                              (1.706)    (1.779)         73       (4,1%)
Total operating costs                                               (16.763)   (13.563)    (3.200)       23,6%

Operating costs increased by 23.6% from Euro 13,563 thousand in 2006 to Euro 16,763
thousand in 2007. The increase mainly regarded costs for services which rose from Euro
5,564 thousand to Euro 7,365 thousand (+32.4%) and to personnel costs which increased
from Euro 3,486 thousand in 2006 to Euro 4,562 thousand, due to the expansion of the
business structure needed to cope with the start of Phase III of TK, and the extension of
clinical trials of ARENEGYR.
The individual operating cost items are analysed in more detail below.
Purchases of raw and consumable materials
Purchases of raw and consumable materials increased by 11.8% from Euro 1,552
thousand in 2006 to Euro 1,735 thousand in 2007. This was in line with the greater
volume of activity to develop the Company’s products.




                                                       Pag. 31
                                                                                      Statutory financial
                                                                                           statements at
                                                                                      December 31, 2007




Costs for services
The change in the make up of the Company’s costs for services compared to prior year is
shown below:
(amounts in thousands of Euro)                          31/12/2007 31/12/2006     Change      % Change

Maintenance                                                        252      192         60          31,3%
Utilities                                                          283      267         16           6,0%
Outsourced quality control                                         364      247       117           47,4%
Outsourced research & development                                  975     1420      (445)       (31,3%)
Outsourced production                                              632      295       337         114,2%
Transport and storage of laboratory materials                      176       90         86          95,6%
Technical consultancy and collaboration                            589      656        (67)      (10,2%)
Commitments towards third parties                                  246      270        (24)        (8,9%)
Clinical trial costs                                               725      479       246           51,4%
Other clinical development costs & support activities              389      158       231         146,2%
Tax and accounting services                                        253      101       152         150,5%
Legal fees                                                         211      164         47          28,7%
Patent costs                                                       455       95       360         378,9%
Management consultancy                                                1      17        (16)      (94,1%)
Directors and statutory auditors' fees                             888      308       580         188,3%
Communications agency fees                                           32       0         32           0,0%
IT assistance                                                      133      163        (30)      (18,4%)
Other general and admin costs                                      188      197         (9)        (4,6%)
Staff training                                                       60      39         21          53,8%
Other personnel costs                                              159      129         30          23,3%
Participation at conventions and meetings                            55      44         11          25,0%
Travel and subsistence                                             299      233         66          28,3%
Total costs for services                                          7.365   5.564     1.801         32,4%

Costs for services increased by 32.4% from Euro 5,564 thousand in 2006 to Euro 7,365
thousand in 2007. This was mainly due to the higher volume of activity regarding
development of the Company’s products.
The fact that the Company has stepped up its clinical development activities for
ARENEGYR, extending its clinical development plan based on the launch of numerous
Phase II trials, has led to a sharp increase in these costs in the Income Statement. In
particular, the largest increases regarded costs relating to the clinical centres where the
trials are carried out – they rose from Euro 479 thousand in 2006 to Euro 725 thousand in
2007 (+51.4%) – and to the cost of clinical trial support services – up from Euro 158
thousand in 2006 to Euro 389 thousand in 2007 (+146.2%).
Outsourced research and development costs decreased due to improved disclosure of
certain items which have been included under outsourced production costs and quality
control costs. Overall, these costs remained broadly stable from 2006 to 2007.
The 31.3% increase in maintenance costs from Euro 192 thousand in 2006 to Euro 252
thousand in 2007 was due to activities needed to keep the GMP facility up to GMP
standards.
The increase in accounting/admin and tax consultancy costs – up from Euro 101 thousand
in 2006 to Euro 253 thousand in 2007 (+150.5%) – was mainly due to the consultancy
services received in preparation for the Company’s Stock Market flotation.
Patent costs increased by 378.9% from Euro 95 thousand at December 31, 2006 to Euro
455 thousand at December 31, 2007. The increase was due to the cost of extending
international patent protection for company products under development.
Directors and Statutory Auditors’ fees increased from Euro 308 thousand at December 31,
2006 to Euro 888 thousand at December 31, 2007 (+188.3%). This was due to the
annual Managing Director’s fee approved by the shareholders in December 2006 and to


                                                        Pag. 32
                                                                             Statutory financial
                                                                                  statements at
                                                                             December 31, 2007




the revised Directors’ fees approved when appointments were renewed in accordance with
the Shareholders’ General Meeting Resolution of November 6, 2007.
“Travel and subsistence costs” and “Participation at congresses and meetings” increased,
respectively, from Euro 233 thousand at December 31, 2006 to Euro 299 thousand at
December 31, 2007 (+28.3%) and from Euro 44 thousand in 2006 to Euro 55 thousand in
2007 (+25.0%). The increases were mainly due to increased travel so as to co-ordinate
clinical trials, a higher level of communications activities to increase MolMed’s visibility as
Italian leader in the biotech sector and increased participation by MolMed in congresses
held in the sector.
In 2007, the Company incurred costs of Euro 32 thousand for the services of
communication agencies so as to manage its communications activities.
Legal costs increased from Euro 164 thousand in 2006 to Euro 211 thousand in 2007
(+28,7%) mainly because of new legal services hired in support of the business
operations.
Use of third party assets
The cost of the use of third party assets amounted to Euro 1,040 thousand at December
31, 2006 and Euro 1,129 thousand at December 31, 2007. The increase of 8.6% was due
to the increased management office space under rental agreements.
Personnel costs
Personnel costs increased by 30.9% from Euro 3,486 thousand in 2006 to Euro 4,562
thousand in 2007. The increase was due to the recruitment of twelve new employees
during the year as well as to salary increases and higher variable bonuses paid to
employees than in prior year.
The increase in the number of employees was necessary so as to strengthen the workforce
especially in operational areas due to the increase in clinical development activities
regarding the Company products.
The average workforce, by employee category, is shown below at December 31, 2007 and
2006:

                                               31/12/2007    31/12/2006    Change      Change
                                                                                         %
Managers                                               7,5           7,0       0,5          7%
Middle managers                                       10,0           8,0       2,0         25%
White collar                                          50,5          48,0       2,5          5%
Blue collar                                            3,0           2,0       1,0         50%
Total                                                 71,0          65,0       6,0          9%

Other operating costs
Other operating costs increased by 86.6% from Euro 142 thousand in 2006 to Euro 265
thousand in 2007. The increase largely related to the setting up of research bursaries for
students at the Università Vita e Salute San Raffaele as well as to an increase in stationery
costs and entertainment costs in line with the larger workforce.
Amortization, depreciation and writedowns
Amortization, depreciation and writedowns amounted to Euro 1,779 thousand at
December 31, 2006 and Euro 1,706 thousand at December 31, 2007. These costs
remained broadly stable due to the routine replacement of equipment used in the
laboratories and pharmaceutical workshop.




                                            Pag. 33
                                                                                Statutory financial
                                                                                     statements at
                                                                                December 31, 2007




Financial income and charges
Financial income and charges were analyzed as follows in 2007 and 2006:
(amounts in thousands of Euro)                    31/12/2007     31/12/2006     Change         %
                                                                                             Change
FINANCIAL INCOME:
Interest and other financial income                      273            154          119         77,3%
Exchange gains                                             4              9           (5)      (55,6%)
Sundry                                                     1              1             -             -
Total financial income                                   278            164          114        69,5%
FINANCIAL CHARGES:
Finance lease interest charges                               -            (1)           1     (100,0%)
Other interest charges                                    (14)           (11)         (3)        27,3%
Roundings and allowances                                   (1)            (1)           0         0,0%
Exchange losses                                            (4)            (3)         (1)        33,3%
Sundry                                                     (6)            (7)           1      (14,3%)
Total financial charges                                  (25)           (23)         (2)         8,7%
Total financial income and (charges)                      253            141         112        79,4%

Net financial income increased from Euro 141 thousand in 2006 to Euro 253 thousand in
2007 (+79.4%). It is affected mainly by interest income on cash at bank and on hand.
Other interest charges mainly consists of the interest charges determined in the actuarial
calculation of pension and employee leaving indemnity liabilities.


3.2     Balance Sheet at December 31, 2007
The following table shows the balance sheet as reclassified based on sources and
applications of funds.
(amounts in thousands of Euro)                                   31/12/2007 31/12/2006

                                                                       (a)                  (b)
Non current assets
Fixed assets and other non current assets                                11.389               12.031
Total non current assets                                                11.389               12.031
Net working capital
Inventory                                                                   200                  119
Trade receivables and other commercial assets                             1.825                1.082
Tax receivables                                                           1.132                1.042
Other receivables and current assets                                      1.842                  485
Trade payables                                                          (5.168)              (3.326)
Other liabilities                                                       (5.061)              (4.763)
Total net working capital                                              (5.230)              (5.361)
Non current liabilities
Other non current liabilities                                              (745)             (1.683)
Total non current liabilities                                             (745)             (1.683)
TOTAL APPLICATIONS                                                        5.414               4.987

Shareholders' equity                                                    11.080               13.413
Net financial position                                                   5.666                8.426
TOTAL SOURCES                                                             5.414               4.987




                                            Pag. 34
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Non current assets
Non current assets at December 31, 2007 and 2006 are analyzed in the following table:
(amounts in thousands of Euro)                  31/12/2007      31/12/2006     % change


Tangible assets                                      2.077           2.325           (10,7%)
Goodwill                                                77              77               0,0%
Intangible assets                                    3.248           4.223           (23,1%)
Financial assets                                         5               1            400,0%
Tax receivables                                      1.851           1.273              45,3%
Other assets                                         4.131           4.131             (0,0%)
Total non current assets                            11.389          12.031           (5,3%)

At December 31, 2007, non current assets totaled Euro 11,389 thousand, some 5.3% less
than the Euro 12,031 thousand total at December 31, 2006.
At both dates, non current assets included other assets of Euro 4,131 thousand
representing the agreed price of a purchase option on research projects. The Company
has signed the agreement with Science Park Raf S.p.A. and its parent company
Fondazione Centro San Raffaele del Monte Tabor. This asset has been classified as non
current as the effectiveness of the option is subject to the admission of the Company’s
shares to trading on a regulated market. When this condition is satisfied, the contract will
be valid for eight years with the possibility of renewal for four more years every four
years. The asset will be decreased and the related charges incurred as from the moment
when the aforementioned condition is satisfied. At that point, the asset will be decreased
and the charges recorded over the next eight years as per the option agreement.
The decrease in non current assets in 2007 mainly regard the reductions in tangible and
intangible assets which decreased from Euro 2,325 thousand to Euro 2,077 (-10.7%) and
from Euro 4,223 thousand to Euro 3,248 thousand (-23.1%), respectively, from December
31, 2006 to December 31, 2007. This is due to the fact that investments made during the
year did not exceed amortization and depreciation.

Net working capital
The following table contains an analysis of net working capital at December 31, 2007 and
2006:
(amounts in thousands of Euro)                   31/12/2007 31/12/2006         % change


Inventory                                                 200            119          68,2%
Trade receivables and other commercial assets           1.825          1.082          68,7%
Tax receivables                                         1.132          1.042            8,6%
Other receivables and current assets                    1.842            485         280,1%
Trade payables                                        (5.168)        (3.326)          55,4%
Other liabilities                                     (5.061)        (4.763)           6,3%
Total net working capital                            (5.230)        (5.361)          (2,4%)

Net working capital was negative at both dates analyzed. It stood at Euro (5,361)
thousand at December 31, 2006 and Euro (5,230) thousand at December 31, 2007. It is
affected by the inclusion in other liabilities of payables of Euro 4,131 thousand regarding
the agreed price of a purchase option on research projects signed by the Company with
Science Park Raf S.p.A. and its parent company Fondazione Centro San Raffaele del Monte
Tabor. This liability has been classified as current as the contract makes the effectiveness
of the option subject to the admission of the Company’s shares to trading on a regulated
market.



                                          Pag. 35
                                                                              Statutory financial
                                                                                   statements at
                                                                              December 31, 2007




Net working capital did not change significantly from December 31, 2006 to December 31,
2007. However, we note the following changes to the various items included in the total
balance:
   •   Trade receivables and other commercial assets increased from Euro 1,082
       thousand to Euro 1,825 thousand (+68.7%) mainly because of the greater amount
       of services rendered;
   •   Tax receivables increased from Euro 1,042 thousand to Euro 1,132 thousand
       (+8.6%) mainly because of the VAT receivable arising during the period;
   •   Other receivables and current assets increased from Euro 485 thousand to Euro
       1,842 thousand (+280.1%) mainly because of public sector research grants
       accruing during the period but not yet received and because of costs directly
       related to the stock market listing process that were deferred in 2007 and will
       deducted from shareholders’ equity the following year as a direct reduction from
       the proceeds from this financial operation;
   •   Trade payables increased from Euro 3,326 thousand to Euro 5,168 thousand
       (+55.4%) due to an increase in operating activities.

Non current liabilities
The following table contains details of the items included in non current liabilities:
(amounts in thousands of Euro)                 31/12/2007 31/12/2006             % change


Liabilities for pensions and employee
leaving indemnity (TFR)                                  269            335           (19,7%)
Trade payables                                           476          1.348           (64,7%)
Total non current liabilities                            745          1.683          (55,7%)
Non current liabilities decreased from Euro 1,683 thousand at December 31, 2006 to Euro
745 thousand at December 31, 2007 (-55.7%). The largest change regarded non current
trade payables which fell from Euro 1,348 thousand to Euro 476 thousand (-64.7%) due
to the transfer to current liabilities of the relevant amount of revenues under the out-
licensing agreements with Takara Bio Inc.

Shareholders’ equity
Details of movements on shareholders’ equity are provided in the Notes to the Financial
Statements under Paragraph 22, Note 11.




                                            Pag. 36
                                                                             Statutory financial
                                                                                  statements at
                                                                             December 31, 2007




4.       ACCOUNTING TREATMENT OF RESEARCH & DEVELOPMENT COSTS

MolMed’s ordinary activities consist of pre-clinical and clinical development of innovative
bio-pharmaceutical anti-tumour therapeutics. These activities result in massive research
and development costs that represent a significant portion of the Company’s total costs.
MolMed’s research and development costs relate to two main types of activity:
     •   performance of pre-clinical and clinical studies to show the effectiveness of
         products, and obtain marketing authorisation from the regulatory authorities;
     •   study of the best processes and methods for the large-scale production of its
         products and/or product components.
These two activities are performed in parallel and are strictly related to one another.
The progress made with the development of the Company’s products, incurring related
costs, leads to an increase – sometimes an exponential one – in the value of the
Company’s products and intangible assets.
Given the Company’s operating activities and the characteristics of the trials and testing
conducted, research and development costs are expensed in full each year: the Company
believes that the current state of development of MolMed’s products makes it prudent not
to capitalise research and development costs.
The comments made above are confirmed by standard accounting practice in the sector:
all companies involved in the preclinical and clinical testing and development of
pharmaceutical and bio-pharmaceutical products tend to opt to charge research and
development costs to the income statement. This is so for both large multinational and
small biotech companies.


5.       HUMAN RESOURCES

MolMed’s average number of employees increased from 65 persons in 2006 to 77 in 2007.
The increase was needed so as to strengthen the workforce, especially in operating areas,
as a result of the increase in clinical development of the Company’s products.
Training was provided to people working in the various business areas. It was intended to
standardize knowledge and understanding of the management system and allow it to be
properly used by personnel in the various operating departments. Due to their specific
nature, scientific training programs were handled directly by the individual departments.
A number of courses on quality, safety and personal data protection completed the
training program during the year.
Departmental managers and the heads of the various operating areas were involved in a
specific training programme intended to improve their staff management skills and Group
working. This programme also covered motivational techniques and coaching useful in the
field of human resources management.
Company management took part in the “Leadership Effectiveness Analysis 360°” that will
continue in 2008 and regards the exploitation of leadership skills.
The Company has also continued its programme of courses aimed at all the staff. The aim
of this training is to bring all staff up to date with IT tools and to improve English language
skills.




                                            Pag. 37
                                                                                                                      Statutory financial
                                                                                                                           statements at
                                                                                                                      December 31, 2007




6.           DEALINGS WITH RELATED PARTIES

MolMed’s share ownership structure is such that no one shareholder holds a majority of
the voting rights that may be exercised at a General Meeting or a sufficient number of
votes to exercise a dominant influence over the Company. It is also such that none of the
shareholders is required to consolidate the MolMed S.p.A. financial statements.

Shareholders at December 31, 2007
                                                                                         The contracts between MolMed and
                                                                                         some of its shareholders regulate
                          Delfin S.àr.l. 10,915%
                                                               Science Park Raf S.p.A.
                                                                                         operational relations. They have been
     H-Equity S.àr.l. SICAR
          10,915%                                                     28,18%             entered into on an arm’s length basis
                                                                                         and     do     not    constitute   the
                                                                                         establishment     of   any    form  of
        Fininvest S.p.A. 21,83%                                                          management and control.
                                                   Airain Lda 28,16%
                                                   The Company by-laws include clauses
that safeguard minority shareholders and exclude the possibility that any shareholder may
exercise management and control over the Company.

Dealings with related parties are analyzed below:
(amounts in thousands of Euro)                                                                                                 Use of assets
                                          Trade             Other         Trade            Other                   Costs for
                                                                                                       Revenues                owned by 3rd
                                       receivables          assets       payables        liabilities               services
                                                                                                                                  parties
Science Park Raf S.p.A.                             -          2.066             42           2.066           15         303          1.079
Fondazione Centro S.Raffaele                       879         2.065            799           2.065         564          634             -
Diagnostic San Raf S.p.A                            -             -               3              -           -             9             -
HSR Resnati S.p.A.                                  -             -               7              -           -            22             -
Editrice San Raffaele                               -             -              15              -           -            30             -
Total                                              879         4.131            866           4.131         579          998          1.079

The trade receivables and revenues regard bone marrow transplant cellular manipulation
services and other gene therapy services in support of research activities as provided to
Fondazione Centro San Raffaele del Monte Tabor.
Other assets include Euro 4,131 thousand representing the agreed price of the purchase
option on research projects as agreed in 2001 by the Company with its shareholder
Science Park Raf S.p.A. and its parent company Fondazione Centro San Raffaele del Monte
Tabor: the agreement gives the Company the right to buy from the other parties research
projects conducted by them in the field of gene and molecular therapy for cancer and
AIDS. The cost of the option is Euro 4,131 thousand and its effectiveness is subject to the
admission of the Company’s shares to trading on a regulated market. When this condition
is satisfied, the contract will be valid for eight years with the possibility of renewal for four
more years every four years. The Company has also recorded a corresponding liability
under “Other liabilities”. The asset will be decreased and the related charges incurred as
from the moment when the aforementioned condition is satisfied. At that point, the asset
will be decreased and the charges recorded over the next eight years as per the option
agreement.
The trade payables and costs for services regard certain support services – and research
services – provided under collaboration agreements by Fondazione Centro San Raffaele del
Monte Tabor and several companies controlled by it.
“Use of third party assets” regards rent paid to Science Park Raf S.p.A. for the premises
used by MolMed insider the San Raffaele Science Park.
Science Park Raf S.p.A. is a subsidiary of FinRaf S.p.A. a company with which MolMed
S.p.A. has no direct relationships. FinRaf S.p.A. is, in turn, controlled by the Fondazione
Centro San Raffaele del Monte Tabor which operates in the clinical/hospital sector and in
the medical research sectors, among others.



                                                                        Pag. 38
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




All dealings with related parties have taken place at market conditions.
There are no dealings with other related parties.
We decided it was not worthwhile preparing a table showing income and cash flows
regarding dealings with related parties. This is due to the fact that, in the period
considered, they related directly to the relations and transactions highlighted above and to
payments made by shareholders in relation to the movements on share capital described
in Paragraph 16 and in Note 11 to the Financial Statements.


7.     OWN SHARES

The Company does not own any of its own shares either directly or indirectly. During the
year it did not purchase or sell any of its own shares either directly or indirectly.


8.     ADDITIONAL INFORMATION

8.1.   Information on financial risks

Information on financial risks is provided in Paragraph 32 of the Notes to the Financial
Statements.

8.2.   Protection of information and sensitive data

In light of the activities carried out by the Company, the protection of the personal data
and information collected and stored both electronically and using traditional methods is of
great importance. For this reason, the Company has adopted a personal data protection
system that meets the requirements of the applicable regulations as included in the Code
on Personal Data Protection (Legislative Decree no 196/2003).
During the year just ended, the Company kept its intranet site up to date so as to grant
employees access to its entire privacy protection system by means of this useful means of
internal communications. This system also enables employees to keep abreast of data
protection updates as and when they take place.
The Company has also updated the Security Planning Document (SPD) previously drafted
as well as supplementing the information and policies that render the security measures
adopted effective.
In any case, we note that, during the year, there were no omissions, actions or other
situations that might have threatened the safety of the personal date of anyone within the
Company.


8.3.   Management and control activities

As described in paragraph 6, MolMed’s share ownership structure is such that no one
shareholder holds a majority of the voting rights that may be exercised at a General
Meeting or a sufficient number of votes to exercise a dominant influence over the
Company. It is also such that none of the shareholders is required to consolidate the
MolMed S.p.A. financial statements.




                                           Pag. 39
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




8.4.   Implementation of an organizational model in terms of Legislative Decree
       no 231/2001

In terms of Legislative Decree no 231 of June 8, 2001, the legal entities are
administratively responsible for offences committed by the directors, managers or
employees in their interests and to their benefit. This is unless it can be shown, among
other things, that an organization, management and control structure capable of
preventing such offences has been adopted and properly implemented.
During 2007, in accordance with the relevant regulations, the Company approved the
adoption of an organization, management and control model to prevent offences in terms
of the aforementioned Legislative Decree no 231 of June 8, 2001. It set up a Supervisory
Body with the necessary requirements of autonomy, independence and professionalism
and the functions provided for in the model. With the support of the Supervisory Body and
a team that also included external advisors, the Company began to test and document the
business procedures and codes of conduction covered by the Model. It adapted them to
changes in the business organization and to changes in regulations and the law.


8.5.   MolMed and the environment and health and safety in the workplace

The facilities at which the Company operates, as well as its production activities, must
comply with stringent environmental regulations and work safety regulations. These
regulations govern, among other things, air pollution emissions; the dumping of harmful
substances into water, on the ground and underground; storage and disposal of waste and
hazardous materials; and decontamination of contaminated sites.
The Company has adopted procedures to ensure the safe handling and disposal of
biological waste, in accordance with Italian legislative decrees No. 626/94 and No. 206/01
regarding the use of genetically modified organisms (“GMOs”). In this regard, the
Company’s laboratory space has been registered with, and authorisation for each use of a
GMO is obtained from, the Ministry of Health. MolMed has two laboratories that are
considered “containment laboratories” and a total of three laboratories in which Type-2
and Type-3 GMOs can be used. All relevant personnel have received specific training on
the subject, and operates subject to procedures intended to minimise the risk of biological
contamination.
With regard to chemical agents, MolMed’s laboratories are “medium risk” within the
meaning of Legislative Decree No. 25/02. When using these chemical agents, personnel
use protective equipment and devices in line with industry-standard practice in the sector.
Potentially infected waste or waste subject to a chemical risk is disposed of in accordance
with the applicable regulations (Legislative Decree 152/06), with the support of a
specialised sub-contractor and following a dedicated procedure.
The Company believes that it is carrying out its activities in full compliance with all
environmental regulations, and has obtained all the authorisations required by applicable
law. It intends to operate in an environmentally responsible manner and identify methods
aimed at improving the impact its activities have on the environment.
There are no particular environmental issues that might affect the Company’s use of its
tangible assets.




                                          Pag. 40
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




9.     SHARES HELD BY DIRECTORS, GENERAL MANAGER, STATUTORY AUDITORS
       AND MANAGERS WITH STRATEGIC RESPONSIBILITY (ART. 79 CONSOB
       REGULATIONS RESOLUTION N. 11971 OF 14.05.99)

Pursuant to Article 79 of the Rules on Issuing Companies, we note that no shares in the
Company are held by Directors, General Manager, Statutory Auditors or managers with
strategic responsibility. Likewise no shares are owned by their non legally separated
spouses or by their minor age children whether directly or through a subsidiary company,
a trust company or any intermediate party.


10.    SIGNIFICANT POST BALANCE SHEET EVENTS

Information on significant post balance sheet events is provided under paragraph 33 of
the Notes to the Financial Statements.



11.    BUSINESS OUTLOOK

Given the current trends in the international biotech sector, in the coming year MolMed
will maintain its commitment to focus even more on therapeutic areas and indications
considered most promising, and to get the most out of its portfolio of products through
collaboration agreements.



12.    PROPOSED ALLOCATION OF THE LOSS FOR THE YEAR

The MolMed S.p.A. statutory financial statements at December 31, 2007 report a net loss
for the year of Euro 12,695,771, some Euro 9,606,152 of it already rescheduled during
the year.
We propose taking the remaining losses of Euro 3,089,619 to accumulated losses.


                                     ***************

The Board of Directors would like to thank all personnel for their services and the Board of
Statutory Auditors and the External Auditors for their audit and control work and for their
valuable comments and suggestions.

Milan, March 19, 2008




Claudio Bordignon
Chairman of the Board of Directors
Managing Director




                                          Pag. 41
                                                                                  Statutory financial
                                                                                       statements at
                                                                                  December 31, 2007




Financial statements at December 31, 2007

13.     BALANCE SHEET

(amounts in thousands of Euro)                                  Note   31/12/2007      31/12/2006

ASSETS


Tangible assets                                                  1          2.077              2.325
Goodwill                                                         2             77                 77
Intangible assets                                                2          3.248              4.223
Financial assets                                                 3              5                  1
Tax receivables                                                  4          1.851              1.273
Other assets                                                     5          4.131              4.131
TOTAL NON CURRENT ASSETS                                                   11.389            12.031


Inventory                                                        6            200                119
Trade receivables and other commercial assets                    7          1.825              1.082
Tax receivables                                                  8          1.132              1.042
Other receivables and sundry assets                              9          1.842                485
Other financial assets                                          9b             75               -
Cash at bank and on hand                                        10          5.591             8.433
TOTAL CURRENT ASSETS                                                       10.666            11.161
Assets held for sale                                                          -                  -
TOTAL ASSETS                                                               22.055            23.192

LIABILITIES AND SHAREHOLDERS' EQUITY


Share capital                                                               16.229            22.487
Share premium reserve                                                         -               10.502
Other reserves                                                               9.606              -
Stock option plan reserve                                                    1.152             1.024
Actuarial valuation reserve                                                     21                 7
Retained earnings (accumulated losses)                                     (3.232)           (9.910)
Profit (loss) for the year                                                (12.696)          (10.697)
TOTAL SHAREHOLDERS' EQUITY                                      11         11.080            13.413

Liabilities for pensions and employee termination indemnities
(TFR)                                                           12            269                335
Trade payables                                                  13            476              1.348
TOTAL NON CURRENT LIABILITIES                                                 745              1.683


Finance lease payables                                          14           -                     7
Trade payables                                                  15          5.168              3.326
Other liabilities                                               16          5.061              4.763
TOTAL CURRENT LIABILITIES                                                  10.230              8.096
Liabilities held for disposal                                                 -                  -
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                 22.055            23.192




                                                Pag. 42
                                                                                Statutory financial
                                                                                     statements at
                                                                                December 31, 2007




14.      INCOME STATEMENT

(amounts in thousands of Euro)                             Note   31/12/2007       31/12/2006

      Revenues                                             17           2.984               1.920
      Other income                                         18             830                 805
Total operating revenues                                               3.814                2.725

      Purchases of raw and consumable materials            19         (1.735)              (1.552)
      Costs for services                                   20         (7.365)              (5.564)
      Costs for use of assets owned by third parties       21         (1.129)              (1.040)
      Personnel costs                                      22         (4.562)              (3.486)
      Other operating costs                                23           (265)                (142)
      Amortization, depreciation & writedowns              24         (1.706)              (1.779)
Total operating costs                                                (16.763)           (13.563)
Operating loss                                                       (12.949)           (10.838)

      Financial income                                                   278                  164
      Financial charges                                                  (25)                 (23)
Net financial income and charges                           25            253                  141
Loss before taxation                                                 (12.696)           (10.697)

   Taxes on income                                         26              -                   -
Net loss from continuing activities                                  (12.696)           (10.697)
   Result from activities disposed of                                      -                   -
Profit (Loss) for year                                               (12.696)           (10.697)



Basic profit/(loss) per share                                       (0,3882)           (0,5367)
Diluted/(profit)/loss per share                                     -                  -




                                                 Pag. 43
                                                                                      Statutory financial
                                                                                           statements at
                                                                                      December 31, 2007




15.     STATEMENT OF CASH FLOWS

The statements of cash flows at December 31, 2007 and December 31, 2006 are set out
below.

(amounts in thousands of Euro)                                                    31/12/2007     31/12/2006



Cash and cash equivalents                                                              8.433           11.701
Opening cash and cash equivalents                                          A           8.433          11.701

Cash flow from operating activities:
Profit (Loss) for the year                                                            (12.696)        (10.697)
Amortization/depreciation of intangible/tangible assets                                 1.706           1.779
Increase (decrease) in TFR/Employee leaving indemnity provision                           (52)             63
Other changes                                                                             128              68
Cash flow from operating activities before changes in working capital                (10.914)         (8.787)

Changes in current assets and liabilities:
(Increase) decrease in inventory                                                          (81)            (16)
(Increase) decrease in trade receivables and other receivables                         (2.266)            (93)
Increase (decrease) in trade payables and other payables                                2.141          (1.048)
Total changes in current assets and liabilities                                         (206)         (1.157)
(Increase) decrease in non current tax receivables                                       (577)             71
Increase (decrease) in non current trade payables                                        (872)              -
Total cash flow from operating activities                                  B         (12.570)         (9.873)

Cash flow from investing activities:
Net investment (divestment) in tangible assets                                           (455)         (1.152)
Net investment (divestment) in intangible assets                                          (27)           (233)
Net investment (divestment) in financial assets                                            (4)            -
Total cas flow from investing activities                                   C            (486)         (1.385)

Cash flow from financing activities:
Increases in share capital and share premium reserve                                   10.220           8.000
Other changes in shareholders' equity                                                       -0            -
Change in medium term finance lease payables                                              -               (8)
Change in short term finance lease payables                                               (7)             (2)
Total cash flow from financing activities                                 D           10.213           7.990

Cash flow generated (absorbed) during the year                          E=B+C+D       (2.843)         (3.268)

Closing cash and cash equivalents                                         A+E          5.591           8.433




                                                       Pag. 44
                                                                                                                              Statutory financial
                                                                                                                                   statements at
                                                                                                                              December 31, 2007




16.        STATEMENT OF SHAREHOLDERS’ EQUITY

The following table contains details of movements on shareholders’ equity in 2006 and
2007.
(amounts in thousands of Euro)                Share        Share       Other     Stock option   Actuarial       Retained         Profit         Total
                                              capital    premium      reserves       plan       valuation       earnings         (Loss)     shareholders'
                                                          reserve                  reserve       reserve      (acc. Losses)     for year       equity
Balance at January 1, 2006                    17.182          -       11.761            956            (5)        (4.094)        (9.770)        16.030
Allocation of prior year loss                     -           -        (3.954)           -            -            (5.816)         9.770            -
Share capital increase                          5.305      10.502      (7.807)           -            -               -              -            8.000
Actuarial valuation                               -           -           -              -              12            -              -                12
Personnel cost for stock options                  -           -           -                68         -               -              -                68
Net loss for year                                 -           -           -              -            -               -          (10.697)       (10.697)
Balance at December 31, 2006                   22.487      10.502         -            1.024              7       (9.910)       (10.697)         13.413




(amounts in thousands of Euro)                Share        Share       Other     Stock option   Actuarial       Retained         Profit         Total
                                              capital    premium      reserves       plan       valuation       earnings         (Loss)     shareholders'
                                                          reserve                  reserve       reserve      (acc. Losses)     for year       equity
Balance at January 1, 2007                     22.487       10.502        -            1.024              7       (9.910)       (10.697)         13.413
Payment of remaining share capital increase       193          -          -              -            -               -              -              193
Allocation of prior year loss                     -        (10.502)       -              -            -              (195)        10.697            -
Payment for future share capital increases        -            -        9.301            -            -               -              -            9.301
Share capital increase                          3.436        6.591     (9.301)           -            -               -              -              726
Reduction in share capital to cover losses     (9.888)      (6.591)     9.606            -            -             6.873            -              -
Personnel cost for stock options                  -            -          -               128         -               -              -               128
Actuarial valuation                               -            -          -              -              14            -              -                14
Net loss for year                                 -            -          -              -            -               -          (12.696)       (12.696)
Balance at December 31, 2007                   16.228          -        9.606          1.152            21        (3.232)       (12.696)         11.080




                                                                    Pag. 45
                                                                                  Statutory financial
                                                                                       statements at
                                                                                  December 31, 2007




17.     BALANCE SHEET IN TERMS OD CONSOB RESOLUTION N. 15519 OF JULY
        27, 2006

(amounts in thousands of Euro)                                  Note   31/12/2007      31/12/2006

ASSETS

Tangible assets                                                  1           2.077            2.325
Goodwill                                                         2              77               77
Intangible assets                                                2           3.248            4.223
Financial assets                                                 3               5                1
Tax receivables                                                  4           1.851            1.273
Other assets                                                     5           4.131            4.131
including with related parties                                  28          4.131             4.131
TOTAL NON CURRENT ASSETS                                                  11.389            12.031

Inventory                                                        6            200               119
Trade receivables and other commercial assets                    7          1.825             1.082
including with related parties                                  28           738                716
Tax receivables                                                  8          1.132             1.042
Other receivables and sundry assets                              9          1.842               485
Other financial assets                                          9b             75               -
Cash at bank and on hand                                        10          5.591             8.433
TOTAL CURRENT ASSETS                                                      10.666            11.161
Assets held for sale                                                          -                  -
TOTAL ASSETS                                                              22.055            23.192
LIABILITIES AND SHAREHOLDERS' EQUITY

Share capital                                                               16.229           22.487
Share premium reserve                                                         -              10.502
Other reserves                                                               9.606              -
Stock option plan reserve                                                    1.152            1.024
Actuarial valuation reserve                                                     21                7
Retained earnings (accumulated losses)                                     (3.232)           (9.910)
Profit (loss) for the year                                                (12.696)          (10.697)
TOTAL SHAREHOLDERS' EQUITY                                      11        11.080            13.413

Liabilities for pensions and employee termination indemnities
(TFR)                                                           12             269              335
Trade payables                                                  13             476            1.348
Finance lease payables                                                        -                 -
TOTAL NON CURRENT LIABILITIES                                                745              1.683

Finance lease payables                                          14            -                   7
Trade payables                                                  15           5.168            3.326
including with related parties                                  28            866               151
Other liabilities                                               16           5.061            4.763
including with related parties                                  28          4.131             4.131
TOTAL CURRENT LIABILITIES                                                 10.230              8.096
Liabilities held for disposal                                                 -                  -
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                22.055            23.192




                                                 Pag. 46
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




18.     INCOME STATEMENT IN TERMS OF CONSOB RESOLUTION N. 15519 OF
        JULY, 2006

(amounts in thousands of Euro)                        Note   31/12/2007        31/12/2006



      Revenues                                        17           2.984                1.920
   including from related parties                     30            579
   Other income                                       18            830                  805
Total operating revenues                                          3.814                2.725


   Purchases of raw and consumable materials          19          (1.735)              (1.552)
   Costs for services                                 20          (7.365)              (5.564)
   including from related parties                     30            (998)
   Costs for use of assets owned by third parties     21          (1.129)              (1.040)
   including from related parties                     30          (1.079)
   Personnel costs                                    22          (4.562)             (3.486)
   Other operating costs                              23            (265)               (142)
   Amortization, depreciation & writedowns            24          (1.706)             (1.779)
Total operating costs                                           (16.763)            (13.563)
Operating loss                                                  (12.949)            (10.838)


   Financial income                                                 278                   164
   Financial charges                                                (25)                  (23)
Net financial income and charges                      25            253                   141
Loss before taxation                                            (12.696)            (10.697)


   Taxes on income                                    26              -                    -
Net loss from continuing activities                             (12.696)            (10.697)
   Result from activities disposed of                                 -                    -
Profit (Loss) for year                                          (12.696)            (10.697)




                                            Pag. 47
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




Notes to the Financial Statements

19.    GENERAL INFORMATION

The MolMed S.p.A. 2007 financial statements have been prepared in accordance with the
International Accounting Standards (“IFRS”) issued by the International Accounting
Standards Board (“IASB”) and approved by the European Union and with the orders issued
in implementation of Article 9 of Legislative Decree no 38/2005. IFRS is also intended as
including all revised International Accounting Standards (“IAS”) as well as all of the
interpretations given by the International Financial Reporting Interpretations Committee
(“IFRIC”), previously known as the Standing Interpretations Committee (“SIC”).
MolMed adopted IFRS as from January 1, 2007 so these are this is the first set of financial
statements prepared in accordance with these standards.
As the prior year financial statements were prepared in accordance with the Accounting
Standards issued by the Italian Accounting Board (Organismo Italiano di Contabilità -
OIC), as required by the applicable regulations, the prior year comparative figures have
been recalculated and restated in accordance with International Accounting Standards
(IFRS).
The Appendix on the “Transition to International Accounting Standards” contains the
reconciliations required by IFRS 1, together with notes on the effects of adopting these
accounting standards.
These schedules have been audited by Deloitte & Touche S.p.A.
We also note that MolMed prepared the financial statements at September 30, 2007 for
inclusion in the Offering Circular prepared for the procedure of admission of the ordinary
shares in MolMed S.p.A. (hereafter “the Company”) to a listing on the Electronic Stock
Market organized and managed by Borsa Italiana S.p.A. Furthermore, with reference to
Regulation 809/2004/CE and Recommendation 05-054b of the Committee of European
Securities Regulators (“CESR”), the Company has prepared financial statements at
December 31, 2006, 2005 and 2004 as restated in accordance with International
Accounting Standards, solely for the purposes mentioned above. For this purpose, the
effects of adopting the IFRS were initially determined with regard to the balance sheet at
January 1, 2004.
We note that shareholders’ equity at January 1, 2006, as determined for the purposes of
preparing these financial statements at December 31, 2007 in accordance with IFRS, does
not differ significantly from the shareholders’ equity at January 1, 2006 as determined
when preparing the financial information included in the Offering Circular.
The financial statements at December 31, 2007, as restated in accordance with IFRS,
comprise the Balance Sheet, the Income Statement, the Statement of Shareholders’
Equity, the Statement of Cash Flows and these Explanatory Notes. With reference to
CONSOB Resolution no 15519 of July 27, 2006 (implementing Article 9(3) of Legislative
Decree no 38/2005) on the financial statements, dealings with related parties have been
highlighted while there are no significant non recurring transactions or atypical or unusual
transactions.
The balance sheet format adopted is based on the presentation and classification of
current and non current assets in accordance with IAS 1. The income statement format is
based on the classification of costs by nature as this classification is considered to provide
the best representation of the company situation.
The statement of cash flows has been prepared based on the indirect method.



                                           Pag. 48
                                                                               Statutory financial
                                                                                    statements at
                                                                               December 31, 2007




20.       SUMMARY OF ACCOUNTING POLICIES AND VALUATION METHODS

General principles
As already stated, the financial statements have been prepared based on IAS/IFRS
international accounting standards in accordance with the historic cost principle.
The financial statements have been prepared on a going concern basis as the financial
resources made available by the shareholders were considered adequate to meet the cash
requirements projected in the business plans. This is despite the fact that, as stated in
the Report on Operations, the Company has, since it was incorporated, sustained losses
mainly because of the massive research and clinical development costs incurred for its
products and its business plans project that further operating losses will be incurred at
least until one of its products is launched for sale or out licensed.
The IASB has issued the following documents which have already been approved by the
European Union and were applicable for the first time from January 1, 2007:
   •      IAS 1 – Presentation of Financial Statements: supplementary information on
          capital: amendment issued in August 2005 and effective as from January 1, 2007;
   •      IFRS 7 – Financial instruments: supplementary information: issued in August 2005
          and effective as from January 1, 2007;
   •      IFRIC 8 – Scope of application of IFRS 2: issued in January 2006 and effective as
          from January 1, 2007;
   •      IFRIC 9 – Reassessment of embedded derivatives: issued in March 2006 and
          effective as from January 1, 2007;
      •   IFRIC 10 – Interim financial reporting and impairment: issued in July 2006 and
          effective as from January 1, 2007.
The above documents do not have any significant impact on shareholders’ equity or the
result for the year.
The new accounting standards or interpretations issued by the IASB that will become
effective in the coming years are set out below:
   •      IFRIC 11 – Group and treasury share transactions: issued in November 2006;
   •      IFRS 8 – Operating segments: issued in November 2006 and effective from January
          1, 2009.
The Company is assessing the potential impact of the application of IFRS 8 on future
financial statements.
The accounting policies adopted are set out below.

Business combinations
Acquisitions of subsidiary companies are accounted for under the acquisition method. The
acquisition cost is determined based on the sum of current value, at the transaction date,
of the assets given, the liabilities incurred or taken on and the financial instruments issued
by the Group in exchange for control of the business acquired, plus costs directly
attributable to the combination.
The assets, liabilities and identifiable contingent liabilities of the business acquired that
respect the recognition criteria of IFRS 3 are recorded at current value at the acquisition
date. This is except for non current assets (or groups of assets to be disposed of) which
are recorded at the lower of book value and fair value net of selling costs.
Goodwill arising on acquisition is recorded as an asset and initially valued at cost. The
cost of goodwill represents the excess of the acquisition cost over the Company’s stake in
the current value of the assets, liabilities and identifiable contingent liabilities recorded. If,
after these amounts have been calculated, the stake in the current value of the assets,


                                             Pag. 49
                                                                             Statutory financial
                                                                                  statements at
                                                                             December 31, 2007




liabilities and identifiable contingent liabilities exceeds the acquisition cost, the excess is
charged immediately to the income statement.
Upon the first time application of IFRS, MolMed opted for the exemption available under
IFRS 1 from the retrospective application of IFRS 3 to business combinations previously
completed. This exemption was applied with regard to the acquisition of 100% of
research company Genera S.p.A, in December 2001 followed by its merger through
incorporation into MolMed S.p.A. with effect from May 2, 2002.


Impairment
At every balance sheet date, the book value of tangible assets, intangible assets and
equity investments must be reviewed to check whether or not there are any signs that
they have been impaired. If there are signs of impairment, the recoverable value of the
assets is estimated so as to determine the amount of the writedown needed. Where it is
not possible to estimate the recoverable value of individual assets, the Company estimates
the recoverable value of the cash generating unit to which the asset belongs.
Intangible assets with an indefinite useful life (goodwill) are subjected to an annual
impairment test irrespective of whether or not there are any actual signs of impairment.
The recoverable amount is equal to the greater of fair value less selling costs and value in
use. When determining value in use, estimated future cash flow is discounted to bring it
into line with present value using an interest rate before taxation that reflects the market
value of the cost of borrowing and the specific risks relating to the asset. If the estimated
recoverable value of an asset or a cash generating unit is lower than book value, the asset
is written down to the recoverable value. The impairment is recorded immediately in the
income statement.
If the reasons for an impairment writedown cease to apply, the book value of the asset or
cash generating unit – except for goodwill – is increased to the new value based on the
estimated recoverable value. This cannot exceed the net book value that would have
arisen if the value of the asset had never been written down due to impairment. The
writeback of value is recorded through the income statement.


Tangible assets
Tangible assets – stated net of accumulated depreciation – are recorded at purchase cost
including all direct incidental charges. Cost is also reduced for commercial discounts.
Depreciation is charged to the income statement. It is calculated based on the estimated
utilization and economic/technical life of the asset considering its remaining useful life.
The depreciation rates set out below are considered a fair reflection of this method. They
have not changed since prior year:
        -   General and laboratory plant and machinery            10-30%
        -   Laboratory equipment                                  10-20%
        -   Electronic office equipment                           20%
        -   Office furniture and equipment                        12%
For newly purchased assets, the above rates of depreciation have, essentially, been
applied as from the date the assets are ready for use.
Ordinary maintenance costs are charged in full to the income statement. The cost of
maintenance work that increases the assets or improves their performance are recorded
as increases to the value of the tangible assets in question and depreciated over the
remaining useful life of the said assets.
Improvements to assets held under operating leases are depreciated over their estimated
useful lives or, if shorter, over the remaining period of the operating lease agreements.



                                            Pag. 50
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




Leased assets
Lease agreements are classified as finance leases when the terms of the agreement
substantially transfer all of the risks and benefits of ownership to the lessee. All other
leases are considered operating leases. Assets held under finance lease agreements are
recorded as tangible assets at the lower of their fair value on the date the lease was
signed and the present value of the minimum payments due under the lease agreement.
The liability towards the lessor is recorded under financial payables. The assets are
depreciated using the rates stated above. Lease payments are split between capital and
interest so as to obtain a constant rate of interest on the outstanding liability. The
financial charges are charged directly to the income statement for the year.
Leases where the lessee does not substantially assume all of the risks and benefits of
ownership are considered operating leases. Costs under such agreements are charged to
the income statement on a straight line basis over the duration of the agreement.


Intangible assets
Intangible assets are only capitalized if they are identifiable and controllable, it is
foreseeable that they will generate future economic benefits and their cost can be reliably
determined.
Intangible assets may be divided between assets with a determinate useful life and assets
with an indeterminate useful life.
Intangible assets with a determinate useful life are valued at purchase or production cost
net of accumulated amortization and impairment losses. Amortization is charged over the
estimated useful life of the assets and commences when the asset becomes available for
use. The useful life is reviewed every year and any changes are applied thenceforth.
Intangible assets with an indeterminate useful life are not amortized. Instead, they are
subjected to impairment tests annually or more frequently if necessary.

Goodwill
Goodwill is recorded as an asset with an indeterminate useful life. It is not amortized by
subjected to an impairment test on an annual basis or more frequently if necessary, also
to confirm that it still has an indeterminate useful life. Impairment losses are charged
immediately to the income statement and are not written back subsequently. Once
initially recorded, goodwill is valued at cost less any accumulated impairment losses.

Other intangible assets
Other intangible assets are recorded at historic purchase cost, including direct incidental
charges, or based on the costs directly incurred to create them. They are amortized on a
straight line basis over their estimated useful life. This is estimated at ten years except
for certain costs regarding concessions, licenses and software which are amortized over
five years.


In more detail:
•   Concessions, licenses and trademarks
    These assets regard costs under license and sub-license agreements for intellectual
    property used in the development of the Company’s products. They are amortized on
    a straight line basis over their future useful life which is estimated at ten years.
•   Patents and intellectual property rights
    Patents that have been purchased are initially recorded at purchase cost and amortized
    on a straight line basis over their future useful life which is estimated at ten years.

                                               Pag. 51
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




•   Research and Development costs
    Research costs are charged to the income statement for the period in which they are
     incurred.
    In-house costs for the development of new products are recorded as intangible assets
    only if the following conditions are satisfied:
        • It is technically possible to complete the product in such a way as to make it
            available for use or sale and there is an intention to do so;
        • The Company is able to use or sell the asset;
        • There is evidence that the costs incurred will generate probable future economic
            benefits. This evidence may consist of the existence of a market for the
            products resulting from the development activities or a possible internal use;
        • There are sufficient technical and financial resources to complete the
            development and the sale or internal use of the products developed;
        • The costs relating to the asset during development can be reliably valued.
We note that MolMed’s typical activities consist of pre-clinical and clinical development of
innovative bio-pharmaceutical products. Given the current state of development of the
products, research and development costs cannot be capitalized.

Receivables
Receivables are initially recorded at nominal value (representing the fair value of the
transaction). They are then stated at amortized value as reduced by writedowns recorded
in the income statement and made necessary where there is evidence that the receivables
value has been impaired.
These writedowns are determined as the difference between the book value of the
receivables and the present value of estimated future cash inflows as discounted at the
effective rate of interest. For current receivables which are little affected by the time
component, the net valuation is equal to nominal value less impairment losses.

Financial assets
Financial assets regard items such as guarantee deposits that the Company intends to
hold until maturity and is capable of so doing. These assets do not fulfill the requirements
for classification as cash equivalents. They are recorded and removed from the balance
sheet based on the date of negotiation. These assets are initially recorded at fair value and
subsequently valued based on the amortized cost method, net of writedowns made to
reflect impairment losses.

Non current assets destined for sale
Non current assets (and groups of assets destined for sale) classified as “held for sale” are
valued at the lower of their previous book value and market value net of selling costs.
Non current assets (and groups of assets destined for sale) are classified as “held for sale”
when their book value is expected to be recovered through sale rather than through
utilization in the operating activities of the business. This condition is only satisfied when
sale is highly likely, the asset (or group of assets) is available for immediate sale in its
current condition and the Company has made a commitment to sell and this will take place
within twelve months of the date of classification under this heading.

Inventory
Inventory is recorded at the lower of cost and net realizable value based on market
trends. Purchase cost is calculated based on weighted average cost.
The gross value of inventory so determined is adjusted by provisions made to take
account of obsolete and slow moving stock.


                                           Pag. 52
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




Cash and cash equivalents
Cash and cash equivalents includes cash, bank current accounts and bank deposits
refundable on demand as well as other highly liquid short term financial investments that
may be readily converted into cash and are not subject to a significant risk of a change of
value. Cash and cash equivalents are valued at fair value which is equal to nominal value
or cost as increased by any interest accruing.

Employee benefits
The Trattamento di fine rapporto (Employee termination indemnity) is classified as a post-
employment benefit, in fact, a defined benefit plan. The amount already accruing must be
projected so as to estimate the amount payable upon termination of the employment
relationship and then discounted, using the Projected unit credit method. This actuarial
method uses demographic and financial assumptions to make a reasonable estimate of the
benefits accruing in favor of each employee for their services.
The actuarial valuation is used to charge the current service cost to the income statement
under “personnel costs”. The current service cost determines the amount of the rights
accruing in favor of the employees during the year. It is also used to record a charge
under “Financial income/charges” for the theoretical interest charge the company would
incur if it had to obtain a loan for the same amount as the TFR on the market.
Actuarial gains and losses reflecting the effects of changes in the actuarial assumptions
used are recorded directly under shareholders’ equity without passing through the income
statement.

Share-based payments (stock option plans)
The Company grants additional benefits to the President and General Manager through
stock option plans. Pursuant to IFRS 2 – Share-based payment – these plans represent a
form of remuneration for the beneficiaries. The cost is equal to the fair value as calculated
on the date the option rights are granted and is recorded in the income statement on a
straight line basis over the vesting period i.e. the date between the date the stock option
plan was granted and the date the rights matured. The other side of the entry is made
directly to shareholders’ equity. Changes in fair value after the grant date do not have an
effect on the initial valuation.

Financial payables
Financial payables consist of liabilities arising under finance lease agreements.

Payables
Trade accounts payable and other payables are recorded based on the amortized cost
method. Given the nature and due date of the payables, this is normally the same as
nominal value.

Provisions
This includes provisions made for current obligations (legal or implicit) and obligations
relating to a past event where performance of the obligation is likely to lead to the
deployment of resources whose amount can be reliably estimated. If the expected
utilization of resources extends beyond a year, the obligation is recorded at present value
as determined by discounting projected future cash flows at a rate of interest that takes
account of the cost of borrowing and the risk of the liability.
The provisions are reviewed whenever financial statements are prepared and are adjusted,
as necessary, to reflect the best current estimate. Any changes are reflected in the
income statement for the period in which the change took place. Risks involving a possible
liability are disclosed in the explanatory notes but no provision is made.


                                           Pag. 53
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




Recognition of revenues and income
Revenues are recognized insofar as is it is probable that the Company will enjoy economic
benefits and their amount can be reliably determined. Revenues are stated net of
discounts, allowances and returns.
Revenues from the performance of services are recognized with reference to the state of
completion of the service only when the result of the service can be reliably estimated.
Revenues regarding upfront payments on the sale to third parties of rights to company
products under development have been spread over the period between the date of
signature of the out-licensing contracts and the next development milestone laid down by
the contracts.
Government grant income is recognized when it is reasonably certain that it will be
received. This takes place when the grant is approved by the relevant public sector body.
This income is recognized based on the costs actually incurred as a percentage of the total
costs budgeted for the research project in respect of which the grant has been awarded.
Interest income is accounted for based on the effective rate of return on an accruals basis.

Recognition of costs and charges
Costs and charges are accounted for on an accruals basis when they regard goods and
services purchased or consumed during the year or when they have no identifiable future
benefit.
Interest charges are recorded on an accruals basis considering the amount financed and
the effective rate of interest applicable.

Taxes on income
Taxes on income include current and deferred taxation.
Current taxation is determined based on a reasonable estimate of the tax rate expected
for the whole year. Taxable income differs from the result shown in the income statement
as it includes revenues and charges that will be taxable or deductible in other years and
also includes those items that will never be taxable or deductible. The current tax liability
is calculated using the rates in force at the balance sheet date.
Deferred taxes are taxes that the Company expects to pay or recover on timing
differences between the book value of assets and liabilities in its financial statements and
the corresponding tax value used when calculating taxable income. These taxes are
accounted for using the balance sheet liabilities method.
Deferred tax liabilities are generally recorded for all taxable timing differences except in
this cases where the Company is able to control the reversal of these timing differences
and it is likely that they will not be reversed in the foreseeable future.
Any deferred tax assets, arising on timing differences and/or accumulated tax losses, are
recorded insofar as it is probable that there will be future taxable income allowing for the
utilization of the deductible timing differences and/or the accumulated tax losses.
These assets and liabilities are not recorded if the timing differences are due to goodwill or
to the first time recording (not from business combinations) of other assets or liabilities in
operations without an impact on statutory income or on taxable income. The book value of
deferred tax assets is review at every balance sheet date and reduced to the extent to
which it is no longer probable that there will be sufficient future taxable income to enable
recovery of all or part of the assets.
Deferred taxes are calculated based on the tax rate the Company expects to be in force
when the asset is realized or the liability extinguished. Deferred taxes are charged directly
to the income statement. This is except for deferred tax relating to items recorded directly


                                           Pag. 54
                                                                             Statutory financial
                                                                                  statements at
                                                                             December 31, 2007




under shareholders’ equity in which case the deferred taxes are also charged to
shareholders’ equity.

Foreign currency transactions
Transactions taking place in currencies other than the Euro are initially recorded at the
spot exchange rate on the transaction date. At the balance sheet date, monetary assets
and liabilities are restated at the current exchange rates on that date.
Exchange differences arising on the settlement of foreign currency balances and from their
restatement at year end exchange rates different than the spot rates used when the
assets and liabilities were first recorded are charged to the income statement for the year.

Other information

Use of estimates
The preparation of the financial statements and accompanying notes in accordance with
IFRS requires management to make estimates and assumptions that have an effect on the
balance sheet assets and liabilities and on the disclosure of contingent assets and liabilities
at the balance sheet date.
The results that actually materialize could differ from these estimates. The estimates are
used to value tangible and intangible assets subjected to impairment tests as described
above and when determining provisions for doubtful accounts, inventory obsolescence
reserves, amortization/depreciation, writedowns of assets, employee benefits, taxation,
restructuring provisions, other accruals and provisions. Accounting estimates and
assumptions are reviewed, periodically, and the effect of every change is reflected
immediately in the income statement.

Earnings per share
Basic earnings per share is calculated dividing the net profit attributable to the owners of
ordinary shares in the Company (the numerator) by the weighted average number of
ordinary shares in issue (the denominator) during the year.
Diluted earnings per share is calculated by adjusting the net profit attributable to owners
of ordinary shares and the weighted average number of ordinary shares during the year to
take account of all potential ordinary shares with a diluting effect. A potential ordinary
share is a financial instrument or other contract that could give its owner the right to
obtain ordinary shares.



21.    SEGMENTAL INFORMATION

With regard to the presentation of income statement and financial sector for each business
segment and geographical area in which the Company operates, we note that
management has identified a single business segment. The essentially uniform nature of
the activities and the state of completion of the projects under development means that it
is not possible to identify several sectors with risks and benefits different from the other
business sectors. Moreover, the services provided, the nature of the production processes
and the type of client for the Company’s products means that it is not possible to split the
Company’s activities into several business segments. Therefore, the Company believes
that, at present, segmental reporting showing income statement and financial information
by business sector and geographical area would not provide a better representation or
understanding of the business or the related risks and benefits.




                                            Pag. 55
                                                                                                             Statutory financial
                                                                                                                  statements at
                                                                                                             December 31, 2007




22.       BALANCE SHEET



NON CURRENT ASSETS


Note 1 – Tangible assets
The following table contains details of tangible assets at December 31, 2007 and
movements thereon in the year then ended:
(amounts in thousands of Euro)       Balance at Increases         Reclassi-   Disposals        Other     Depreciation     Balance at
                                    31/12/2006                    fications                  movements   & w/downs       31/12/2007
Gross value
Plant and machinery                         524       -                  -          (26)          -               -              498
Industrial & commercial equipment         2.534       322                -          (71)          -               -            2.785
Leasehold improvements                    3.476        87                -          -             -               -            3.563
Other assets                                683        48                -          (28)          -               -              703
Assets under construction and
                                           -              12             -          -             -               -                  12
payments on account
Total gross value                        7.217        469                -        (126)           -               -            7.560
Accumulated depreciation
Plant and machinery                       (195)       -                  -              15        -               (51)          (231)
Industrial & commercial equipment       (1.750)       -                  -              71        -              (243)        (1.927)
Leasehold improvements                  (2.415)       -                  -          -             -              (352)        (2.767)
Other assets                              (530)       -                  -              25        -               (59)          (559)
Assets under construction and
                                           -          -                  -          -             -               -              -
payments on account
Total accum. Depreciation               (4.890)      -                   -          111           -              (705)       (5.484)
NBV
Plant and machinery                        328        -                  -          (11)          -               (51)          267
Industrial & commercial equipment          783        322                -          -             -              (243)          858
Leasehold improvements                   1.061         87                -          -             -              (352)          796
Other assets                               154          48               -            (3)         -               (59)          144
Assets under construction and
                                           -              12             -          -             -               -                  12
payments on account
Total NBV                                2.325        469                -         (14)           -              (705)         2.077

Plant and machinery includes specific plant and machinery used to develop the Company’s
products and to provide services.
Equipment includes various types of tangible asset including laboratory equipment used to
provide services and develop the Company’s products.
Leasehold improvements include the cost of refurbishing the premises used by the
Company, in particular, its pharmaceutical laboratories. These premises are used under a
lease agreement. The costs incurred generally regarded building work and work on the
systems that form an integral part of the premises e.g. the electrical system and the air
conditioning system.
Other tangible assets include furniture and fittings and electronic office equipment.
The most significant changes during the year include the following:
    •     Purchases of equipment totaling Euro 322 thousand. These additions regard the
          periodical renewal of laboratory equipment and the improvement of existing
          equipment to cope with the increased activity regarding clinical development of the
          Company’s products;
    •     An increase of Euro 87 thousand in leasehold improvements due to the
          refurbishment of the premises used by the Company, especially the pharmaceutical
          workshop premises. The increase of Euro 48 thousand in other assets is due to the
          routine renewal of the Company’s electrical and electronic equipment;
      •   Additions of Euro 12 thousand to assets under construction and payments on
          account include the cost incurred to renovate the new premises occupied by the
          Company in Palazzo Canova, Milano 2, Segrate (MI). Since February 2008, these
          premises have hosted several business divisions.


                                                               Pag. 56
                                                                                                 Statutory financial
                                                                                                      statements at
                                                                                                 December 31, 2007




Note 2 – Intangible assets and goodwill
The following table contains details of intangible assets at December 31, 2007 and
movements thereon in the year then ended:
(amounts in thousands of Euro)            Balance at Increases     Other        Disposals   Amortization      Balance at
                                         31/12/2006              reclassific.                                31/12/2007

Merger with Genera S.p.A                        77         -             -           -               -              77
Goodwill                                        77         -             -           -               -              77

Patents & intellectual property rights        3.529        -             -           -               (860)        2.670
Concessions, licences & trademarks              694        27            -           -               (142)          579
Other intangible assets                       4.223        27            -           -            (1.001)         3.248
Total                                         4.300        27            -           -            (1.001)         3.326

The goodwill regards the balance recorded by Genera S.p.A. following a contribution made
by the Shareholders when the company was formed in 1997 before being merged with
MolMed.
On its first time adoption of IFRS, the Company decided not to apply IFRS 3 – Business
combinations on a retroactive basis to business acquisitions taking place before January 1,
2006. As a result, goodwill arising on acquisitions prior to the date of transition to IFRS
has been maintained at the value determined under Italian GAAP at that date while testing
for and recording any impairment losses following an appropriate test. The recoverability
of this goodwill is founded on the knowhow of the technical personnel carrying out the
research activities on the new product development projects and on the possible revenues
that could be generated by their commercial development.
In accordance with IAS 36, goodwill has not been amortized but subjected to an
impairment test.
Patents and intellectual property rights includes patents that belonged to Genera S.p.A.
the company that has been absorbed. At December 31, 2007, this item included Euro
1,021 thousand representing the residual value of the allocation of the entire merger
deficit arising on the merger with Genera S.p.A in 2002.
Concessions, licenses and trademarks includes the payments made under license and sub-
license agreements for intellectual property used in the development of the Company’s
products. The additions of Euro 27 thousand recorded in the year ended December 31,
2007 mainly regard software purchases.


Note 3 – Financial assets
Financial assets amount to Euro 5 thousand and include guarantee deposits.


Note 4 – Tax receivables
Non current tax receivables represent the portion of VAT receivables not expected to be
collected after less than a year. As its costs exceed its revenues at this state of its
business development, the Company generates a VAT receivable every year. Under
current tax receivables, the Company only shows the amount of the VAT receivable that
may be offset against other taxes under Italian tax law i.e. Euro 516 thousand together
with VAT receivables for which refunds were requested in prior years and are expected to
be collected after less than a year. The remaining VAT receivables i.e. the bulk of the
balance is disclosed under non current tax receivables.
At December 31, 2007, the balance included Euro 640 thousand of VAT receivables for
which refunds had been requested and Euro 1,211 thousand of VAT receivables for which
refunds had not yet been requested.
Further information is provided in Note 8.


                                                      Pag. 57
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




Note 5 – Other assets
Other assets, amounting to Euro 4,131 thousand, includes the agreed price of a purchase
option on research projects. The Company has signed the agreement with Science Park
Raf S.p.A. and its parent company Fondazione Centro San Raffaele del Monte Tabor: the
agreement gives the Company the right to buy from the other parties research projects
conducted by them in the field of gene and molecular therapy for cancer and AIDS. The
cost of the option is Euro 4,131 thousand and its effectiveness is subject to the admission
of the Company’s shares to trading on a regulated market. When this condition is
satisfied, the contract will be valid for eight years with the possibility of renewal for four
more years every four years.
The other side of the entry made by the Company is a liability recorded under “Other
payables”. The asset will be decreased and the related charges incurred as from the
moment when the aforementioned condition is satisfied. At that point, the asset will be
decreased and the charges recorded over the next eight years as per the option
agreement.


CURRENT ASSETS


Note 6 - Inventory
Inventory was analyzed as follows at December 31, 2007 and 2006:
(amounts in thousands of Euro)                                     31/12/2007 31/12/2006

Processing materials                                                         75             53
Reagent materials                                                            86             52
General materials                                                            40             14
Total inventory of raw, ancillary and consumable materials                  200            119

At December 31, 2007, inventory consisted of materials and reagents used in laboratory
activities. The increase in the balance is due to the more intensified research and
development activities regarding the Company’s products.


Note 7 – Trade accounts receivable and other commercial assets
Trade accounts receivable relate to services provided. At December 31, 2007, they were
analyzed as follows:
(amounts in thousands of Euro)                                 31/12/2007 31/12/2006


Trade receivables                                                        974               366
Receivables from related parties                                         851               716
Total trade receivables                                                1.825            1.082

Trade accounts receivable mainly relate to services rendered. The receivables also include
prepaid expenses under license agreements, contracts for maintenance and assistance
which have been classified under this heading given their nature.
As stated in Section 28, receivables from related parties mainly regard the services
performed by the Company for related party Fondazione Centro San Raffaele del Monte
Tabor.




                                             Pag. 58
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




Note 8 – Tax receivables
At December 31, 2007, tax receivables were analyzed as follows:
(amounts in thousands of Euro)                              31/12/2007 31/12/2006

VAT receivable                                                       908                908
Tax receivables                                                      134                 25
Withholding taxes suffered                                            90                109
Total tax receivables                                              1.132              1.042

Current tax receivables represent the portion of VAT receivables expected to be collected
after less than a year. As its costs exceed its revenues at this state of its business
development, the Company generates a VAT receivable every year. Under current tax
receivables, the Company only shows the amount of the VAT receivable that may be offset
against other taxes under Italian tax law i.e. Euro 516 thousand together with VAT
receivables for which refunds were requested in prior years and are expected to be
collected after less than a year. The remaining VAT receivables i.e. the bulk of the
balance is disclosed under non current tax receivables; see Note 4.
At December 31, 2007, the balance includes the VAT receivable of Euro 517 thousand for
2007 that will be offset against other taxes in 2008. It also includes Euro 391 thousand
representing the VAT receivable for the 2004 tax year which is expected to be refunded
within less than a year.



Note 9 – Other receivables and sundry assets
Other receivables – amounting to Euro 1,842 thousand and Euro 485 thousand at
December 31, 2007 and 2006, respectively – comprise advances to suppliers, government
research subsidies accruing but not yet received and prepaid expenses. These prepaid
expenses regard insurance premiums and IT assistance charges. The balance includes
Euro 1,379 thousand of costs directly related to the Stock Exchange listing process that
were deferred in 20007 before being recorded directly against shareholders’ equity the
next year as a reduction from the proceeds of the said financial operation.



Note 9b – Other financial assets
The other financial assets shown under other current assets include interest income
receivable from the banks (Euro 52 thousand) and from the tax authorities (Euro 23
thousand).



Note 10 – Cash and cash equivalents
Cash and cash equivalents may be analyzed as follows:
(amounts in thousands of Euro)                            31/12/2007        31/12/2006

 Bank and post office accounts                                    5.584              8.426
 Cash and cash equivalents on hand                                    6                  7
 Cash and cash equivalents                                        5.591              8.433

At December 31, 2007, cash and cash equivalents totaled Euro 5,591 thousand. They
included cash at bank of Euro 5,584 thousand and cash on hand of Euro 6 thousand. The
balance includes the proceeds from the execution of the share capital increase approved


                                         Pag. 59
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




by the General Meeting of April 24, 2007. The increase was subscribed in June 2007 (Euro
7,182 thousand) and in September 2007 (Euro 2,119 thousand).


Note 11 – Shareholders’ equity
Shareholders’ equity was analyzed as follows at December 31, 2007 and 2006:
(amounts in thousands of Euro)                                31/12/2007 31/12/2006



Share capital                                                        16.229           22.487
Share premium reserve                                                  -              10.502
Other reserves                                                        9.606             -
Stock option plan reserve                                             1.152            1.024
Actuarial valuation reserve                                              21                7
Retained earnings (accumulated losses)                              (3.232)          (9.910)
Profit (Loss) for the year                                         (12.696)         (10.697)
Total Shareholders' Equity                                          11.080           13.413

Movements on Shareholders’ Equity are shown in the table included in Paragraph 16.

Share Capital
At December 31, 2007, share capital was wholly subscribed and paid. It amounted to
Euro 16,229 thousand and consisted of 78,350,856 ordinary shares with no nominal value.
Movements in 2007 reflect the execution of the share capital increase approved on April
24, 2007 and the General Meeting resolution of September 28, 2007.
On April 24, 2007, the MolMed shareholders’ General meeting resolved to:
   •   proceed with a paid share capital increase of up to Euro 10 million, some of it to be
       allocated to the share premium reserve. The share capital increase would be
       effected by means of the issue of new ordinary shares under a rights issue offered
       to existing shareholders based on the current interests held by them;
   •   give the Board of Directors powers – up to the maximum amounts indicated – to
       allocate amounts to the nominal share premium. It was possible for the amount in
       question to differ from one shareholder to another in the event that payments on
       investments subscribed were made on different dates.
The next Board of Directors’ meeting held on May 16, 2007 resolved to set:
   •   a share premium of Euro 1.91 for each of the ordinary shares with a unit value of
       Euro 1 each that will be offered to shareholders in the manner and timing set by
       the Shareholders’ General Meeting of April 24, 2007 (document by Notary Mr La
       Porta rep. 23,554); this will apply for subscriptions by June 30, 2007;
   •   a share premium of Euro 1.91955 for subscriptions after the above deadline but by
       July 31, 2007;
   •   a share premium of Euro 1.92910 for subscriptions after July 31, 2007 but by
       August 31, 2007;
   •   a share premium of Euro 1.93865 for subscriptions after August 31, 2007 but by
       September 30, 2007;
   •   a share premium of Euro 1.94820 for subscriptions after September 30, 2007 but
       by the final deadline of October 31, 2007.
As at September 28, 2007, the share capital increase approved by the Shareholders’
General Meeting of April 24, 2007 had been wholly subscribed.


                                          Pag. 60
                                                                             Statutory financial
                                                                                  statements at
                                                                             December 31, 2007




On the same date, the MolMed Shareholders’ General Meeting resolved:
   •   that the Company’s share capital should consist of shares with no stated nominal
       value and not paper securities;
   •   to use the full amount of the share premium reserve of Euro 6,591 thousand to
       cover part of the losses of Euro 16,479 thousand accumulated at August 31, 2007
       and comprising Euro 6,873 thousand of losses brought forward from 2006 and Euro
       9,606 thousand of losses for the period from January 1 to August 31, 2007;
   •   to cover the remaining losses of Euro 9,888 thousand by reducing share capital
       from Euro 26,116 thousand to Euro 16,228 thousand.
On October 29, 2007, the shareholders’ General Meeting resolved:
   •   to reduce the book parity of the shares in issue by increasing the total number of
       ordinary shares in issue from 26,116,952 to 78,350,856 without altering the
       nominal value of share capital;
   •   to effect a paid share capital increase, in one or more installments, in terms of
       Article 2349 (2) of the Italian Civil Code while excluding option rights in terms of
       Article 2441 (5) of the Italian Civil Code. The increase would be for a maximum
       nominal amount of Euro 8,738 thousand through the issue of a maximum of
       42,188,922 ordinary shares with full dividend rights that would be offered for
       subscription under the Global Offering to take place by December 31, 2008 and, if
       earlier, by the last settlement date of the offering, including possible exercise of the
       Greenshoe Option;
   •   subject to the issue by Borsa Italiana of the order admitting the Company shares to
       trading on the MTA and from that date, to increase share capital, in one or more
       stages in terms of Article 2439(2) of the Italian Civil Code and excluding option
       rights in terms of Article 2441(5) and (8) of the Italian Civil Code, by up to a
       maximum of Euro 772 thousand through the issue of a maximum of 3,728,034
       ordinary shares for the purposes of the share option scheme reserved for MolMed
       directors, consultants and employees and possibly those of subsidiary and parent
       companies.

Share premium reserve
We note that the share premium reserve was used in full at December 31, 2007, in the
amount of Euro 10,502 thousand, to cover 2006 losses, as per the General Meeting
resolution of April 24, 2007. Furthermore, in relation to subsequent movements on the
reserve, reference should be made to the information previously provided on the share
capital increase and the subsequent reduction as approved by the General Meetings of
April 24, 2007 and September 28, 2007.

Other reserves
Other reserves regard payments made by the shareholders into accounts for the coverage
of 2007 losses. The movement for the year regards the coverage of losses for the year in
progress as approved on September 28, 2008.

Stock Option Plan reserve
The Stock Option Plan reserve was created as at January 1, 2006 upon first time adoption
of IFRS. It was created so as to reflect the Stock Option Plans set up in 2001 and 2002.
The reserve was calculated by determining the fair value of the rights in question on the
grant dates. The reserve amounted to Euro 956 thousand at January 1, 2006. This was
equal to the charges accruing between the first grant date and that date. The other side of
the entry was made to the First Time Adoption Reserve which is classified under Retained
Earnings/(Accumulated Losses).     In later years, the Stock Option Plan reserve has
increased with an income statement effect under personnel costs.


                                            Pag. 61
                                                                                      Statutory financial
                                                                                           statements at
                                                                                      December 31, 2007




Actuarial valuation reserve
The actuarial valuation reserve reflects actuarial gains/losses arising from the valuation of
the TFR/employee termination indemnity at December 31, 2007.

Retained earnings/(accumulated losses)
This item may be analyzed as follows:

(amounts in thousands of Euro)                                         31/12/2007 31/12/2006


First time IFRS adoption reserve                                               (4.094)            (4.094)
Retained earnings (accumulated losses)                                               862          (5.816)
Total                                                                         (3.232)             (9.910)

The First Time IFRS Adoption Reserve of Euro (4,094) thousand was created on January 1,
2006 upon the first time adoption of IFRS. The other side of the entry regarded the
adjustments made to the Italian GAAP account balances as a result of IFRS adoption (as
required by IFRS no 1).
Retained Earnings / (Accumulated Losses) at December 31, 2007 shows the overall
positive effect on shareholders’ equity of the application of IAS/IFRS during the year.


We note the following in completion of our analysis of the items included in Shareholders’
Equity:

Availability of main Shareholders’ Equity items
                                              Balance at
(amounts in thousands of Euro)                                Possible utilization    Amount available
                                              31.12.2007
Share capital                                        16.229
Reserves
                   Coverage of 2007 losses            9.606            B                      -
                  Stock option plan reserve           1.152            -                      -

Legend:
A: for share capital increases
B: to cover losses
C: for distribution to shareholders




                                                 Pag. 62
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




NON CURRENT LIABILITIES


Note 12 – Liabilities for pension obligations and employees’ leaving indemnity
This item regards all obligations for pensions and other employee benefits after
termination of the employment relationship and payable when certain requirements are
met. The balance consists of the provision for the employees’ leaving indemnity.
Movements on the balance are as follows:
(amounts in thousands of Euro)                               31/12/2007 31/12/2006


Opening balance                                                        335               284
Accrued for the year                                                     24                  63
Utilized                                                               (71)              -
Curtailment (effect of reform)                                          (5)              -
Actuarial gains/(losses)                                               (14)              (12)
Closing balance                                                        269               335

The TFR has been determined based on an actuarial calculation performed based on a
method that complies with IAS 19.
As from January 1, 2007, the Finance Act and related implementation orders introduced
changes to the regulation of the TFR. These included giving the employee the choice of
how to employ the TFR accruing. Specifically, the employee may opt to have newly
accruing TFR paid into supplementary pension funds or to keep it in the Company.
As a result of the supplementary pension reform introduced by the aforementioned
decree, TFR accruing up to December 31, 2006 will remain in the Company and will
constitute a defined benefit scheme (obligation for benefits accruing subject to actuarial
valuation). Meanwhile, amounts accruing as from January 1, 2007 will, depending on the
option chosen by the employee, be paid into a supplementary pension fund or transferred
by the Company to the public pension fund managed by INPS. When the decision is made
by the employee, these amounts will constitute a defined contribution scheme (no longer
subject to actuarial valuation) and actuarial calculations will have to be performed though,
unlike the calculation performed as at December 31, 2006, they will have to exclude the
element relating to future salary increases.
In accordance with Paragraph 109 of IAS 19, this calculation was performed when
preparing the financial statements at December 31, 2007 without any particular significant
effects on the Company.


Note 13 – Trade accounts payable
Non current trade payables – amounting to Euro 476 thousand at December 31, 2007 and
Euro 1,348 thousand at December 31, 2006 - regard the portion of deferred income that
will reverse after more than a year. This regards revenues relating to future years and
relating to upfront payments received on the sale to third parties of rights to the
Company’s products under development. These revenues have been spread over the
period between the date of signature of the out-licensing contracts and the next
development Milestone under the said contracts. At December 31, 2007, the Company
was party to three out-licensing and scientific cooperation agreements with Japanese
company Takara. The portion of this deferred income that will reverse after less than a
year has been classified under current trade accounts payable as described in Note 15.




                                           Pag. 63
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Note 14 – Finance lease payables
There were no finance lease payables at December 31, 2007 after the extinction, in
September 2007, of a finance lease agreement relating to an electronic microscope.


CURRENT LIABILITIES
Note 15 – Trade accounts payable
Trade accounts payable were analyzed as follows at December 31, 2007:
(amounts in thousands of Euro)                                  31/12/2007 31/12/2006


Trade payables                                                        3.354            2.242
Payables to related parties                                             839              151
Other payables for costs relating to future periods                     102                58
Deferred income for upfront payments received                           873              875
Total trade payables                                                  5.168            3.326

At December 31, 2007, trade accounts payable included Euro 2,744 thousand due in Italy,
Euro 479 thousand due in other European Union countries and Euro 131 thousand due in
other countries (mainly denominated in USD and GB Pounds). The increase in the balance
is due to the growth in the Company’s research and development activities.
Amounts payable to related companies mainly consist of invoices issued for services
provided to the Company by San Raffaele Foundation del Monte Tabor and Science Park
Raf S.p.A. as described in Section 28.
The deferred income regards future year income from upfront payments received on the
sale to third parties of rights to company products under development. This income has
been spread over the period between signature of the out-licensing agreements and the
next development Milestone under the contracts. At December 31, 2007, the Company
had three out-licensing and scientific co-operation agreements with Japanese company
Takara. This item only includes the portion of the deferred income that will reverse during
the next year. The deferred income relating to future years has been classified under non
current trade accounts payable as described in Note 13.

Note 16 – Other liabilities
This balance may be analyzed as follows:
(amounts in thousands of Euro)                                  31/12/2007 31/12/2006

Tax payables                                                            192              133
Due to pension/social security institutions                             234              172
Due to employees for holiday pay                                        276              229
Due to employees for remuneration, expense claims and other                23               11
Due to freelance consultants                                            119                69
Advances from clients                                                    -                -
Other payables                                                             85               18
Option payables                                                       4.131            4.131
Other current liabilities                                             5.061            4.763

Tax and social security payables consist of income taxes and social security contributions
withheld at source from employee salaries and the remuneration of freelance workers for
the month of December 2007 but paid to the authorities the next month. The Company
made tax losses in the two years considered. It also has no taxable income for IRAP
purposes and, therefore, has no current tax liabilities.


                                                Pag. 64
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




At December 31, 2007, other payables mainly consisted of deferred income regarding the
portion of grants awarded by Lombardy Region and the European Union that may be
postponed to future periods based on the state of completion of the projects financed. The
increase at December 31, 2007 on December 31, 2006 is mainly due to collection of the
second installment of the grant awarded by Lombardy Region which, based on the
distribution of the project costs, is partially attributable to the first quarter of 2008.
The amounts payable for options represent the other side of the entry made to other
assets for the value of the option agreement held by the Company on the research
projects of the San Raffaele Foundation and Science Park Raf. This agreement is subject to
the listing of the Company on a regulated market.
For further information, reference should be made to Note 5.



23.    INCOME STATEMENT

Note 17 - Revenues
The Company’s revenues are generated by the following services:
(amounts in thousands of Euro)                                 31/12/2007 31/12/2006

Gene therapy services                                                   777              412
Cell therapy services                                                   420              138
Cellular bank and bulk                                                   -               391
Molecular analysis services                                                 9             11
Upfront and Milestone revenues                                        1.697              872
Other consultancy                                                          81             96
Total revenues                                                        2.984            1.920

Gene therapy revenues mainly regard activities under the co-operation agreement with
the Telethon Foundation.
Cell therapy services regard cellular manipulation activities and the production of materials
for use in clinical trials managed by the San Raffaele Foundation.
During the period, services previously classified as “Cell banks and Bulk” – Euro 255
thousand – were classified under “Cell therapy services” so as to provide a better
representation of the revenue allocation.
Milestones and upfront revenues regard upfront elating to contracts signed in prior years
with Japanese biotech company Takara Bio Inc. for projects TK, M3TK and HIV. These
revenues have been spread over the period between the date of signature of the out-
licensing contracts and the next expected milestone based on management estimates. The
increase on prior year is due to a milestone of Euro 825 thousand reached in relation to
the AIDS gene therapy project. The milestone revenue was recognized in full in 2007
when entitlement to the milestone payment arose.
Total revenues at December 31, 2007 includes Euro 579 thousand of revenues from
related parties. Further information is provided in Section 28.




                                           Pag. 65
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




Note 18 – Other income
This item mainly consists of public sector research and development grants. It may be
analyzed as follows:
(amounts in thousands of Euro)                                  31/12/2007 31/12/2006

Lombardy Region (Lombardy Industrial areas)                            433             489
European Commission (project "Consert")                                169             169
European Commission(project "Skintherapy")                              92             125
Ministry of Universities and Research (FAR GPS DM28936)                 44               0
Ministry of Universities and Research (FIRB GPS DM24528)                15               0
Istituto Superiore di Sanità (AIDS research project)                    30               0
Other grants                                                             2               9
Other revenue                                                           45              13
Other income                                                           830             805

This income, amounting to Euro 830 thousand, regards subsidies that have actually been
granted by the relevant public sector bodies. It is recognized based on the costs actually
incurred as a percentage of total costs budgeted for the subsidized research projects.
The most significant public sector subsidies recorded in 2007 included Euro 433 thousand
regarding the Lombardy Region program for the promotion of excellence in the industrial
areas of Lombardy and Euro 261 thousand regarding projects under the EU VI Research
and Development Master Program (specifically, project “CONSERT” Euro 169 thousand and
“Skintherapy” Euro 92 thousand).


Note 19 – Purchases of raw and consumable materials
This item may be analyzed as follows:
(amounts in thousands of Euro)                                 31/12/2007 31/12/2006

Processing materials                                                    520            668
Reagents                                                              1.060            746
General laboratory materials                                            196            124
Maintenance materials                                                    41              31
Change in raw materials inventory                                       (81)            (17)
Total purchases of materials                                          1.735           1.552

Purchases of raw and consumable materials mainly regard materials and reagents
ordinarily used in laboratories. The increase compared to 2006 is mainly due to reagents
used in large scale production of materials for use in the clinical trials conducted by the
Company.




                                             Pag. 66
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Note 20 – Costs for services
This item may be analyzed as follows at December 31, 2007 and 2006:
(amounts in thousands of Euro)                               31/12/2007 31/12/2006

Maintenance                                                           252                192
Utilities                                                             283                267
Outsourced quality control                                            364                247
Outsourced research & development                                     975               1420
Outsourced production                                                 632                295
Transport and storage of laboratory materials                         176                 90
Technical consultancy and collaboration                               589                656
Commitments towards third parties                                     246                270
Clinical trial costs                                                  725                479
Other clinical development costs & support activities                 389                158
Tax and accounting services                                           253                101
Legal fees                                                            211                164
Patent costs                                                          455                 95
Management consultancy                                                   1                17
Directors and statutory auditors' fees                                888                308
Communications agency fees                                              32                 0
IT assistance                                                         133                163
Other general and admin costs                                         188                197
Staff training                                                          60                39
Other personnel costs                                                 159                129
Participation at conventions and meetings                               55                44
Travel and subsistence                                                299                233
Total costs for services                                             7.365             5.564
Costs for services increased by 32.4% from Euro 5,564 thousand in 2006 to Euro 7,365 in
2007.    The increase was mainly due to the higher volume of activity regarding
development of the Company’s projects.
The fact that the Company has stepped up its clinical development activities for the
Arenegyr product while extending its clinical development plan based on the launch of
numerous Phase II studies has led to a sharp increase in these costs in the Income
Statement. In particular, the largest increases regarded costs relating to the clinics where
the trials are carried out – they rose from Euro 479 thousand in 2006 to Euro 725
thousand in 2007 (+51.4%) – and to the cost of clinical trial support services – up from
Euro 158 thousand in 2006 to Euro 389 thousand in 2007 (+146.2%).
Outsourced research and development costs decreased due to improved disclosure of
certain items which have been included under outsourced production costs and quality
control costs. Overall, these costs remained broadly stable from 2006 to 2007.
The 31.3% increase in maintenance costs from Euro 192 thousand in 2006 to Euro 252
thousand in 2007 was due to activities needed to keep the pharmaceutical workshop up to
GMP standards.
The increase in accounting/admin and tax consultancy costs – up from Euro 101 thousand
in 2006 to Euro 253 thousand in 2007 (+150.5%) – was mainly due to the consultancy
services received in preparation for the Company’s Stock Market flotation and with regard
to an audit of the Company’s internal control system.



                                          Pag. 67
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Patent costs increased by 378.9% from Euro 95 thousand at December 31, 2006 to Euro
455 thousand at December 31, 2007. The increase was due to the cost of extending
international patent protection for company products under development.
Directors and Statutory Auditors’ fees increased from Euro 308 thousand at December 31,
2006 to Euro 888 thousand at December 31, 2007 (+188.3%). This was due to the
revised Directors’ fees approved when appointments were renewed in accordance with the
Shareholders’ General Meeting Resolution of April 24, 2007
“Travel and subsistence costs” and “Participation at congresses and meetings” increased,
respectively, from Euro 233 thousand at December 31, 2006 to Euro 299 thousand at
December 31, 2007 (+28.3%) and from Euro 44 thousand in 2006 to Euro 55 thousand in
2007 (+25.0%). The increases were mainly due to increased travel so as to co-ordinate
clinical trials and to communications activities and participation at congresses to increase
MolMed’s visibility as Italian leader in the biotech sector.
In 2007, the Company incurred costs of Euro 32 thousand for the services of
communications agencies so as to manage its communications activities.
Legal costs increased from Euro 164 thousand in 2006 to Euro 211 thousand in 2007
(+28,7%) mainly because of new legal services hired in support of the business
operations.
Directors and Statutory Auditors’ fees are summarized in the following table:
(amounts in thousands of Euro)                               31/12/2007 31/12/2006

Directors' fees                                                        869               319
Statutory auditors' fees                                                70                38
Total                                                                  939               357
It should be noted that the above table shows the Directors and Statutory Auditors’ fees
relating to prior years. The Directors and Statutory Auditors’ fees shown in the table on
costs for services regard the cost regarding emoluments as adjusted for prior year fees of
Euro 51 thousand that have been waived.


Note 21 – Use of third party assets

This item may be analyzed as follows:
(amounts in thousands of Euro)                                31/12/2007 31/12/2006



Rental of premises                                                   1.084            1.011
Other lease/rental costs                                                45               29
Total use of assets owned by third parties                           1.129            1.040

The cost of the use of third party assets almost entirely consists of the rental cost of the
premises used by the Company.
The premises within the San Raffaele Science Park are made available by related company
Science Park Raf S.p.A. Further information on dealings with related parties is provided in
Section 26.




                                           Pag. 68
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




Note 22 – Personnel costs
This item may be analyzed as follows:
(amounts in thousands of Euro)                               31/12/2007 31/12/2006

Wages and salaries                                                 3.238            2.530
Social contributions                                                 984              720
TFR - employee leaving indemnity                                     196              152
Other personnel costs                                                 17               16
Stock option plan costs                                              128               68
Total personnel costs                                              4.562            3.486

Personnel costs include all costs incurred by the Company for the remuneration of
its employees. The increase was due to the recruitment of twelve new employees during
the year as well as to salary increases and higher variable bonuses paid to employees than
in prior year.
The increase in the number of employees was necessary so as to strengthen the workforce
especially in operational areas due to the increase in clinical development activities
regarding the Company products.


Note 23 – Other operating costs
This item may be analyzed as follows:
(amounts in thousands of Euro)                            31.12.2007         31.12.2006

Printed and promotional materials                                    19                  21
Stationery                                                           45                  24
Entertainment costs                                                  26                  16
Membership fees                                                      40                  39
Sponsorship                                                          73                  14
Unaccrued prior years charges and losses on disposal                 23                   7
Other charges                                                        39                  21
Total other operating charges                                       265                 142



Note 24 – Amortization, depreciation and writedowns
This item may be analyzed as follows:
(amounts in thousands of Euro)                                31/12/2007 31/12/2006

Amortization of intangible assets                                    1.001              999
Depreciation of tangible assets                                        705              780
Total amortization, depreciation & writedowns                        1.706            1.779




                                             Pag. 69
                                                                                                  Statutory financial
                                                                                                       statements at
                                                                                                  December 31, 2007




Note 25 – Financial income and charges
This item may be analyzed as follows:
(amounts in thousands of Euro)                                                 31/12/2007             31/12/2006

FINANCIAL INCOME:
Interest and other financial income                                                          273                   154
Exchange gains                                                                                 4                     9
Sundry                                                                                         1                     1
Total financial income                                                                       278                   164
FINANCIAL CHARGES:
Finance lease interest charges                                                                  -                   (1)
Other interest charges                                                                       (14)                  (11)
Roundings and allowances                                                                      (1)                   (1)
Exchange losses                                                                               (4)                   (3)
Sundry                                                                                        (6)                   (7)
Total financial charges                                                                     (25)                  (23)
Total financial income and (charges)                                                         253                   141

Interest income is earned on the temporary employment of the Company’s cash
resources.
Other interest charges mainly consist of the interest cost determined in the actuarial
calculation of liabilities for pensions and employee termination indemnities/TFR.
Exchange gains and losses have arisen as a result of fluctuations in the USD and GBP
against the Euro during the period.

Note 26 – Taxes on income
The financial statements do not include current taxation or deferred tax charges or income
(from recognition of deferred tax assets) as the Company has, in prior years, recorded
significant losses for statutory reporting and tax purposes.
Bearing in the mind the Company’s activities and the medium term outlook, deferred tax
assets and liabilities have not been recorded, also because deferred tax assets would
exceed deferred tax liabilities.
The following table contains a summary of the temporary timing differences excluded from
the calculation of the result for the year:
(amounts in thousands of Euro)                               31/12/2007                         31/12/2006

                                                    Timing differences                 Timing differences
                                                                         Tax effect                         Tax effect
                                                         amount                             amount



Directors' fees                                                119               33                70               23
Other timing differences                                        13                3                10                4
Tax losses for carry forward with no limit                   1.552              427             1.552              512
Taxes losses for carry forward for limited period           50.423           13.866            44.780           14.777

Total deferred tax assets                                  52.107           14.329            46.412           15.316

Merger deficit                                                  412              129               514              192

Total deferred tax liabilities                                 412              129               514              192

It should be noted that, in order to stimulate innovation, the Finance Act 2007 introduced
a tax credit, available for offsetting, in the form of a percentage of the R&D costs incurred
by companies: this form of relief was confirmed and improved in the Finance Act 2008
but, at the date of approval of these financial statements, implementation orders had not
been issued so it was not possible to estimate the possible benefits for the Company. The

                                                     Pag. 70
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




implementation orders are expected before the deadline for filing of the annual tax return
so the relief available to the Company will be determined at that point.


Note 27 –Basic and diluted profit per share
The basic profit per share is as follows:

(amounts in Euro)                    31/12/2007 31/12/2006


Basic earnings/(loss) per share             (0,3882)    (0,5367)
Diluted earnings/(loss) per share                -           -


As required by IAS 33, diluted profit per share should take account of the effect of all
potential ordinary shares with a diluting effect. The Company has set up a stock option
plan which offers call options on shares in the Company at a pre-determined strike price.
The Company has not calculated the diluted loss per share as the market value of the
shares is higher than the option strike price based on stock market trading since March 5,
2008 and it would have the opposite effect of a dilution and should not be shown.


24.    NET FINANCIAL POSITION

The net financial position is as follows:

(amounts in thousands of Euro)                                31/12/2007 31/12/2006


Cash and cash equivalents                                            5.591            8.433
A. Cash and cash equivalents                                         5.591            8.433
Other current financial receivables                                      75             -
B. Current financial receivables                                         75             -
Finance lease payables                                                 -                  (7)
C. Current financial debt                                              -                  (7)
D. Net current financial position (A+B+C)                            5.666            8.426
E. Non current net financial position                                  -                -

F. Net financial position (D+E)                                       5.666           8.426

The Company’s net financial position shows net cash and is boosted by the funds injected
by the shareholders in the form of capital. As shown in Note 10, the positive net financial
position almost entirely consists of cash at bank and on hand.


25.    COMMITMENTS AND GUARANTEES

Commitments and guarantees may be analyzed as follows:
(amounts in thousands of Euro)                                  31/12/2007 31/12/2006

Guarantees                                                             1.813           1.374
Commitments                                                             195              50
Total guarantees and commitments                                      2.008           1.424




                                              Pag. 71
                                                                            Statutory financial
                                                                                 statements at
                                                                            December 31, 2007




At December 31, 2007, guarantees included sureties provided as security for non
refundable funding of research projects (Euro 1,374 thousand) and as security for rebates
of VAT receivables (Euro 439 thousand).
At December 31, 2007, commitments included Euro 180 thousand of sureties issued to
Università Vita/Salute San Raffaele for commitments made by the Company in relation to
the funding of research bursaries and Euro 15 thousand of sureties as guarantees for
payment of real estate rent.


26.    CONTINGENT LIABILITIES

The Company was called to appear before the Court of Milan by LTK Farma S.a.s. and the
Université Pierre et Marie Curie – Paris VI (the “plaintiffs”) by a summons and complaint
dated May 10, 2006, alleging that the Company infringed a European patent, namely EP
0564646, owned by the Université Pierre et Marie Curie – Paris VI and licensed to LTK
Farma S.a.s. Specifically, the plaintiffs asked the court to (i) declare that testing MolMed’s
TK product constituted an infringement of the disputed patent as well as unfair
competition under Article 2598 of the Italian Code of Civil Procedure; (ii) grant an
injunction against any form of advertising or marketing of the TK product; and (iii) award
damages against the Company, with the amount of such damages to be to be determined
during the legal proceedings. This complaint was dismissed by a court order of June 7,
2007, as a result of the plaintiffs having missed an administrative filing deadline.
On June 7, 2007, the plaintiffs served a new summons and complaint on the Company on
the same grounds and containing the same allegations.
The Company answered the complaint by filing a brief on October 18, 2007, raising the
interlocutory issue of lack of standing, and counterclaiming that the patent be revoked due
to the validity requirements applicable to it having not been met. The Company also
requested an award of damages arising from the vexatious nature of the plaintiffs’ lawsuit,
which damages the Company quantified in the amount of Euro 200 thousand.
The Company argued in the alternative that the opposing parties’ claims be rejected as
the patent was not infringed for the following reasons: (i) the activity challenged by the
plaintiffs, in relation to the TK product, exclusively consisted of research and testing
which, in and of themselves, cannot be deemed to constitute infringement under Article 68
of Legislative Decree No. 20 of February 10, 2005 (the “Industrial Property Code”) (this
provision stating that patent protection cannot be extended to testing even if the testing is
aimed at obtaining an authorization to market); and (ii) in any event, a significant
difference exists between the TK product and the object of the disputed patent. A decision
on the matter by the court of first instance is expected for 2010.
Should the Company fail to prevail in this litigation, the judge in the case could prohibit
the marketing of the Company’s TK product until the plaintiffs’ patent expires. The
Company’s management maintains that the Company’s testing of the TK product should
not be affected by any injunction. More importantly, the Company does not envisage
marketing the TK product before 2012 when the disputed patent empire. For these
reasons, the Company does not believe it needs to make any provision for risks relating to
the possible loss of this dispute.




                                           Pag. 72
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




27.    SHARE BASED PAYMENTS

Stock option plans 2001 and 2002
On December 2001, an Extraordinary Shareholders’ Meeting gave the Board of Directors
the power to increase share capital by up to a maximum of Euro 431,711 in service of a
stock option plan granted to the President and CEO Prof. Claudio Bordignon and the
General Manager Marina Del Bue. The Board of Directors then resolved to grant the said
beneficiaries a total of 431,711 options. These options included 265,668 options granted
to Prof. Claudio Bordignon and 166,043 options granted to Marina Del Bue. The strike
price of the options thus granted was set, based on an appraisal, at Euro 2.8276 per
share.
On November 26, 2002, taking account of the share capital increases that had taken
place, the Company Board of Directors approved a new stock option plan to grant Prof.
Claudio Bordignon and Ms Del Bue further stock options so to maintain the same
percentage ratio between the number of shares offered for subscription to each of the
beneficiaries of the stock option plan and the total number of shares included in the
Company share capital.
On December 20, 2002, an Extraordinary General meeting approved a share capital
increase of up to Euro 1,669,144 to service the aforementioned stock option plans (i.e. the
original allocation made in December 2001 and the subsequent one to the same
beneficiaries in November 2002). It revoked and replaced the powers granted to the
Board of Directors on December 11, 2001 and ratified the actions of the Company Board
of Directors with regard to the stock options allocated to Prof Claudio Bordignon and
Marina Del Bue in December 2001 and November 2002.
On September 26, 2003, the Company Board of Directors resolved to fix the number of
options allocated to Prof Bordignon on November 26, 2002 at 462, 032 shares while fixing
the number of shares allocated to Ms Del Bue at 288, 770; they were given the right to
subscribe the said number of shares. The strike price of these options was set at Euro 2.4
per share as based on a specific appraisal of the value of the Company.
As amended by the Shareholders’ General Meeting of April 27, 2007, the exercise period
for the options granted under both stock option plans is from December 31, 2008 to June
30, 2009. In execution of the share capital increase approved by the Extraordinary
General meeting of the Company on December 20, 2002, no further options can be
granted in addition to those allocated by the Board of Directors on September 26, 2003.
After the book parity of the shares in issue was reduced and the total number of order
shares in issue increased by a resolution approved by the Company Extraordinary General
Meeting on October 29, 2007, by the end of the year, as described above, Prof Claudio
Bordignon and Ms Marina Del Bue can subscribe a total of 2,183,100 and 1,364,439
ordinary shares, respectively. More specifically, Prof. Bordignon can subscribe 797,004
shares at a price of Euro 0.94253 per share and 1,386,096 shares at a price of Euro 0.8
per share while Ms Del Bue can subscribe 498,129 shares at a price of Euro 0.94253 per
share and 866,310 shares at a price of Euro 0.8 per share.
The options are allocated free of charge. They are nominal, personal and non-transferable
except upon death. They cannot be made subject to any restrictions – specifically with
regard to pledges and guarantees – and will cease to be valid in the case of dismissal for
due cause or reason of any option holder who is a manager of the Company or removal
from office of any option holder who is a Director of the Company; they shall also cease to
be valid if the option holder resigns.
Under the regulations that govern the stock option plan approved in 2002, in the event of
extraordinary operations e.g. changes in share capital or any operations that increase or
decrease the Company’s shareholders’ equity, the Company Board of Directors shall,
insofar as necessary to ensure that the substantive value of the options is maintained,

                                          Pag. 73
                                                                                                                                                        Statutory financial
                                                                                                                                                             statements at
                                                                                                                                                        December 31, 2007




adjust, in accordance with the rules commonly accepted as normal practice on financial
markets (as per the regulations), the strike price and/or the number of shares covered by
options not net exercised or it shall implement a new plan with broadly the same
conditions (except the strike price and/or the number of shares underlying each option not
yet exercised). This shall be done as necessary and appropriate so as to maintain the
assisted tax regime in terms of Article 48(2) of Presidential Decree no 917 of December
22, 1986.
The options granted are analyzed below:
                                                                                                                                        Options
                                                                                                     Options exercised during the
                              Options held at start of year        Options granted during the year                                  expiring during        Options held at year end
                                                                                                                year
                                                                                                                                          year

                                                                                                                                                      (11)=1+4-7-
                             (1)           (2)           (3)         (4)       (5)         (6)       (7)        (8)         (9)          (10)              10        (12)         (13)


                                         Average                   Number    Average              Number     Average     Average                                    Average
Name and      Position     Number of                   Average                          Average                                       Number of        Number of                 Average
                                         exercise                    of      exercise               of       exercise    expiry                                     exercise
surname        held         options                  expiry date                      expiry date                                      options          options                expiry date
                                          price                    options    price               options     price       date                                       price

Claudio      Chairman of    2.183.100        0,852   30/06/2009        -                               -                                        -       2.183.100      0,852   30/06/2009
Bordignon    BoD & MD


Marina Del   General        1.364.439        0,852   30/06/2009        -                               -                                        -       1.364.439      0,852   30/06/2009
Bue          Manager




Stock option plan 2007
The Company’s Extraordinary General Meeting of October 29, 2007 resolved to effect a
paid share capital increase of up to a total of Euro 772,178.60, through the issue of a
maximum of 3,728,034 ordinary shares. These shares will be reserved, in terms of Article
2441 (last paragraph) of the Italian Civil Code, to the employees of the Company and of
any subsidiary or parent companies as part of the share option plans organized for them
and, in terms of Article 2441 (5) of the Italian Civil Code, to the executive directors and
consultants of the Company and any subsidiary or parent companies as part of the share
option plans organized for them. This share capital increase may be performed in several
installments in terms of Article 2439(2) of the Italian Civil Code and may be carried out
and subscribed in one of more stages by December 31, 2023. The General Meeting also
resolved to grant the Board of Directors powers to draw up one or more incentive
schemes, to identify the beneficiaries of options among the executive directors,
consultants and employees of the Company (or subsidiary or parent companies) and to
determine the number of options to be granted to each beneficiary and the strike price
that will be determined each time that options are granted at an amount equal to the
“normal value” of the newly issued ordinary shares, in terms of Article 9(4)(a) of
Presidential Decree 917/1986 as at the date of allocation of the options.
Under the powers granted by the General Meeting, on January 7, 2008, the Board of
Directors approved the adoption of an incentive scheme, subject to the start of trading in
the shares on the MTA. The scheme provides for two different types of options that may
be granted to beneficiaries to de identified by the Board of Directors – or the General
Meeting where required by law – from among the Executive Directors, consultants and
employees of the Company (and of any subsidiary and parent companies):
      •       "type A options” maturing at the end of the third year from the date on which
              trading in the Company shares begins on the MTA; may be exercised in a single
              installment as from the maturity date and by a deadline of seven years from the
              maturation date;
      •       “type B options” maturity is subject to achievement of objectives identified by the
              Board of Directors upon granting and, in any case, not before the end of the third
              year from the date of allocation.       They may be allocated in one or more
              installments as from the maturity date and by a deadline of seven years from the
              maturation date.



                                                                                       Pag. 74
                                                                                                 Statutory financial
                                                                                                      statements at
                                                                                                 December 31, 2007




The Board of Directors has approved an initial allocation of options to Company
management in accordance with the stock option plan and in the manner required by the
regulations. It has granted a total of 2,400,000 options, giving the right to subscribe one
ordinary share each, for a total nominal value of Euro 497,106.24 at a price per share
equal to the Offering Price as follows:
      1) Type A options, a total of 600,000 options;
      2) Type B options, a total of 1,800,000 options;
The Board of Directors has established that the Type B options will mature in several
installments depending on achievement of business objectives after three and five years.
The options are allocated free of charge. They are nominal, personal and non-transferable
except upon death. They cannot be made subject to any restrictions – specifically with
regard to pledges and guarantees – and will cease to be valid in the case of dismissal for
due cause or reason of any option holder who is a manager of the Company or removal
from office of any option holder who is a Director of the Company; they shall also cease to
be valid if the option holder resigns.
Under the aforementioned incentive plan regulations, in the event of any extraordinary
transactions e.g. changes in share capital or merger and/or demerger operations, the
Company Board of Directors shall, insofar as necessary to maintain the substantive value
of the options, adjust, in accordance with the rules commonly accepted as normal practice
on financial markets (as per the regulations), the strike price and/or the number of shares
covered by options not net exercised or it shall implement a new plan with broadly the
same conditions.


28.      DEALINGS WITH RELATED PARTIES

The following table shows the effect on the Company’s 2007 Income Statement and
Balance Sheet of dealings with related parties, as identified in accordance with IAS 24:
(amounts in thousands of Euro)                                                                            Use of assets
                                    Trade      Other      Trade       Other                   Costs for
                                                                                  Revenues                owned by 3rd
                                 receivables   assets    payables   liabilities               services
                                                                                                             parties
Science Park Raf S.p.A.                  -       2.066         42        2.066           15         303          1.079
Fondazione Centro S.Raffaele            879      2.065        799        2.065         564          634             -
Diagnostic San Raf S.p.A                 -          -           3           -           -             9             -
HSR Resnati S.p.A.                       -          -           7           -           -            22             -
Editrice San Raffaele                    -          -          15           -           -            30             -
Total                                   879      4.131        866        4.131         579          998          1.079

Receivables and revenues – amounting to Euro 879 thousand and Euro 579 thousand,
respectively – mainly arise in relation to the cellular manipulation services provided by the
Company to related party the Fondazione Centro San Raffaele del Monte Tabor.
Trade payables, costs for services and costs for use of assets owned by third parties –
Euro 866 thousand, Euro 998 thousand and Euro 1,079 thousand, respectively - mainly
relate to services provided by Science Park Raf S.p.A. to the Company. These include
providing the premises used by the Company at the San Raffaele science park as well as
certain support, consultancy and research services under technical/scientific co-operation
agreements. There are also payables towards Fondazione Centro San Raffaele del Monte
Tabor and to certain companies controlled by it. These companies provide certain support
services as well as research services under scientific co-operation agreements.
Other assets and liabilities include Euro 4,131 thousand regarding the agreed price of a
purchase option on research projects. The Company has signed the agreement with
Science Park Raf S.p.A. and its parent company Fondazione Centro San Raffaele del Monte
Tabor: the agreement gives the Company the right to buy from the other parties research
projects conducted by them in the field of gene and molecular therapy for cancer and


                                                         Pag. 75
                                                                               Statutory financial
                                                                                    statements at
                                                                               December 31, 2007




AIDS. The cost of the option is Euro 4,131 thousand and its effectiveness is subject to the
admission of the Company’s shares to trading on a regulated market. When this condition
is satisfied, the contract will be valid for eight years with the possibility of renewal for four
more years every four years.
All dealings with related parties have taken place at arm’s length.
We opted not to show cash flow relating to dealings with related parties as, in the period
analyzed, it related almost entirely to the dealings and transactions highlighted above and
to payments made by shareholders in relation to the movements on share capital
described in detail in Section 16 and Note 11 of these Notes.


29.    SIGNIFICANT NON RECURRING EVENTS AND TRANSACTIONS

Pursuant to the CONSOB Communication of July 28, 2006, we note that the Company did
not enter into any significant non recurring transactions during the year.


30.    TRANSACTIONS          RESULTING        FROM      ATYPICAL        AND/OR         UNUSUAL
       OPERATIONS

Pursuant to the CONSOB Communication of July 28, 2006 we note that, during the year,
the Company did not enter into any atypical or unusual operations. The Communication
defines atypical or unusual operations as operations that may raise doubts as to the
accuracy/completeness of the information in the financial statements, a conflict of
interests, safeguarding of the business’s net assets and safeguarding of the minority
shareholders as a result of the following characteristics of the operations:         their
significance/importance, the other parties in the operation, the subject of the operation,
how the transfer price was determined and the timing of the event/operation (proximity to
year end).


31.    OTHER INFORMATION

31.1   Average number of employees by category
The average number of employees, by category, has varied as follows in the last two
years:
                                                31/12/2007     31/12/2006   Change       Change
                                                                                           %
Managers                                                 7,5          7,0        0,5          7%
Middle managers                                         10,0          8,0        2,0         25%
White collar                                            50,5         48,0        2,5          5%
Blue collar                                              3,0          2,0        1,0         50%
Total                                                   71,0         65,0        6,0          9%




                                             Pag. 76
                                                                                                                            Statutory financial
                                                                                                                                 statements at
                                                                                                                            December 31, 2007




31.2       Emoluments of the Directors, Statutory Auditors, General Managers and
           Managers with strategic responsibility (Art.78 of CONSOB Regulation no
           11971/99)
The following information is provided in accordance with Article 78 of CONSOB Regulation
no 11971 of May 14, 1999, as subsequently amended, on the adoption of regulations
implementing Legislative Decree no 58 of February 24, 2008 (Testo Unico Draghi) on the
regulation of issuers.
(amounts in thousands of Euro)                                                                                                     at 31/12/2007
                                                                 Period in which                                                                Benefits in
Name                       Position                                                   Appointment end date                      Fees
                                                                 position held                                                                  kind
Claudio Bordignon          Chairman and Managing Director        1.1.07 - 31.12.07    on approval of 2009   Fin.   Statements          764                33
Renato Botti               Director                              1.1.07 - 31.12.07    on approval of 2009   Fin.   Statements           13              -
Maurizio Carfagna          Director                              1.1.07 - 31.12.07    on approval of 2009   Fin.   Statements           14              -
Sabina Grossi              Director                              1.1.07 - 31.12.07    on approval of 2009   Fin.   Statements           14              -
Alfredo Messina            Director                              1.1.07 - 31.12.07    on approval of 2009   Fin.   Statements           14              -
Riccardo Cortese           Director                              6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements            4              -
Marina Del Bue             Director                              6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements            4              -
Alessandro De Nicola       Director                              6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements            4              -
Massimiliano Frank         Director                              6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements            4              -
Fabio Scoyni               Director                              6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements            4              -
Ferdinando Superti Furga   Director                              6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements            4              -
Maurizio Tassi             Director                              6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements            4              -
Francesco Bongiovanni      Director                              6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements            3              -
Paolo Del Bue              Director                              1.1.07 - 6.11.07     resigned in 2007                                  10              -
Ivo Sciorilli Borrelli     Director                              1.1.07 - 6.11.07     resigned in 2007                                   8              -
Enrico Cappelli            Director                              1.1.07 - 24.4.07     resigned in 2007                                   3              -
                                                                                                                                       869               33

Gianfranzo Zanda           Chairman of Board of Stat. Auditors   6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements               4           -
Luigi Bianchi              Statutory auditor                     6.11.07 - 31.12.07   on approval of 2009   Fin.   Statements          -                -
Enrico Scio                Statutory auditor                     1.1.07 - 31.12.07    on approval of 2009   Fin.   Statements              21           -
Gaia Balp                  Substitute statutory auditor          1.1.07 - 31.12.07    on approval of 2009   Fin.   Statements          -                -
Marco Lori                 Chairman of Board of Stat. Auditors   1.1.07 - 31.12.07    resigned in 2008                                 25               -
Ferdinando Superti Furga   Statutory auditor                     1.1.07 - 6.11.07     resigned in 2007                                 20               -
                                                                                                                                       70               -

Francesco M. Bongiovanni, Riccardo Cortese, Marina Del Bue, Alessandro De Nicola,
Massimiliano Frank, Fabio Scoyni and Maurizio Tassi were appointed a Directors of the
Company for the first time at the Ordinary General Meeting of November 6, 2007.
Ferdinando Superti Furga fulfilled the role of Statutory Auditor until November 6, 2007.
He was appointed as a Director of the Company on that date.
Marco Lori acted as Chairman of the Board of Statutory Auditors until November 6, 2007
before becoming a Statutory Auditor on December 31, 2007.
The total gross remuneration (including bonuses and fringe benefits and excluding the TFR
accrual) of senior management of the Company – including General Manager Marina Del
Bue – amounted to Euro 1,226 thousand in 2007.
In 2007, Marina Del Bue received remuneration totaling Euro 377 thousand as General
Manager of the Company.




                                                                    Pag. 77
                                                                                            Statutory financial
                                                                                                 statements at
                                                                                            December 31, 2007




31.3    Information in terms of Article 149 (12) of the CONSOB Issuers’
        Regulations
The following table has been prepared in terms of Article 149(12) of the CONSOB Issuers’
Regulations. It shows the fees for 2007 for the audit services and other non audit services
provided by the external auditors. No additional services were provided by other entities
belonging to the external auditors’ network.
(amounts in thousands of Euro)               Entity that provided service       Fees for 2007

Audit (1)                                Deloitte & Touche S.p.A.                                       117.700
Certification services (2)               Deloitte & Touche S.p.A.                                       117.000
Assistance with transition to IFRS       Deloitte & Touche S.p.A.                                        22.000
Total                                                                                                  256.700
(1) Audit of the annual financial statements at December 31, 2007, the interim financial statements at
    September 30, 2007, the appendix for the transition to IFRS and the financial statements at December 31,
    2004, 2005 and 2006, as restated in accordance with IFRS.
(2) Activities regarding the issue of first comfort letter on the offering circular and signature of Unico and 770
    tax returns.



32.     INFORMATION ON FINANCIAL RISKS

Capital management
The Company’s capital management objectives are geared towards guaranteeing its ability
to continue to pursue the best interests of the stakeholders while also maintaining an
optimal capital structure.
Exchange rate risk
At December 31, 2007, the Company was not significant exposed to the exchange rate
risk as it did not have significant receivable or payable balances in currencies other than
the Euro or any financial instruments subject to an exchange rate risk.
Interest rate risk
The Company does not have any significant financial payables or financial receivables
other than its current account balances which are remunerated at a rate affected by
changes in the short term interest rate. An immediate, unfavorable change of 10% in the
short term interest rate would lead to a reduction of around Euro 25 thousand in financial
income before taxation, per annum (Euro 16 thousand at December 31, 2006).
Credit risk
The nature of its activities and the business structure means that the Company is subject
to a limited credit risk. The credit risk regarding the Company’s current assets – including
cash at bank and on hand, tax receivables, trade accounts receivable and other assets – is
subject to a maximum risk equal to the book value of these assets should the other
parties in question default. There are no significant overdue balances. We note that all of
the main parties to these balances are leading financial institutions and well known
companies.
Liquidity risk
The liquidity risk may lead to an inability to raise, at economic conditions, the financial
resources needed for operations. The liquidity required to fund the business activities has,
historically, been guaranteed by the injection of risk capital by the Shareholders. In the
second half of the year, the Company began the process for a listing on the Electronic
Stock Market (MTA) managed by Borsa Italiana. This process was concluded on March 5,
2008 and raised a total of Euro 56,151 thousand before the costs relating to the
operation. Management believes that the financial resources currently available will enable
the Company to meet the requirements from its investment activities and working capital
management.


                                                    Pag. 78
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




33.    SIGNIFICANT POST BALANCE SHEET EVENTS

As approved by the Shareholders’ General Meeting of October 29, 2007, on January 28,
2008, the Company was admitted to a listing by Borsa Italiana and, on February 13, 2008,
CONSOB gave the green light for publication of its Offering Circular. As a result, on March
5, 2008, trading commenced in the Company’s shares on the Electronic Stock Market
(MTA – standard segment) managed by Borsa Italiana.
The operation involved a Global Offering of 26,116,952 shares with no nominal value,
representing 25% of share capital (post offering), at a price of Euro 2.15 per share. The
listing process raised finances totaling Euro 56,151 thousand before costs relating to the
operation.
Again in execution of the resolution approved by the Shareholders’ General Meeting of
October 29, 2007, on January 7, 2008, the Board of Directors resolved – subject to the
start of trading in the Company shares on the MTA – to adopt a new incentive scheme
with the granting of options as described in Section 27 above.
There have been no other significant post balance sheet events that could have a material
impact on operations or lead to the need for adjustment to the financial statements for the
year.




                                          Pag. 79
                                                                             Statutory financial
                                                                                  statements at
                                                                             December 31, 2007




34.       DECLARATIONS ON THE STATUTORY FINANCIAL STATEMENTS IN TERMS
          OF ART. 81-TER OF CONSOB REGULATION N. 11971 OF MAY 14, 1999 AS
          SUBSEQUENTLY AMENDED AND SUPPLEMENTED

The undersigned Claudio Bordignon, as Chairman and Managing Director, and Enrico
Cappelli, as manager responsible for preparing the MolMed S.p.A. corporate accounting
documents, declare the following, taking account of the provisions of Article 154 bis (3)
and(4) of Legislative Decree no 58 of February 24, 1998:
in 2007, the administrative and accounting procedures used to prepare the financial
statements were:
      •   adequate bearing in mind the business characteristics and
      •   properly applied.
We also confirm that the financial statements at December 31, 2007:
      a) reflect the accounting books and records;
      b) have been prepared in accordance with the International Financial reporting
         Standards (“IFRS”) issued by the International Accounting Standards Board
         (“IASB”) and approved by the European Union and the provisions issued in
         implementation of Article 9 of Legislative Decree no 38/2005. They provide a true
         and fair view of the balance sheet, income statement and financial situation of the
         issuer.


Milan, March 19, 2008




Claudio Bordignon                                     Enrico Cappelli
Chairman and Managing Director                        Manager responsible for preparing
                                                      corporate accounting documents




                                            Pag. 80
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Appendix:            Transition to International Accounting
                     Standards (IFRS)

FOREWORD

EU Regulation no 1606/2002 of July 19, 2002 made it compulsory, as from 2005, to adopt
the International Financial Reporting Standards (“IFRS”) issued by the International
Accounting Standards Board (“IASB”) and adopted by the European Commission when
preparing the consolidated financial statements of companies whose share capital and/or
bonds are listed on one of the regulated markets in the European Union.
After the above EU Regulation was issued, on February 20, 2005, the Italian government
issued Legislative Decree no 38. It legislated for the obligation to apply IFRS in Italy and
extended it to preparation of stand alone financial statements of the companies in
question as from 2006.
On January 28, 2008, MolMed was admitted by Borsa Italiana to a listing on the Electronic
Stock Market (MTA) while trading in the Company shares began on March 5, 2008.
Consequently, MolMed has prepared its stand alone financial statements at December 31,
2007 in accordance with International Financial Reporting Standards (“IFRS”) issued by
the International Accounting Standards Board.
Pursuant to IFRS 1, the date of transition to IFRS is January 1, 2006.
This document provides the reconciliations and explanatory notes required by IFRS 1 –
First time adoption of IFRS – on shareholders’ equity and result for the year as prepared in
accordance with the former Italian Accounting Standards and in accordance with the new
international accounting standards (hereafter “IAS/IFRS standards”):
   •   at the date of transition (January 1, 2006) which represents the start of the period
       used for comparative with the first year of adoption of IAS/IFRS standards;
   •   at December 31, 2006 and the result for 2006.
As required by IFRS 1, at the date of transition to the new accounting standards (January
1, 2006), a balance sheet was prepared in which:
   •   all assets and liabilities recorded under the IAS/IFRS standards were shown;
   •   assets and liabilities were valued as if the IAS/IFRS standards had been applied
       retrospectively;
   •   items previously reported using a method different to that required by IFRS were
       reclassified.
The effect of the adoption of IAS/IFRS standards on the opening asset and liability
balances was reflected in net equity, by means of specific earnings reserve (First Time
Adoption Reserve) with considering the tax effect as it is the period over which deferred
tax assets and liabilities will be used cannot be foreseen.
It should be noted that the account schedules and reconciliations were only prepared for
the purposes of the first time adoption of IAS/IFRS standards. Therefore, they do not
include comparative figures for the corresponding periods in prior year or the explanatory
notes that would be required in order to provide a true and fair view of the balance sheet
and financial position of MolMed S.p.A. and the result for the year in accordance with IFRS
adopted by the European Union.         The figures recorded in accordance with Italian
Accounting Standards have been reclassified so as to show the new financial statements
format that the Company has decided to adopt.


                                          Pag. 81
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




Accounting options made upon first time adoption of IAS/IFRS
When the opening Balance Sheet at January 1, 2006 was prepared together with the
financial statements at December 31, 2006, it was necessary to choose between the
following options as available under IAS/IFRS Standards:
   •   the disclosure method adopted for the financial statements; the “current/non
       current” method was chosen for the Balance Sheet while costs were classified by
       nature for Income Statement purposes; this made it necessary to restate the
       historic financial statements as prepared in the format required by Legislative
       Decree 127/1991;
   •   optional exemptions under IFRS 1 on first time adoption (January 1, 2006)
Upon first time adoption, the restatement of the balance sheet at the date of transition to
the new standards required a number of decisions to be made in relation to optional
exemptions permitted by IFRS 1. The main options chosen by MolMed regarded:
   •   business combinations taking place prior to the date of transition were not revised
       retrospectively; this would have involved redetermining the current value of the
       assets and liabilities in question at the date of acquisition by the Company. This
       was the case with regard to the acquisition of a 100% interest in research company
       Genera S.p.A. in December 2002 as followed by its merger through incorporation
       into MolMed S.p.A. with effect from May 2, 2002;
   •   maintenance of historic cost (rather than fair value) as the valuation method
       applied to intangible and tangible fixed assets after initial recording;
   •   for employee retirement benefits, actuarial gains and losses at the date of
       transition were recognised, recording them against the First Time Adoption
       Reserve.




                                          Pag. 82
                                                                                                                                      Statutory financial
                                                                                                                                           statements at
                                                                                                                                      December 31, 2007




Reconciliations between figures stated in the financial statements prepared
under Italian Accounting Standards and those stated in the financial statements
as restated in accordance with IFRS adopted by the European Union


BALANCE SHEET AT JANUARY 1, 2006

BALANCE SHEET AT JANUARY 1, 2006
                                    EFFECT OF TRANSITION TO IFRS ON BALANCE SHEET AT JANUARY 1, 2006
(amounts in thousands of Euro)                                                       Italian            Reclassif-       Adjust-       IFRS           Notes
                                                                                     GAAP               ications         ments                      Adjustments

ASSETS


Due from shareholders for unpaid share capital                                                   193          (193)              -              -

Tangible assets                                                                                1.032            897            25         1.954         AB
Goodwill                                                                                          77              -             -            77          C
Intangible assets                                                                              5.982          (897)          (96)         4.989         D
Financial assets                                                                                    1             -             -             1
Other assets                                                                                       -              -         4.131         4.131         E
Tax receivables                                                                                    -            795                         795
TOTAL NON CURRENT ASSETS                                                                    7.285              602         4.060         11.947


Inventory                                                                                     102                 -              -          102
Trade receivables and other commercial assets                                                 255               251              -          506
Tax receivables                                                                             1.789             (795)              -          994
Other receivables and sundry assets                                                         1.096               448              -        1.544
Other financial assets                                                                          -                21              -           21
Cash and cash equivalents                                                                  11.701                 -              -       11.701
TOTAL CURRENT ASSETS                                                                      14.944               (75)              -       14.869
Prepaid expenses and accrued income                                                          720              (720)                         -
NON CURRENT ASSETS DESTINED FOR SALE                                                                                                        -
TOTAL ASSETS                                                                              22.949             (193)         4.060         26.816

LIABILITIES AND SHAREHOLDERS' EQUITY


Share capital                                                                              17.182                -             -          17.182
Share premium reserve                                                                           -                -             -               -
Other reserves                                                                                  -                -             -               -
Stock option plan reserve                                                                       -                -           956             956        F
Coverage of prior year losses                                                               3.954                -             -           3.954
Paid in for share capital increase                                                          6.014                -             -           6.014
Paid in for future share capital increase                                                   1.986             (193)            -           1.793
Actuarial valuation reserve                                                                     -                -            (5) -           5
Retained earnings (accumulated losses)                                                          -                -        (4.094)        (4.094)        G
Profit (loss) for the year                                                                (9.770)                -             -         (9.770)
TOTAL SHAREHOLDERS' EQUITY                                                                19.366                     -   (3.143)         16.030


Liabilities for pension obligations and employee leaving indemnity (TFR)                         322                 -       (38)           284         H
Trade payables                                                                                     -                 -      2.222         2.222
Finance lease payables                                                                             -                 -         8              8         B
TOTAL NON CURRENT ASSETS                                                                        322            -           2.192          2.514


Finance lease payables                                                                             -                 -         10            10         B
Trade payables                                                                                 2.102                30        870         3.002         I
Altri passività                                                                                  550               579      4.131         5.260         E
TOTAL CURRENT LIABILITIES                                                                   2.652              608         5.011          8.272
Accrued expenses and deferred income                                                          608             (608)                         -
LIABILITIES DESTINED FOR DISPOSAL                                                                                                           -
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                22.949               -           4.060         26.816



The main reclassifications regarded:
     •      intangible assets: with “leasehold improvements” regarding the extension of the
            pharmaceutical workshop reclassified to tangible assets;
     •      current assets and liabilities: with prepaid expenses and accrued income and
            accrued expenses and deferred income reclassified to receivables and payables
            based on their nature.



                                                                           Pag. 83
                                                                                                                                                                                    Statutory financial
                                                                                                                                                                                         statements at
                                                                                                                                                                                    December 31, 2007




The following table shows the main adjustments:
                                                                                      IAS 38             IAS 16         IAS17           IAS 18             IAS 19         IFRS 2
                                                                         IAS/IFRS                                                                                                         Effects of
Account balance                                            Under Italian Reclassifica Intangible         Tangible
                                                                                                                        Leasing         Revenues
                                                                                                                                                           Employee       Stock                               Under
                                                                                      assets             assets                                            benefits       Options         transition to
                                                           GAAP          tions                                                                                                                                IAS/IFRS
                                                                                                                                                                                          IAS/IFRS

                                        Amounts in Euro                                 A                B              C               D                  E              F
ASSETS

DUE FROM SHAREHOLDERS FOR UNPAID SHARE
CAPITAL                                                          193.299    (193.299)               0               0               0                 0               0              0                    0              0


Goodwill                                                          77.469            0              (0)              0               0                 0               0              0               (0)            77.468
Intangible assets                                              5.981.549    (896.884)         (95.644)              0               0                 0               0              0          (95.644)         4.989.021
Tangible assets                                                1.032.430     896.884           (1.016)        (3.542)        29.295                   0               0              0            24.737         1.954.051
Financial assets                                                     683            0       4.131.660               0               0                 0               0              0         4.131.660         4.132.343
Tax receivables                                                              795.008                0               0               0                 0               0              0                    0        795.008


TOTAL NON CURRENT ASSETS                                      7.285.430      601.709        4.035.000        (3.542)        29.295                    0               0              0        4.060.753        11.947.891


Inventory                                                        102.335            0               0               0               0                 0               0              0                    0        102.335
Trade receivables                                                254.940     251.136                0               0               0                 0               0              0                    0        506.076
Other receivables                                              1.096.049     448.029                0               0               0                 0               0              0                    0      1.544.078
Tax receivables                                                1.788.806    (795.008)               0               0               0                 0               0              0                    0        993.798
Financial receivables and other current financial assets               0       21.141               0               0               0                 0               0              0                    0         21.141
Cash and cash equivalents                                     11.701.337            0               0               0               0                 0               0              0                    0     11.701.337


TOTAL CURRENT ASSETS                                         14.943.467     (74.702)                0               0              0                  0               0              0                    0    14.868.765
Prepaid expenses and accrued income                              720.306    (720.306)               0               0               0                 0               0              0                    0              0
TOTAL ASSETS                                                 22.949.202    (193.299)        4.035.000        (3.542)        29.295                    0               0              0        4.060.753        26.816.656


LIABILITIES & SHAREHOLDERS' EQUITY


Share capital                                                 17.182.205            0               0               0               0                 0               0              0                    0     17.182.205
First Time Adoption reserve                                                         0         (96.660)        (3.542)        12.020          (3.092.724)         43.025       (956.017)      (4.093.898)        (4.093.898)
Share premium reserve                                                  0            0               0               0               0                 0               0              0                    0              0
Stock Option plan reserve                                              0            0               0               0               0                 0               0        956.017           956.017           956.017
Coverage of prior year losses                                  3.954.319            0               0               0               0                 0               0              0                    0      3.954.319
Paid in for share capital increase                             6.014.021            0               0               0               0                 0               0              0                    0      6.014.021
Paid in for future share capital increases                     1.986.014    (193.299)               0               0               0                 0               0              0                    0      1.792.715
Actuarial Valuation reserve                                                         0               0               0               0                 0         (4.921)              0           (4.921)            (4.921)
Accumulated losses                                                     0           0               (0)             0             0                    0              0               0               (0)               (0)
Net loss for the year                                        (9.770.200)           0               (0)             0             0                    0              0               0               (0)       (9.770.200)
TOTAL SHAREHOLDERS' EQUITY                                   19.366.359    (193.299)         (96.660)        (3.542)        12.020          (3.092.724)         38.104               0      (3.142.802)        16.030.258


TFR and other personnel related provisions                       322.150            0               0               0               0                 0        (38.104)              0          (38.104)           284.046
Trade payables                                                                      0               0               0               0         2.222.462               0              0         2.222.462         2.222.462


TOTAL NON CURRENT LIABILITIES                                   322.150            0                0               0           7.614        2.222.462         (38.104)              0        2.191.972         2.514.122


Financial payables due after less than a year                          0            0               0               0           9.661                 0               0              0             9.661             9.661
Trade payables                                                 2.101.823       29.876               0               0               0           870.263               0              0           870.263         3.001.962
Sundry payables and other liabilities                            550.369     578.623        4.131.660               0               0                 0               0              0         4.131.660         5.260.653


TOTAL CURRENT LIABILITIES                                     2.652.193      608.500        4.131.660               0           9.661          870.263                0              0        5.011.584         8.272.276
Accrued expenses and deferred income                             608.499    (608.499)               0              0             0                    0               0              0                0                 0
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY                     22.949.202    (193.299)        4.035.000        (3.542)        29.295                    0               0              0        4.060.753        26.816.656




                                                                                                  Pag. 84
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




Comments on the main IAS/IFRS adjustments:

A – Tangible assets (IAS 16)
Some minor deferred charges (mobile telephony) were no longer considered suitable for
capitalization; the net book value at the date of transition – Euro (3.5) thousand – was
written off against the “First Time Adoption Reserve”.
B – Tangible assets (IAS 17)
Accounting for finance lease agreements in accordance with the balance sheet method
made it necessary to eliminate certain costs previously recorded as “use of assets owned
by third parties” and to record depreciation on assets held under finance leases. This had
an effect of Euro 29 thousand on tangible assets, an effect totaling Euro 17 thousand on
current and non current finance lease payables and an effect of Euro 12 thousand on
shareholders’ equity.
C - Goodwill (IAS 36)
Under IFRS, “Goodwill” is no longer amortized but subjected to an impairment test at least
once a year. This policy did not lead to the writedown of this balance.
D – Intangible assets (IAS 38)
Certain types of deferred charges (start-up and expansion costs, IT development costs )
can no longer be capitalized under IFRS. The net book value of these assets at the date of
transition (Euro 97 thousand) was written off against the “First Time Adoption Reserve”.
E – Other assets and liabilities
“Other assets” includes the value of the option (Euro 4,131 thousand) held by MolMed on
the research projects carried out by San Raffaele Foundation and Science Park Raf: as the
contract is subject to the Company’s listing on a regulated market, the receivable recorded
will begin to decrease once this condition is met and will continue to do so over the eight
years thereafter, as per the contract. The other side of the entry has been made to “other
liabilities”.
F – Share based payments - Stock Option (IFRS 2)
The Stock Option Plan granted in 2001 but not yet maturing as at January 1, 2006 was
accounted for at the date of transition by determining the fair value of the rights awarded
at the grant date. The amount of Euro 956 thousand thus determined represents the
charges maturing between the first grant date and January 1, 2006 and has been
regarded as a negative item against the “First time Adoption Reserve” with the other side
of the entry being made to a specific shareholders’ equity reserve (Stock Option Plan
Reserve).




                                          Pag. 85
                                                                         Statutory financial
                                                                              statements at
                                                                         December 31, 2007




G- First time adoption reserve IAS/IFRS (IFRS 1)
“Retained earnings / (accumulated losses” does not include the effects of the adjustments
needed due to “first time adoption” when preparing the financial statements in accordance
with IFRS.
The following table contains a breakdown of the First Time Adoption Reserve.

(amounts in thousands of Euro)
                                                               01.01.2006


Intangible assets - costs not capitalised under IAS 38                 (97)
Tangible assets - costs not capitalised under IAS 16                     (4)
Leasing - IAS 17                                                          12
Revenues - IAS 18                                                    (3.093)
Employee benefits - IAS 19                                                43
Stock options - IFRS 2                                                (956)

Total                                                               (4.094)


H – Liabilities for pensions and employee leaving indemnities (TFR) (IAS 19)
With regard to post employment benefits, the redetermination of the TFR liability towards
employees in accordance with the actuarial method had a positive effect of Euro 38
thousand on the Company’s shareholders’ equity. There was a corresponding decrease in
liabilities for pensions and employee leaving indemnities (TFR).
I - Revenues (IAS 18)
Revenues in the form of upfront payments from the sale to third parties of rights to
company products under development have been spread over the period between the date
of signature of the related out licensing contract and the next development milestone
under these contracts. As upfront revenues were previously recognized in full upon
signature of the agreement given that the revenue was certain – in 2003 – this change of
accounting method generated a negative shareholders’ equity effect of Euro 3,093
thousand at the date of transition and led to the inclusion of current trade accounts
payable of Euro 870 thousand and non current trade accounts payable of Euro 2,223
thousand.




                                          Pag. 86
                                                                                                                                                                             Statutory financial
                                                                                                                                                                                  statements at
                                                                                                                                                                             December 31, 2007




INCOME STATEMENT AT DECEMBER 31, 2006

                                             EFFECT OF TRANSITION TO IFRS ON 2006 INCOME STATEMENT
(amounts in thousands of Euro)                                                                  Italian                     Reclassif-                   Adjust-             IFRS           Notes
                                                                                                 GAAP                        ications                    ments                           Adjustments



    Revenues                                                                                                   1048                            0                   872         1.920               I
    Other income                                                                                                792                           12                                 805
Total operating income                                                                                    1.840                               12               872           2.725

    Purchases of raw and consumable materials                                                            (1.552)                          -                    -             (1.552)
    Costs for services                                                                                   (5.556)                              37               (46)          (5.564)              AD
    Use of assets owned by third parties                                                                 (1.051)                          -                      11          (1.040)               B
    Personnel costs                                                                                      (3.425)                              (4)              (57)          (3.486)              FH
    Other operating costs                                                                                  (135)                              (7)              -               (142)
    Amortization, depreciation and writedowns                                                            (1.873)                          -                      94          (1.779)             ABCD
Total operating costs                                                                              (13.592)                                   26                    3    (13.563)
Operating loss                                                                                     (11.751)                                   38               875       (10.839)

    Financial income                                                                                            164                       -                    -                 164
    Financial charges                                                                                          (10)                       -                    (13)             (23)              BH
Net financial income and charges                                                                               154                        -                    (13)             141
Extraordinary income and charges                                                                                38                        (38)                 -                -
Loss before taxation                                                                               (11.559)                               -                    862       (10.697)
   Taxes on income                                                                                       -                                                                   -
Net result from continuing operations                                                              (11.559)                               -                    862       (10.697)

    Result from activities disposed of                                                                         -                          -                    -                     -
Profit (loss) for the year                                                                         (11.559)                               -                    862       (10.697)

The main reclassification adjustments were made so as to allocate items shown as
extraordinary income and charges under the previous accounting standards to the
individual income statement account balances.
The following table shows the main reclassifications and adjustments made:
                                                                                   IAS 38        IAS 16            IAS 17        IAS 18         IAS 19         IFRS 2
                                                                   IAS/IFRS
                                                                                 Intangible     Tangible                                      Employee          Stock          Effects of
              Account Balance                                     Reclassificati                                Leasing         Revenues
                                                 Per Italian GAAP                  assets        assets                                        benefits        Options       transition to        IAS/IFRS
                                                                      ons
                                                                                                                                                                               IAS/IFRS
                           Amounts in Euro/000                                       A             B                 C             D                 E              F
   NET REVENUES                                         1.047.924                                                                 872.178                                           872.178            1.920.102
   OTHER INCOME                                           792.420        12.119                                                                                                           0              804.539

Total Consolidated Net Revenues                        1.840.344        12.119              0              0                0     872.178                 0              0          872.178            2.724.641

   MATERIALS CONSUMED                                   1.551.533                                                                                                                         0            1.551.533
   SERVICES                                             5.555.553       (36.852)     42.250            3.300                                                                         45.550            5.564.251
   USE OF ASSETS OWNED BY THIRD
   PARTIES                                              1.050.987                                                   (11.015)                                                        (11.015)           1.039.972
   PERSONNEL                                            3.425.189         3.878                                                                 (10.544)           67.779             57.235           3.486.302
   OTHER OPERATING COSTS                                  135.177         7.253                                                                                                            0             142.430

Total operating costs                                 11.718.439       (25.720)     42.250          3.300          (11.015)               0     (10.544)           67.779            91.770        11.784.489

   AMORTIZATION, DEPRECIATION AND
   WRITEDOWNS                                          1.873.208                   (96.953)       (1.376)            3.906                                                          (94.423)           1.778.785

OPERATING LOSS                                      (11.751.303)        37.839      54.703        (1.924)            7.109        872.178           10.544     (67.779)             874.831       (10.838.633)

       Financial income (charges)                         154.055                                                    (1.354)                        (11.362)                         (12.716)            141.339
       Extraordinary income (charges)                      37.839       (37.839)                                                                                                            0                  0

LOSS BEFORE TAXATION                                (11.559.409)              0     54.703        (1.924)            5.755        872.178             (818)    (67.779)             862.115       (10.697.294)

   TAXES ON INCOME                                              0             0             0              0                0             0               0              0                   0                0

NET LOSS FROM CONTINUING ACTIVITIES                 (11.559.409)              0     54.703        (1.924)            5.755        872.178             (818)    (67.779)             862.115       (10.697.294)

   NET LOSS FROM DISCONTINUED
   ACTIVITIES                                                                                                                                                                                0                0

NET LOSS                                            (11.559.409)              0     54.703        (1.924)            5.755        872.178             (818)    (67.779)             862.115       (10.697.294)




                                                                                         Pag. 87
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




Comments on the main IAS/IFRS adjustments:

A – Tangible assets (IAS 16)
Some minor deferred charges (mobile telephony) were no longer considered suitable for
capitalization; the net book value of items recorded during the year (Euro 2 thousand) was
eliminated.
B – Tangible assets (IAS 17)
Accounting for finance lease agreements in accordance with the balance sheet method
made it necessary to eliminate the cost of installments paid during the year and recorded
as “use of assets owned by third parties” (Euro 11 thousand)and to record depreciation on
assets held under finance leases (Euro 4 thousand) and financial charges (Euro 1
thousand). This had an overall effect of Euro 18 thousand on shareholders’ equity and led
to the recording of tangible assets of Euro 25 thousand.
C - Goodwill (IAS 36)
Under IFRS, “Goodwill” is no longer amortized but subjected to an impairment test at least
once a year. This policy did not lead to the writedown of this balance.
D – Intangible assets (IAS 38)
Certain types of deferred charges (start-up and expansion costs, IT development costs )
can no longer be capitalized under IFRS. The net book value of assets bought during the
year (Euro 55 thousand) has been written off.
E – Other assets
“Other assets” includes the value of the option held by MolMed on the research projects
carried out by San Raffaele Foundation and Science Park Raf: as the contract is subject to
the Company’s listing on a regulated market, the receivable recorded will begin to
decrease once this condition is met and will continue to do so over the eight years
thereafter, as per the contract. The other side of the entry has been made to “other
liabilities”.
F – Share based payments - Stock Options (IFRS 2)
The fair value of the rights awarded that are expected to have matured at the end of the
vesting period is spread over the period from the granting period until the end of the
maturity period. In 2006, the cost for the year (Euro 68 thousand) relating to stock
option plans granted in 2001 and 2002 was recorded. The stock option reserve this
increased from Euro 956 thousand at January 1, 2006 to Euro 1,024 thousand at
December 31, 2006.
G – Retained earnings / (accumulated losses)
“Retained earnings ( accumulated losses)” includes the effects of the first time transition
to IFRS (opening balance sheet at January 1, 2006).
H - Liabilities for pensions and employee leaving indemnities (TFR) (IAS19)
The difference between the TFR accrual for statutory reporting purposes and the amount
accruing in favor of employees for the year (“current service cost”), as based on the
actuarial method calculation of the TFR liability, leads to a reduction of around Euro 11
thousand in personnel costs. Furthermore, this method led to the inclusion of an interest
cost of Euro 11 thousand.




                                          Pag. 88
                                                                        Statutory financial
                                                                             statements at
                                                                        December 31, 2007




I - Revenues (IAS 18)
Revenues in the form of upfront payments from the sale to third parties of rights to
company products under development have been spread over the period between the date
of signature of the related out licensing contract and the next development milestone
under these contracts. As, in 2003, upfront revenues were recognized in full upon
signature of the agreement given that the revenue was certain, this change of accounting
method generated a positive Income Statement effect of around Euro 872 thousand in
2006. Non current trade accounts payable of Euro 1,348 thousand were recorded in the
December 31, 2006 balance sheet together with current trade accounts payable of Euro
873 thousand.
L – Segmental information (IAS 14)
With regard to the presentation of segmental income statement and financial information
by business sector and geographical area, we note that management has identified just
one business segment. The Issuer’s activities are broadly standard and the state of
progress of ongoing projects means that they cannot be divided into several segments
subject to risks and benefits that vary from other business segments. Moreover, the
services provided, the nature of the production processes and the type of client per
product means that the Company’s activities cannot be split into several business
segments. Therefore, management believes that, at present income statement and
financial information by business sector and geographical area would not provide a better
representation or understanding of the Issuer’s business or of its risks and benefits.




                                         Pag. 89
                                                                                                                 Statutory financial
                                                                                                                      statements at
                                                                                                                 December 31, 2007




BALANCE SHEET AT DECEMBER 31, 2006


                           EFFECT OF TRANSITION TO IFRS ON BALANCE SHEET AT DECEMBER 31, 2006
(amounts in thousands of Euro)                                   Italian            Reclassif-       Adjust-     IFRS          Notes
                                                                 GAAP               ications         ments                   Adjustments

ASSETS


Due from shareholders for unpaid share capital                               193          (193)              -          -

Tangible assets                                                            1.244          1.062            19       2.325        AB
Goodwill                                                                      52              -           26           77         C
Intangible assets                                                          5.351        (1.062)          (67)       4.223        D
Financial assets                                                                1             -             -           1
Other assets                                                                   -              -         4.131       4.131        E
Tax receivables                                                                -         1.273                      1.273
TOTAL NON CURRENT ASSETS                                                6.841            1.080         4.109      12.031


Inventory                                                                    119              -              -        119
Trade receivables and other commercial assets                                910            172              -      1.082
Tax receivables                                                            2.315        (1.273)              -      1.042
Other receivables and sundry assets                                           63            422              -        485
Other financial assets                                                         -              -              -          0
Cash and cash equivalents                                                  8.433              -              -      8.433
TOTAL CURRENT ASSETS                                                  11.841             (680)               -    11.161
Prepaid expenses and accrued income                                      594              (594)                      -
NON CURRENT ASSETS DESTINED FOR SALE                                                                                 -
TOTAL ASSETS                                                          19.276             (193)         4.109      23.192

LIABILITIES AND SHAREHOLDERS' EQUITY


Share capital                                                          22.681             (193)            -       22.487
Share premium reserve                                                  10.502                -             -       10.502
Other reserves                                                              -                -             -            -
Stock option plan reserve                                                   -                -         1.024        1.024        F
Coverage of prior year losses                                               -                -             -            -
Paid in for share capital increase                                          -                -             -            -
Paid in for future share capital increase                                   -                -             -            -
Actuarial valuation reserve                                                 -                -              7            7
Retained earnings (accumulated losses)                                (5.816)                -        (4.094)     (9.910)        G
Profit (loss) for the year                                           (11.559)                -           862     (10.697)
TOTAL SHAREHOLDERS' EQUITY                                            15.807                     -   (2.201)      13.413


Liabilities for pension obligations and employee leaving inde                384                 -       (49)         335        H
Trade payables                                                                 -                 -      1.348       1.348
Finance lease payables                                                         -                 -          -           -        B
TOTAL NON CURRENT ASSETS                                                    384            -           1.299       1.683


Finance lease payables                                                         -                -           8           8        B
Trade payables                                                             2.395               58         873       3.326        I
Altri passività                                                              617               15       4.131       4.763        E
TOTAL CURRENT LIABILITIES                                               3.012               73         5.011       8.096
Accrued expenses and deferred income                                       73              (73)                      -
LIABILITIES DESTINED FOR DISPOSAL
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                            19.276               -           4.109      23.192




                                                                Pag. 90
                                                                                                                                                                                         Statutory financial
                                                                                                                                                                                              statements at
                                                                                                                                                                                         December 31, 2007




The following table shows the main types of reclassification and adjustment made:
                                                                                            IAS 38            IAS 16         IAS17           IAS 18             IAS 19         IFRS 2
                                                                              IAS/IFRS                                                                                                         Effects of
                                                          Under Italian                     Intangible        Tangible                                          Employee       Stock                               Under
Account Balance                                                               Reclassificat                                  Leasing         Revenues                                          transition to
                                                          GAAP                              assets            assets                                            benefits       Options                             IAS/IFRS
                                                                              ions                                                                                                             IAS/IFRS

                                        Amounts in Euro                                      A                B              C               D                  E              F
ASSETS

DUE FROM SHAREHOLDERS FOR UNPAID
SHARE CAPITAL                                                   193.299          (193.299)               0               0              0                   0              0              0                    0                 0

Goodwill                                                          51.646                 0          25.823               0              0                   0              0              0           25.823               77.468
Intangible assets                                              5.351.301       (1.061.779)         (66.764)              0              0                   0              0              0         (66.764)            4.222.758
Tangible assets                                                1.244.320         1.061.779          (1.016)       (5.466)        25.389                     0              0              0           18.907            2.325.006
Financial assets                                                    698                  0       4.131.660               0              0                   0              0              0        4.131.660            4.132.358
Tax receivables                                                                  1.273.416               0               0              0                   0              0              0                    0        1.273.416

TOTAL NON CURRENT ASSETS                                      6.841.264         1.080.117        4.089.703        (5.466)        25.389                    0               0              0       4.109.626           12.031.006

Inventory                                                       118.997                  0               0               0              0                   0              0              0                    0         118.997
Trade receivables                                               910.076            172.037               0               0              0                   0              0              0                    0        1.082.113
Other receivables                                                 63.175           421.521               0               0              0                   0              0              0                    0         484.696
Tax receivables                                                2.315.416       (1.273.416)               0               0              0                   0              0              0                    0        1.042.000
Financial receivables and other current financial assets                                 0               0               0              0                   0              0              0                    0                 0
Cash and cash equivalents                                      8.433.493                 0               0               0              0                   0              0              0                    0        8.433.493

TOTAL CURRENT ASSETS                                        11.841.157          (679.858)                0               0              0                  0               0              0                0          11.161.299
Prepaid expenses and accrued income                             593.558          (593.558)               0               0              0                   0              0              0                0                     0
TOTAL ASSETS                                                19.275.979          (193.299)        4.089.703        (5.466)        25.389                    0               0              0       4.109.626           23.192.306

LIABILITIES & SHAREHOLDERS' EQUITY

Share capital                                                 22.680.511         (193.299)               0               0              0                   0              0              0                    0       22.487.212
First Time Adoption reserve                                                              0         (96.660)       (3.542)        12.020           (3.092.724)         43.025       (956.017)     (4.093.898)          (4.093.898)
Share premium reserve                                         10.501.764                 0               0               0              0                   0              0              0                    0       10.501.764
Stock Option plan reserve                                                                0               0               0              0                   0              0       1.023.796       1.023.796            1.023.796
Coverage of prior year losses                                             0              0               0               0              0                   0              0              0                    0                 0
Paid in for share capital increase                                        0              0               0               0              0                   0              0              0                    0                 0
Paid in for future share capital increases                                0              0               0               0              0                   0              0              0                    0                 0
Actuarial Valuation reserve                                                              0               0               0              0                   0          7.035              0            7.035                  7.035
Accumulated losses                                           (5.815.881)                 0              (0)             0                0                  0              0               0             (0)           (5.815.881)
Net loss for the year                                       (11.559.409)                 0          54.703        (1.924)            5.755            872.178          (818)        (67.779)        862.115          (10.697.294)
                                                                                                                                                                                                           0                     0
TOTAL SHAREHOLDERS' EQUITY                                  15.806.985          (193.299)         (41.957)        (5.466)        17.775          (2.220.546)         49.242               0     (2.200.952)           13.412.734

TFR and other personnel related provisions                      384.403                  0               0               0              0                   0       (49.242)              0         (49.242)             335.161
Trade payables                                                                           0               0               0              0          1.347.784               0              0        1.347.784            1.347.784

TOTAL NON CURRENT LIABILITIES                                   384.403                  0               0               0              0         1.347.784         (49.242)              0       1.298.541            1.682.944


Financial payables due after less than a year                             0              0               0               0           7.614                  0              0              0            7.614                  7.614
Trade payables                                                 2.395.454            57.505               0               0              0             872.763              0              0          872.763            3.325.722
Sundry payables and other liabilities                           616.631             15.000       4.131.660               0              0                   0              0              0        4.131.660            4.763.292


TOTAL CURRENT LIABILITIES                                     3.012.085            72.506        4.131.660               0        7.614               872.763              0              0       5.012.037            8.096.628
Accrued expenses and deferred income                            72.505            (72.505)               0              0             0                    0               0              0               0                   (0)
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY                    19.275.979          (193.298)        4.089.703        (5.466)        25.389                    0             (0)              0       4.109.626           23.192.306




                                                                                                        Pag. 91
                                                                               Statutory financial
                                                                                    statements at
                                                                               December 31, 2007




Reconciliations between shareholders’ equity and result for the year as per the
financial statements prepared in accordance with Italian Accounting Standards
and shareholders’ equity and result for the year per the figures as restated in
accordance with IFRS as adopted by the European Union


RECONCILIATION OF SHAREHOLDERS’ EQUITY AT JANUARY 1, 2006

Reconciliation of Shareholders' Equity at 01.01.2006

Shareholders' Equity per Italian GAAP (in thousands of Euro)                                 19.366
 Reclassifications                                                                             (193)
 A. Intangible assets (IAS 38)                                                                   (97)
 B. Tangible assets (IAS 16)                                                                      (4)
 C. Different accounting method for assets under finance leases (IAS 17)                             12
 D. Different revenue recognition method (IAS 18)                                             (3.093)
 E. Employee benefits (IAS 19)                                                                       38
 F. Share based payments - Stock Options (IFRS 2)                                                     0
 Total IFRS adjustments                                                                      (3.336)
 Shareholders' Equity per IFRS                                                               16.030




RECONCILIATION OF SHAREHOLDERS’ EQUITY AND INCOME STATEMENT FOR
2006

(amounts in thousands of Euro)
                                                                           Shareholders Net loss for
                                                                             ' equity      year
Italian GAAP Financial Statements                                               15.807       (11.559)
Reclassifications                                                                 (193)          -
A. Intangible assets (IAS 38)                                                      (42)           55
B. Tangible assets (IAS 16)                                                          (5) -           2
C. Different accounting method for assets under finance leases (IAS 17)              18              6
D. Different revenue recognition method (IAS 18)                                 (2.221)         872
E. Employee benefits (IAS 19)                                                        49 -            1
F. Share based payments - Stock Options (IFRS 2)                                      0 -         68
Total IFRS adjustments                                                          (2.394)          862
IFRS Financial Statements                                                       13.413       (10.697)




                                                           Pag. 92
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




Report of the Board of Statutory Auditors
Report of the Board of Statutory Auditors to the MolMed S.p.A. Shareholders’
General Meeting pursuant to Article 153 of Legislative Decree 58/1998

Dear Shareholders,
In the year ended December 31, 2007, the Board of Statutory Auditors of MolMed S.p.A.
(hereafter “the Company”) performed the supervisory activities required by law, with
reference to the code of conduct issued by the Italian Accounting Profession (i Consigli
Nazionali dei Dottori Commercialisti e dei Ragionieri. The Company was admitted to listing
on the Italian Stock Market at the end of January 2008. Trading in its shares began on
March 5, 2008.

During the year 2007, the Board of Statutory Auditors acquired the information needed to
perform its general supervisory duties. It did so through discussions with management of
the various company divisions and by attending meetings of the Board of Directors. The
Board of Directors has decision making powers on the main strategic operations and on
the matters of most importance to the Company business. Furthermore, the Board of
Directors – in the presence of the Board of Statutory Auditors – gives its prior approval for
dealings with related parties that, due to the subject matter, amount involved, manner or
timing, could have an effect on the net assets of the Company or on the completeness and
accuracy of information, including accounting information, relating to the Company.

l. MolMed S.p.A. is a medical biotechnology company that concentrates on research,
development and clinical testing of innovative therapies to treat tumours. It has a broad
portfolio or products including three anti-tumour drugs at the clinical trials stage: TK,
Arenegyr and M3TK. The year 2007 was a year of fundamental importance for the
Company as it continued with the clinical and pre-clinical development of its products and
with its search for co-operation agreements with a view to making the most of its
intangible assets portfolio. It also commenced the process to have its shares listed on the
Electronic Stock Market (MTA) managed by Borsa Italiana.
The main research activities undertaken in 2007 and the results obtained may be
summarized as follows:
a)      launch of Phase II clinical development of Arenegyr with start of four studies;
b)      completion of regulatory proceedings for launch of Phase III of TK in the field of
leukaemia. The proceedings were concluded with the submission of an application for
AIFA (Italian Pharmaceutical Agency) authorization.
In the past, the Company was granted Pharmaceutical Workshop (“Officina Farmaceutica”)
status and has a GMP (Good Manufacturing Practice) facility that is authorized to
manufacture cell therapy medicinal products for clinical use. The facility was approved
following an AIFA inspection in 2007. It has been used to provide TK and M3TK medicines
for use in the clinical trials conducted by the Company and to provide cell and gene
therapy services to a number of strategic partners thus helping generate revenues for the
Company.
The most significant investments in tangible assets made by the Company in 2007
essentially regarded the renewal of laboratory equipment and the purchase of equipment
used in the Pharmaceutical Workshop.
During the year, the Company carried out a number of share capital operations as
described in detail in Section 2.6 of the Financial Statements.
The operations mentioned above are set out in the Directors’ Report on Operations. The
Board of Statutory Auditors has confirmed that they comply with the law, the corporate
by-laws and principles of proper administration. It has also ensured that they are not
manifestly imprudent or risky and that they are not in contravention of resolutions
approved by the Shareholders’ General Meeting or are such that they threaten to affect
the Company’s shareholders’ equity.

                                           Pag. 93
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




2. During the year ended December 31, 2007 and since it ended, the Board of Statutory
Auditors did not identify any atypical and/or unusual transactions with third parties or
related parties.
Information on dealings with related parties in 2007 and details of the nature of these
transactions and their value are provided in the Directors’ Report on Operations (point 6),
the Notes to the Financial Statements (point 28) and in the Balance Sheet and Income
Statement as prepared in accordance with CONSOB Resolution no 15519 of July 27, 2006
(points 17 and 18 of the Financial Statements at December 31, 2007).
In 2007, in accordance with the requirements of Article 2391 of the Italian Civil Code, the
Board of Statutory Auditors confirmed that the Company had adopted practices intended
to guarantee procedural and substantive correctness and transparency with regard to the
decision making process and execution of operations with related parties.
It should be noted that, on November 6, 2007, the MolMed S.p.A. Board of Directors
approved the adoption of a Code on dealings with related parties in accordance with the
Self Regulatory Code issued by the Committee for the Corporate Governance of Listed
companies. The Code was adopted with effect from the date of issue by Borsa Italiana of
the order admitting the Company shares to a listing on the Electronic Stock Market (MTA).

3. The information provided in the 2007 Financial Statements regard to the Company’s
dealings with related parties is adequate bearing in mind the size and structure of the
Company.

4. On April 4, 2008, auditors Deloitte & Touche S.p.A. issued their audit report in terms of
Article 156 of the Consolidated Finance Act (Legislative Decree 58/1998). In it they
confirmed that the statutory financial statements at December 31, 2007 comply with
reporting requirements, have been prepared clearly and provide a true and fair view of the
balance sheet and financial situation of the Company and of its results for the year.

5. In 2007, no circumstances were reported to the Board of Statutory Auditors in relation
to Article 2408 of the Italian Civil Code.

6. No statements or reports were received by the Board of Statutory Auditors in 2007.

7. In 2007, MolMed S.p.A. appointed Deloitte & Touche S.p.A. to perform the following
engagements in addition to the compulsory audit. The related fees are summarized
below:
Audit                         Euro                             117,700
Certification services        Euro                             117,000
Assistance with transition to
IFRS                          Euro                               22,000
Total                                                          256,700

Further information is provided under Note 31.3 to the Financial Statements.

8. During 2007, MolMed S.p.A. did not award any engagements to persons/entities with
an ongoing relationship with Deloitte & Touche or to and companies belonging to the
Deloitte & Touche network.

9. In 2007, the Board of Statutory Auditors gave one opinion, in terms of Article 2389(3)
of the Italian Civil Code, on the emoluments awarded to Directors with particular duties.

10. In 2007, the Board of Directors met twelve times and the Board of Statutory Auditors
attended all of these meetings.


                                          Pag. 94
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




The Board of Statutory Auditors met nine while it also attended the Shareholders’ General
Meetings held on April 24, September 28, October 29 and November 6, 2007.

11. The Board of Statutory Information has gathered information and checked – insofar as
it is responsible – that principles of proper management have been observed. This has
taken place by means of direct observation, the collection of information from the persons
in charge of the Company business divisions, management and from meetings with
external auditors Deloitte & Touche S.p.A.
With regard to the decision making processes of the Board of Directors, the Board of
Statutory Auditors has confirmed – also through direct involvement in Board meetings –
that the decisions made by the Directors were compliant with the law and the corporate
by-laws and that the resolutions passed were adequately supported by reliable information
and by analysis and verification processes involving, where necessary, the use of external
professional advisors.
In relation to implementation of orders adopting the Self Regulatory Code issued by Borsa
Italiana, the Board of Directors’ meeting of November 6, 2007 approved adoption of the
following documents:
-       Code on dealings with related parties;
-       Internal Dealing Code;
-       Code on Non Public information and Register of persons with access to Non Public
        information;
The same Board of Directors’ meeting:
-       approved the establishment of an Internal Control Committee and a Remuneration
        Committee;
-       appointed an Information Contact and a Substitute Information Contact;
-       established the role of Investor Relator and appointed the person responsible;
-       identified the Independent Directors in terms of the Consolidated Finance Act and
        the Self Regulatory Code and appointed the Lead Independent Director;
-       approved the creation of an Internal Audit department and made it responsible to
        the Chairman and Managing Director of the Company;
-       decided that the Head of the Internal Audit department would be the “Person
        responsible for Internal Control”;
-       resolved to establish a Supervisory Body so as to continue with the realization and
        adoption of an Organizational Model in terms of Legislative Decree 231/2001 so as
        to supervise the operation, updating and observance of the Organizational Model;
-       appointed the Chairman of the Supervisory Body;
-       gave the Supervisory Body the task of preparing regulations on the organization,
        powers and operation of the said Supervisory Body and the duty to implement
        flows of information to the Board of Directors;
-       appointed the Manager responsible for preparing accounting and company
        documents in terms of Article 154 bis of Legislative Decree 58/98;
-       approved the Memorandum on the set up and operation of the management control
        system.
At the meeting held on January 21, 2008, the MolMed S.p.A. Board of Directors appointed
the Executive Director who will oversee the operations of the internal control system. It
also appointed the second member of the Supervisory Body and approved the schedule
intended to implement fully the Organizational Model 231/2001 by the end of 2008.
The Board of Statutory Auditors believes that the corporate governance instruments and
bodies established by the Company – operational upon authorization of a listing on the
Italian Stock Market – represent a valid means of ensuring that principles of proper
management are followed during operating activities. The Board expresses its approval
thereof.




                                          Pag. 95
                                                                           Statutory financial
                                                                                statements at
                                                                           December 31, 2007




12. The Board of Statutory Auditors has also acquired information and checked that the
Company’s organizational structure is adequate. It has done so by gathering information
from the managers responsible.
At December 31, 2007, the MolMed S.p.A. organizational structure was divided into four
main operating divisions:
-      Research;
-      Pharmaceutical development and production;
-      Clinical Department;
-      Regulatory affairs & quality certification.
These divisions report to the General Manager who, in turn, reports to the Chairman and
Managing Director.
The above operational divisions are supported by a system of horizontal business functions
under the following:
-      Administration and Finance;
-      Human Resources;
-      Business Development.
The organization has been completed by the establishment of the functions and
committees outlined in point 11 of this report.
The Board of Statutory Auditors expresses a positive opinion on the organizational
structure in terms of its ability to pursue the general business objectives in a specialized
and co-ordinated manner. The lines of influence (authority, function and assistance) and
the specific duties appear clear.
At December 31, 2007, MolMed S.p.A. had 77 full time employees. It recruited 12 new
researchers during 2007. Significant training activities have been organized for the
various business areas and this has helped develop the specific knowledge required to
carry out roles within the business effectively. Heads of department and the persons in
charge of the individual operating areas have taken part in a specific training program
intended to improve their managerial skills (management, motivation, guidance and co-
ordination of personnel).
The Company did not hold any controlling investments at December 31, 2007.

13. The Board of Statutory Auditors has evaluated and assessed the internal control
systems through meetings with management.
The internal control system consists of rules, procedures and organizational structures
intended – through a suitable process to identify, measure manage and monitor the main
business risks – to ensure that the business objectives are pursued by means of proper,
co-ordinated and effective management and operations.
A valid internal control system moves from the need to develop, within the business,
transparent, reliable procedures and codes of conduct linked to precise responsibilities. It
contributes towards assuring the effective and efficient management that can be readily
understood and tested, that financial information is reliable, that laws and regulations are
complied with and that the Company assets are safeguarded while preventing fraud to the
damage of the Company and the financial market.
Before the shares were listed on the Electronic Stock Market (MTA), the Company’s
internal control system was primarily based on first level controls (managerial controls),
on the preparation of business plans and budgets, on the careful definition of roles (duties,
responsibility and powers) and on the introduction of operating procedures. Overall, this
system appeared adequate with regard to Company requirements and, in the view of the
Board of Statutory Auditors, it satisfactorily assured the segregation of duties, an audit
trail for decisions and operations and the reliability of business figures and information.
Finally, the Board of Statutory Auditors notes that no significant problems were identified
with regard to the internal control system in 2007.
The Company reorganized its internal control system with a view to the Stock Market
listing.


                                           Pag. 96
                                                                             Statutory financial
                                                                                  statements at
                                                                             December 31, 2007




First of all, with the assistance of external advisors, a study was performed out with
regard to the set up and operation of the management control system: the resulting
Memorandum was approved by the Board of Directors’ meeting of November 6, 2007.
The overall design of the new internal control system which became operational upon the
Company’s admission to listing on the MTA was approved by the Board of Directors on
November 6, 2007 and January 21, 2008. It is based on the following:
-       Board of Directors: establishes the internal control system objectives with
assistance from the Internal Control Committee; ensures that the system is adequate,
effective and working properly. All of this is performed with the aim of ensuring that the
main business risks (operational, economic, financial and compliance) are adequately
highlighted, monitored and managed.
-       Executive director appointed to oversee the operations of the internal control
system: Role is to identify the main business risks; to implement the objectives laid down
by the Board of Directors; to design, realize and manage the internal control system and
continually check – based on internal and external operating conditions – its adequacy,
effectiveness and efficiency.
-       Person responsible for internal control: responsible for checking the adequacy and
effectiveness of the internal control system and proposing corrective measures when
problems are identified. The Board of Directors has decided that the Head of Internal
Audit will fulfill this role. The Person reports to the Company Chairman and to the Internal
Control Committee while dealing with the Executive Director appointed to deal with
internal control.
-       Internal control committee: Together with the manager responsible for preparing
accounting and company documents and the external auditors, checks that accounting
standards are being properly applied. At the request of the Executive Director responsible
for internal controls, identifies opinions on identification of business risks and on planning,
realization and management of internal control system. Assesses work plans and reports
of person responsible for internal control and the external auditors. Helps the Board of
Directors with its duties in relation to internal controls.
-       Internal audit: Performs Internal Audit activities i.e. services intended to test and
improve the effectiveness and efficiency of the internal control system and risk
management.
-       Manager responsible for preparing company and accounting documents: duties
described in detail in Article 154-bis of Legislative Decree 58/1998.
The overall picture is completed by “Form 231” which regulates the internal control system
with regard to the provisions of Legislative Decree 231/2001 in terms of the administrative
responsibility of entities for offences committed by their employees and consultants. At
present, the Company has approved and prepared the General Part of its Organizational,
Management and Control Model in terms of Legislative Decree 231/2001. It is currently
implementing and supplementing the mode and preparing the Special Section (mainly
regarding the Ethical Code, the Self regulatory Code, the mapping of sensitive activities,
the delegation of powers and operating procedures).
The internal control system structure also includes the activities of the external auditors
and the Board of Statutory Auditors.
Overall, the new internal control system adopted by MolMed S.p.A. seems extensive and
suited to the characteristics of the Company. It complies with the Regulations for the
Markets Organized and Managed by Borsa Italiana S.p.A. and the Board of Statutory
Auditors expresses its approval thereof.

14. The Board of Statutory Auditors has evaluated and assessed the adequacy of the
administrative and accounting system and its ability to reflect operations accurately. It
did so by gathering information from the persons in charge of the Company departments,
by reviewing company documents and analyzing the results of the work done by the
external auditors, Deloitte & Touche.


                                            Pag. 97
                                                                          Statutory financial
                                                                               statements at
                                                                          December 31, 2007




15. The Board of Statutory Auditors has, through direct checks and information obtained
from the external auditors Deloitte & Touche, confirmed that IAS/IFRS (and legal and
regulatory requirements) have been complied with with regard to the form and content of
the statutory financial statements and the accompanying Directors’ reports on operations.
In particular: i) as regards segmental information on business sectors and geographical
areas under IAS 14, the Company has identified a single business sector; ii) the
information required by CONSOB resolution 15519 of July 27, 2006 and CONSOB
Communication DEM/6064293 of July 28, 2006 has been provided.
The Chairman and Managing Director and the Manager responsible for preparing the
company and accounting documents have made the statements in terms of Article 154-bis
(3) and (4) of Legislative Decree no 58 of February 24, 1998.

16. The Board of Statutory Auditors has overseen preparation and implementation of the
corporate governance rules included in the Self Regulatory Code prepared by the
Committee for the Corporate Governance of Listed Companies as adopted by the Company
by means of a Board of Directors’ resolution on November 6, 2007. It should be noted
that the Company has prepared a “Report on Corporate Governance” as approved by the
Board of Directors on March 19, 2008.
Information on the documents prepared and the persons/bodies appointed by the
Company in terms of the recommendations contained in the Self regulatory Code prepared
by Borsa Italiana has already been provided in point 11 of this report.
The following information should also be borne in mind.
In accordance with the corporate by-laws, the Board of Directors was appointed using the
list voting system so as to ensure that at least one of the Directors comes from a minority
list.
The Board of Directors appointed by the Shareholders’ General Meeting of November 6,
2007 has thirteen directors, three of them classed as independent in terms of the Self
Regulatory Code and Legislative Decree 58/1998. The Chairman of the Company has
been appointed Executive Director and the Board of Directors gave him specific delegated
powers at its meeting of November 6, 2007.
Still with regard to independent Directors, the Company has set up the figure of Lead
Independent Director (the Chairman of the Internal Control Committee). He represents
the point of reference for queries and contributions by the Non Executive Directors and, in
particular, by the independent directors.
As previously mentioned, the Internal Control Committee and the Remuneration
Committee were set up with effect from the date of admission to listing. Both Committees
consist of three Directors, including one non executive Director and two non executive,
independent Directors.
It should also be noted that, by means of a Shareholders’ General Meeting resolution of
October 29, 2007, the Company adopted new company by-laws consistent with the
requirements of Legislative Decree 58/1998.
The company by-laws and the new corporate governance instruments were effective when
the shares were listed on the Electronic Stock Market (MTA).
Further information on the Corporate Governance of the Company is provided in the
specific Report prepared and approved by the Board of Directors. It also contains the
reasons for any deviations from the recommendations made by the Self Regulatory Code
issued by the Committee for Corporate Governance as published by Borsa Italiana in
March 2006.
The Board of Statutory Auditors stresses that it has been constantly involved in the
analysis and implementation of the Company’s corporate governance system and, as
already stated in point 11 of this report, it expresses its approval thereof.

17. Pursuant to the decisions of the Shareholders’ General Meeting of October 29, 2007,
on January 28, 2008, the Company was admitted to the listing process by Borsa Italiana
and, on February 13, 2008, CONSOB gave its final approval for publication of the Offering

                                          Pag. 98
                                                                        Statutory financial
                                                                             statements at
                                                                        December 31, 2007




Circular. On March 5, 2008, trading in MolMed shares began on the Electronic Stock
Market managed by Borsa Italiana.
The Board of Statutory Auditors constantly monitored the listing process and ensured that
applicable legislation and regulations were complied with.

18. Our supervision and control activities, as described above, did not identify any
significant events requiring to be mentioned in our Report to the Shareholders’ General
Meeting or to the regulatory and control bodies.

20. The Board of Statutory Auditors notes the contents of the financial statements at
December 31, 2007 and does not raise any objections in relation to the proposals made by
the Board of Directors with regard to coverage of the loss for the year.
                                           ***
The appointment of the Statutory Auditor who took over on January 22, 2008 from
another Statutory Auditor who resigned expires upon the calling of the General Meeting to
approve the Financial Statements at December 31, 2007. The Board of Statutory Auditors
invites the Shareholders to appoint a new Statutory Auditor and a new Substitute
Statutory Auditor.

Milan, April 4, 2008

THE BOARD OF STATUTORY AUDITORS




                                         Pag. 99
                                      Statutory financial
                                           statements at
                                      December 31, 2007




External auditors’report




                           Pag. 100
           Statutory financial
                statements at
           December 31, 2007




Pag. 101

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:16
posted:10/6/2012
language:Unknown
pages:101