Interim Results

RNS Number : 9427L

Futura Medical PLC

11 September 2012

 



For immediate release

11 September 2012

 

 

Futura Medical PLC

("Futura" or the "Company")

Interim Results for the six months ended 30 June 2012

Futura Medical plc (AIM: FUM), the pharmaceutical group that develops innovative products for consumer healthcare, is pleased to announce interim results for the six months ended 30 June 2012.

Key Events

·      CSD500 and MED2002 - Rights regained for both products

·      PET500 - Upcoming US launch by Ansell under the LifeStyles^® brand

·      CRF100 - Cellulite reduction product clinical trial completed

·      John Clarke joined the Company as Non-Executive Chairman to lead the next stages

in the Company's development

·      Net loss of £0.96 million in the period with net cash outflow of £0.72 million

·      Cash resources of £1.86 million at 30 June 2012

James Barder, Futura's Chief Executive, said: "We continue to make good progress across our portfolio but our primary focus in the short term is on the commercialisation of CSD500 now that we have regained control of the product. We have a clear commercialisation strategy for CSD500 and remain confident of licensing the product to one or more commercial partners."

For further information:

Futura Medical plc	+ 44 (0) 1483 685 670
James Barder, Chief Executive Officer
Mail to: [e-mail]	www.futuramedical.com
Nomura Code Securities Limited	+ 44 (0) 20 7776 1200
Phil Walker / Giles Balleny
Buchanan	+ 44 (0) 20 7466 5000
Mark Court / Fiona Henson / Sophie Cowles

Notes to editors:

About Futura Medical plc

Futura Medical is a pharmaceutical group that develops innovative products for consumer healthcare.  The Company is developing a portfolio of products and its strategy is to license their manufacture and distribution to major pharmaceutical and healthcare groups.

Futura is based in Guildford, Surrey, and its shares trade on the AIM market of the London Stock Exchange.

www.futuramedical.com

Chairman's and Chief Executive's Joint Review

The first six months of the financial year represent an important period in Futura's development, particularly in respect of our lead product, the novel condom CSD500, but also for our growing pipeline of innovative products and for our broader strategic and commercial direction.

During the period we became increasingly concerned about our commercial relationship with Reckitt Benckiser in connection with CSD500 and MED2002, both of which were licensed to Reckitt Benckiser as a consequence of its acquisition of SSL International plc. As announced on 28 August 2012, discussions with Reckitt Benckiser culminated in our regaining the worldwide rights to both products.

CSD500's intellectual property is protected worldwide and clinical studies have shown compelling efficacy. The product has attracted significant interest from potential distributors and we have begun a formal process to ensure that new licensing arrangements are put in place to maximise shareholder returns and speed of the product to market.

In order to get CSD500 to market as quickly as possible Futura has taken control of the product's manufacture and will become the CE mark holder. Manufacturing has already been outsourced to a third party condom manufacturer with the necessary ISO 13485 certification for the manufacture of condoms with ancillary medicinal substances.

CSD500 is an approved product but there are a number of routine steps that must be undertaken for the re-issue of the CE mark relating to a change of manufacturer and Futura becoming the CE mark holder. We plan to complete this process during 2013 ahead of the product being available for launch within Europe.

We also regained rights to MED2002, which is a product we have always viewed as a very valuable asset. On regaining worldwide rights we have re-activated development work.

Elsewhere in our portfolio, PET500, our innovative spray for enhanced sexual control, which is licensed to Ansell Limited, is progressing through its phased launch and roll out in the USA.

We have also had encouraging results from the initial clinical study of CRF100, our novel product for the reduction of cellulite, though further formulation work will be required to optimise the product ahead of a further clinical study.

In summary, Futura remains confident of achieving its key objective in the foreseeable future of becoming a profitable R&D company at the forefront of topical drug innovation.

Portfolio updates - Sexual healthcare

CSD500: Condom safety device

As announced on 28 August 2012, we have regained the rights to CSD500 from Reckitt Benckiser and have a clear strategy for commercialising the product.

The first steps in this strategy are well advanced with the appointment of a contract condom manufacturer and confirmation of the regulatory requirements, which are straightforward, following a meeting with the relevant regulator for the issue of a CE mark. Other than new manufacturing data on the different condoms used no further data is required and therefore Futura expects to submit a revised dossier for CSD500 to EU regulators in the first half of 2013 with approval expected before the end of 2013.

Under this new commercialisation strategy, Futura will control the manufacture of CSD500 but manufacturing itself will be outsourced to a contract condom manufacturer. This approach provides a number of benefits for Futura, including increased control with the ability to license CSD500 to a number of different distributors. Futura's virtual business model remains unchanged, and the Company will therefore not be directly involved in manufacturing, packaging, warehousing or any other discipline associated with integrated businesses.

Futura is in discussion with many of the world's major condom distributors and healthcare companies and is confident of relicensing CSD500 to one or more of these companies. In parallel with regulatory work, Futura has entered into formal discussions with a number of these companies as well as exploring alternative distribution approaches with a view to concluding distribution arrangements by the time of the award of the new CE mark. The key difference compared with the previous commercialisation agreement is that in the first instance Futura will be in control of all manufacturing and development work. The distribution agreements will be focused on commercialisation. Once licensed, manufacture may switch to the relevant distributor's preferred location but adopting the strategy outlined above is aimed at guaranteeing continuity of supply and certainty to our shareholders.

CSD500's unique intellectual property position has been protected throughout the world including the principal consumer markets within Europe, the USA and Canada through patents now granted or proceeding to grant in 36 countries with one application still pending. CSD500 benefits from three marketing claims which have been clinically proven and approved by the regulatory authorities: the maintenance of a firmer erection, increased penile size and a longer lasting sexual experience for women. These claims were demonstrated in a statistically significant user study involving 108 couples.

As previously announced, the results of our own market research, conducted by internationally recognised research companies, reinforce the commercial potential of CSD500 with men and women who already use condoms as well as with men and women who do not currently use them. Market research showed that 88% of existing condom users would be interested in purchasing CSD500 and that 49% of non-condom users would be interested in purchasing the product. Further research also showed that 46% of men had experienced some loss of sensitivity when using a condom during sexual intercourse, which can lead to loss of erection. This is one reason why some men avoid condoms, thereby increasing the risks of unwanted pregnancies and contracting or spreading sexually transmitted infections.

MED2002: Treatment for erectile dysfunction

MED2002, which shares the same active ingredient as CSD500, is our topical gel for the treatment of men with erectile dysfunction. It has the potential to become the world's first non-prescription pharmaceutical treatment for men with erectile dysfunction, a condition that affects, to some degree, as many as 52% of men aged 40 or over¹.

As announced on 28 August 2012 we regained the rights to MED2002 from Reckitt Benckiser at the same time as we regained the rights to CSD500.

We have always considered MED2002 to be a very valuable asset but for the past few years development work has remained dormant. Now that we have regained control of the product, we have already re-activated development work. We can confirm that we intend to exploit the significant potential that we consider MED2002 represents.

Note1: Massachusetts Male Aging Study (MMAS), J Urol. 1994 Jan; I5I (1): 54-61

PET500: Enhanced sexual control

PET500 is a topical spray that combines our DermaSys^®AquaFree delivery system with a well-known mild topical anaesthetic. It is designed to take effect rapidly and to delay male ejaculation, thereby offering enhanced sexual control.

PET500 is licensed to Ansell Limited, one of the world's major sexual health companies, which signed an exclusive worldwide agreement in February 2011 to commercialise the product under Ansell's LifeStyles^® brand. Under the terms of the agreement Futura will receive a significant royalty rate on sales.

Since signing the agreement, Ansell has developed the brand positioning and packaging for PET500 for initial sale in the USA and will be sold under their well-known LifeStyles^® brand.

In June 2012 Ansell showcased the product at the annual Marketplace meeting of the US National Association of Chain Drug Stores (NACDS) in Denver, Colorado. Presentations about the clinical performance and commercial prospects for PET500 were made to key retailers at Marketplace, which represents the largest conference of its type in the USA.

Ansell is currently finalising the details of its advertising strategy, which is expected to be designed to target existing users of sexual control products in the first instance. In the USA, PET500 is approved for sale under the current Food & Drug Administration monograph for male genital desensitisers and promotion of the product will be required to conform to the monograph.

Key US retail outlets only conduct a review on an annual basis culminating with a change to in-store listings generally in the first quarter of the year. Futura expects to receive some revenue from PET500 in the current financial year though this is not expected to be significant owing to the product's phased launch and roll out.

Portfolio updates - Pain relief management

TPR100 and TPR100-Rx: Topical pain relief

TPR100 uses our highly efficient transdermal delivery system, DermaSys^®, for the delivery of a non-steroidal anti-inflammatory drug ("NSAID"). As previously announced, clinical tests carried out by Futura have shown that TPR100 achieves approximately 35 times higher bioavailability than that achieved by the market-leading product. TPR100's speed of permeation brings potential benefits including the rapid onset of action of pain relief.

Futura has a development agreement for TPR100 with GlaxoSmithKline Consumer Healthcare ("GSK") under which GSK is responsible for all clinical and regulatory development including its funding. GSK is also making modest annual payments to Futura whilst development work proceeds within GSK. We will update shareholders further when we are able to.

TPR100-Rx contains a higher dose of the same NSAID as TPR100. This will require it to be regulated as a prescription product for the treatment of more profound pain associated with conditions such as osteoarthritis and rheumatic pain. Its targeted delivery through the skin has the potential benefit of avoiding the systemic side-effects seen in the use of oral NSAIDs.

TPR100 and TPR100-Rx continue to attract interest from a number of potential commercial parties and TPR100-Rx is currently under evaluation with a number of pharmaceutical companies.

RAD100: Rapid anaesthetic delivery

RAD100 was conceived in a similar way to TPR100-Rx in that the success of a low dose of topical anaesthetic compound in PET500 prompted us to explore the potential of a higher dose to provide rapid topical anaesthesia prior to injection, vaccination or cannulation. Demand in this market is already well developed with existing treatments taking at least 30 to 45 minutes to take effect.

With the increased rate of permeation of anaesthetic across the skin using the DermaSys^®AquaFree delivery system, we have reduced the time for the anaesthetic to take effect to about 20 minutes. However we believe that an out-licensing partner would require an even faster speed of onset of skin desensitisation of less than 5 minutes to generate real commercial value. We therefore do not intend to commit any further resources to the product at the current time.

Portfolio updates - Cellulite reduction

CRF100: Topical treatment for cellulite

CRF100 is a topically applied cream for the treatment of cellulite, the condition characterised by dimpled skin, which we added to our early stage pipeline in December 2011. It comprises a well-characterised chemical compound (an alkaloid) within Futura'sDermaSys^® delivery system. The alkaloid is already used by a number of major cosmetics companies in the treatment of cellulite and its use, at levels sufficient to produce a physiological effect, is supported by a growing body of scientific literature.

CRF100 has been shown in vitro to achieve at least an eight-fold improvement in delivery of the alkaloid through the skin compared with a number of market-leading comparator products. It is intended that CRF100 will be a cosmetic product and will be licensed at an appropriate time to a major global company for commercialisation. A number of patent applications are in various stages of grant or prosecution and further applications may be considered pending the achievement of successful clinical outcomes.

We are today announcing the finding of the initial clinical study of CRF100, conducted in France by a specialist dermatological contract research organisation. A total of 44 healthy females with mild cellulite took part in the randomised, double blinded and placebo controlled study with a treatment period of 14 weeks.

A statistically significant trend of improvement in cellulite was seen at the first review point after 28 days, compared with placebo. However, a relatively high incidence of dry skin was also seen in eight subjects receiving both the placebo and CRF100 test articles which resulted in these subjects being withdrawn from the study. That the effect was seen in both the placebo and CRF100 suggested that the base cream, which was used in the placebo and in CRF100, was responsible for the dry skin.

As a consequence of the dry skin the dosing regime was modified in the second and third months of the study on ethical grounds from twice a day to once a day. This had the effect of overcoming the dry skin problem since only one further subject was withdrawn for dry skin after the dosing regime was altered. However the 50% reduction in the level of CRF100 may have compromised any potential further improvements in cellulite reduction that could have resulted from longer term exposure to the original higher dose.

Professor Anthony Rawlings, a Visiting Professor at the London School of Pharmacy and scientific advisor to Futura, commented that if the rate of reduction in cellulite observed after one month had been maintained to the end of the study this would have resulted in a dramatic reduction in cellulite.

To achieve the positive clinical effect seen in the first month of the study it is now intended to adjust the CRF100 formulation to allow the required therapeutic dose originally given at the commencement of the study without causing dry skin. This type of reformulation work is a standard part of product development at Futura and we hope that the optimal formulation with proven efficacy and good aesthetics can be achieved.

In addition to the reduction in cellulite, a slimming effect (decreased hypodermal dermis) was also observed at the end of the study with the use of CRF100 compared with placebo. This result was also statistically significant but we will pursue this potential use only if we can generate robust clinical data in line with Futura's business strategy.

Early Stage Product Development

We have a rigorous approach to vetting potential new products and our interest is contingent upon robust evidence-based outcomes. Our initial evaluation includes five key criteria: performance, aesthetics, stability, defensible intellectual property and commercial potential. Unless a new opportunity gives a clear indication of meeting these criteria then the product concept will not progress to the next stage of development.

Futura's highly efficient DermaSys^® delivery system is a versatile asset and we are currently working on a number of potential products at various stages.

Finance

Cash and cash equivalents at 30 June 2012 was £1.86 million (31 December 2011: £2.58 million) with a net cash outflow of £723k in the period. We continue to manage our financial resources carefully.

In the period under review, we earned milestone payments totalling £75k (year ended 31 December 2011: £158k). The retained loss for the six months ended 30 June 2012 was £959k. Research and development ("R&D") costs of £683k were higher than that for the corresponding six month period ended 30 June 2011: £515k (year ended 31 December 2011: £1,481k) as we are investigating new products to add to the development pipeline. Other administrative costs of £481k were higher than that for the corresponding six month period ended 30 June 2011: £319k (year ended 31 December 2011: £776k) and includes the full year charge for 2012 of the revision to the policy on Non-Executive Directors' remuneration.

Outlook

We continue to make good progress across our portfolio but our primary focus in the short term is on the commercialisation of CSD500 now that we have regained control of the product. We have a clear commercialisation strategy for CSD500 and remain confident of licensing the product to one or more commercial partners.

John Clarke	James Barder
Chairman	Chief Executive

Group Statement of Comprehensive Income

		Unaudited 6 months ended 30 June 2012	Unaudited 6 months ended 30 June 2011	Audited  year  ended 31 December 2011
	Notes	£	£	£
Revenue	1.5	75,000	120,555	158,055
Research and development costs		(683,420)	(515,117)	(1,480,774)
Administrative costs		(480,859)	(319,928)	(776,154)
Operating loss		(1,089,279)	(714,490)	(2,098,873)
Finance income		10,460	13,363	24,209
Loss before tax		(1,078,819)	(701,127)	(2,074,664)
Taxation		120,258	83,618	259,704
Total comprehensive loss for the period attributable to owners of the parent company		(958,561)	(617,509)	(1,814,960)
Loss per share (pence)	3	(1.30p)	(0.87p)	(2.53p)

All amounts relate to continuing activities.

Group Statement of Changes in Equity

			Share  capital	Share  premium	Merger  reserve	Retained losses	Total    equity
		Note	£	£	£	£	£
At 1 January 2011 - audited			135,287	15,623,127	1,152,165	(16,010,034)	900,545
Total comprehensive loss for the period			-	-	-	(617,509)	(617,509)
Share-based payment			-	-	-	49,890	49,890
Shares issued during the period		6	10,034	3,344,612	-	-	3,354,646
Costs of share issues			-	(127,910)	-	-	(127,910)
At 30 June 2011 - unaudited			145,321	18,839,829	1,152,165	(16,577,653)	3,559,662
Total comprehensive loss for the period			-	-	-	(1,197,451)	(1,197,451)
Share-based payment			-	-	-	53,181	53,181
Shares issued during the period		6	1,126	341,031	-	-	342,157
At 31 December 2011 - audited			146,447	19,180,860	1,152,165	(17,721,923)	2,757,549
Total comprehensive loss for the period			-	-	-	(958,561)	(958,561)
Share-based payment			-	-	-	67,195	67,195
Shares issued during the period		6	981	118,018	-	-	118,999
At 30 June 2012 - unaudited			147,428	19,298,878	1,152,165	(18,613,289)	1,985,182

Share premium represents amounts subscribed for share capital in excess of nominal value, less the related costs of share issues.

Merger reserve represents the reserve arising on the acquisition of Futura Medical Developments Limited on 6 June 2001 via a share for share exchange accounted for as a group reconstruction using merger accounting under UK GAAP.

Retained losses represent cumulative net losses recognised in the Group Statement of Comprehensive Income. The total comprehensive loss for each period represents the total recognised income and expense for that period.

Group Statement of Financial Position

		Unaudited    30 June          2012	Unaudited    30 June          2011	Audited 31 December          2011
	Notes	£	£	£
Assets
Non-current assets
Plant and equipment		5,209	5,937	4,520
Total non-current assets		5,209	5,937	4,520
Current assets
Inventories		8,045	9,378	8,400
Trade and other receivables	4	202,142	209,208	96,632
Current tax asset		120,258	83,618	259,704
Cash and cash equivalents	5	1,860,086	3,398,116	2,582,609
Total current assets		2,190,531	3,700,320	2,947,345
Liabilities
Current liabilities
Trade and other payables		(210,558)	(146,595)	(194,316)
Total liabilities		(210,588)	(146,595)	(194,316)
Total net assets		1,985,182	3,559,662	2,757,549
Capital and reservesattributable to owners of the parent company
Share capital	6	147,428	145,321	146,447
Share premium	6	19,298,878	18,839,829	19,180,860
Merger reserve		1,152,165	1,152,165	1,152,165
Retained losses		(18,613,289)	(16,577,653)	(17,721,923)
Total equity		1,985,182	3,559,662	2,757,549

Group Statement of Cash Flows

	Unaudited       6 months             ended         30 June                2012	Unaudited        6 months             ended          30 June               2011	Audited year  ended    31 December               2011
	£	£	£
Cash flows from operating activities
Loss before tax	(1,078,819)	(701,127)	(2,074,664)
Adjustments for:
Depreciation	923	2,470	3,887
Finance income	(10,460)	(13,363)	(24,209)
Share-based payment charge	67,195	49,890	103,071
Cash flows from operating activities before changes in working capital	(1,021,161)	(662,130)	(1,991,915)
Decrease in inventories	355	-	978
Increase in trade and other receivables	(105,697)	(145,540)	(33,416)
Increase/(decrease) in trade and other payables	16,242	(6,160)	41,561
Cash used in operations	(1,110,261)	(813,830)	(1,982,792)
Income tax received	259,704	146,380	146,380
Net cash used in operating activities	(850,557)	(667,450)	(1,836,412)
Cash flows from investing activities
Purchase of plant and equipment	(1,612)	-	-
Interest received	10,647	14,009	25,307
Cash generated by investing activities	9,035	14,009	25,307
Cash flows from financing activities
Issue of ordinary shares	118,999	3,354,646	3,696,803
Expenses paid in connection with share issues	-	(127,910)	(127,910)
Cash generated by financing activities	118,999	3,226,736	3,568,893
(Decrease)/increase in cash and cash equivalents	(722,523)	2,573,295	1,757,788
Cash and cash equivalents at beginning of period	2,582,609	824,821	824,821
Cash and cash equivalents at end of period	1,860,086	3,398,116	2,582,609

Notes to the Group Interim Financial Information

1. Accounting policies

1.1 Basis of preparation

The unaudited Interim Report was approved by the Board of Directors on 10 September 2012.

The interim financial information for the six months ended 30 June 2012 and for the six months ended 30 June 2011 does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 and is unaudited.

The Group financial information for the year ended 31 December 2011 which has been extracted from the financial statements of the statutory accounts ("Annual Report") of Futura Medical plc, which were prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union, does not constitute the full statutory accounts for that period. The Annual Report for 2011 has been filed with the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

1.2 Going concern

The Group had cash balances of £1.86 million at 30 June 2012, with a net cash outflow of £723k in the period.

The Interim Report has been prepared on the going concern basis which assumes that the Group will continue in operational existence for the foreseeable future. The financial statements do not reflect any adjustments that would be required if they were to be prepared on a basis other than the going concern basis.

1.3 Accounting developments

The following new standards, amendments to standards or interpretations have been issued but are not effective for the year ended 31 December 2012 and have not been adopted early as the Directors do not expect them to have a material effect on the Group financial statements:

·  IFRS 10 'Consolidated Financial Statements'

·  IAS 1 (Amended) 'Presentation of Financial Statements'

·  IAS 19 (Amended) 'Employee Benefits'

1.4 Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business, so as to obtain benefits from its activities, it is classified as a subsidiary. The Group financial statements present the results of the Company and its sole subsidiary Futura Medical Developments Limited as if they formed a single entity ("the Group"). Intra-group transactions and balances are eliminated in preparing the Group financial statements.

1.5 Revenue

Revenue comprises the fair value received or receivable for: exclusivity arrangements, consultancy fees, milestone income or royalties, net of value added tax.

The accounting policies for the principal revenue streams of the Group are as follows:

(i)    Exclusivity arrangements and similar agreements are recognised as revenue in the accounting period in which the related services, or required activities, are performed or specified conditions are fulfilled in accordance with the terms of completion of the specific transaction.

(ii)   Consultancy fees are recognised as revenue in the accounting period in which the revenue becomes receivable.

(iii)  Non-refundable milestone income is recognised as revenue in the accounting period in which the milestones are achieved. If any milestone income is creditable against royalty payments then it is deferred and released to the Group Statement of Comprehensive Incomeover the accounting periods in which the royalties would otherwise be receivable.

(iv)   Royalty income relating to the sale by a licensee of licensed product is recognised on an accruals basis in accordance with the substance of the relevant agreement and based on the receipt from the licensee of the relevant information to enable calculation of the royalty due.

1.6 Leased Assets

Leases, which contain terms whereby the Group does not assume substantially all the risks and rewards incidental to ownership of the leased item are classified as operating leases. Operating lease rentals are charged to the Group Statement of Comprehensive Incomeon a straight-line basis over the lease term. The Group does not hold any assets under finance leases.

1.7 Intangible assets

Research and development ("R&D")

Expenditure incurred on the development of internally generated products is capitalised if it can be demonstrated that:

·      it is technically feasible to develop the product for it to be sold;

·      adequate resources are available to complete the development;

·      there is an intention to complete and sell the product;

·      the Group is able to out-licence or sell the product;

·      sale of the product will generate future economic benefits; and

·      expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods in which the Group expects to benefit from selling the products developed but not exceeding five years. The amortisation expense is included in R&D costs recognised in the Group Statement of Comprehensive Income. The useful life and the value of the capitalised development cost are assessed for impairment at least annually. The value is written down immediately if impairment has occurred and the unimpaired cost amortised over the reduced useful life. The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to that product being commercially launched in at least one country.

Development expenditure, not satisfying the above criteria, and expenditure on the research phase of internal projects are included in R&D costs recognised in the Group Statement of Comprehensive Incomeas incurred.

Patents and trademarks

The costs incurred in establishing patents and trademarks are either expensed or capitalised in accordance with the corresponding treatment of the development expenditure for the product to which they relate.

1.8 Plant and equipment

Plant and equipment is initially recognised at cost, and subsequently at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is charged to the Group Statement of Comprehensive Incomeat rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over their estimated useful lives.

The assets' residual values and useful lives are determined by the Directors and reviewed and adjusted if appropriate at each Group Statement of Financial Position date.
 

1.9 Impairment of non-financial assets

Assets that are subject to depreciation are reviewed for impairment on a half-yearly basis and when events or circumstances suggest that the carrying amount may not be recoverable. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). An impairment loss is recognised immediately in the Group Statement of Comprehensive Incomefor the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of fair value, less disposal costs, and value in use. 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.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in the Group Statement of Comprehensive Income.

1.10 Inventories

Inventories are materials and supplies to be consumed in the course of R&D and are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost includes materials, related contract manufacturing costs and other direct costs. Cost is calculated using the first-in, first-out method. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and disposal.

A provision is recognised immediately in the Group Statement of Comprehensive Incomein respect of obsolete, slow-moving or defective items, where appropriate.

1.11 Financial instruments

Financial assets

The Group classifies its financial assets in the category of loans and receivables, they comprise 'trade and other receivables' and 'cash and cash equivalents'. They are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest rate method, less an estimate made for impairment based on a review of all past due amounts at the period end. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due. If an impairment loss is required the carrying amount of the trade or other receivable is reduced through the use of an allowance account and the amount of the loss recognised immediately in the Group Statement of Comprehensive Incomein administrative costs.

Cash and cash equivalents are financial assets and comprise cash in hand and sterling fixed rate short-term deposits with original maturities of three months or less which are held by the Group so as to be available to meet short-term cash commitments.

The Group assesses at each Statement of Financial Position date whether there is objective evidence that a financial asset is impaired.

Financial liabilities

The Group's financial liabilities comprise 'trade and other payables' recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

1.12 Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Group Statement of Comprehensive Incomein the period in which they arise.

1.13 Finance income

Interest income is recognised on a time-proportion basis using the effective interest rate method.

1.14 Taxation

Income tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively enacted at the Group Statement of Financial Position date. R&D tax credits are recognised on an accruals basis and are included as an income tax credit under current assets.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability on the Group Statement of Financial Position date differs from its tax base, except for differences arising on:

·      the initial recognition of an asset or liability in a transaction which is not a business combination and which at the time of the transaction affects neither accounting profit nor taxable profit; and

·      investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profits will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the Group Statement of Financial Position date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

·      the same taxable group company; or

·      different group entities which intend to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, on each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

1.15 Employee benefits

(i) Defined contribution plans

The Group provides retirement benefits to all employees and Executive Directors who wish to participate in defined contribution pension schemes. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to the Group Statement of Comprehensive Incomein the period in which they become payable.

(ii) Accrued holiday pay

Provision is made at each Group Statement of Financial Position date for holidays accrued but not taken at the salary of the relevant employee at that date. The expected cost of compensated short-term absence (i.e. holidays) is charged to the Group Statement of Comprehensive Incomeon an accruals basis.

(iii) Share-based payment transactions

The Group operates an equity-settled share-based compensation plan. For all share options awarded to employees, and others providing similar services, the fair value of the share options at the date of grant is charged to the Group Statement of Comprehensive Incomeover the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Group Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of share options that eventually vest. There are no market vesting conditions. If the terms and conditions of share options are modified before they vest, the change in the fair value of the share options, measured immediately before and after the modification, is also charged to the Group Statement of Comprehensive Incomeover the remaining vesting period.

The proceeds received when share options are exercised, net of any directly attributable transaction costs, are credited to share capital (nominal value) and the remaining balance to share premium. All employee share option holders enter into an HM Revenue & Customs joint election to transfer the employers' national insurance contribution potential liability to the employee, therefore no asset or liability arises.

(iv) Long-term incentive scheme

The Group operates a long-term incentive scheme for the Executive Directors. The quantum of any awards receivable by the Executive Directors will depend on the Group achieving set milestones and the share price at the time relative to targets set in advance. The Group can exercise discretion in settling any award in equity or in cash. 

1.16 Critical accounting estimates and judgements

Critical accounting estimates, assumptions and judgements are continually evaluated by the Directors based on available information and experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates.

Judgements

(i) Revenue recognition

Fees invoiced in respect of non-refundable milestones have been recognised as revenue in the Group Statement of Comprehensive Income in the period.

(ii) Intangible asset recognition

The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to the product being commercially launched in at least one country.

(iii) Deferred tax recognition

The Directors consider that, given the current stage of development of the business, deferred tax assets should not be recognised before the Group is generating significant revenue.

Estimates and assumptions

(iv) Useful lives of plant and equipment

Plant and equipment is amortised or depreciated over its useful life. Useful lives are based on the Directors' estimates of the periods over which the assets will be used in developing revenue generating products and the estimates are reviewed annually for continued appropriateness. The estimated useful lives are between two and five years for computer equipment and between three and ten years for furniture and fittings. Changes to estimates can result in significant variations in the carrying value and amounts charged to the Group Statement of Comprehensive Income in specific periods.

(v) Fair value of financial instruments

The Group determines the fair value of financial instruments using valuation techniques which can be significantly affected by the assumptions used, including interest and discount rates and estimates of future cash flows.

(vi) Inventories

The Group reviews the net realisable value of its inventories on a half-yearly basis to provide assurance that recorded inventories are stated at the lower of cost or net realisable value. Factors that could impact realisable value include: the timing and success of future technological innovations in relation to product R&D, competitor and Government actions, supplier prices and economic trends.

(vii) Share-based payments

The Group operates an equity-settled share-based compensation plan. Employee (and similar) services received and the corresponding increase in equity are measured by reference to the fair value of the equity instruments as at the date of grant.

2. Segment reporting

The Group is organised and operates as one business segment, being the development of pharmaceutical drugs and medical devices and their commercial exploitation. The main area of R&D continues to be in the field of innovative products for the consumer healthcare market with the focus being on sexual healthcare and pain relief management.

The Group manages any overseas R&D from the UK, the primary business segment. Segment revenue is based on the geographical location of the Group's customers. Since there is currently only one business segment and one geographical segment, no separate segment reporting has been prepared.

3. Loss per share (pence)

The calculation of the loss per share is based on a loss of £958,561 (six months ended 30 June 2011: loss of £617,509; year ended 31 December 2011: loss of £1,814,960) and on a weighted average number of shares in issue of 73,687,149 (six months ended 30 June 2011: 70,626,248; year ended 31 December 2011: 71,769,963).

The loss attributable to equity holders of the Company for the purpose of calculating the fully diluted loss per share is identical to that used for calculating the basic loss per share. The exercise of share options, or the issue of shares under the long-term incentive scheme, would have the effect of reducing the loss per share and is therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'.

4. Trade and other receivables

	Unaudited    30 June          2012	Unaudited    30 June          2011	Audited 31 December          2011
	£	£	£
Amounts receivable within one year:
Trade receivables	75,000	120,555	-
Other receivables	24,863	22,674	20,811
Prepayments and accrued income	102,279	65,979	75,821
	202,142	209,208	96,632

Trade receivables that are under three months past due are not considered impaired. As of each period end there were no trade receivables past due but not impaired.

The other classes within trade and other receivables do not contain impaired assets. The Group does not hold any collateral as security and the maximum exposure to credit risk at the Group Statement of Financial Position date is the fair value of each class of receivables.

5. Cash and cash equivalents

	Unaudited    30 June          2012	Unaudited    30 June          2011	Audited 31 December          2011
	£	£	£
Cash at bank and in hand	46,003	175,793	101,104
Sterling fixed rate short-term deposits	1,814,083	3,222,323	2,481,505
	1,860,086	3,398,116	2,582,609

6. Share capital and share premium

On 10 January 2012 share options over 490,721 new ordinary shares were exercised by three Directors. This generated additional funds of £118,999 for the Company.

7. Related party transactions

Related parties, as defined by IAS 24 'Related Party Disclosures', are the wholly owned subsidiary company, Futura Medical Developments Limited, the Board and the Chief Scientific Officer. Transactions between the Company and the wholly owned subsidiary company have been eliminated on consolidation and are not disclosed in this note.

Bill Potter, a Director of the Company until 31 January 2012 and the Chief Scientific Officer from 1 February 2012, provides consulting services to the wholly owned subsidiary Futura Medical Developments Limited, through Stapleford Scientific Services Limited. Of the total fees and expenses, excluding VAT, invoiced during the period of £48,578 (six months ended 30 June 2011: £42,778; year ended 31 December 2011: £85,081), the amount outstanding at 30 June 2012 including VAT was £9,768 (six months ended 30 June 2011: £8,441; year ended 31 December 2011: £8,424), which has since been settled in cash.

 

END

 

 

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