Interim Results
Futura Medical PLC
21 September 2006
For immediate release 21 September 2006
Futura Medical Plc
Interim Results for the six months ended 30 June 2006
Futura Medical plc (AIM: FUM), the pharmaceutical and medical device group, is
pleased to announce its Interim Results for the six months ended 30 June 2006.
Operational Highlights in the year to date
• MED2002: global development agreement with GSK
• CSD500: regulatory approval on track
• FLD500: dossier submission scheduled for 2007
• DCF100: excellent permeation study results
Financial Highlights
• Pre-tax loss of £1.0 million for the six months ended 30 June 2006 (H1
2005: pre-tax loss of £1.0 million - as restated)
• Cash of £1.4 million at 30 June 2006 (30 June 2005: £2.7 million)
• Successful placing raised £3.4 million net in July 2006
Commenting on the results James Barder, Futura's Chief Executive, said: 'The
period under review, and post the period end, has been transformational for the
Company in that, with GSK and SSL, we now have routes to market with blue chip
partners for all of our three leading products. In addition we have progressed
our new product portfolio by leveraging our intellectual property portfolio to
create value for shareholders.'
For further information:
Futura Medical plc Tel: +44 (0) 1483 685 670
James Barder, Chief Executive
email to: james.barder@futuramedical.co.uk www.futuramedical.co.uk
Media enquiries:
Buchanan Communications Tel: +44 (0) 20 7466 5000
Mark Court / Rebecca Skye Dietrich
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
The end of the beginning
The first three products upon which Futura was founded are now at an advanced
stage of development: the dossier for CSD500 has been submitted to EU
regulators; we expect to follow suit with the submission of the FLD500 dossier
next year; in July we announced a development agreement for MED2002 with
GlaxoSmithKline Consumer Healthcare, a division of GlaxoSmithKline plc ('GSK'),
to complete MED2002's clinical development programme.
With this in mind, Futura is currently undergoing a strategic review to
determine the best way of leveraging our intellectual property assets, know-how
and commercial expertise in order to assure the continued success and growth of
the company. Futura has developed a highly efficient and proprietary delivery
system for the rapid absorption of active molecules through the skin. By using
this system, low doses of certain compounds can be targeted, which brings
potential benefits such as localised site of action, rapid speed of onset and
reduced side effects. We are assessing its use in a range of compounds.
Our new product evaluation is already showing excellent progress with the recent
announcement of impressive skin permeation rates for DCF100, our topical
analgesic, and discussions have commenced with potential distributors. We hope
to be able to report further new product initiatives to our shareholders during
the coming months.
Key Product Development
MED2002
Treatment for Erectile Dysfunction (ED)
Since the founding of Futura we have received in excess of 60 approaches from
different pharmaceutical companies for the distribution and marketing rights for
MED2002. We have always had faith in the huge commercial potential of MED2002
and for its becoming the world's first over-the-counter ('OTC') treatment for
ED. Only one in five patients with ED seek treatment as all existing ethical
medicines require a doctor's prescription. As an OTC treatment, the possibility
of buying MED2002 through the pharmacy will be easier and less embarrassing.
Accordingly, it has been absolutely critical to us that we secured the best
possible distributor capable of successfully addressing the sensitivities
associated with the positioning and marketing of MED2002.
We were therefore delighted when in July this year we announced a development
agreement with GSK for MED2002. Within the OTC industry, GSK's infrastructure
is considered to be the best. This makes them an ideal partner for MED2002.
Under the development agreement GSK will primarily run and manage the ongoing
clinical trial programme for MED2002 through to regulatory submission in 2008
and provide global regulatory and technical support. 65% of the costs of the
clinical programme will be met by GSK. The main licensing terms between GSK and
Futura have also been established. These are currently being incorporated into a
global distribution and marketing agreement for which both companies intend to
obtain formal Board approval as soon as practicable.
Since signing the development agreement arrangements have been progressing to
enable the next clinical study to start before the end of 2006. We expect to be
able to update our shareholders later this year on this study along with the
likely timetable for the results.
CSD500 - ZanifilTM
Condom safety device
In the past few days we have received a detailed response from the relevant
Notified Body and Competent Authority (regulators) regarding the regulatory
dossier for CSD500's marketing authorisation within the EU.
There are some remaining questions on the chemical and pharmaceutical aspects of
the regulatory dossier but these are being addressed as part of the ongoing
programme. We expect to be able to provide a full and satisfactory response to
these questions in the near future.
The assessment by regulators of the clinical aspects and potential marketing
claims is more complex. The regulators have proposed a hearing where these
issues can be discussed between all parties to determine the necessary steps to
gain regulatory approval.
The regulatory approval of CSD500 will be a major milestone achievement for
Futura which will lead to our generating revenues from the first of our three
key products.
FLD500
Female lubrication device
Real progress has been made this year in addressing the technical challenges of
coating a thin elastomer film containing the active compound onto the outer
surface of a Durex(TM)condom without damaging the integrity of the condom or
compromising the stability of the active compound. Following encouraging
initial laboratory results SSL conducted pilot scale-up trials in July.
Assuming a successful outcome of these trials we would expect a submission to EU
regulators during 2007 for FLD500's marketing authorisation. This will
represent Futura's second regulatory filing within two years.
DCF100
A topical formulation of the non-steroidal anti-inflammatory drug (NSAID)
Diclofenac
Several weeks ago we announced impressive results for our novel topical
formulation of Diclofenac in human in vitro skin permeation studies with
permeation rates in excess of eight times higher than the world's current market
leader, Voltarol (R) Emulgel.
Global topical NSAID sales in 2005 were US$2.35 billion. Notably, this excludes
the world's largest pharmaceutical market, the USA, where no topical NSAID has
yet received marketing approval from the Food and Drug Administration. This is
due to concerns over the inability of existing topical NSAID formulations to
deliver sufficient dose through the skin to achieve a therapeutic effect. In
contrast, we believe DCF100's potent trans-dermal delivery addresses this issue.
With Voltarol (R) Emulgel achieving global sales of US$215 million even without
sales in the USA, we believe DCF100 represents a significant commercial
opportunity.
Plans are now at an advanced stage to conduct Phase I human tissue
micro-dialysis and plasma level studies on the final formulation later in the
year, with results anticipated for mid-2007. In the meantime, discussions have
commenced with potential global distributors for DCF100 and we will update our
shareholders on their progress in due course.
The technology upon which DCF100 is based has been developed in-house as a
by-product of the challenges we resolved last year in reformulating MED2002. The
cost of adapting the technology to create DCF100 has therefore been minimal,
although there is valuable intellectual property associated with it.
Furthermore, the regulatory hurdles normally faced with new products or
indications are considerably less as Diclofenac is already well-characterised
and is licensed in oral form throughout the world and in topical form in most
regions. A patent was filed in early 2006 for DCF100.
PET500
An OTC treatment for Premature Ejaculation (PE)
As with DCF100, the technology used in PET500 largely exploits that already
developed for MED2002. We remain optimistic that we can develop a
consumer-friendly, fast-acting and rapidly-dissipating treatment to enable men
to have greater sexual control without compromising their sexual satisfaction.
PE is considered the most common form of sexual dysfunction in men.
Perhaps even more than ED, PE has many social and emotional taboos associated
with the condition. As a consequence, we believe that it is essential for the
positioning and design of PET500 to accurately reflect these issues. For this
reason extensive market research is underway in order that we can fully
understand the needs of men with PE as well as those of their partners.
We expect to conclude our extensive market research by the end of the year.
Assuming satisfactory outcomes, we would expect to commence phase II studies in
the first half of 2007. Under the MED2002 agreement GSK hold the right of first
refusal for PET500. As with MED2002 we consider it essential for the success of
PET500 that we have a strong global distribution partner.
Business Analysis
Our retained loss for the six months ended 30 June 2006 was £923,220. Research
and development costs of £588,901 were 15% lower compared with last year's
interim results. This reflects decreased clinical research activity on MED2002
pending the GSK development agreement signed in July. Other administrative
expenses have risen by only £96,954 over 6 months, with the increase being
chiefly divided between legal and negotiation costs culminating in the deal for
MED2002 and the expansion of our core team, including a marketing executive. We
continue to maintain a tight control on expenditure. Cash at the end of June
2006 was £1.4 million prior to raising a further £3.4 million net of costs in
July 2006.
Outlook
We go into the next stage of Futura's development with growing anticipation as
we continue to build a company with a range of exciting and commercially
attractive products. This anticipation is shared by your Board of Directors,
who recently took the opportunity to invest in Futura by ploughing the profits
realised from the exercise of their shortly-to-expire options into Futura
shares.
Directors' holdings have thereby increased from an aggregate holding of 566,649
to 1,377,890 ordinary shares in Futura, with all Executive Directors now owning
shares in Futura as opposed to only half owning shares prior to this recent
exercise. In the case of every Director this represents a holding value of at
least double their respective Futura annual salary based on the share price at
the time of exercise, a meaningful sum that demonstrates the underlying
commitment of all of your Executive Directors.
Futura's biggest asset is its staff and its team of consultants. Their
contribution was strongly demonstrated this year with DCF100 being developed
purely out of their ingenuity and creativity. Again we offer our thanks to them
for all their continued efforts and fertile imaginations!
Dr W D Potter, Chairman J H Barder, Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Notes Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
As restated As restated
£ £ £
Turnover 492 - 1,660
Research and development costs (588,901) (691,624) (1,547,872)
Other administrative costs (481,631) (384,677) (801,256)
Administrative expenses (1,070,532) (1,076,301) (2,349,128)
Operating loss (1,070,040) (1,076,301) (2,347,468)
Other interest receivable and similar income 37,592 77,937 133,467
Loss on ordinary activities before taxation (1,032,448) (998,364) (2,214,001)
Tax on loss on ordinary activities 3 109,228 132,530 286,973
Loss on ordinary activities after taxation and
retained loss for the period 4 (923,220) (865,834) (1,927,028)
Basic and diluted loss per share (pence) 5 (1.9) (1.8) (4.0)
All amounts relate to continuing activities.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Notes Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
As restated As restated
£ £ £
Loss for the period (923,220) (865,834) (1,927,028)
Prior period adjustments
- Share-based payment 2 (39,462)
Total gains and losses recognised since last
financial statements (962,682)
CONSOLIDATED BALANCE SHEET
Notes Unaudited Unaudited Audited
30 June 30 June 31 December
2006 2005 2005
£ £ £
Fixed Assets
Tangible assets 24,989 27,914 25,370
24,989 27,914 25,370
Current Assets
Stock 31,956 5,320 31,956
Debtors 172,576 398,445 351,079
Cash at bank and in hand 1,448,665 2,661,562 1,808,913
1,653,197 3,065,327 2,191,948
Creditors: amounts falling due within one year (242,266) (200,753) (237,147)
Net current assets 1,410,931 2,864,574 1,954,801
Total net assets 1,435,920 2,892,488 1,980,171
Capital and reserves
Called up share capital 99,337 97,357 97,877
Share premium account 6 8,925,420 8,425,707 8,560,987
Other reserves 1,152,165 1,152,165 1,152,165
Profit and loss account 7 (8,741,002) (6,782,741) (7,830,858)
Equity shareholders' funds 8 1,435,920 2,892,488 1,980,171
CONSOLIDATED CASH FLOW STATEMENT
Notes Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
As restated As restated
£ £ £
Net cash outflow from operating activities 9 (1,046,286) (1,064,305) (2,292,863)
Returns on investments and servicing of finance
Interest received 41,880 64,154 139,306
Net cash inflow from returns on investments and
servicing of finance 41,880 64,154 139,306
Corporation Tax
Research and development tax credit received 282,636 - 167,858
282,636 - 167,858
Capital expenditure
Payments to acquire tangible assets (4,414) (10,934) (13,835)
Proceeds on disposal of fixed assets 43 - -
Net cash outflow from capital expenditure (4,371) (10,934) (13,835)
Net cash outflow before use of liquid
resources and financing (726,141) (1,011,085) (1,999,534)
Management of liquid resources
Decrease in short term deposits 10 394,061 986,301 1,787,913
Financing
Issue of ordinary shares 365,893 - 135,800
Net cash inflow from financing 365,893 - 135,800
Increase / (Decrease) in net cash 10 33,813 (24,784) (75,821)
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. Basis of preparation
The unaudited Interim Report was approved by the Board of Directors on 20
September 2006.
The financial information contained in this Interim Report has been prepared on
the basis of the accounting policies set out in the Group's Annual Report for
the year ended 31 December 2005 as well as applying the requirements of
Financial Reporting Standard 20 (Share-based payment) for the first time.
The financial information for the six months ended 30 June 2006 and for the six
months ended 30 June 2005 is unaudited.
The financial information for the Group set out above does not constitute '
statutory accounts' within the meaning of Section 240 of the Companies Act 1985.
The information for the year ended
31 December 2005 has been extracted from the statutory accounts of Futura
Medical plc which have been delivered to the Registrar of Companies. The
auditors have reported on those financial statements; their reports were
unqualified and did not contain statements under Section 237(2) or (3) of the
Companies Act 1985.
2. Change in accounting policy
The Group has applied the requirements of Financial Reporting Standard 20
(Share-based payment) which it has adopted for the first time with effect from 1
January 2006 as its application is obligatory for accounting periods commencing
on or after that date. In accordance with the transitional provisions, Financial
Reporting Standard 20 has been applied to all grants of equity instruments after
7 November 2002 that were unvested at 1 January 2006.
The Group issues equity-settled share-based payments, i.e. share options, to
certain directors and employees. Equity-settled share-based payments are
measured at fair value (excluding the effect of non-market-based vesting
conditions) at the date of grant using an appropriate valuation model.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed to the profit and loss account on a straight-line basis
over the vesting period, based on the Group's estimate of shares that will
eventually vest and adjusted for the effect of non market-based vesting
conditions. At each balance sheet date the cumulative charge in respect of each
option plan is adjusted to reflect expected and actual levels of options
vesting. Prior to adoption of Financial Reporting Standard 20, equity-settled
share-based payments were not expensed to the profit and loss account.
The effect of this is to increase costs for the six months ended 30 June 2006 by
£13,076. The prior period comparatives have been restated resulting in an
increase in cost for the six months ended 30 June 2005 of £9,807 and for the
year ended 31 December 2005 of £22,884. The cumulative effect on opening
reserves at 1 January 2005 is a charge of £16,578 and a corresponding credit of
£16,578 resulting in £nil net change. This has resulted in an increase in loss
per ordinary share for the six months ended 30 June 2006 of 0.03 pence per share
(six months ended 30 June 2005: increase of 0.02 pence per share; year ended 31
December 2005: increase of 0.05 pence per share).
3. Taxation
Taxation represents tax credits for certain research and development expenditure
based on the expenditure incurred in the relevant period or year. Deferred tax
assets have not been recognised on the basis that their future economic benefit
is not certain.
4. Dividends
No dividends have been paid and none are proposed.
5. Loss per ordinary share
The loss attributable to ordinary shareholders and weighted average number of
ordinary shares for the purpose of calculating the diluted earnings per ordinary
share are identical to those used for basic earnings per share. This is because
the exercise of share options would have the effect of reducing the loss per
ordinary share and is therefore not dilutive under the terms of Financial
Reporting Standard 14.
The calculation of the loss per ordinary share is based on a loss of £923,220
(six months to 30 June 2005: loss of £865,834 as restated; year to 31 December
2005: loss of £1,927,128 as restated) and on a weighted average of 49,556,032
shares in issue (six months to 30 June 2005: 48,678,601 shares; year to 31
December 2005: 48,686,327 shares).
6. Share premium
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 30 June 31 December
2006 2005 2005
£ £ £
Opening share premium 8,560,987 8,425,707 8,425,707
Premium on shares issued 364,433 - 135,280
Closing share premium 8,925,420 8,425,707 8,560,987
7. Profit and loss reserve
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 30 June 31 December
2006 2005 2005
£ £ £
Opening profit and loss reserve as previously
stated (7,830,858) (5,926,714) (5,926,714)
Prior period adjustments:
- Share-based payment (note 2) (39,462) (16,578) (16,578)
- Share-based credit to reserves (note 2) 39,462 16,578 16,578
Opening profit and loss reserve as restated (7,830,858) (5,926,714) (5,926,714)
Retained loss for the period (923,220) (865,834) (1,927,028)
Share-based credit to reserves 13,076 9,807 22,884
Closing profit and loss reserve (8,741,002) (6,782,741) (7,830,858)
8. Reconciliation of movements in shareholders' funds
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 30 June 31 December
2006 2005 2005
£ £ £
Retained loss for the period (923,220) (865,834) (1,927,028)
Net proceeds from issue of shares 365,893 - 135,800
Share-based credit to reserves 13,076 9,807 22,884
Net decrease in shareholders' funds (544,251) (856,027) (1,768,344)
Opening shareholders' funds as previously stated 1,980,171 3,748,515 3,748,515
Prior year adjustments:
- Share-based payment (note 2) (39,462) (16,578) (16,578)
- Share-based credit to reserves (note 2) 39,462 16,578 16,578
Opening shareholders' funds as restated 1,980,171 3,748,515 3,748,515
Closing shareholders' funds 1,435,920 2,892,488 1,980,171
9. Reconciliation of operating profit to operating cashflows
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 30 June 31 December
2006 2005 2005
£ £ £
Operating loss (1,070,040) (1,076,301) (2,347,468)
Depreciation 5,195 7,758 13,203
Share-based payment charge 13,076 9,807 22,884
Profit on sale of fixed assets (43) - -
Decrease / (increase) in stocks - 9,492 (17,144)
Decrease in debtors 805 6,079 20,408
Increase / (decrease) in creditors 4,721 (21,140) 15,254
Net cash outflow from operating activities (1,046,286) (1,064,305) (2,292,863)
10. Reconciliation of net cash flow to movement in net funds
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 30 June 31 December
2006 2005 2005
£ £ £
Increase / (decrease) in cash in the period 33,813 (24,784) (75,821)
Cash outflow from changes in liquid resources (394,061) (986,301) (1,787,913)
Movement in net funds in the period (360,248) (1,011,085) (1,863,734)
Net funds at start of period 1,808,913 3,672,647 3,672,647
Net funds at end of period 1,448,665 2,661,562 1,808,913
11. Post balance sheet events
On 3 July 2006 our subsidiary, Futura Medical Developments Limited, entered into
a development agreement with GSK for MED2002. Under the terms of the agreement
GSK will primarily run and manage the ongoing clinical trial programme for
MED2002 through to regulatory submission in 2008, provide global regulatory and
technical support, and pay 65% of the clinical development programme costs which
would result in a contribution to those costs of £2.4 million.
On 10 July 2006, Futura completed a private placing of 3,400,000 new ordinary
shares at 78 pence per share which raised £2,534,170 net of costs for the
company.
On 10 July 2006, the directors completed the exercise of all of the 2,125,000
options over new ordinary shares held by them which would otherwise have expired
on 31 January 2007. This raised £831,250 net of costs for Futura Medical plc and
increased the directors' shareholdings in Futura Medical plc by 811,241 new
ordinary shares.
The directors sold sufficient shares at 78 pence per share to pay a total of
£1,001,404 which comprised the purchase price of £831,250 due to Futura for the
exercise of options and the tax and national insurance liabilities arising from
these transactions of £170,154. No director received a cash profit after tax
from the exercise of options and sale of shares with the exception of David
Davies who realised a small cash profit of approximately £30,000 but he retained
a total holding of 408,275 ordinary shares. In addition, staff exercised 110,000
options.
Following the above transactions, resulting in the issue of 5,635,000 new
ordinary shares, together with 730,000 options exercised by other persons
(former directors and consultants) during the six months ended 30 June 2006, the
issued share capital of Futura as at 10 July 2006 had increased to 55,303,601.
The number of options following the above exercises was 1,160,000 prior to a
further grant of 350,000 options to employees (not directors) on 8 July 2006.
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