HispanicBusiness

Royalties on sales are paid quarterly in arrears based on the calendar year. In fiscal 2012, we received royalty and license fees revenue of $4,255,000 compared to $1,443,000 in 2011. Most of the increase is due to growth in EGRIFTA™ sales, which were up significantly in Fiscal 2012 compared to Fiscal 2011. In addition, the royalties reported in Fiscal 2012 include an amount of $699,000 based on management's estimate of the royalties earned on EGRIFTA™ sales in October 2012 and November 2012, for which the comparable amounts from last year were only recorded in the first quarter of Fiscal 2012.

Revenue also includes the amortization of the initial payment of $27,097,000 received upon the closing of the EMD Serono Agreement. For the twelve-month period ended November 30, 2012, $4,077,000 was recognized as revenue related to the initial payment, compared to $5,134,000 in Fiscal 2011. The amortization amount in Fiscal 2012 reflects an extension made to the service period attributed to the initial payment in order to allow sufficient time for work that has yet to be completed. At November 30, 2012, the remaining deferred revenue related to this transaction recorded on the consolidated statement of financial position amounted to $4,481,000.

For the twelve months ended November 30, 2012, the cost of sales of EGRIFTA™ amounted to $5,056,000 compared to $9,146,000 in Fiscal 2011, largely as a result of the lower sale of goods in Fiscal 2012 as described above. The cost of sales exceeded sale of goods revenue in 2011, reflecting the depletion of higher-cost inventory produced at an earlier date and expenses associated with validating additional suppliers for EGRIFTA™. Cost of sales is detailed in note 7 "Cost of sales" of our audited consolidated financial statements for the years ended November 30, 2012, 2011 and 2010.

R&D expenses, net of tax credits, amounted to $6,341,000 in the twelve months ended November 30, 2012 compared to $10,992,000 in Fiscal 2011. The significant reduction in R&D expenses is largely due to the adoption of a more focused business plan and the related restructuring initiatives. R&D expenses in 2012 were associated with pursuing the development of TH1173 and a new formulation of EGRIFTA™, the two Phase 4 clinical trials, and helping our commercial partners to pursue regulatory approvals in their respective jurisdictions.

Selling and market development expenses amounted to $852,000 for the twelve months ended November 30, 2012, compared to $2,019,000 in Fiscal 2011, reflecting cost savings from restructuring initiatives in Fiscal 2012. With EGRIFTA™ licensing agreements now in place in major markets, the ongoing selling and market development expenses are reduced to the costs of managing relationships with our commercial partners and certain selling expenses such as insurance coverage for inventories.

General and administrative expenses amounted to $5,462,000 in the twelve months ended November 30, 2012 compared to $10,823,000 in Fiscal 2011. The expenses in 2012 were considerably lower as a result of restructurings, the departure of the former President and Chief Executive Officer and the suspension of executive bonuses. In addition, the relatively high expenses in 2011 included the costs associated with the planned public offering of our common shares, the cost of listing our common shares on NASDAQ, as well as costs related to the change in leadership of the Company in that year.