EX-4.2






Exhibit 4.2




Consolidated Financial Statements of



THERATECHNOLOGIES INC.



Years ended November 30, 2010 and 2009 and as at December 1, 2008












 









 














	 	 	 	 	 

	KPMG LLP

	 	Telephone
	 	(514) 840-2100
	Chartered Accountants

	 	Fax
	 	(514) 840-2187
	600 de Maisonneuve Blvd. West

	 	Internet
	 	www.kpmg.ca
	Suite 1500
	 	 	 	 
	Tour KPMG
	 	 	 	 
	Montréal (Québec) H3A 03A
	 	 	 	 






AUDITORS’ REPORT TO THE SHAREHOLDERS



We have audited the consolidated statements of financial position of Theratechnologies Inc. as
at November 30, 2010 and 2009 and December 1, 2008, and the consolidated statements of
comprehensive income, statements of changes in equity and statements of cash flows for the years
ended November 30, 2010 and 2009. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.



We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.



In our opinion, these consolidated financial statements present fairly, in all material respects,
the financial position of the Company as at November 30, 2010 and 2009 and December 1, 2008, and
its financial performance and its cash flows for the years ended November 30, 2010 and 2009 in
accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board.







Chartered Accountants



Montréal, Canada



February 8, 2011




*CA Auditor permit no 14553




KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG

network of independent member firms affiliated with KPMG International Cooperative

(“KPMG International”), a Swiss entity.

KPMG Canada provides services to KPMG LLP.




 









 





THERATECHNOLOGIES INC.




Consolidated Financial Statements



Years ended November 30, 2010 and 2009 and as at December 1, 2008




Financial Statements




	 	 	 	 	 

	Consolidated Statement of Financial Position
	 	 	1	 
	Consolidated Statement of Comprehensive Income
	 	 	2	 
	Consolidated Statement of Changes in Equity
	 	 	3	 
	Consolidated Statement of Cash Flows
	 	 	4	 
	Notes to the Consolidated Financial Statements
	 	 	5	 






 









 






THERATECHNOLOGIES INC.




Consolidated Statement of Financial Position




As at November 30, 2010 and 2009 and December 1, 2008

(in thousands of Canadian dollars)
 





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	November 30,	 	 	November 30,	 	 	December 1,	 
	 	 	Note	 	 	2010	 	 	2009	 	 	2008	 
	 	 	 	 	 	 	$	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assets
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current assets:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash
	 	 	 	 	 	 	26,649	 	 	 	1,519	 	 	 	133	 
	Bonds
	 	 	8	 	 	 	1,860	 	 	 	10,036	 	 	 	10,955	 
	Trade and other receivables
	 	 	9	 	 	 	161	 	 	 	375	 	 	 	610	 
	Tax credits and grants receivable
	 	 	10	 	 	 	332	 	 	 	1,333	 	 	 	1,451	 
	Inventories
	 	 	11	 	 	 	4,317	 	 	 	2,225	 	 	 	—	 
	Prepaid expenses
	 	 	 	 	 	 	1,231	 	 	 	630	 	 	 	739	 
	 
	Total current assets
	 	 	 	 	 	 	34,550	 	 	 	16,118	 	 	 	13,888	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-current assets:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Bonds
	 	 	8	 	 	 	36,041	 	 	 	51,807	 	 	 	35,249	 
	Property and equipment
	 	 	12	 	 	 	1,060	 	 	 	1,229	 	 	 	1,299	 
	Other assets
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	2,776	 
	 
	Total non-current assets
	 	 	 	 	 	 	37,101	 	 	 	53,036	 	 	 	39,324	 
	 
	Total assets
	 	 	 	 	 	 	71,651	 	 	 	69,154	 	 	 	53,212	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Liabilities
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current liabilities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities
	 	 	13	 	 	 	4,977	 	 	 	5,568	 	 	 	6,865	 
	Current portion of deferred revenue
	 	 	4	 	 	 	6,847	 	 	 	6,847	 	 	 	—	 
	 
	Total current liabilities
	 	 	 	 	 	 	11,824	 	 	 	12,415	 	 	 	6,865	 
	 
	Non-current liabilities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other liabilities
	 	 	14	 	 	 	325	 	 	 	—	 	 	 	—	 
	Deferred revenue
	 	 	4	 	 	 	6,846	 	 	 	13,691	 	 	 	—	 
	 
	Total non-current liabilities
	 	 	 	 	 	 	7,171	 	 	 	13,691	 	 	 	—	 
	 
	Total liabilities
	 	 	 	 	 	 	18,995	 	 	 	26,106	 	 	 	6,865	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Equity
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Share capital
	 	 	15	 	 	 	279,398	 	 	 	279,169	 	 	 	269,219	 
	Contributed surplus
	 	 	 	 	 	 	7,808	 	 	 	6,757	 	 	 	5,760	 
	Deficit
	 	 	 	 	 	 	(235,116	)	 	 	(244,160	)	 	 	(229,004	)
	Accumulated other comprehensive income
	 	 	 	 	 	 	566	 	 	 	1,282	 	 	 	372	 
	 
	Total equity
	 	 	 	 	 	 	52,656	 	 	 	43,048	 	 	 	46,347	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Contingent liability
	 	 	18	 	 	 	 	 	 	 	 	 	 	 	 	 
	Commitments
	 	 	23	 	 	 	 	 	 	 	 	 	 	 	 	 
	Subsequent events
	 	 	26	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Total liabilities and equity
	 	 	 	 	 	 	71,651	 	 	 	69,154	 	 	 	53,212	 
	 






See accompanying notes to the consolidated financial statements.




	 	 	 

	On behalf of the Board,
	 	 
	 
	 	 
	(signed) Paul Pommier

	 	(signed) Jean-Denis Talon
	 

	 	 
	Director

	 	Director







1











 





THERATECHNOLOGIES INC.

Consolidated Statement of Comprehensive Income




Years ended November 30, 2010 and 2009

(in thousands of Canadian dollars, except per share amounts)

 





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	November 30,	 	 	November 30,	 
	 	 	Note	 	 	2010	 	 	2009	 
	 
	 	 	 	 	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Revenue:
	 	 	 	 	 	 	 	 	 	 	 	 
	Research services:
	 	 	 	 	 	 	 	 	 	 	 	 
	Milestone payments
	 	 	4	 	 	 	25,000	 	 	 	10,884	 
	Upfront payments and initial technology access fees
	 	 	4	 	 	 	6,846	 	 	 	6,560	 
	Royalties and license fees
	 	 	 	 	 	 	22	 	 	 	24	 
	 
	Total revenue
	 	 	 	 	 	 	31,868	 	 	 	17,468	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of sales
	 	 	 	 	 	 	469	 	 	 	—	 
	Research and development expenses, net of tax credits of $934 (2009 - $1,795)
	 	 	10	 	 	 	14,064	 	 	 	20,810	 
	Selling and market development expenses
	 	 	6	 	 	 	2,670	 	 	 	6,862	 
	General and administrative expenses
	 	 	 	 	 	 	8,002	 	 	 	6,543	 
	 
	Total operating expenses
	 	 	 	 	 	 	25,205	 	 	 	34,215	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Results from operating activities
	 	 	 	 	 	 	6,663	 	 	 	(16,747	)
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Finance income
	 	 	7	 	 	 	1,888	 	 	 	2,252	 
	Finance costs
	 	 	7	 	 	 	493	 	 	 	(661	)
	 
	Total net financial income
	 	 	 	 	 	 	2,381	 	 	 	1,591	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net profit (loss) before income taxes
	 	 	 	 	 	 	9,044	 	 	 	(15,156	)
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Income tax expense
	 	 	16	 	 	 	114	 	 	 	—	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Net profit (loss)
	 	 	 	 	 	 	8,930	 	 	 	(15,156	)
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Other comprehensive income (loss), net of tax:
	 	 	 	 	 	 	 	 	 	 	 	 
	Net change in fair value available-for-sale financial assets, net of tax
	 	 	 	 	 	 	(390	)	 	 	1,039	 
	Net change in fair value available-for-sale financial assets transferred to net profit (loss),
net of tax
	 	 	 	 	 	 	(326	)	 	 	(129	)
	 
	 
	 	 	 	 	 	 	(716	)	 	 	910	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Total comprehensive income (loss) for the year
	 	 	 	 	 	 	8,214	 	 	 	(14,246	)
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Basic and diluted earnings (loss) per share
	 	 	15	 	 	 	0.15	 	 	 	(0.25	)
	 






See accompanying notes to the consolidated financial statements.





2









 








THERATECHNOLOGIES INC.

Consolidated Statement of Changes in Equity




Years ended November 30, 2010 and 2009

(in thousands of Canadian dollars)

 





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Unrealized gains	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	or losses on	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	available-for-sale	 	 	 	 	 	 	 
	 	 	 	 	 	 	Share capital	 	 	Contributed	 	 	financial	 	 	 	 	 	 	 
	 	 	Note	 	 	Number	 	 	Dollars	 	 	surplus	 	 	assets (i)	 	 	Deficit	 	 	Total	 
	 
	 	 	 	 	 	 	 	 	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	Balance as at December 1, 2008
	 	 	 	 	 	 	58,215,090	 	 	 	269,219	 	 	 	5,760	 	 	 	372	 	 	 	(229,004	)	 	 	46,347	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total comprehensive income (loss) for the year:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(15,156	)	 	 	(15,156	)
	Other comprehensive income (loss):
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net change in fair value of available-for-sale financial assets, net of tax
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,039	 	 	 	—	 	 	 	1,039	 
	Net change in fair value of available-for-sale financial assets transferred to net profit (loss),
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	net of tax
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(129	)	 	 	—	 	 	 	(129	)
	 
	Total comprehensive income (loss) for the year
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	910	 	 	 	(15,156	)	 	 	(14,246	)
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Transactions with owners, recorded directly in equity:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issue of common shares
	 	 	15 	(i)	 	 	2,214,303	 	 	 	9,950	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	9,950	 
	Share-based compensation for stock option plan
	 	15 (iv)	 	 	—	 	 	 	—	 	 	 	997	 	 	 	—	 	 	 	—	 	 	 	997	 
	 
	Total contributions by owners
	 	 	 	 	 	 	2,214,303	 	 	 	9,950	 	 	 	997	 	 	 	—	 	 	 	—	 	 	 	10,947	 
	 
	Balance as at November 30, 2009
	 	 	 	 	 	 	60,429,393	 	 	 	279,169	 	 	 	6,757	 	 	 	1,282	 	 	 	(244,160	)	 	 	43,048	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total comprehensive income (loss) for the year:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net profit
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	8,930	 	 	 	8,930	 
	Other comprehensive income (loss):
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net change in fair value of available-for-sale financial assets, net of tax
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(390	)	 	 	—	 	 	 	(390	)
	Net change in fair value of available-for-sale financial assets transferred to net profit (loss),
net of tax
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(326	)	 	 	—	 	 	 	(326	)
	 
	Total comprehensive income (loss) for the year
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(716	)	 	 	8,930	 	 	 	8,214	 
	 
	Transactions with owners, recorded directly in equity:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issue of common shares
	 	 	15 	(i)	 	 	2,880	 	 	 	15	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	15	 
	Income tax related to share issue costs
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	114	 	 	 	114	 
	Share-based compensation plan:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Share-based compensation for stock option plan
	 	15 (iv)	 	 	—	 	 	 	—	 	 	 	1,133	 	 	 	—	 	 	 	—	 	 	 	1,133	 
	Exercise of stock options:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Monetary consideration
	 	15 (iv)	 	 	80,491	 	 	 	132	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	132	 
	Attributed value
	 	15 (iv)	 	 	—	 	 	 	82	 	 	 	(82	)	 	 	—	 	 	 	—	 	 	 	—	 
	 
	Total contributions by owners
	 	 	 	 	 	 	83,371	 	 	 	229	 	 	 	1,051	 	 	 	—	 	 	 	114	 	 	 	1,394	 
	 
	Balance as at November 30, 2010
	 	 	 	 	 	 	60,512,764	 	 	 	279,398	 	 	 	7,808	 	 	 	566	 	 	 	(235,116	)	 	 	52,656	 
	 








 




			
	(i)	 	Accumulated other comprehensive income.





See accompanying notes to the consolidated financial statements.













3









 











THERATECHNOLOGIES INC.

Consolidated Statement of Cash Flows




Years ended November 30, 2010 and 2009

(in thousands of Canadian dollars)

 





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	November 30,	 	 	November 30,	 
	 	 	Note	 	 	2010	 	 	2009	 
	 
	 	 	 	 	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Operating activities:
	 	 	 	 	 	 	 	 	 	 	 	 
	Net profit (loss)
	 	 	 	 	 	 	8,930	 	 	 	(15,156	)
	Adjustments for:
	 	 	 	 	 	 	 	 	 	 	 	 
	Depreciation of property and equipment
	 	 	12	 	 	 	466	 	 	 	612	 
	Share-based compensation
	 	 	 	 	 	 	1,133	 	 	 	997	 
	Income tax expense
	 	 	 	 	 	 	114	 	 	 	—	 
	Write-down of inventories
	 	 	11	 	 	 	192	 	 	 	—	 
	Lease inducements and amortization
	 	 	17	 	 	 	325	 	 	 	—	 
	 
	Operating activities before changes in operating assets and liabilities
	 	 	 	 	 	 	11,160	 	 	 	(13,547	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Change in accrued interest income on bonds
	 	 	 	 	 	 	728	 	 	 	(923	)
	Change in trade and other receivables
	 	 	 	 	 	 	214	 	 	 	235	 
	Change in tax credits and grants receivable
	 	 	 	 	 	 	1,001	 	 	 	118	 
	Change in inventories
	 	 	 	 	 	 	(2,284	)	 	 	(2,225	)
	Change in prepaid expenses
	 	 	 	 	 	 	(601	)	 	 	109	 
	Change in other assets
	 	 	 	 	 	 	—	 	 	 	2,776	 
	Change in accounts payable and accrued liabilities
	 	 	 	 	 	 	(473	)	 	 	(1,424	)
	Change in deferred revenue
	 	 	 	 	 	 	(6,845	)	 	 	20,538	 
	 
	 
	 	 	 	 	 	 	(8,260	)	 	 	19,204	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Cash flows from operating activities
	 	 	 	 	 	 	2,900	 	 	 	5,657	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Financing activities:
	 	 	 	 	 	 	 	 	 	 	 	 
	Proceeds from issue of share capital
	 	 	 	 	 	 	15	 	 	 	9,950	 
	Proceeds from exercise of stock options
	 	 	15	 	 	 	132	 	 	 	—	 
	Share issue costs
	 	 	 	 	 	 	—	 	 	 	(8	)
	 
	Cash flows from financing activities
	 	 	 	 	 	 	147	 	 	 	9,942	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Investing activities:
	 	 	 	 	 	 	 	 	 	 	 	 
	Acquisition of property and equipment
	 	 	12	 	 	 	(415	)	 	 	(407	)
	Proceeds from sale of bonds
	 	 	 	 	 	 	22,498	 	 	 	15,305	 
	Acquisition of bonds
	 	 	 	 	 	 	—	 	 	 	(29,111	)
	 
	Cash flows from (used in) investing activities
	 	 	 	 	 	 	22,083	 	 	 	(14,213	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Net change in cash
	 	 	 	 	 	 	25,130	 	 	 	1,386	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Cash as at December 1
	 	 	 	 	 	 	1,519	 	 	 	133	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Cash as at November 30
	 	 	 	 	 	 	26,649	 	 	 	1,519	 
	 






See note 19 for supplemental cash flow information.




See accompanying notes to the consolidated financial statements.





4











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements



Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in
thousands of Canadian dollars, except per share amounts)



 






	1.	 	Reporting entity:
	 
	 	 	Theratechnologies Inc. is a specialty pharmaceutical company that discovers and develops
innovative therapeutic peptide products with an emphasis on growth hormone releasing factor
peptides. Theratechnologies Inc. is leveraging its expertise in the field of metabolism to
discover and develop products in specialty markets. Its commercialization strategy is to retain
all or a significant portion of the commercial rights to its products. Its first product,
EGRIFTATM (tesamorelin for injection), was approved by the United States
Food and Drug Administration (“FDA”) in November 2010. To date,
EGRIFTATM is the only approved therapy for the reduction of excess
abdominal fat in HIV-infected patients with lipodystrophy.
	 
	 	 	The consolidated financial statements include the accounts of Theratechnologies Inc. and its
wholly-owned subsidiaries (together referred to as the “Company” and individually as “the
subsidiaries of the Company”).
	 
	 	 	Theratechnologies Inc. is incorporated under Part 1A of the Québec Companies Act and is
domiciled in Quebec, Canada. The Company is located at 2310 boul. Alfred-Nobel, Montreal,
Quebec, H4S 2B4.
	 
	2.	 	Basis of preparation:






	 	(a)	 	Statement of compliance:
	 
	 	 	 	The consolidated financial statements of the Company have been prepared in accordance with
IFRSs as issued by the International Accounting Standards Board (“IASB”). These are the
Company’s first consolidated financial statements prepared in accordance with International
Financial Reporting Standards (“IFRSs”). The Company has applied IFRS 1,
First-time Adoption of International Financial Reporting Standards, using December 1, 2008
as the date of transition to IFRSs.
	 
	 	 	 	An explanation of how the transition to IFRSs has affected the reported financial position,
financial performance and cash flows of the Company is provided in note 27.
	 
	 	 	 	The consolidated financial statements were authorized for issue by the Board of Directors
on February 8, 2011.
	 
	 	(b)	 	Basis of measurement:
	 
	 	 	 	The Company’s consolidated financial statements have been prepared on a going concern and
historical cost basis, except for available-for-sale financial assets which are measured at
fair value.
	 
	 	 	 	The methods used to measure fair value are discussed further in note 22.




5









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
(in
thousands of Canadian dollars, except per share amounts)



 






	2.	 	Basis of preparation (continued):






	 	(c)	 	Functional and presentation currency:
	 
	 	 	 	These consolidated financial statements are presented in Canadian dollars, which is the
Company’s functional currency. All financial information presented in Canadian dollars has
been rounded to the nearest thousand.
	 
	 	(d)	 	Use of estimates and judgements:
	 
	 	 	 	The preparation of the Company’s consolidated financial statements in conformity with IFRSs
requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the
reporting period.
	 
	 	 	 	Information about critical judgements in applying accounting policies and assumption and
estimation uncertainties that have the most significant effect on the amounts recognized in
the consolidated financial statements is included in the following notes:






	 	•	 	Note 4 — Revenue and deferred revenue;
	 
	 	•	 	Note 15 (iv) — Stock option plan;
	 
	 	•	 	Note 16 — Income taxes;
	 
	 	•	 	Note 18 — Contingent liability.






	 	 	 	Other areas of judgement and uncertainty relate to the estimation of accruals for clinical
trial expenses, the recoverability of inventories, the measurement of the amount and
assessment of the recoverability of tax credits and grants receivable and capitalization of
development expenditures.
	 
	 	 	 	Reported amounts and note disclosure reflect the overall economic conditions that are most
likely to occur and anticipated measures management intends to take. Actual results could
differ from those estimates.
	 
	 	 	 	The above estimates and assumptions are reviewed regularly. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future
periods affected.






	3.	 	Significant accounting policies:
	 
	 	 	The accounting policies set out below have been applied consistently to all periods presented
in these consolidated financial statements and in preparing the opening IFRS statement of
financial position at December 1, 2008, the date of transition to IFRSs.









6









 








THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
(in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):
	 
	 	 	The accounting policies have been applied consistently by the subsidiaries of the Company.






	 	(a)	 	Basis of consolidation:
	 
	 	 	 	The financial statements of subsidiaries are included in the consolidated financial
statements from the date on which control commences until the date on which control ceases.
Subsidiaries are entities controlled by the Company. Control is present where the Company
has the power to govern the financial and operating policies of the entity so as to obtain
benefits from its activities. In assessing control, potential voting rights that are
exercisable currently are taken into consideration. The accounting policies of subsidiaries
are changed when necessary to align them with the policies adopted by the Company.
	 
	 	 	 	Reciprocal balances and transactions, revenues and expenses resulting from transactions
between subsidiaries and with the Company are eliminated in preparing the consolidated
financial statements.
	 
	 	(b)	 	Foreign currency:
	 
	 	 	 	Transactions in foreign currencies are translated to the respective functional currencies
of the subsidiaries of the Company at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the exchange rate at that date. The foreign
currency gain or loss on monetary items is the difference between amortized cost in the
functional currency at the beginning of the period, adjusted for effective interest and
payments during the period, and the amortized cost in foreign currency translated at the
exchange rate at the end of the reporting period.
	 
	 	 	 	Foreign currency differences arising on translation are recognized in net profit (loss),
except for differences arising on the translation of available-for-sale equity instruments,
which are recognized in other comprehensive income. Non-monetary assets and liabilities
denominated in foreign currencies that are measured at fair value are translated to the
functional currency at the exchange rate at the date on which the fair value was
determined. Non-monetary items that are measured at historical cost in a foreign currency
are translated using the exchange rate at the date of the transaction.
	 
	 	(c)	 	Revenue recognition:
	 
	 	 	 	Collaboration agreements that include multiple deliverables are considered to be
multi-element arrangements. Under this type of arrangement, the identification of separate
units of accounting is required and revenue is allocated among the separate units based on
their relative fair values.






7











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
(in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(c)	 	Revenue recognition (continued):
	 
	 	 	 	Payments received under the collaboration agreement may include upfront payments, milestone
payments, research services, royalties and license fees. Revenues for each unit of
accounting are recorded as described below:






	 	(i)	 	Sale of goods:
	 
	 	 	 	Revenues from the sale of goods are recognized when the Company has transferred to the
buyer the significant risks and rewards of ownership of the goods, there is no
continuing management involvement with the goods, and the amount of revenue can be
measured reliably.
	 
	 	(ii)	 	Royalties and license fees:
	 
	 	 	 	Royalties and license fees are recognized when conditions and events under the license
agreement have occurred and collectibility is reasonably assured.
	 
	 	(iii)	 	Research services:
	 
	 	 	 	Revenues from research contracts are recognized when services to be provided are
rendered and all conditions under the terms of the underlying agreement are met.






	 	(a)	 	Upfront payments and initial technology access fees:
	 
	 	 	 	Upfront payments and initial technology access fees are deferred and recognized as
revenue on a systematic basis over the period during which the related products or
services are delivered and all obligations are performed.
	 
	 	(b)	 	Milestone payments:
	 
	 	 	 	Revenues subject to the achievement of milestones are recognized only when the
specified events have occurred and collectibility is reasonably assured.






	 	(d)	 	Cost of sales:
	 
	 	 	 	Cost of sales represents the cost of goods sold and includes the cost of raw materials,
supplies, direct overhead charges, unallocated indirect costs related to production as well
as write-down of inventories. Other direct costs, such as manufacturing start-up costs
between validation and the achievement of normal production, are expensed as incurred.









8









 








THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
(in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(e)	 	Employee benefits:
	 
	 	 	 	Salaries and short-term employee benefits:
	 
	 	 	 	Salaries and short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is recognized for the
amount expected to be paid under short-term profit-sharing or cash bonus plans if the
Company has a legal or constructive obligation to pay an amount as a result of past
services rendered by an employee and the obligation can be estimated reliably.
	 
	 	 	 	Post-employment benefits:
	 
	 	 	 	Post-employment benefits include a defined contribution plan under which an entity pays
fixed contributions into a separate entity and will have no legal or constructive
obligation to pay further amounts. Obligations for contributions to defined contribution
plans are recognized as an employee benefit expense when due. Prepaid contributions are
recognized as an asset to the extent that a cash refund or a reduction in future payments
is available. The Company’s defined contribution plan comprises the registered retirement
savings plan, the Quebec Pension Plan and unemployment insurance.
	 
	 	 	 	Termination benefits:
	 
	 	 	 	Termination benefits are recognized as an expense when the Company is committed
demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to
either terminate employment before the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy.
	 
	 	(f)	 	Finance income and finance costs:
	 
	 	 	 	Finance income comprises interest income on available-for-sale financial assets and gains
(losses) on the disposal of available-for-sale financial assets. Interest income is
recognized as it accrues in profit (loss), using the effective interest method.
	 
	 	 	 	Finance costs are comprised of bank charges, impairment losses on financial assets
recognized in profit (loss) and of foreign currency gains and losses which are reported on
a net basis.









9









 








THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
(in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(g)	 	Inventories:
	 
	 	 	 	Inventories are presented at the lower of cost, determined using the first-in first-out
method, or net realizable value. Inventory costs include the purchase price and other costs
directly related to the acquisition of materials, and other costs incurred in bringing the
inventories to their present location and condition. Inventory costs also include the costs
directly related to the conversion of materials to finished goods, such as direct labour,
and a systematic allocation of fixed and variable production overhead, including
manufacturing depreciation expense. The allocation of fixed production overheads to the
cost of inventories is based on the normal capacity of the production facilities. Normal
capacity is the average production expected to be achieved over a number of periods under
normal circumstances.
	 
	 	 	 	Net realizable value is the estimated selling price in the Company’s ordinary course of
business, less the estimated costs of completion and selling expenses.
	 
	 	(h)	 	Property and equipment:
	 
	 	 	 	Recognition and measurement:
	 
	 	 	 	Items of property and equipment are recognized at cost less accumulated depreciation and
accumulated impairment losses. Cost includes expenditure that is directly attributable to
the acquisition of the asset and the costs of dismantling and removing the item and
restoring the site on which it is located, if any.
	 
	 	 	 	When parts of an item of property and equipment have different useful lives, they are
accounted for as separate items (major components) of property and equipment.
	 
	 	 	 	Gains and losses on disposal of an item of property and equipment are determined by
comparing the proceeds from disposal with the carrying amount of property and equipment,
and are recognized in net profit (loss).
	 
	 	 	 	Subsequent costs:
	 
	 	 	 	The cost of replacing a part of an item of property and equipment is recognized in the
carrying amount of the item if it is probable that the future economic benefits embodied
within the part will flow to the Company, and its cost can be measured reliably. The
carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing
of property and equipment are recognized in profit (loss) as incurred.






10












 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
 (in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(h)	 	Property and equipment (continued):
	 
	 	 	 	Depreciation:
	 
	 	 	 	The estimated useful lives and the methods of depreciation for the current and comparative
periods are as follows:





	 	 	 	 	 	 	 
	Asset	 	Method	 	Rate/Period	 
	 
	Computer equipment

	 	Declining balance
	 	 	50	%
	Laboratory equipment

	 	Declining balance
	 	 	20	%
	 

	 	and straight-line
	 	 	5 years
	 
	Office furniture and equipment

	 	Declining balance
	 	 	20	%
	Leasehold improvements

	 	Straight-line
	 	 	Lower of term of lease
or economic life
	 







	 	 	 	This most closely reflects the expected pattern of consumption of the future economic
benefits embodied in the asset.
	 
	 	 	 	Estimates for depreciation methods, useful lives and residual values are reviewed at each
reporting period-end and adjusted if appropriate.
	 
	 	(i)	 	Intangible assets:
	 
	 	 	 	Research and development:
	 
	 	 	 	Expenditure on research activities, undertaken with the prospect of gaining new scientific
or technical knowledge and understanding, is expensed as incurred.
	 
	 	 	 	Development activities involve a plan or design for the production of new or substantially
improved products and processes. Development expenditure is capitalized only if development
costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Company intends to and has
sufficient resources to complete development and to use or sell the asset. These criteria
are usually met when a regulatory filing has been made in a major market and approval is
considered highly probable. The expenditure capitalized includes the cost of materials,
direct labour, and overhead costs that are directly attributable to preparing the asset for
its intended use. Other development expenditures are expensed as incurred. Capitalized
development expenditures are measured at cost less accumulated amortization and accumulated
impairment losses.
	 
	 	 	 	During the years ended November 30, 2010 and 2009 and as at December 1, 2008, no
development expenditures were capitalized.




11









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
 (in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(j)	 	Financial instruments:
	 
	 	 	 	The Company’s financial instruments are classified into one of three categories: loans and
receivables, available-for-sale financial assets and other financial liabilities. Loans and
receivables and other financial liabilities are measured at amortized cost.
	 
	 	 	 	The Company has classified its bonds as available-for-sale financial assets. The Company
has classified cash and trade and other receivables as loans and receivables, and accounts
payable and accrued liabilities as other financial liabilities.
	 
	 	 	 	Available-for-sale financial assets are non-derivative financial assets that are designated
as available-for-sale and that are not classified in any of the other categories.
Subsequent to initial recognition, they are measured at fair value and changes therein,
other than impairment losses and foreign currency differences on available-for-sale debt
instruments, are recognized in other comprehensive income and presented within equity. When
an investment is derecognized, the cumulative gain or loss in other comprehensive income is
transferred to profit (loss).
	 
	 	(k)	 	Other assets:
	 
	 	 	 	Other assets consist of prepaid expenses for research supplies that are not expected to be
used within one year from the date of the consolidated statement of financial position.
	 
	 	 	 	Research supplies are purchased in advance, in accordance with specific regulatory
requirements, to be used in connection with the Company’s clinical trials.
	 
	 	(l)	 	Leases:
	 
	 	 	 	Operating lease payments are recognized in net profit (loss) on a straight-line basis over
the term of the lease.
	 
	 	 	 	Lease inducements arising from leasehold improvement allowances and rent-free periods form
an integral part of the total lease cost and are deferred and recognized in net profit
(loss) over the term of the lease on a straight-line basis.




12









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
 (in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(m)	 	Impairment:
	 
	 	 	 	Financial assets:
	 
	 	 	 	A financial asset not carried at fair value through profit or loss is assessed at each
consolidated financial statement reporting date to determine whether there is objective
evidence that it is impaired. The Company considers that a financial asset is impaired if
objective evidence indicates that one or more loss events had a negative effect on the
estimated future cash flows of that asset that can be estimated reliably.
	 
	 	 	 	An impairment test is performed, on an individual basis, for each material financial asset.
Other individually non-material financial assets are tested as groups of financial assets
with similar risk characteristics. Impairment losses are recognized in net profit (loss).
	 
	 	 	 	An impairment loss in respect of a financial asset measured at amortized cost is calculated
as the difference between its carrying amount and the present value of the estimated future
cash flows discounted at the asset’s original effective interest rate. Losses are
recognized in net profit (loss) and reflected in an allowance account against the
respective financial asset. Interest on the impaired asset continues to be recognized
through the unwinding of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through net profit
(loss).
	 
	 	 	 	Impairment losses on available-for-sale investment securities are recognized by
transferring the cumulative loss that has been recognized in other comprehensive income,
and presented in unrealized gains/losses on available-for-sale financial assets in equity,
to net profit (loss). The cumulative loss that is removed from other comprehensive income
and recognized in net profit (loss) is the difference between the acquisition cost, net of
any principal repayment and amortization, and the current fair value, less any impairment
loss previously recognized in net profit (loss). Changes in impairment provisions
attributable to time value are reflected as a separate component of interest income.
	 
	 	 	 	If, in a subsequent period, the fair value of an impaired available-for-sale debt security
increases and the increase can be related objectively to an event occurring after the
impairment loss was recognized in net profit (loss), then the impairment loss is reversed,
with the amount of the reversal recognized in net profit (loss). However, any subsequent
recovery in the fair value of an impaired available-for-sale equity security is recognized
in other comprehensive income.






13











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
 (in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(m)	 	Impairment (continued):
	 
	 	 	 	Non-financial assets:
	 
	 	 	 	The carrying amounts of the Company’s non-financial assets, other than inventories and
deferred tax assets, are reviewed at each reporting date to determine whether there is any
indication of impairment. If such an indication exists, the recoverable amount is
estimated.
	 
	 	 	 	The recoverable amount of an asset or a cash-generating unit is the greater of its value in
use and its fair value less costs to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to
the asset. For the purpose of impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely
independent of cash inflows from other assets or groups of assets (''cash-generating
unit’’). Impairment losses recognized in prior periods are determined at each reporting
date for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the
recoverable amount. An asset’s carrying amount, increased through reversal of an impairment
loss, must not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized.
	 
	 	(n)	 	Provisions:
	 
	 	 	 	A provision is recognized if, as a result of a past event, the Company has a present legal
or constructive obligation that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle the obligation. Provisions are
assessed by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the
liability. The unwinding of the discount on provisions is recognized in finance costs.
	 
	 	 	 	Onerous contracts:
	 
	 	 	 	A provision for onerous contracts is recognized when the expected benefits to be derived by
the Company from a contract are lower than the unavoidable cost of meeting its obligations
under the contract. The provision is measured at the present value of the lower of the
expected cost of terminating the contract and the expected net cost of continuing with the
contract. Before a provision is established, the Company recognizes any impairment loss on
the assets associated with that contract. There were no onerous contracts as at November
30, 2010 and 2009 and December 1, 2008.




14









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
 (in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(n)	 	Provisions (continued):
	 
	 	 	 	Site restoration:
	 
	 	 	 	Where there is a legal or constructive obligation to restore leased premises to good
condition, except for normal aging on expiry or early termination of the lease, the
resulting costs are provisioned up to the discounted value of estimated future costs and
increase the carrying amount of the corresponding item of property and equipment. The
Company amortizes the cost of restoring leased premises and recognizes an unwinding of
discount expense on the liability related to the term of the lease.
	 
	 	 	 	Contingent liability:
	 
	 	 	 	A contingent liability is a possible obligation that arises from past events and of which
the existence will be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the Company; or a present
obligation that arises from past events (and therefore exists), but is not recognized
because it is not probable that a transfer or use of assets, provision of services or any
other transfer of economic benefits will be required to settle the obligation, or the
amount of the obligation cannot be estimated reliably.
	 
	 	(o)	 	Income taxes:
	 
	 	 	 	Income tax expense comprises current and deferred tax. Current tax and deferred tax are
recognized in net profit (loss) except to the extent that they relate to items recognized
directly in other comprehensive income or in equity.
	 
	 	 	 	Current tax:
	 
	 	 	 	Current tax is the expected tax payable or receivable on the taxable income or loss for the
year, using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years. The Company establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
	 
	 	 	 	Deferred tax:
	 
	 	 	 	Deferred tax is recognized in respect of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is measured at the tax rates that are expected to be
applied to temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date.
	 
	 	 	 	A deferred tax liability is generally recognized for all taxable temporary differences.




15









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008
 (in
thousands of Canadian dollars, except per share amounts)



 






	3.	 	Significant accounting policies (continued):






	 	(o)	 	Income taxes
(continued): 
	 
	 	 	 	 Deferred
tax (continued):
	 
	 	 	 	A deferred tax asset is recognized for unused tax losses and deductible temporary
differences, to the extent that it is probable that future taxable profits will be
available against which they can be utilized. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related
tax benefit will be realized.
	 
	 	(p)	 	Share-based compensation:
	 
	 	 	 	The Company records share-based compensation related to employee stock options granted
using the fair value based method estimated using the Black-Scholes model. Under this
method, compensation cost is measured at fair value at the date of grant and expensed, as
employee benefits, over the period in which employees unconditionally become entitled to
the award. The amount recognized as an expense is adjusted to reflect the number of awards
for which the related service conditions are expected to be met, such that the amount
ultimately recognized as an expense is based on the number of awards that do meet the
related service and non-market performance conditions at the vesting date.
	 
	 	 	 	Share-based payment arrangements in which the Company receives goods or services as
consideration for its own equity instruments are accounted for as equity-settled
share-based payment transactions, regardless of how the equity instruments are obtained by
the Company.
	 
	 	 	 	As permitted by IFRS 1, the Company elected not to restate options that were granted before
November 7, 2002 and those granted after November 7, 2002 that were fully vested prior to
the date of transition to IFRS.
	 
	 	(q)	 	Government grants:
	 
	 	 	 	Government grants consisting of grants and investment tax credits, are recorded as a
reduction of the related expense or cost of the asset acquired. Government grants are
recognized when there is reasonable assurance that the Company has met the requirements of
the approved grant program and there is reasonable assurance that the grant will be
received.






16











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)




 






	3.	 	Significant accounting policies (continued):






	 	(r)	 	Share capital:
	 
	 	 	 	Common shares:
	 
	 	 	 	Common shares are classified as equity. Incremental costs directly attributable to the
issue of common shares and share options are recognized as a deduction from equity, net of
any tax effects.
	 
	 	(s)	 	Earnings per share:
	 
	 	 	 	The Company presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic EPS is calculated by dividing the net profit or loss attributable to common
shareholders of the Company by the weighted average number of common shares outstanding
during the period, adjusted for own shares held, if applicable. Diluted EPS is determined
by adjusting the profit or loss attributable to common shareholders and the weighted
average number of common shares outstanding, adjusted for own shares held if applicable,
for the effects of all dilutive potential common shares, which consist of the stock options
granted to employees.
	 
	 	(t)	 	New standards and interpretations not yet applied:
	 
	 	 	 	Certain pronouncements were issued by the IASB or International Financial Reporting
Interpretation Committee that are mandatory for annual periods beginning on or after
January 1, 2010 or later periods. Many of these updates are not applicable or are
inconsequential to the Company and have been excluded from the discussion below. The
remaining pronouncements are being assessed to determine their impact on the Company’s
results and financial position:
	 
	 	 	 	Annual improvements to IFRS:
	 
	 	 	 	The IASB’s improvements to IFRS published in April 2009 contain fifteen amendments to
twelve standards that result in accounting changes for presentation, recognition or
measurement purposes largely for annual periods beginning on or after January 1, 2010, with
early adoption permitted. These amendments were considered by the Company and deemed to be
not applicable to the Company other than for the amendment to IAS 17 — Leases relating to
leases which include both land and buildings elements. In this case, the Company early
adopted this amendment.
	 
	 	 	 	The IASB’s improvements to IFRS contain seven amendments that result in accounting changes
for presentation, recognition or measurement purposes. The most significant features of the
IASB’s annual improvements project published in May 2010 are included under the specific
revisions to standards discussed below.




17









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)




 






	3.	 	Significant accounting policies (continued):






	 	(t)	 	New standards and interpretations not yet applied (continued):
	 
	 	 	 	Annual improvements to IFRS (continued):






	 	(i)	 	IFRS 3:
	 
	 	 	 	Revision to IFRS 3, Business Combinations:
	 
	 	 	 	Effective for annual periods beginning on or after July 1, 2010 with earlier adoption
permitted.
	 
	 	 	 	Clarification on the following areas:






	 	•	 	the choice of measuring non-controlling interests at fair value or at the
proportionate share of the acquiree’s net assets applies only to instruments that
represent present ownership interests and entitle their holders to a proportionate
share of the net assets in the event of liquidation. All other components of
non-controlling interest are measured at fair value unless another measurement
basis is required by IFRS.
	 
	 	•	 	application guidance relating to the accounting for share-based payments
in IFRS 3 applies to all share-based payment transactions that are part of a
business combination, including unreplaced awards (i.e., unexpired awards over the
acquiree shares that remain outstanding rather than being replaced by the
acquirer) and voluntarily replaced share-based payment awards.






	 	(ii)	 	IFRS 7:
	 
	 	 	 	Amendment to IFRS 7, Financial Instruments: Disclosures:
	 
	 	 	 	Effective for annual periods beginning on or after January 1, 2011, with earlier
adoption permitted.
	 
	 	 	 	Multiple clarifications related to the disclosure of financial instruments and in
particular in regards to transfers of financial assets.
	 
	 	(iii)	 	IAS 1:
	 
	 	 	 	Amendment to IAS 1, Presentation of Financial Statements:
	 
	 	 	 	Effective for annual periods beginning on or after January 1, 2011, with earlier
adoption permitted.
	 
	 	 	 	Entities may present the analysis of the components of other comprehensive income
either in the statement of changes in equity or within the notes to the financial
statements.




18









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)




 






	3.	 	Significant accounting policies (continued):






	 	(t)	 	New standards and interpretations not yet applied (continued):
	 
	 	 	 	Annual improvements to IFRS (continued):






	 	(iv)	 	IAS 27:
	 
	 	 	 	Amendment to IAS 27, Consolidated and Separate Financial Statements:
	 
	 	 	 	Effective for annual periods beginning on or after January 1, 2011, with earlier
adoption permitted.
	 
	 	 	 	The 2008 revisions to this standard resulted in consequential amendments to IAS 21,
The Effects of Changes in Foreign Exchange
Rates, IAS 28, Investments in Associates, and
IAS 31, Interests in Joint Ventures. IAS 27 now provides that these amendments are to be
applied prospectively.
	 
	 	(v)	 	IAS 34:
	 
	 	 	 	Amendment to IAS 34, Interim Financial Reporting:
	 
	 	 	 	Effective for annual periods beginning on or after January 1, 2011, with earlier
adoption permitted.
	 
	 	 	 	The amendments place greater emphasis on the disclosure principles for interim financial
reporting involving significant events and transactions, including changes to fair value
measurements and the need to update relevant information from the most recent annual
report.






	 	 	 	New or revised standards and interpretations:
	 
	 	 	 	In addition, the following new or revised standards and interpretations have been issued but
are not yet applicable to the Company:






	 	(i)	 	IAS 24:
	 
	 	 	 	Amendments to IAS 24, Related Party Disclosures:
	 
	 	 	 	Effective for annual periods beginning on or after January 1, 2011, with earlier
adoption permitted.
	 
	 	 	 	There are limited differences in the definition of what constitutes a related party;
however, the amendment requires more detailed disclosures regarding commitments.






19












 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)




 






	3.	 	Significant accounting policies (continued):






	 	(t)	 	New standards and interpretations not yet applied (continued):
	 
	 	 	 	New or revised standards and interpretations (continued):






	 	(ii)	 	IFRS 8:
	 
	 	 	 	IFRS 8, Operating Segments:
	 
	 	 	 	Effective for annual periods beginning on or after January 1,
2010. Requires purchase information about segment assets.
	 
	 	(iii)	 	IFRS 9:
	 
	 	 	 	New standard IFRS 9, Financial Instruments:
	 
	 	 	 	Effective for annual periods beginning on or after January 1, 2013, with earlier
adoption permitted.
	 
	 	 	 	As part of the project to replace IAS 39, Financial Instruments: Recognition and
Measurement, this standard retains but simplifies the mixed measurement model and
establishes two primary measurement categories for financial assets. More specifically,
the standard:






	 	•	 	deals with classification and measurement of financial assets
	 
	 	•	 	establishes two primary measurement categories for financial assets:
amortized cost and fair value
	 
	 	•	 	classification depends on entity’s business model and the contractual
cash flow characteristics of the financial asset
	 
	 	•	 	eliminates the existing categories: held to maturity, available for sale,
and loans and receivables.






	 	 	 	Certain changes were also made regarding the fair value option for financial
liabilities and accounting for certain derivatives linked to unquoted equity
instruments.






	4.	 	Revenue and deferred revenue:
	 
	 	 	On October 28, 2008, the Company entered into a collaboration and licensing agreement with EMD
Serono Inc. (“EMD Serono”), an affiliate of the Group Merck KGaA, of Darmstadt, Germany,
regarding the exclusive commercialization rights of tesamorelin in the United States for the
treatment of excess abdominal fat in HIV-infected patients with lipodystrophy (the “Initial
Product”). The Company retains all tesamorelin commercialization rights outside of the United
States.




20









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)




 






	4.	 	Revenue and deferred revenue (continued):
	 
	 	 	Under the terms of the agreement, the Company is responsible for the development of the Initial
Product up to obtaining marketing approval in the United States, which was obtained on November
10, 2010. The Company is also responsible for product production and for developing a new
formulation of the Initial Product. EMD Serono is responsible for conducting product
commercialization activities.
	 
	 	 	At the closing of the agreement on December 15, 2008, the Company received US$30,000
(C$36,951), which includes an initial payment of US$22,000 (C$27,097) and US$8,000 (C$9,854) as
a subscription for common shares in the Company by Merck KGaA at a price of US$3.67 (C$4.52)
per share. The Company may receive up to US$215,000, which amount includes the initial payment
of US$22,000, the equity investment of US$8,000, as well as payments based on the achievement
of certain development, regulatory and sales milestones. The Company will also be entitled to
receive increasing royalties on annual net sales of tesamorelin in the United States, if
applicable.
	 
	 	 	The initial payment of $27,097 has been deferred and is being amortized on a straight-line
basis over the estimated period for developing a new formulation of the Initial Product. This
period may be modified in the future based on additional information that may be received by
the Company. At November 30, 2010, an amount of $6,846 (2009 — $6,560) was recognized as
revenue. As at November 30, 2010, the deferred revenue related to this transaction amounted to
$13,692 (2009 — $20,537).
	 
	 	 	On August 12, 2009, the FDA accepted the New Drug Application (''NDA’’) made by the Company for
tesamorelin. Under the terms of the Company’s collaboration and licensing agreement with EMD
Serono, the acceptance of the tesamorelin NDA resulted in a milestone payment of US$10,000
(C$10,884).
	 
	 	 	On November 10, 2010, the FDA approved EGRIFTATM as the first approved
treatment in the United States for the reduction of excess abdominal fat in HIV-infected
patients with lipodystrophy. By virtue of the collaboration and licensing agreement entered
into in 2008 with EMD Serono, the Company received a milestone payment of US$25,000 (C$25,000)
associated with the FDA-approval of EGRIFTATM. This payment was received
by the Company on November 30, 2010.
	 
	 	 	The Company may conduct research and development activities for additional indications. Under
the collaboration and licensing agreement, EMD Serono will also have the option to
commercialize additional indications for tesamorelin in the United States. If it exercises this
option, EMD Serono will pay half of the development costs related to such additional
indications. In such cases, the Company will also have the right, subject to an agreement with
EMD Serono, to participate in promoting these additional indications.




21









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)




 






	5.	 	Personnel expenses:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	November 30,	 	 	November 30,	 
	 	 	Note	 	 	2010	 	 	2009	 
	 
	 	 	 	 	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Salaries and short-term employee benefits
	 	 	 	 	 	 	11,577	 	 	 	10,779	 
	Post-employment benefits
	 	 	 	 	 	 	579	 	 	 	542	 
	Termination benefits
	 	 	 	 	 	 	20	 	 	 	275	 
	Share-based compensation
	 	15 (iv)	 	 	1,133	 	 	 	997	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Total personnel expenses
	 	 	 	 	 	 	13,309	 	 	 	12,593	 
	 







	6.	 	Selling and market development expenses:
	 
	 	 	In 2008, the Company completed a formal review of the strategic alternatives regarding its
operations which culminated in the signing of the collaborative licensing agreement with EMD
Serono (note 4). As a result of this process, $4,269 was recorded in 2009 for professional fees
related to the closing of the agreement with EMD Serono.






	7.	 	Finance income and finance costs:
	 
	 	 	Recognized in net profit (loss):





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 
	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 
	Interest income
	 	 	1,562	 	 	 	2,123	 
	Net gain on disposal of available-for-sale financial assets transferred from equity
	 	 	326	 	 	 	129	 
	 
	Finance income
	 	 	1,888	 	 	 	2,252	 
	 
	 	 	 	 	 	 	 	 
	Bank charges
	 	 	(18	)	 	 	(26	)
	Net foreign currency gain (loss)
	 	 	511	 	 	 	(635	)
	 
	Finance costs
	 	 	493	 	 	 	(661	)
	 
	 	 	 	 	 	 	 	 
	 
	Net finance income recognized in net profit (loss)
	 	 	2,381	 	 	 	1,591	 
	 







22











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	7.	 	Finance income and finance costs (continued):
	 
	 	 	Recognized in other comprehensive income:





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 
	 	 	$	 	 	$	 
	 
	Net change in fair value of available-for-sale financial assets
	 	 	(390	)	 	 	1,039	 
	Net change in fair value of available-for-sale financial assets transferred to net profit (loss)
	 	 	(326	)	 	 	(129	)
	 
	 
	Finance (costs) income recognized in other comprehensive income, net of tax
	 	 	(716	)	 	 	910	 
	 







	8.	 	Bonds:
	 
	 	 	Bonds are interest-bearing available-for-sale financial assets, with a carrying amount of
$37,901 as at November 30, 2010 ($61,843 in 2009, and $46,204 as at December 1, 2008), have
stated interest rates of 2.37% to 6.75% (2.37% to 6.75% in 2009 and 3.00% to 6.85% as at
December 1, 2008) and mature in 1.9 year (2.16 in 2009 and 1.8 in 2008).
	 
	 	 	The Company’s exposure to credit and interest rate risks related to bonds is presented in note
20.






	9.	 	Trade and other receivables:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	November 30,	 	 	November 30,	 	 	December 1,	 
	 	 	Note	 	 	2010	 	 	2009	 	 	2008	 
	 
	 	 	 
	 	 	$	 	 	$	 	 	$	 
	 
	Trade receivables
	 	 	 	 	 	 	6	 	 	 	3	 	 	 	12	 
	Sales tax receivable
	 	 	 	 	 	 	100	 	 	 	190	 	 	 	419	 
	Loans granted to employees under the share purchase plan
	 	15 (iii)	 	 	25	 	 	 	74	 	 	 	91	 
	Loans granted to related parties under the share purchase plan
	 	15 (iii)	 	 	22	 	 	 	75	 	 	 	59	 
	Other receivables
	 	 	 	 	 	 	8	 	 	 	33	 	 	 	29	 
	 
	 
	 
	 	 	 	 	 	 	161	 	 	 	375	 	 	 	610	 
	 







	 	 	The Company’s exposure to credit and currency risks related to trade and other receivables
is presented in note 20.




23









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	10.	 	Tax credits and grants receivable:





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 
	 	 	$	 	 	$	 
	 
	Balance at beginning of the year
	 	 	1,333	 	 	 	1,451	 
	Investment tax credits and grants received
	 	 	(1,935	)	 	 	(1,913	)
	Investment tax credits and grants recognized in net profit (loss)
	 	 	934	 	 	 	1,795	 
	 
	 
	 
	 	 	332	 	 	 	1,333	 
	 







Tax credits and grants receivable comprise research and development investment tax credits
receivable from the provincial government which relate to qualifiable research and development
expenditures under the applicable tax laws. The amounts recorded as receivable are subject to a
government tax audit and the final amounts received may differ from those recorded. There are
no unfulfilled conditions or contingencies associated with the government assistance received.




Unused federal tax credits may be used to reduce future income tax and expire as follows:



	 	 	 	 	 
	 	 	$	 
	 
	 
	2023
	 	 	452	 
	2024
	 	 	1,597	 
	2025
	 	 	1,863	 
	2026
	 	 	2,178	 
	2027
	 	 	3,000	 
	2028
	 	 	3,328	 
	2029
	 	 	2,250	 
	2030
	 	 	1,167	 
	 
	 
	 
	 	 	15,835	 
	 







	11.	 	Inventories:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 	 	December 1,	 
	 	 	2010	 	 	2009	 	 	2008	 
	 
	 	 	$	 	 	$	 	 	$	 
	 
	Raw materials
	 	 	3,395	 	 	 	2,225	 	 	 	—	 
	Work in progress
	 	 	922	 	 	 	—	 	 	 	—	 
	 
	 
	 
	 	 	4,317	 	 	 	2,225	 	 	 	—	 
	 






24









 






THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	11.	 	Inventories (continued):
	 
	 	 	In 2010, $123 of raw materials, and $69 of work in progress were written down to their net
realizable value (November 30, 2009 — nil and nil; December 1, 2008 — nil and nil).
Consequently, a write-down of $192 was recorded to cost of sales in 2010 (2009 — nil).
	 
	 	 	The write-down was due to unfavourable pricing related to raw materials that were not
originally purchased under the conditions of the Company’s current long-term procurement
agreements.
	 
	12.	 	Property and equipment:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Office	 	 	 	 	 	 	 
	 	 	Computer	 	 	Laboratory	 	 	furniture and	 	 	Leasehold	 	 	 	 
	 	 	equipment	 	 	equipment	 	 	equipment	 	 	improvements	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 
	Cost:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at December 1, 2008
	 	 	682	 	 	 	1,824	 	 	 	1,015	 	 	 	1,846	 	 	 	5,367	 
	Additions
	 	 	222	 	 	 	125	 	 	 	188	 	 	 	8	 	 	 	543	 
	Disposals
	 	 	(30	)	 	 	(4	)	 	 	(79	)	 	 	—	 	 	 	(113	)
	 
	Balance at November 30, 2009
	 	 	874	 	 	 	1,945	 	 	 	1,124	 	 	 	1,854	 	 	 	5,797	 
	 
	Additions
	 	 	130	 	 	 	116	 	 	 	7	 	 	 	46	 	 	 	299	 
	Disposals
	 	 	(63	)	 	 	(43	)	 	 	(2	)	 	 	—	 	 	 	(108	)
	 
	Balance at November 30, 2010
	 	 	941	 	 	 	2,018	 	 	 	1,129	 	 	 	1,900	 	 	 	5,988	 
	 
	Accumulated depreciation:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at December 1, 2008
	 	 	500	 	 	 	1,427	 	 	 	700	 	 	 	1,441	 	 	 	4,068	 
	 
	Depreciation for the year
	 	 	147	 	 	 	96	 	 	 	79	 	 	 	290	 	 	 	612	 
	Disposals
	 	 	(30	)	 	 	(4	)	 	 	(78	)	 	 	—	 	 	 	(112	)
	 
	Balance at November 30, 2009
	 	 	617	 	 	 	1,519	 	 	 	701	 	 	 	1,731	 	 	 	4,568	 
	Depreciation for the year
	 	 	170	 	 	 	88	 	 	 	85	 	 	 	123	 	 	 	466	 
	Disposals
	 	 	(63	)	 	 	(41	)	 	 	(2	)	 	 	—	 	 	 	(106	)
	 
	Balance at November 30, 2010
	 	 	724	 	 	 	1,566	 	 	 	784	 	 	 	1,854	 	 	 	4,928	 
	 
	 
	Net carrying amounts:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	December 1, 2008
	 	 	182	 	 	 	397	 	 	 	315	 	 	 	405	 	 	 	1,299	 
	November 30, 2009
	 	 	257	 	 	 	426	 	 	 	423	 	 	 	123	 	 	 	1,229	 
	November 30, 2010
	 	 	217	 	 	 	452	 	 	 	345	 	 	 	46	 	 	 	1,060	 
	 
	 







25












 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	12.	 	Property and equipment (continued):
	 
	 	 	Depreciation expense for the year has been recorded in the following accounts in the
consolidated statement of comprehensive income:





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 
	 	 	$	 	 	$	 
	Cost of sales
	 	 	8	 	 	 	—	 
	Research and development expenses
	 	 	231	 	 	 	306	 
	Selling and market development expenses
	 	 	10	 	 	 	14	 
	General and administrative expenses
	 	 	217	 	 	 	292	 
	 
	 
	 	 	466	 	 	 	612	 
	 







	13.	 	Accounts payable and accrued liabilities:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	November 30,	 	 	November 30,	 	 	December 1,	 
	 	 	 	Note	 	 	2010	 	 	2009	 	 	2008	 
	 
	 	 	 	 	 	 	$	 	 	$	 	 	$	 
	Trade payables
	 	 	 	 	 	 	1,001	 	 	 	1,984	 	 	 	284	 
	Accrued liabilities and other payables
	 	 	 	 	 	 	1,440	 	 	 	1,768	 	 	 	4,692	 
	Salaries and benefits due to related parties
	 	 	25	 	 	 	565	 	 	 	450	 	 	 	504	 
	Employee salaries and benefits payable
	 	 	 	 	 	 	1,971	 	 	 	1,366	 	 	 	1,385	 
	 
	 
	 	 	 	 	 	 	4,977	 	 	 	5,568	 	 	 	6,865	 
	 






The Company’s exposure to currency and liquidity risks related to accounts payable and
accrued liabilities is presented in note 20.




	14.	 	Other liabilities:
	 
	 	 	Other liabilities consist of deferred lease inducements relating to rent free periods amounting
to $325 as at November 30, 2010 (November 30, 2009 and December 1, 2008 — nil) (note 17).




26









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	15.	 	Share capital:
	 
	 	 	Authorized in unlimited number and without par value:






	 	 	 	Common shares
	 
	 	 	 	Preferred shares issuable in one or more series






All issued shares are fully paid, except for 33,524 (2009 — 90,298) issued under the share
purchase plan and for which the loan has not been repaid in full (see note 15 (iii)).




Common shareholders are entitled to receive dividends as declared by the Company at its
discretion and are entitled to one vote per share at the Company’s annual general meeting.




No preferred shares are outstanding.




	 	(i)	 	2010:
	 
	 	 	 	In 2010, the Company received subscriptions in the amount of $15 for the issuance of 2,880
common shares in connection with its share purchase plan.
	 
	 	 	 	2009:
	 
	 	 	 	Under the terms of the collaboration and licensing agreement with EMD Serono, the Company
issued 2,179,837 common shares for a cash consideration of $9,854 (see note 4).
	 
	 	 	 	In 2009, the Company also received subscriptions in the amount of $96 for the issuance of
34,466 common shares in connection with its share purchase plan.
	 
	 	 	 	All shares issued were for cash consideration.
	 
	 	(ii)	 	Shareholder rights plan:
	 
	 	 	 	On February 10, 2010, the Company’s Board of Directors adopted a shareholder rights plan
(the ''Plan’’), effective as of that date. The Plan is designed to provide adequate time
for the Board of Directors and the shareholders, to assess an unsolicited takeover bid for
the Company. In addition, the Plan provides the Board of Directors with sufficient time to
explore and develop alternatives for maximizing shareholder value if a takeover bid is
made, as well as provide shareholders with an equal opportunity to participate in a
takeover bid to receive full and fair value for their common shares. The Plan will expire
at the close of the Company’s annual meeting of shareholders in 2013.




27









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	15.	 	Share capital (continued):






	 	(ii)	 	Shareholder rights plan (continued):
	 
	 	 	 	The rights issued under the Plan will initially attach to and trade with the common shares
and no separate certificates will be issued unless a triggering event occurs. The rights
will become exercisable only when a person, including any party related to it, acquires or
attempts to acquire 20% or more of the outstanding shares without complying with the
“Permitted Bid” provisions of the Plan or without approval of the Board of Directors.
Should such an acquisition occur or be announced, each right would, upon exercise, entitle
a rights holder, other than the acquiring person and related persons, to purchase common shares at a 50% discount to the market price at the time.
	 
	 	 	 	Under the Plan, a Permitted Bid is a bid made to all holders of the common shares and which
is open for acceptance for not less than 60 days. If at the end of 60 days at least 50% of
the outstanding common shares, other than those owned by the offeror and certain related
parties, have been tendered, the offeror may take up and pay for the common shares, but
must extend the bid for a further 10 days to allow other shareholders to tender.
	 
	 	(iii)	 	Share purchase plan:
	 
	 	 	 	The Share Purchase Plan entitles full-time and part-time employees of the Company who, on
the participation date, are residents of Canada, are not under a probationary period and do
not hold, directly or indirectly, five percent (5%) or more of the Company’s outstanding
common shares, to directly subscribe for common shares of the Company. Under the Share
Purchase Plan, a maximum of 550,000 common shares may be issued to employees.
	 
	 	 	 	On May 1 and November 1 of each year (the “Participation Dates”), an employee may
subscribe for a number of common shares under the Share Purchase Plan for an amount that
does not exceed 10% of that employee’s gross annual salary for that year. Under the Share
Purchase Plan, the Board of Directors has the authority to suspend or defer a subscription
of common shares, or to decide that no subscription of common shares will be allowed on a
Participation Date if it is in the Company’s best interest.
	 
	 	 	 	The Share Purchase Plan provides that the number of common shares that may be issued to
insiders, at any time, under all share-based compensation arrangements of the Company,
cannot exceed 10% of the Company’s outstanding common shares, and the number of common shares issued to insiders, within any one-year period, under all security-based
compensation arrangements, cannot exceed 10% of the outstanding common shares.
	 
	 	 	 	The subscription price for each new common share subscribed for under the Share Purchase
Plan is equal to the weighted average closing price of the common shares on the Toronto
Stock Exchange during a period of five days prior to the Participation Date. Employees may
not assign the rights granted under the Share Purchase Plan.






28











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	15.	 	Share capital (continued):






	 	(iii)	 	Share purchase plan (continued):
	 
	 	 	 	An employee may elect to pay the subscription price for common shares in cash or through an
interest-free loan from the Company. Loans granted by the Company under the Share Purchase
Plan are repayable through salary withholdings over a period not exceeding two years. All
loans may be repaid prior to the scheduled repayment at any time. The loans granted to any
employee may at no time exceed 10% of that employee’s current annual gross salary. All
common shares purchased through an interest-free loan are hypothecated to secure full and
final repayment of the loan and are held by a trustee until repayment in full. Loans are
immediately due and payable on the occurrence of any of the following events:
(i) termination of employment; (ii) sale or seizure of the hypothecated common shares;
(iii) bankruptcy or insolvency of the employee; or (iv) suspension of the payment of
an employee’s salary or revocation of the employee’s right to salary withholdings.
	 
	 	 	 	At November 30, 2010, $47 (November 30, 2009 — $149; December 1, 2008 — $150) was
receivable under these loans (see note 9).
	 
	 	(iv)	 	Stock option plan:
	 
	 	 	 	The Company has established a stock option plan under which it can grant to its directors,
officers, employees, researchers and consultants non-transferable options for the purchase
of common shares. The exercise date of an option may not be later than 10 years after the
grant date. A maximum number of 5,000,000 options can be granted under the plan. Generally,
the options vest at the date of the grant or over a period up to 5 years. As at November
30, 2010, 981,005 options could still be granted by the Company (2009 — 1,244,834).
	 
	 	 	 	All options are to be settled by physical delivery of shares.









29









 








THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	15.	 	Share capital (continued):






	 	(iv)	 	Stock option plan (continued):
	 
	 	 	 	Changes in the number of options outstanding during the past two years were as follows:





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Weighted	 
	 	 	 	 	 	 	average	 
	 	 	 	 	 	 	exercise price	 
	 	 	Options	 	 	per option	 
	 	 	 	 	 	 	$	 
	 
	 	 	 	 	 	 	 	 
	Options at December 1, 2008
	 	 	2,161,800	 	 	 	6.52	 
	 
	 	 	 	 	 	 	 	 
	Granted
	 	 	680,500	 	 	 	1.83	 
	Expired
	 	 	(58,500	)	 	 	5.16	 
	Forfeited
	 	 	(118,000	)	 	 	9.92	 
	 
	 	 	 	 	 	 	 	 
	 
	Options at November 30, 2009
	 	 	2,665,800	 	 	 	5.20	 
	 
	 	 	 	 	 	 	 	 
	Granted
	 	 	335,000	 	 	 	4.03	 
	Expired
	 	 	(32,500	)	 	 	11.15	 
	Forfeited
	 	 	(38,671	)	 	 	3.61	 
	Exercised (weighted average share price: $5.14)
	 	 	(80,491	)	 	 	1.66	 
	 
	 	 	 	 	 	 	 	 
	 
	Options at November 30, 2010
	 	 	2,849,138	 	 	 	5.12	 
	 
	Exercisable at November 30, 2010
	 	 	2,196,403	 	 	 	5.77	 
	 







	 
	 	 	 	The following table provides stock option information as at November 30, 2010:     





	 	 	 	 	 	 	 	 	 	 	 	 	 
	Options outstanding	 
	 	 	 	 	 	 	Weighted	 	 	 	 
	 	 	 	 	 	 	average	 	 	Weighted	 
	 	 	Number of	 	 	remaining	 	 	average	 
	 	 	options	 	 	life	 	 	exercise	 
	Price range ($)	 	outstanding	 	 	(years)	 	 	price	 
	 	 	 	 	 	 	 	 	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	1.20 — 2.00
	 	 	1,183,015	 	 	 	6.54	 	 	 	1.71	 
	2.01 — 2.75
	 	 	141,459	 	 	 	3.85	 	 	 	2.59	 
	2.76 — 3.75
	 	 	70,000	 	 	 	5.51	 	 	 	3.37	 
	3.76 — 4.60
	 	 	265,000	 	 	 	9.03	 	 	 	3.84	 
	4.61 — 6.00
	 	 	95,000	 	 	 	7.69	 	 	 	4.93	 
	6.01 — 9.00
	 	 	570,664	 	 	 	4.82	 	 	 	8.17	 
	9.01 — 13.50
	 	 	480,000	 	 	 	2.86	 	 	 	10.72	 
	13.51 — 15.30
	 	 	44,000	 	 	 	0.36	 	 	 	15.12	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 
	 	 	2,849,138	 	 	 	5.59	 	 	 	5.12	 
	 






30









 






THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	15.	 	Share capital (continued):






	 	(iv)	 	Stock option plan (continued):
	 
	 	 	 	The fair value of options granted was estimated at the grant date using the Black-Scholes
model and the following weighted average assumptions:





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 
	 
	 	 	 	 	 	 	 	 
	Risk-free interest rate
	 	 	2.49	%	 	 	1.83	%
	Expected volatility
	 	 	81.13	%	 	 	79.50	%
	Average option life in years
	 	 	7.5	 	 	 	7.5	 
	Expected dividends
	 	 	nil	 	 	 	nil	 
	Grant-date share price
	 	$	4.03	 	 	$	1.83	 
	Option exercise price
	 	$	4.03	 	 	$	1.83	 







	 	 	 	The risk-free interest rate is based on the implied yield on a Canadian Government
zero-coupon issue with a remaining term equal to the expected term of the option. The
volatility is based solely on historical volatility equal to the expected life of the
option. The life of the options is estimated considering the vesting period at the grant
date, the life of the option and the average length of time similar grants have remained
outstanding in the past. The dividend yield was excluded from the calculation since it is
the present policy of the Company to retain all earnings to finance operations and future
growth.
	 
	 	 	 	The following table summarizes the measurement date weighted average fair value of stock
options granted during the years ended November 2010 and 2009:





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Weighted	 
	 	 	 	 	 	 	average	 
	 	 	Number of	 	 	grant-date	 
	 	 	options	 	 	fair value	 
	 	 	 	 	 	 	$	 
	 
	 	 	 	 	 	 	 	 
	2010
	 	 	335,000	 	 	 	3.05	 
	2009
	 	 	680,500	 	 	 	1.36	 







	 	 	 	The Black-Scholes model used by the Company to calculate option values was developed
to estimate the fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differs from the Company’s stock option awards. This
model also requires four highly subjective assumptions, including future stock price
volatility and average option life, which greatly affect the calculated values.









31









 








THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	15.	 	Share capital (continued):






	 	(v)	 	Earnings per share:
	 
	 	 	 	The calculation of basic earnings per share at November 30, 2010 was based on the net
profit (loss) attributable to common shareholders of the Company of $8,930 (2009 -
($15,156)), and a weighted average number of common shares outstanding of 60,480,032 (2009
 — 60,314,309), calculated as follows:





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 
	 
	 	 	 	 	 	 	 	 
	Issued common shares at December 1
	 	 	60,429,393	 	 	 	58,215,090	 
	Effect of share options exercised
	 	 	49,030	 	 	 	—	 
	Effect of shares issued during the year
	 	 	1,609	 	 	 	2,099,219	 
	 
	 	 	 	 	 	 	 	 
	 
	Weighted average number of common shares at November 30
	 	 	60,480,032	 	 	 	60,314,309	 
	 







	 	 	 	The calculation of diluted earnings per share was based on a weighted average number
of common shares calculated as follows:





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 
	 
	 	 	 	 	 	 	 	 
	Weighted average number of common shares (basic)
	 	 	60,480,032	 	 	 	60,314,309	 
	Effect of stock options on issue
	 	 	842,959	 	 	 	—	 
	 
	 	 	 	 	 	 	 	 
	 
	Weighted average number of common shares (diluted) at November 30
	 	 	61,322,991	 	 	 	60,314,309	 
	 







	 	 	 	At November 30, 2010, 1,119,664 options (2009 — 1,371,167) were excluded from the
diluted weighted average number of common shares calculation as their effect would have
been anti-dilutive.
	 
	 	 	 	The average market value of the Company’s shares for purposes of calculating the dilutive
effect of share options was based on quoted market prices for the period during which the
options were outstanding.









32









 








THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	16.	 	Income taxes:
	 
	 	 	Current tax expense:





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 
	Current tax expense:
	 	 	 	 	 	 	 	 
	Current tax expense for the year
	 	 	3,285	 	 	 	—	 
	Recognition of previously unrecognized tax losses
	 	 	(3,171	)	 	 	—	 
	 
	 	 	 	 	 	 	 	 
	 
	Current Income tax expense
	 	 	114	 	 	 	—	 
	 
	 
	 	 	 	 	 	 	 	 
	Deferred tax expense:
	 	 	 	 	 	 	 	 
	Recognition and reversal of temporary differences
	 	 	—	 	 	 	(4,031	)
	Change in unrecognized deductible temporary differences
	 	 	—	 	 	 	4,031	 
	 
	 	 	 	 	 	 	 	 
	 
	Deferred income tax expense
	 	 	—	 	 	 	—	 
	 
	 
	 	 	 	 	 	 	 	 
	Total income tax expense
	 	 	114	 	 	 	—	 
	 







	 
	 
	 
	 
	 
	 	 	Reconciliation between effective and applicable tax amounts:     





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 
	Income taxes at domestic tax statutory rate
	 	 	2,713	 	 	 	(4,683	)
	Change in unrecognized deductible temporary differences
	 	 	(3,171	)	 	 	4,031	 
	Non-deductible expenses and other
	 	 	572	 	 	 	652	 
	 
	 	 	 	 	 	 	 	 
	 
	 
	 	 	114	 	 	 	—	 
	 







	 	 	Deferred tax assets:
	 
	 	 	Deferred tax asset of $114 (2009 — nil) related to share issue costs was recognized directly in
equity.









33









 








THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	16.	 	Income taxes (continued):
	 
	 	 	Deferred tax assets (continued):
	 
	 	 	Unrecognized deferred tax assets:
	 
	 	 	At November 30, 2010, temporary differences for which no deferred tax asset was recognized were
as follows:





	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 
	Long-term:
	 	 	 	 	 	 	 	 
	Research and development expenses
	 	 	30,143	 	 	 	29,380	 
	Deferred non-capital losses
	 	 	21,013	 	 	 	21,490	 
	Property and equipment
	 	 	609	 	 	 	674	 
	Intellectual property and patent fees
	 	 	9,230	 	 	 	12,307	 
	Available deductions and other
	 	 	4,648	 	 	 	4,963	 
	 
	 	 	 	 	 	 	 	 
	 
	 
	 	 	65,643	 	 	 	68,814	 
	 







	 	 	In assessing the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income. The generation of future taxable income is dependent on the successful
commercialization of the Company’s products and technologies.
	 
	 	 	Given the Company’s past losses, management does not believe that it is more probable than not
that the Company can realize its deferred tax assets and therefore it has not recognized any
amount in the statement of financial position.






34











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	16.	 	Income taxes (continued):
	 
	 	 	Deferred tax assets (continued):
	 
	 	 	Unrecognized deferred tax assets (continued):
	 
	 	 	At November 30, 2010, the amounts and expiry dates of tax attributes to be deferred for which
no deferred tax asset was recognized were as follows:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	November 30,	 	 	 	 	 	 	November 30,	 
	 	 	 	 	 	 	2010	 	 	 	 	 	 	2009	 
	 
	 	 	Federal	 	 	Provincial	 	 	Federal	 	 	Provincial	 
	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	Research and development expenses,
without time limitation
	 	 	103,324	 	 	 	123,062	 	 	 	103,346	 	 	 	115,686	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Losses carried forward:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2014
	 	 	1,216	 	 	 	—	 	 	 	9,603	 	 	 	—	 
	2015
	 	 	275	 	 	 	—	 	 	 	275	 	 	 	—	 
	2027
	 	 	7,638	 	 	 	7,628	 	 	 	7,638	 	 	 	7,628	 
	2028
	 	 	46,316	 	 	 	32,174	 	 	 	46,316	 	 	 	46,271	 
	2029
	 	 	19,484	 	 	 	16,467	 	 	 	21,785	 	 	 	18,802	 
	2030
	 	 	11,440	 	 	 	11,436	 	 	 	—	 	 	 	—	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other temporary differences, without time limitation:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Excess of tax value of property and equipment
over carrying value
	 	 	2,773	 	 	 	1,666	 	 	 	3,121	 	 	 	1,785	 
	Tax value of intellectual property and patent fees
	 	 	34,301	 	 	 	34,289	 	 	 	45,735	 	 	 	45,718	 
	Available deductions and other
	 	 	57,343	 	 	 	1,412	 	 	 	58,415	 	 	 	2,732	 







	17.	 	Operating leases:
	 
	 	 	The Company rents its headquarters and main office pursuant to an operating lease (the
“Lease”) expiring in April 2021. Under the terms of the Lease, the Company has also been
granted two renewal options for periods of five years each. Lease payments will increase by 11%
beginning on November 1, 2015.
	 
	 	 	During the year ended November 30, 2010, an amount of $628 was recognized as an expense in
respect of operating leases (2009 — $805). Of the amount $133 (2009 — $176) is included in
General and administrative expenses and $495 (2009 — $629) is included in Research and
development expenses.




35









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	17.	 	Operating leases (continued):
	 
	 	 	The Company’s lease includes a lease of land and building. Since the land title does not pass,
and the Company does not participate in the residual value of the building, it was determined
that substantially all the risks and rewards of the building are with the lessor. As such, the
Company determined that the lease is an operating lease.
	 
	 	 	The Company has committed to pay the lessor for its share of some operating expenses of the
leased premises. This amount has been set at $240 per year beginning May 1, 2010 and will be
increased by 2.5% annually for the duration of the Lease. Refer to note 23 for the contractual
commitments related to this lease.
	 
	 	 	The lessor granted the Company a monetary allowance in the amount of $728 to make leasehold
improvements. This amount had not been received as at November 30, 2010. Furthermore, the
Company benefits from a 25-month rent free period which is deferred and recognized over the
lease term. As at November 30, 2010, $325 was included in Other liability (nil — November 30,
2009) in regards to the deferred free rent inducement (note 14 — Other liabilities).
	 
	 	 	The Company had issued an irrevocable letter of credit in favour of the lessor in the amount of
$323 under the terms of the Lease renewal, along with a first ranking movable hypothec in the
amount of $1,150 covering all the Company’s tangible assets located in the rented premises. The
letter of credit and the hypothec were cancelled on April 30, 2010.
	 
	18.	 	Contingent liability:
	 
	 	 	On July 26, 2010, the Company received a motion of authorization to institute a class action
lawsuit against the Company, a director and a former executive officer (the “Motion”). This
Motion was filed in the Superior Court of Quebec, district of Montreal. The applicant is
seeking to initiate a class action suit to represent the class of persons who were shareholders
at May 21, 2010 and who sold their common shares of the Company on May 25 or 26, 2010. This
applicant alleges that the Company did not comply with its continuous disclosure obligations as
a reporting issuer by failing to disclose certain alleged adverse effects relating to the
administration of EGRIFTATM. The Company is of the view that the
allegations contained in the Motion are entirely without merit and intends to take all
appropriate actions to vigorously defend its position.
	 
	 	 	The Motion had not yet been heard by the Superior Court of Quebec and a date has not been set
for the hearing.




36









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	18.	 	Contingent liability (continued):
	 
	 	 	The Company has subscribed to insurance covering its potential liability and the potential
liability of its directors and officers in the performance of their duties for the Company
subject to a $200 deductible. At November 30, 2010, an amount of $96 in legal fees has been
accrued and included in general and administrative expenses, of which $61 was paid during the
year and $35 remained in accounts payable and accrued liabilities.
	 
	19.	 	Statement of cash flows:
	 
	 	 	The Company entered into the following transactions which had no impact on the cash flows:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 	 	December 1,	 
	 	 	2010	 	 	2009	 	 	2008	 
	 
	 	 	$	 	 	$	 	 	$	 
	 
	Additions to property and equipment included in accounts
payable and accrued liabilities
	 	 	65	 	 	 	183	 	 	 	48	 
	Share issue costs included in accounts payable and accrued liabilities
	 	 	—	 	 	 	—	 	 	 	8	 







	 	 	In addition, interest received totalled $2,290 (2009 — $1,200).
	 
	20.	 	Financial instruments:
	 
	 	 	Overview:
	 
	 	 	This note provides disclosures relating to the nature and extent of the Company’s exposure to
risks arising from financial instruments, including credit risk, liquidity risk, currency risk
and interest rate risk, and how the Company manages those risks.






	 	(a)	 	Credit risk:
	 
	 	 	 	Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial
instrument fails to meet its contractual obligations. The Company regularly monitors credit
risk exposure and takes steps to mitigate the likelihood of this exposure resulting in
losses.




37









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	20.	 	Financial instruments (continued):
	 
	 	 	Overview (continued):






	 	(a)	 	Credit risk (continued):
	 
	 	 	 	The Company’s exposure to credit risk currently relates to accounts receivable with only
one customer (see note 4). Financial instruments other than cash and trade and other
receivables that potentially subject the Company to significant credit risk consist
principally of bonds. The Company invests its available cash in highly liquid fixed income
instruments from governmental, paragovernmental and municipal bodies ($37,542 as at
November 30, 2010) as well as from companies with high credit ratings ($359 as at November
30, 2010). As at November 30, 2010, the Company was not exposed to any credit risk over the
carrying amount of the bonds.
	 
	 	(b)	 	Liquidity risk:
	 
	 	 	 	Liquidity risk is the risk that the Company will not be able to meet its financial
obligations as they become due. As indicated in the capital management section below, the
Company manages this risk through the management of its capital structure. It also manages
liquidity risk by continuously monitoring actual and projected cash flows. The Board of
Directors and/or the Audit Committee reviews and approves the Company’s operating and
capital budgets, as well as any material transactions out of the ordinary course of
business.
	 
	 	 	 	The Company has adopted an investment policy in respect of the safety and preservation of
its capital to ensure the Company’s liquidity needs are met. The instruments are selected
with regard to the expected timing of expenditures and prevailing interest rates.
	 
	 	 	 	The following are amounts due on the contractual maturities of financial liabilities as at
November 30, 2010 and 2009:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	November 30,	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2010	 
	 
	 	 	 	 	 	 	Carrying	 	 	Less than	 	 	1 to	 	 	More than	 
	 	 	Total	 	 	amount	 	 	1 year	 	 	5 years	 	 	5 years	 
	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 
	Accounts payable and accrued liabilities
	 	 	4,977	 	 	 	4,977	 	 	 	4,977	 	 	 	—	 	 	 	—	 






38









 






THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	20.	 	Financial instruments (continued):
	 
	 	 	Overview (continued):






	 	(b)	 	Liquidity risk (continued):





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	November 30,	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2009	 
	 
	 	 	 	 	 	 	Carrying	 	 	Less than	 	 	1 to	 	 	More than	 
	 	 	Total	 	 	amount	 	 	1 year	 	 	5 years	 	 	5 years	 
	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 
	Accounts payable and accrued liabilities
	 	 	5,568	 	 	 	5,568	 	 	 	5,568	 	 	 	—	 	 	 	—	 







	 	(c)	 	Currency risk:
	 
	 	 	 	The Company is exposed to financial risk related to the fluctuation of foreign exchange
rates and the degree of volatility of those rates. Currency risk is limited to the portion
of the Company’s business transactions denominated in currencies other than the Canadian
dollar, primarily revenues from milestone payments and expenses for research and
development incurred in US dollars, euros and pounds sterling (“GBP”). The Company does
not use derivative financial instruments to reduce its foreign exchange exposure.
	 
	 	 	 	The Company manages currency risk by maintaining cash in US dollars on hand to support US
forecasted cash budgets for a maximum 12-month period. The Company does not currently view
its exposure to the euro and GBP as a significant foreign exchange risk due to the limited
volume of transactions conducted by the Company in these currencies.
	 
	 	 	 	Exchange rate fluctuations for foreign currency transactions can cause cash flows as well
as amounts recorded in the consolidated statement of comprehensive income to vary from
period to period and not necessarily correspond to those forecasted in operating budgets
and projections. Additional earnings variability arises from the translation of monetary
assets and liabilities denominated in currencies other than the Canadian dollar at the
rates of exchange at each consolidated statement of financial position date, the impact of
which is reported as foreign exchange gain or loss in the consolidated statement of
comprehensive income. Given the Company’s policy on the management of the Company’s US
foreign currency risk, the Company does not believe a sudden change in foreign exchange
rates would impair or enhance its ability to pay its US dollar denominated obligations.




39









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008


(in thousands of Canadian dollars, except per share amounts) 






	20.	 	Financial instruments (continued):
	 
	 	 	Overview (continued):






	 	(c)	 	Currency risk (continued):
	 
	 	 	 	The following table presents the significant items exposed to currency risk at the
following dates:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	November 30,	 
	 	 	 	 	 	 	 	 	 	 	2010	 
	 
	 	 	$US	 	 	EURO	 	 	GBP	 
	 
	 
	Cash
	 	 	26,424	 	 	 	—	 	 	 	1	 
	Trade and other receivables
	 	 	—	 	 	 	—	 	 	 	—	 
	Accounts payable and accrued liabilities
	 	 	(465	)	 	 	(26	)	 	 	(81	)
	 
	 
	Items exposed to currency risk
	 	 	25,959	 	 	 	(26	)	 	 	(80	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	November 30,	 
	 	 	 	 	 	 	 	 	 	 	2009	 
	 
	 	 	$US	 	 	EURO	 	 	GBP	 
	 
	 
	Cash
	 	 	1,471	 	 	 	—	 	 	 	—	 
	Trade and other receivables
	 	 	—	 	 	 	4	 	 	 	—	 
	Accounts payable and accrued liabilities
	 	 	(1,095	)	 	 	—	 	 	 	(25	)
	 
	 
	Items exposed to currency risk
	 	 	376	 	 	 	4	 	 	 	(25	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	December 1,	 
	 	 	 	 	 	 	 	 	 	 	2008	 
	 
	 	 	$US	 	 	EURO	 	 	GBP	 
	 
	 
	Cash
	 	 	1	 	 	 	—	 	 	 	—	 
	Trade and other receivables
	 	 	—	 	 	 	—	 	 	 	—	 
	Accounts payable and accrued liabilities
	 	 	(2,589	)	 	 	(159	)	 	 	(348	)
	 
	 
	Items exposed to currency risk
	 	 	(2,588	)	 	 	(159	)	 	 	(348	)
	 







40











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued



Years ended November 30, 2010 and 2009 and as at December 1, 2008 

(in thousands of Canadian dollars, except per share amounts)
 






	20.	 	Financial instruments (continued):
	 
	 	 	Overview (continued):






	 	(c)	 	Currency risk (continued):
	 
	 	 	 	The following exchange rates are those applicable to the following periods and dates:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 	 	December 1,	 
	 	 	2010	 	 	2009	 	 	2008	 
	 
	 	 	Average	 	 	Reporting	 	 	Average	 	 	Reporting	 	 	Average	 	 	Reporting	 
	 	 	rate	 	 	date rate	 	 	rate	 	 	date rate	 	 	rate	 	 	date rate	 
	 
	$US — C$
	 	 	1.0345	 	 	 	1.0266	 	 	 	1.0594	 	 	 	1.0556	 	 	 	1.0479	 	 	 	1.2370	 
	EURO — C$
	 	 	1.3848	 	 	 	1.3326	 	 	 	1.5808	 	 	 	1.5852	 	 	 	1.5440	 	 	 	1.5711	 
	GBP — C$
	 	 	1.6051	 	 	 	1.5969	 	 	 	1.7597	 	 	 	1.7366	 	 	 	1.9767	 	 	 	1.9060	 







Based on the Company’s foreign currency exposures noted above, varying the above
foreign exchange rates to reflect a 5% strengthening of the Canadian dollar would have
increased the net profit (loss) as follows, assuming that all other variables remained
constant:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 
	 	 	2010	 	 	2009	 
	 
	 	 	$US	 	 	EURO	 	 	GBP	 	 	$US	 	 	Euro	 	 	GBP	 
	 
	Increase in net profit (loss)
	 	 	1,298	 	 	 	(1	)	 	 	(4	)	 	 	19	 	 	 	—	 	 	 	(1	)







	 	 	 	An assumed 5% weakening of the Canadian dollar would have had an equal but opposite
effect on the above currencies to the amounts shown above, assuming that all other
variables remain constant.
	 
	 	(d)	 	Interest rate risk:
	 
	 	 	 	Interest rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates.
	 
	 	 	 	Short-term bonds held by the Company are invested at fixed interest rates and/or mature in
the short-term. Long-term bonds are also instruments that bear interest at fixed rates. The
risk that the Company will realize a loss as a result of a decline in the fair value of its
bonds is limited because these investments, although they are classified as available for
sale, are generally held to maturity. The unrealized gains or losses on bonds are recorded
in accumulated other comprehensive income.




41









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	20.	 	Financial instruments (continued):
	 
	 	 	Overview (continued):






	 	(d)	 	Interest rate risk (continued):
	 
	 	 	 	Based on the value of the Company’s short and long-term bonds at November 30, 2010, an
assumed 0.5% decrease in market interest rates would have increased the fair value of these
bonds and the accumulated other comprehensive income by approximately $336; an assumed
increase in interest rate of 0.5% would have an equal but opposite effect, assuming that
all other variables remained constant.
	 
	 	 	 	Cash bears interest at a variable rate. Trade and other receivables, accounts payable and
accrued liabilities bear no interest.
	 
	 	 	 	Based on the average value of variable interest-bearing cash during the year ended November
30, 2010 ($3,219), an assumed 0.5% increase in interest rates during such period would have
increased future cash flow and net profit by approximately $16; an assumed decrease of 0.5%
would have had an equal but opposite effect.






	21.	 	Capital management:
	 
	 	 	The Company’s objective in managing capital is to ensure a sufficient liquidity position to
finance its research and development activities, general and administrative expenses, working
capital and capital spending.
	 
	 	 	To fund its activities, the Company relied primarily on public offerings of common shares in
Canada and private placements of its common shares as well as up-front payments and milestone
payments primarily associated with EMD Serono. When possible, the Company optimizes its
liquidity position using non-dilutive sources, including investment tax credits, grants and
interest income.
	 
	 	 	The Company has a $1,800 revolving credit facility for its short-term financing needs which was
unused at November 30, 2010 (see note 23 (c)).
	 
	 	 	The capital management objectives remain the same as for the previous year.
	 
	 	 	At November 30, 2010, cash and bonds amounted to $64,550 and tax credits and grants receivable
amounted to $332, for a total of $64,882. The Company believes that its cash position will be
sufficient to finance its operations and capital needs for the next year.
	 
	 	 	Currently, the Company’s general policy on dividends is to retain cash to keep funds available
to finance the Company’s growth.
	 
	 	 	The Company is not subject to any externally imposed capital requirements.




42









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	22.	 	Determination of fair values:
	 
	 	 	Certain of the Company’s accounting policies and disclosures require the determination of fair
value, for both financial and non-financial assets and liabilities. Fair values have been
determined for measurement and/or disclosure purposes based on the following methods. When
applicable, further information about the assumptions made in determining fair values is
disclosed in the notes specific to that asset or liability.
	 
	 	 	Financial assets and liabilities:
	 
	 	 	In establishing fair value, the Company uses a fair value hierarchy based on levels as defined
below:






	 	•	 	Level 1: defined as observable inputs such as quoted prices in active markets.
	 
	 	•	 	Level 2: defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable.
	 
	 	•	 	Level 3: defined as inputs that are based on little or no observable market data,
therefore requiring entities to develop its own assumptions.






The Company has determined that the carrying values of its short-term financial assets and
liabilities, including cash, trade and other receivables as well as accounts payable and
accrued liabilities, approximate their fair value because of the relatively short period to
maturity of the instruments.




Bonds are stated at estimated fair value, determined by inputs that are primarily based on
broker quotes at the reporting date (Level 2).




Share-based payment transactions:




The fair value of the employee stock options is measured based on the Black-Scholes valuation
model. Measurement inputs include share price on measurement date, exercise price of the
instrument, expected volatility (based on weighted average historic volatility adjusted for
changes expected due to publicly available information), weighted average expected life of the
instruments (based on historical experience and general option holder behaviour), expected
dividends, and the risk-free interest rate (based on government bonds). Service and non-market
performance conditions attached to the transactions are not taken into account in determining
fair value.




43











 





THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	23.	 	Commitments:






	 	(a)	 	Leases:
	 
	 	 	 	At November 30, 2010 and 2009 and December 1, 2008, the minimum payments required under the
terms of the non-cancellable lease are as follows:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	November 30,	 	 	November 30,	 	 	December 1,	 
	 	 	2010	 	 	2009	 	 	2008	 
	 
	 	 	$	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Less than one year
	 	 	55	 	 	 	340	 	 	 	816	 
	Between one and five years
	 	 	2,239	 	 	 	2,020	 	 	 	340	 
	More than five years
	 	 	3,943	 	 	 	4,216	 	 	 	—	 
	 
	 
	 	 	6,237	 	 	 	6,576	 	 	 	1,156	 
	 







	 	(b)	 	Long-term procurement agreements:
	 
	 	 	 	During and after the years ended November 30, 2010 and 2009, the Company entered into
long-term procurement agreements with third-party suppliers in anticipation of the
commercialization of EGRIFTATM.
	 
	 	(c)	 	Credit facility:
	 
	 	 	 	The Company has a $1,800 revolving credit facility, bearing interest at prime plus 0.5%.
Under the term of the credit facility, the market value of investments held must always be
equivalent to 150% of amounts drawn under the facility. If the market value falls below
$7,000, the Company will provide the bank with a first rank movable hypothec (security
interest) of $1,850 on securities judged satisfactory by the bank.
	 
	 	 	 	As at November 30, 2010 and 2009, the Company did not have any borrowings outstanding under
this credit facility.






	24.	 	Operating segments:
	 
	 	 	The Company has a single operating segment. As described in note 4, all of the Company’s
revenues are generated from one customer, EMD Serono, which is domiciled in the United States.
	 
	 	 	All of the Company’s non-current assets are located in Canada, the Company’s headquarters.




44









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	25.	 	Related parties:
	 
	 	 	The Company has a related party relationship with its wholly-owned subsidiaries. There are no
transactions between the Company and its subsidiaries.
	 
	 	 	The key management personnel of the Company are the Directors.
	 
	 	 	Key management personnel compensation comprised:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	November 30,	 	 	November 30,	 
	 	 	Note	 	 	2010	 	 	2009	 
	 
	 	 	 	 	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Short-term employee benefits
	 	 	 	 	 	 	1,891	 	 	 	1,647	 
	Post-employment benefits
	 	 	 	 	 	 	61	 	 	 	59	 
	Share-based compensation
	 	15 (iv)	 	 	331	 	 	 	175	 
	 
	 
	 	 	 	 	 	 	2,283	 	 	 	1,881	 
	 







	 	 	Directors of the Company control 1.2 percent of the voting shares of the Company.
	 
	 	 	On November 30, 2010, loans granted to key management personnel under share purchase plan (note
15 (iii)) amount to $22 as at November 30, 2010 ($75 as at November 30, 2009 and $59 as at
December 1, 2008).
	 
	26.	 	Subsequent events:
	 
	 	 	Distribution and licensing agreement:
	 
	 	 	On December 6, 2010, the Company announced the signing of a distribution and licensing
agreement with Sanofi-aventis (“Sanofi”), covering the commercial rights for EGRIFTATM in
Latin America, Africa, and the Middle East for the treatment of excess abdominal fat in
HIV-infected patients with lipodystrophy.
	 
	 	 	Under the terms of the agreement, the Company will sell EGRIFTATM to Sanofi at a transfer price
equal to the higher of a percentage of Sanofi’s net selling price and a predetermined floor
price. The Company has retained all future development rights to EGRIFTATM and will be
responsible for conducting research and development for any additional potential indications.
Sanofi will be responsible for conducting all regulatory activities for EGRIFTATM in the
aforementioned territories, including applications for approval in the different countries for
the treatment of excess abdominal fat in HIV-infected patients with lipodystrophy. The Company
also granted Sanofi an option to commercialize tesamorelin for other indications in the
territories mentioned above. If such option is not exercised, or is declined, by Sanofi, the
Company may commercialize tesamorelin for such indications on its own or with a third party.




45









 











THERATECHNOLOGIES INC.




Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts)

 






	26.	 	Subsequent events (continued):
	 
	 	 	Distribution and licensing agreement (continued):
	 
	 	 	On February 3, 2011, the Company entered into a distribution and licensing agreement with
Ferrer covering the commercial rights for EGRIFTATM for the treatment of
excess abdominal fat in HIV-infected patients with lipodystrophy in Europe, Russia, South
Korea, Taiwan, Thailand and certain central Asian countries.
	 
	 	 	Under the terms of the Agreement, the Company will sell EGRIFTATM to
Ferrer at a transfer price equal to the higher of a significant percentage of the Ferrer’s net
selling price and a predetermined floor price. The Company has retained all development rights
to EGRIFTATM for other indications and will be responsible for
conducting research and development for any additional programs. Ferrer will be responsible for
conducting all regulatory and commercialization activities in connection with
EGRIFTATM for the treatment of excess abdominal fat in HIV-infected
patients with lipodystrophy in the territories subject to the agreement. The Company will be
responsible for the manufacture and supply of EGRIFTATM to Ferrer. The
Company has the option to co-promote EGRIFTATM for the reduction of
excess abdominal fat in HIV-infected patients with lipodystrophy in the territories. Ferrer has
the option to enter into a co-development and commercialization agreement using tesamorelin
relating to any such new indications. The terms and conditions of such a co-development and
commercialization agreement will be negotiated based on any additional program chosen for
development.
	 
	 	 	Deferred share unit plan:
	 
	 	 	In December 2010, the Company adopted a deferred share unit plan (“Plan”) to provide
long-term incentive compensation for its directors and executive officers. Under the Plan,
directors must receive their annual remuneration as a board member in fully vested deferred
share units (“DSUs”) until they reach a percentage of their annual remuneration and, once
such percentage is attained, they have the option to elect to receive part or all of this
annual remuneration in DSUs. Under the plan, executive officers have the option of receiving
all or a portion of their annual bonus in the form of fully-vested DSUs. The units are only
redeemable for cash when a participant ceases to be an employee or member of the Board of
Directors. The Company manages the risk associated with the issuance of the DSU by entering
into a yearly forward contract with a third party. As at February 7, 2011, all of the 99,912
DSU outstanding were covered by a prepaid forward contract.
	 
	 	 	Stock option plan:
	 
	 	 	Between December 1, 2010 and February 7, 2011, the Company granted 250,000 options at an
exercise price of $5.65 per share. Also 27,832 options were forfeited and expired at a weighted
exercise average price of $12.06 per share. Furthermore, 3,000 options were exercised at a
weighted exercise average price of $1.80 per share for a cash consideration of $5.






46











 





THERATECHNOLOGIES INC.



Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	27.	 	Transition to IFRS:
	 
	 	 	As stated in note 2 (a), these are the Company’s first consolidated financial statements
prepared in accordance with IFRSs. The Company has applied IFRS 1 and the accounting policies
set out in note 3 in preparing the financial statements for the year ended November 30, 2010,
the comparative information presented in these financial statements for the year ended November
30, 2009 and in the opening IFRS statement of financial position at December 1, 2008 (the
Company’s date of transition).
	 
	 	 	In preparing these consolidated financial statements in accordance with IFRS 1, the Company has
applied the mandatory exceptions and certain of the optional exemptions from full retrospective
application of IFRSs.
	 
	 	 	The Company elected to apply the following optional exemptions from full retrospective
application:






	 	(i)	 	Share-based payment transaction exemption:
	 
	 	 	 	The Company has elected to apply the share-based payment exemption. It applied IFRS 2 from
December 1, 2008 to those stock options that were issued after November 7, 2002 but that
had not vested by December 1, 2008. The application of the exemption is detailed below.
	 
	 	(ii)	 	Designation of financial assets and financial liabilities exemption:
	 
	 	 	 	The Company elected to re-designate cash from the held-for-trading category to loans and
receivables.






	 	 	As required by IFRS 1, estimates made under IFRS at the date of transition must be consistent
with estimates made for the same date under previous GAAP, unless there is evidence that those
estimates were in error.
	 
	 	 	In preparing its opening IFRS consolidated statement of financial position, the Company has
adjusted amounts reported previously in financial statements prepared in accordance with
Canadian GAAP.
	 
	 	 	An explanation of how the transition from previous Canadian GAAP to IFRS has affected the
Company’s financial position, financial performance and cash flows is set out in the following
tables and accompanying notes.




47









 











THERATECHNOLOGIES INC.



Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	27.	 	Transition to IFRS (continued):
	 
	 	 	Reconciliation of equity as at December 1, 2008 and November 30, 2009:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	December 1, 2008	 	 	November 30, 2009	 
	 	 	 	 	 	 	 	 	 	 	IFRS	 	 	IFRS	 	 	 	 	 	 	 	 	 	 	IFRS	 	 	IFRS	 	 	 	 
	 	 	 	 	 	 	Canadian	 	 	adjust-	 	 	reclassi-	 	 	 	 	 	 	Canadian	 	 	adjust-	 	 	reclassi-	 	 	 	 
	 	 	Note	 	 	GAAP	 	 	ments	 	 	fications	 	 	IFRS	 	 	GAAP	 	 	ments	 	 	fications	 	 	IFRS	 
	 	 	 	 	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assets
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current assets:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash
	 	 	 	 	 	 	133	 	 	 	—	 	 	 	—	 	 	 	133	 	 	 	1,519	 	 	 	—	 	 	 	—	 	 	 	1,519	 
	Bonds
	 	 	 	 	 	 	10,955	 	 	 	—	 	 	 	—	 	 	 	10,955	 	 	 	10,036	 	 	 	—	 	 	 	—	 	 	 	10,036	 
	Trade and other
receivables
	 	 	 	 	 	 	610	 	 	 	—	 	 	 	—	 	 	 	610	 	 	 	375	 	 	 	—	 	 	 	—	 	 	 	375	 
	Tax credits and
grants receivable
	 	 	(a	)	 	 	1,784	 	 	 	—	 	 	 	(333	)	 	 	1,451	 	 	 	1,666	 	 	 	—	 	 	 	(333	)	 	 	1,333	 
	Inventories
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2,225	 	 	 	—	 	 	 	—	 	 	 	2,225	 
	Research supplies
	 	 	(a	)	 	 	301	 	 	 	—	 	 	 	(301	)	 	 	—	 	 	 	287	 	 	 	—	 	 	 	(287	)	 	 	—	 
	Prepaid expenses
	 	 	(a	)	 	 	397	 	 	 	—	 	 	 	342	 	 	 	739	 	 	 	302	 	 	 	—	 	 	 	328	 	 	 	630	 
	 
	Total current assets
	 	 	 	 	 	 	14,180	 	 	 	—	 	 	 	(292	)	 	 	13,888	 	 	 	16,410	 	 	 	—	 	 	 	(292	)	 	 	16,118	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-current assets:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Bonds
	 	 	 	 	 	 	35,249	 	 	 	—	 	 	 	—	 	 	 	35,249	 	 	 	51,807	 	 	 	—	 	 	 	—	 	 	 	51,807	 
	Property and equipment
	 	 	 	 	 	 	1,299	 	 	 	—	 	 	 	—	 	 	 	1,299	 	 	 	1,229	 	 	 	—	 	 	 	—	 	 	 	1,229	 
	Other assets
	 	 	(a	)	 	 	2,817	 	 	 	—	 	 	 	(41	)	 	 	2,776	 	 	 	41	 	 	 	—	 	 	 	(41	)	 	 	—	 
	 
	Total non-current assets
	 	 	 	 	 	 	39,365	 	 	 	—	 	 	 	(41	)	 	 	39,324	 	 	 	53,077	 	 	 	—	 	 	 	(41	)	 	 	53,036	 
	 
	Total assets
	 	 	 	 	 	 	53,545	 	 	 	—	 	 	 	(333	)	 	 	53,212	 	 	 	69,487	 	 	 	—	 	 	 	(333	)	 	 	69,154	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Liabilities
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current liabilities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts payable
and accrued liabilities
	 	 	(a	)	 	 	7,198	 	 	 	—	 	 	 	(333	)	 	 	6,865	 	 	 	5,901	 	 	 	—	 	 	 	(333	)	 	 	5,568	 
	Current portion of
deferred revenue
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6,847	 	 	 	—	 	 	 	—	 	 	 	6,847	 
	 
	Total current liabilities
	 	 	 	 	 	 	7,198	 	 	 	—	 	 	 	(333	)	 	 	6,865	 	 	 	12,748	 	 	 	—	 	 	 	(333	)	 	 	12,415	 
	 
	Non-current liabilities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred revenue
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	13,691	 	 	 	—	 	 	 	—	 	 	 	13,691	 
	 
	Total non-current liabilities
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	13,691	 	 	 	—	 	 	 	—	 	 	 	13,691	 
	 
	Total liabilities
	 	 	 	 	 	 	7,198	 	 	 	—	 	 	 	(333	)	 	 	6,865	 	 	 	26,439	 	 	 	—	 	 	 	(333	)	 	 	26,106	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Equity
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Share capital
	 	 	 	 	 	 	269,219	 	 	 	—	 	 	 	—	 	 	 	269,219	 	 	 	279,169	 	 	 	—	 	 	 	—	 	 	 	279,169	 
	Contributed surplus
	 	 	(b	)	 	 	5,585	 	 	 	175	 	 	 	—	 	 	 	5,760	 	 	 	6,484	 	 	 	273	 	 	 	—	 	 	 	6,757	 
	Deficit
	 	 	(b	)	 	 	(228,829	)	 	 	(175	)	 	 	—	 	 	 	(229,004	)	 	 	(243,887	)	 	 	(273	)	 	 	—	 	 	 	(244,160	)
	Accumulated other
comprehensive income
	 	 	 	 	 	 	372	 	 	 	—	 	 	 	—	 	 	 	372	 	 	 	1,282	 	 	 	—	 	 	 	—	 	 	 	1,282	 
	 
	Total equity
	 	 	 	 	 	 	46,347	 	 	 	—	 	 	 	—	 	 	 	46,347	 	 	 	43,048	 	 	 	—	 	 	 	—	 	 	 	43,048	 
	 
	Total liabilities and equity
	 	 	 	 	 	 	53,545	 	 	 	—	 	 	 	(333	)	 	 	53,212	 	 	 	69,487	 	 	 	—	 	 	 	(333	)	 	 	69,154	 
	 






48









 






THERATECHNOLOGIES INC.



Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	27.	 	Transition to IFRS (continued):
	 
	 	 	Reconciliation of comprehensive income for the year ended November 30, 2009:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	IFRS	 	 	IFRS	 	 	 	 
	 	 	 	 	 	 	Canadian	 	 	adjust-	 	 	reclassi-	 	 	 	 
	 	 	Note	 	 	GAAP	 	 	ments	 	 	fication	 	 	IFRS	 
	 	 	 	 	 	 	$	 	 	$	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenue:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Research services:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Milestone payments
	 	 	(c	)	 	 	—	 	 	 	—	 	 	 	10,884	 	 	 	10,884	 
	Upfront payments and initial technology access fees
	 	 	(c	)	 	 	—	 	 	 	—	 	 	 	6,560	 	 	 	6,560	 
	Royalties and license fees
	 	 	(c	)	 	 	17,468	 	 	 	—	 	 	 	(17,444	)	 	 	24	 
	Interest
	 	 	(c	)	 	 	2,252	 	 	 	—	 	 	 	(2,252	)	 	 	—	 
	 
	Total revenue
	 	 	 	 	 	 	19,720	 	 	 	—	 	 	 	(2,252	)	 	 	17,468	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Research and development expenses, net of tax credits
	 	 	(b), 	(c)	 	 	20,431	 	 	 	33	 	 	 	346	 	 	 	20,810	 
	Selling and market development expenses
	 	 	(b), 	(c)	 	 	2,583	 	 	 	10	 	 	 	4,269	 	 	 	6,862	 
	General and administrative expenses
	 	 	(b), 	(c)	 	 	7,149	 	 	 	55	 	 	 	(661	)	 	 	6,543	 
	Patents
	 	 	(c	)	 	 	346	 	 	 	—	 	 	 	(346	)	 	 	—	 
	Fees associated with the collaboration and licensing
agreement
	 	 	(c	)	 	 	4,269	 	 	 	—	 	 	 	(4,269	)	 	 	—	 
	 
	Total operating expenses
	 	 	 	 	 	 	34,778	 	 	 	98	 	 	 	(661	)	 	 	34,215	 
	 
	Results from operating activities
	 	 	 	 	 	 	(15,058	)	 	 	(98	)	 	 	(1,591	)	 	 	(16,747	)
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Finance income
	 	 	(c	)	 	 	—	 	 	 	—	 	 	 	2,252	 	 	 	2,252	 
	Finance costs
	 	 	(c	)	 	 	—	 	 	 	—	 	 	 	(661	)	 	 	(661	)
	 
	Total net finance income
	 	 	 	 	 	 	—	 	 	 	—	 	 	 	1,591	 	 	 	1,591	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss
	 	 	 	 	 	 	(15,058	)	 	 	(98	)	 	 	—	 	 	 	(15,156	)
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other comprehensive income:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net change in fair value of available-for-sale financial assets
	 	 	 	 	 	 	1,039	 	 	 	—	 	 	 	—	 	 	 	1,039	 
	Net change in fair value of available-for-sale financial assets
transferred to net profit (loss)
	 	 	 	 	 	 	(129	)	 	 	—	 	 	 	—	 	 	 	(129	)
	 
	Other comprehensive income for the year
	 	 	 	 	 	 	910	 	 	 	—	 	 	 	—	 	 	 	910	 
	 
	Total comprehensive income for the year
	 	 	 	 	 	 	(14,148	)	 	 	(98	)	 	 	—	 	 	 	(14,246	)
	 







	 	 	Material adjustments to the consolidated statement of cash flows for 2009:
	 
	 	 	There are no material differences between the consolidated statement of cash flows presented
under IFRS and the consolidated statement of cash flows presented under previous Canadian GAAP.









49









 








THERATECHNOLOGIES INC.



Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	27.	 	Transition to IFRS (continued):
	 
	 	 	Notes to the reconciliations:






	 	(a)	 	Reclassification in the consolidated statement of financial position:
	 
	 	 	 	Certain corresponding figures as at December 1, 2008 and November 30, 2009 have been
reclassified to conform to the new presentation under IFRS.
	 
	 	(b)	 	Share-based compensation:
	 
	 	 	 	In certain situations, stock options granted vest in instalments over a specified vesting
period. When the only vesting condition is service from the grant date to the vesting date
of each tranche awarded, then each instalment should be accounted for as a separate
share-based payment arrangement under IFRS, otherwise known as graded vesting. Canadian
GAAP permits an entity the accounting policy choice with respect to graded vesting awards.
Each instalment can be considered as a separate award, each with a different vesting
period, consistent with IFRS, or the arrangement can be treated as a single award with a
vesting period based on the average vesting period of the instalments depending on the
policy elected.
	 
	 	 	 	The Company’s policy under Canadian GAAP was to treat graded vesting awards under the
latter method and, as a result, an adjustment of $175 was required on the application of
IFRS 2 at the transition date, and an adjustment of $98 was required for the restated 2009
comparative balances as shown below:





	 	 	 	 	 	 	 	 	 
	 	 	December 1,	 	 	November 30,	 
	 	 	2008	 	 	2009	 
	 	 	$	 	 	$	 
	 
	 	 	 	 	 	 	 	 
	Consolidated statement of comprehensive income:
	 	 	 	 	 	 	 	 
	Increase in research and development expenses
	 	 	—	 	 	 	33	 
	Increase in selling and market development expenses
	 	 	—	 	 	 	10	 
	Increase in general and administrative expenses
	 	 	—	 	 	 	55	 
	 
	 
	 	 	 	 	 	 	 	 
	Adjustment to net loss and total comprehensive loss
	 	 	—	 	 	 	98	 
	 
	 
	 	 	 	 	 	 	 	 
	Deficit
	 	 	(175	)	 	 	(273	)
	Increase in contributed surplus
	 	 	175	 	 	 	273	 
	 






50









 






THERATECHNOLOGIES INC.



Notes to the Consolidated Financial Statements, Continued




Years ended November 30, 2010 and 2009 and as at December 1, 2008

(in thousands of Canadian dollars, except per share amounts) 






	27.	 	Transition to IFRS (continued):
	 
	 	 	Notes to the reconciliations (continued):






	 	(c)	 	Reclassification in the consolidated statement of comprehensive income:
	 
	 	 	 	Under IFRS, the Company elected to present expenses using a classification based on their
function and presents net finance income separately. The effect of these changes is
summarized below:





	 	 	 	 	 
	 	 	November 30,	 
	 	 	2009	 
	 	 	$	 
	Decrease in interest
	 	 	(2,252	)
	Increase in finance income
	 	 	2,252	 
	Increase in research and development expenses
	 	 	346	 
	Decrease in patent fees
	 	 	(346	)
	Decrease in general and administrative expenses
	 	 	(661	)
	Increase in finance costs
	 	 	661	 
	Increase in selling and market development expenses
	 	 	4,269	 
	Decrease in fees associated with the collaboration and licensing agreement
	 	 	(4,269	)
	 
	 
	 	 	—	 
	 







	 	 	 	Changes in presentation were also made to the revenue caption in order to conform with
the new presentation under IFRS as noted below:





	 	 	 	 	 
	 	 	November 30,	 
	 	 	2009	 
	 	 	$	 
	Decrease in royalties and license fees
	 	 	(17,444	)
	Increase in upfront payments and initial technology access fees
	 	 	6,560	 
	Increase in milestone payments
	 	 	10,884	 
	 
	 
	 	 	—	 
	 
	 	 	 
	 







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