Interim Results
Syntopix Group plc
24 April 2008
Immediate release 24 April 2008
SYNTOPIX GROUP PLC
('Syntopix' or 'the Company')
Interim results for the six months ended 31 January 2008
Syntopix Group plc (AIM: SYN) the speciality pharmaceutical research and
development company focused on dermatological diseases, today announces its
interim results for the six months ended 31 January 2008.
Highlights:
• Positive results from our first Phase II study.
• First commercial exclusive evaluation agreement with a major consumer
healthcare company.
• Strengthening prospects for further licensing and joint development
agreements with other healthcare and dermatological companies.
• Expanding library of compounds and combinations of compounds.
• Growing intellectual property portfolio with three granted patents and
12 patent applications.
Dr Stephen Jones (Chief Executive Officer) commented: 'I am pleased with the
Group's progress over the last 6 months. We are expanding the use of our
antimicrobial pipeline and are attracting commercial interest in new areas of
consumer healthcare. Our Phase II proof of concept study yielded positive
results, which has enabled us to progress discussions with several
dermatological companies. I am also pleased to report that we signed our first
commercial agreement in December 2007 with a major healthcare company and we
have expectations for further commercial opportunities in the next 12 months.'
Enquiries
Syntopix Group plc + 44 (0) 845 125 9204
Dr Rod Adams, Chairman
Dr Stephen Jones, Chief Executive
Officer
Buchanan Communications Limited + 44 (0) 20 7466 5000
Mark Court
Catherine Breen
KBC Peel Hunt Ltd + 44 (0) 20 7418 8900
Capel Irwin
Notes to editors
About Syntopix Group plc
Syntopix is a group focused on the discovery and development of drugs for the
topical treatment of dermatological diseases. The company was founded in 2003 as
a spin-out from the University of Leeds by Dr Jon Cove and Dr Anne Eady, two of
the leading experts in skin microbiology, with initial funding from The Wellcome
Trust.
Syntopix' strategy is to seek to reduce the risks and costs of drug discovery
and development by discovering novel uses for known compounds. The company
concentrates on compounds and combinations of compounds that have a history of
use in man; and that have well characterised properties, for example
antimicrobials and anti-inflammatories. The Group currently has 3 granted
patents and 12 further pending patent applications.
Syntopix is currently concentrating on acne and Staphylococcus aureus infections
and has identified a pipeline of lead drug candidates that it intends to take
through pre-clinical and, as appropriate, clinical trials. The Group intends to
out-license products to commercial partners on obtaining proof of principle and
to seek co-development partnerships.
The Group is based at the Institute of Pharmaceutical Innovation in Bradford,
giving access to the expertise in skin biology, formulation and toxicology at
the universities of Bradford and Leeds.
Syntopix' shareholders include Techtran Group Limited (a subsidiary of IP Group
plc), The Wellcome Trust Limited, University of Leeds Limited and Ridings Early
Growth Investment Company Limited. Syntopix joined the AIM market of the London
Stock Exchange in March 2006.
For further information please visit www.syntopix.com.
Chairman and Chief Executive's Statement
We are pleased to report the interim result for the six months to 31 January
2008.
Since our last annual report, we have continued to work on the discovery of
compounds for use in the treatment of acne and the prevention and treatment of
superficial skin infections due to Staphylococcus aureus including methicillin
resistant strains (MRSA). We are also expanding into new areas of consumer
healthcare where our ability to detect novel activities of known compounds and
beneficial interactions between compounds is of potential commercial interest.
We have conducted and reported a Phase II clinical study in subjects with
acne-prone skin and have also evaluated a range of compounds for activity
against MRSA in a model system. Additionally, we have signed and reported a
12-month exclusive evaluation agreement with a major consumer healthcare company
in the field of oral healthcare. Finally, we are in an advanced stage of
discussions with another major consumer healthcare company to evaluate the use
of our antimicrobial pipeline in another area of personal healthcare.
Development Programme
We have completed the Phase II proof-of-concept clinical study in 130 subjects
with acneic skin that we reported as just having started in the last Annual
Report. This randomised, blinded trial began in July 2007 and was conducted in
Germany. Two Syntopix preparations were investigated: SYN 0126, a compound used
in cosmetic preparations; and a combination of SYN 0126 with SYN 0091, a
bacteriostatic agent used in soaps and cosmetics. The study had positive (an
existing marketed product) and negative (vehicle) controls, and the products
were used once a day for eight weeks.
The combination preparation containing SYN 0126 and SYN 0091 ranked as more
effective than the marketed product and as most effective overall with
statistically significant reductions in inflammatory and non-inflammatory
lesions (spots) from week 2 to the end of the study. By week 8, this preparation
had reduced the total number of lesions by 27% and the acne severity grade by
38%; reductions for the marketed product were 12% and 24% respectively. From
week 4 onwards the Syntopix product reduced the total number of acne spots to a
significantly greater extent than the currently marketed acne treatment.
Following these positive study results, several major dermatological companies
have approached us. It is the Group's intention to investigate the possibility
of a licensing agreement with a suitable partner in the cosmetics or consumer
healthcare industries.
We have also conducted a study, in Canada, using a model system to determine the
effectiveness of SYN 0017, SYN 0854, SYN 0564 and SYN 0017 in combination with
SYN 0710 against the carriage of MRSA. Compared to vehicle, SYN0017 produced a
greater reduction in numbers of MRSA than the positive control and ranked as the
most effective treatment. The commercial significance of this result is being
evaluated.
Commercial agreements
In December 2007 we announced that we had signed a 12-month exclusive evaluation
agreement with a major consumer healthcare company. Under this agreement,
Syntopix will evaluate the Group's library of compounds for their potential
usefulness in oral healthcare. The full financial details of the agreement are
confidential, although Syntopix has received an upfront payment at the start of
the exclusivity period and will receive further payments for any compounds
subject to additional evaluation. Commercialisation of a compound would be
subject to a licensing agreement to be negotiated separately.
We have also been in discussions with another major consumer healthcare company,
concerning the use of antimicrobial compounds in a different area of personal
healthcare. These discussions will be completed over the next few months, and we
are very confident that this will result in a Joint Development Agreement to
evaluate Syntopix compounds in order to improve the effectiveness of a major
consumer healthcare brand. Discussions are underway with this company regarding
a commercial contract.
Lead candidate development programmes
It is our intention to conduct another human use study in 2008 with a new test
compound. This will utilise the experience gained from the previous studies and
will use the same clinical model that was used so successfully for our first
Phase II study. We anticipate results will be available before the end of the
calendar year.
Pipeline
The Group continues its research activities to generate further potential
promising synergistic combinations. We continue to screen single compounds and
combinations of compounds and now have over 1,400 compounds in our library.
Approximately 20% of these compounds show antimicrobial activity against
Propionibacterium acnes and/or Staphylococcus aureus. We are also extending the
range of microbes that we use to evaluate antimicrobial activity, in line with
the commercial interest we are receiving from several healthcare companies and
anticipate that this will result in more commercial opportunities.
Our intellectual property portfolio continues to grow: Syntopix has a patent
portfolio that currently comprises three granted patents and a further 12 patent
applications. Each application is continually re-evaluated for commercial
relevance, and in the last 12 months we have filed a new application on average
every six to eight weeks.
Financial summary
Since our last Annual Report, the Group has continued its development programme
and we have completed the Phase II study in Germany and the MRSA study in
Canada. Total research and development costs during the six months to 31 January
2008 were £668,883 (six months to 31 January 2007: £490,763). The increase is
partly attributable to the additional studies undertaken in this period and
partly due to additional expenditure on patent protection for our growing
intellectual property portfolio.
Towards the end of this accounting period we signed our first commercial deal.
The group has received upfront payments for an exclusivity and evaluation
agreement amounting to £145,000. In accordance with our revenue recognition
accounting policy, this is initially treated as deferred income and is being
recognised in revenue over the period of the agreement. Consequently, revenue
recognised in this accounting period amounts to £36,666 and the remaining
deferred income of £108,334 will be recognised over the next 10 months.
The Group is well positioned for establishing further revenue streams from
commercial deals going forward.
At 31 January 2008, the Group had cash reserves of £724,505 (31 January 2007:
£2,501,993) and net assets of £798,024 (31 January 2007: £2,636,275). As in
previous periods we anticipate further Research and Development tax credits in
the coming months. The Group continues to carefully monitor overhead costs.
In our 2007 Annual Report, we stated that the Group will need additional funding
during the next financial period to enable the planned development programme to
continue and to ensure that the Group has sufficient financial resources to
sustain the trading operations until the Group becomes cash generative as a
result of revenues from royalties, milestones and other commercial deals. The
directors remain confident that the Group will be able to raise sufficient
additional funds.
This is the first accounting period in which the Group is required to comply
with International Financial Reporting Standards and consequently this report is
prepared in accordance with the new requirements. The effect of implementing the
new standards is largely presentational and there is no significant impact on
the reported results or net assets.
Outlook
The Group has made significant progress during the six months to 31 January
2008. We have entered into our first commercial deal and the positive results
from the Phase II study have enabled us to progress discussions with several
major dermatological companies. Consequently, we believe that the Group is well
positioned to capitalise on the development activity undertaken in this period.
Dr Rod Adams, Chairman
Dr Stephen Jones, Chief Executive Officer
23 April 2008
Condensed consolidated interim income statement - unaudited
For the six months ended 31 January 2008
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2008 2007 2007
Note £ £ £
Turnover 36,666 2,500 30,962
Administrative expenses:
Research and development costs (668,883) (490,763) (1,398,092)
Other administrative expenses (369,859) (356,355) (628,785)
(1,038,742) (847,118) (2,026,877)
Other operating income 13,085 20,000 21,921
Operating loss (988,991) (824,618) (1,973,994)
Financial income 22,784 54,186 99,741
Loss before tax (966,207) (770,432) (1,874,253)
Income tax credit 72,000 92,207 133,561
Loss for the period (894,207) (678,225) (1,740,692)
Loss per share
Basic and diluted 4 (15.6p) (11.9p) (30.6p)
All Group activities relate to continuing operations.
Condensed consolidated interim balance sheet - unaudited
As at 31 January 2008
At At At
31 January 31 January 31 July
2008 2007 2007
£ £ £
Assets
Non-current assets
Property, plant and equipment 95,553 117,470 112,401
Current assets
Trade and other receivables 197,451 87,161 208,110
Income tax 72,000 92,207 133,561
Cash and cash equivalents 724,505 2,501,993 1,494,018
Total current assets 993,956 2,681,361 1,835,689
Total assets 1,089,509 2,798,831 1,948,090
Liabilities
Current liabilities
Trade and other payables (291,485) (162,556) (306,001)
Total liabilities (291,485) (162,556) (306,001)
Net assets 798,024 2,636,275 1,642,089
Capital and reserves attributable to equity
holders of the company
Share capital 573,260 568,398 573,260
Share premium reserve 3,379,046 3,379,046 3,379,046
Merger reserve 337,935 337,935 337,935
Share-based payments reserve 182,453 69,378 132,311
Retained losses (3,674,670) (1,718,482) (2,780,463)
798,024 2,636,275 1,642,089
Minority interest - - -
Total equity 798,024 2,636,275 1,642,089
Consolidated statement of changes in equity - unaudited
For the six months ended 31 January 2008
Share
based Retained
Share Share Merger Payments (losses)/
Capital Premium Reserve Reserve Earnings Total
£ £ £ £ £ £
Balance at 1 August 568,398 3,379,046 337,935 16,832 (1,040,257) 3,261,954
2006
Loss for the six
month period ended
31 January 2007 - - - - (678,225) (678,225)
Total recognised
(expense) for the
period - - - - (678,225) (678,225)
Share option charge - - - 52,546 - 52,546
in the period
Balance at 31
January 2007 568,398 3,379,046 337,935 69,378 (1,718,482) 2,636,275
Balance at 1 August
2006 568,398 3,379,046 337,935 16,832 (1,040,257) 3,261,954
Loss for the year
ended 31 July 2007 - - - - (1,740,692) (1,740,692)
Total recognised
(expense) for the
year - - - - (1,740,692) (1,740,692)
Share option charge
in the year - - - 115,965 - 115,965
Adjustment for
options subsequently
exercised - - - (486) 486 -
Shares issued in the
year 4,862 - - - - 4,862
Balance at 31 July
2007 573,260 3,379,046 337,935 132,311 (2,780,463) 1,642,089
Balance at 1 August
2007 573,260 3,379,046 337,935 132,311 (2,780,463) 1,642,089
Loss for the six
month period ended
31 January 2008 - - - - (894,207) (894,207)
Total recognised
(expense) for the
period - - - - (894,207) (894,207)
Share option charge
in the period - - - 50,142 - 50,142
Balance at 31
January 2008 573,260 3,379,046 337,935 182,453 (3,674,670) 798,024
Condensed consolidated interim statement of cash flows - unaudited
for the six months ended 31 January 2008
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2008 2007 2007
£ £ £
Cash flows from operations
Loss for the period (894,207) (678,225) (1,740,692)
Adjustments for:
Interest received (22,784) (54,186) (99,741)
Income tax credit (72,000) (92,207) (133,561)
Depreciation 18,068 15,931 33,332
Share option expense 50,142 52,546 115,965
Decrease/(increase) in trade and
other receivables 10,659 (49,354) (170,303)
(Decrease)/increase in trade and
other payables (14,516) (67,936) 75,508
Net cash from operating activities (924,638) (873,431) (1,919,492)
Income tax received 133,561 86,168 86,169
Net cash flows used in operating
activities (791,077) (787,263) (1,833,323)
Cash flows used in investing
activities
Interest received 22,784 54,186 99,741
Purchase of property, plant and
equipment (1,220) (12,360) (24,692)
Net cash flows used in investing
activities 21,564 41,826 75,049
Cash flows from financing activities
Share issue - - 4,862
Net cash flows used in financing
activities - - 4,862
Net decrease in cash and cash
equivalents (769,513) (745,437) (1,753,412)
Cash and cash equivalents at start
of period 1,494,018 3,247,430 3,247,430
Cash and cash equivalents at end of
period 724,505 2,501,993 1,494,018
Notes to the consolidated interim report
For the six months ended 31 January 2008
1. Accounting Policies
Basis of preparation
From 1 August 2007, the Group has adopted International Financial Reporting
Standards (IFRS) as adopted by the EU in the preparation of the consolidated
financial statements.
Prior to this accounting period, the Group prepared its audited annual financial
statements under UK Generally Accepted Accounting Principles (UK GAAP). For
periods commencing 1 August 2007, the Group is required to prepare its annual
consolidated financial statements in accordance with IFRS as adopted by the
European Union. As the financial statements for the year to 31 July 2008 will
include comparatives for the year ended 31 July 2007, the Group's date of
transition to IFRS is 1 August 2006 and the comparatives will be restated to
IFRS. Accordingly, the financial information for the six months to 31 January
2007 has been restated to present the comparative information in accordance with
IFRS based on a transition date of 1 August 2006. Note 5 of this interim
financial information sets out how the Group's previous financial position is
affected by the change to IFRS.
The financial information for the six months ended 31 January 2008 and 31
January 2007 is unaudited. The financial information does not constitute the
financial statements for that period within the meaning of Section 240 of the
Companies Act 1985. The comparative figures for the year ended 31 July 2007 were
derived from the Group's audited financial statements for that period as filed
with the Registrar of Companies as restated for IFRS. Those accounts received an
unqualified audit report which does not contain any statement under Section 237
(2) or (3) of the Companies Act 1985.
Statement of compliance
These condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standard (IFRS) IAS 34,
Interim Financial Reporting. They do not include all of the information required
for full annual financial statements and should be read in conjunction with the
consolidated financial statements of the group as at and for the year ended 31
July 2007.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 23 April 2008.
The financial information has been neither audited nor reviewed pursuant to
guidance issued by the Auditing Practices Board.
Changes in Accounting Policies
(a) Standards, amendments and interpretations to published standards effective
in 2007 but which are not relevant to the group
The following standards, amendments and interpretations to published standards
are mandatory for accounting periods beginning on or after 1 January 2007 but
are currently not relevant to the group's operations:
- IFRIC 7, Applying the restatement approach under IAS 29, Financial
Reporting in Hyperinflationary Economies
(b) Standards, amendments and interpretations to published standards not yet
effective
Certain new standards, amendments and interpretations to existing standards have
been published that are mandatory for the group's accounting periods beginning
on or after 1 January 2008 or later periods and which the group has decided not
to adopt early. These are:
- Revised IAS 1, Presentation of Financial Statements (effective for
accounting periods beginning on or after 1 January 2009, yet to be endorsed by
the EU)
- Amendments to IAS 32, Financial Instruments: Presentation and IAS 1
Presentation of Financial Statements - Puttable Financial Instruments and
Obligations Arising on Liquidation (effective for accounting periods beginning
on 1 January 2009)
- IFRS 8, Operating Segments (effective for accounting periods
beginning on or after 1 January 2009)
- IAS 23, Borrowing Costs (revised) (effective for accounting periods
beginning on or after 1 January 2009)
- IFRIC 11, IFRS 2 - Group and Treasury Share Transactions (effective
for accounting periods beginning on or after 1 March 2007)
- IFRIC 12, Service Concession Arrangements (effective for accounting
periods beginning on or after 1 January 2008)
- IFRIC 13, Customer Loyalty Programmes (effective for accounting
periods beginning on or after 1 July 2008)
- IFRIC 14, IAS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction (effective for accounting periods
beginning on or after 1 January 2008).
- Revised IFRS 3, Business Combinations and complementary Amendments to
IAS 27, Consolidated and Separate Financial Statements (both effective for
accounting periods beginning on or after 1 July 2009).
- Amendment to IFRS 2, Share-based payments: vesting conditions and
cancellations (effective for accounting periods beginning on or after 1 January
2009).
Revenue
Revenue is recognised when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, prices are fixed or
determinable and collectability is assured. Certain revenues are generated from
licensing and exclusivity agreements under which we grant third parties rights
to certain of our products or technologies. Upfront payments and other similar
non-refundable payments received under these agreements are recorded as deferred
revenue and are recognised in the income statement over the performance period
stipulated in the agreement. Non-refundable milestone payments which represent
the achievement of a significant technical/regulatory hurdle in the research and
development process, pursuant to collaborative agreements, are recognised as
revenue upon the achievement of the specified milestone. The group may also
generate revenues from collaborative research and development as well as
co-promotion arrangements. Such agreements may consist of multiple elements and
provide for varying consideration terms, such as upfront, milestone and similar
payments, which are complex and require significant analysis by management in
order to determine the most appropriate method of revenue recognition. Such
determinations require us to make certain assumptions and judgements.
Royalty income is recognised on an accruals basis in accordance with the
economic substance of the agreement and is reported as part of revenue.
Other revenues are recorded as earned or as the services are performed.
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 consolidated
financial statements present the result of the company and its subsidiaries
('the group') as if they formed a single entity. Intercompany transactions and
balances between group companies are therefore eliminated in full.
Business combinations
The consolidated financial statements incorporate the results of business
combinations using the purchase method. In the consolidated balance sheet, the
acquiree's identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date. The results
of acquired operations are included in the consolidated income statement from
the date on which control is obtained.
Business combinations that took place prior to 1 August 2006 have not been
restated. The group has used merger accounting to consolidate the results and
assets of its subsidiary company, Syntopix Limited, as this business combination
took place prior to 1 August 2006. The group has applied the exemptions of IFRS1
on transition in prior periods.
Segment reporting
A business segment is a distinguishable component of an enterprise that is
engaged in providing an individual product or service or a group of related
products or services and that is subject to risks and returns that are different
from those of other business segments. A geographical segment is a
distinguishable component of an enterprise that is engaged in providing products
or services within a particular economic environment and that is subject to
risks and returns that are different from those of components operating in other
economic environments.
Financial assets
The group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired. The group has
not classified any of its financial assets as held to maturity. The group's
accounting policy for each category is a follows:
Fair value through profit or loss: The group does not currently have any
derivative financial instruments.
Loans and receivables: These assets are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to customers (e.g.
trade receivables), but also incorporate other types of contractual monetary
asset. They are initially recognised at fair value plus transaction costs that
are directly attributable to their acquisition or issue, and are subsequently
carried at amortised cost using the effective interest rate method, less
provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default or
significant delay in payment) that the group will be unable to collect all of
the amounts due under the terms receivable, the amount of such a provision being
the difference between the net carrying amount and the present value of the
future expected cash flows associated with the impaired receivable. For trade
receivables, which are reported net, such provisions are recorded in a separate
allowance account with the loss being recognised within administrative expenses
in the income statement. On confirmation that the trade receivable will not be
collectible, the gross carrying value of the asset is written off against the
associated provision.
The group's loans and receivables comprise trade and other receivables and cash
and cash equivalents in the balance sheet.
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short term highly liquid investments with original maturities of
three months or less.
Financial liabilities
The group classes its financial liabilities into different categories, depending
on the purpose for which the asset was acquired. The group's accounting policies
for each relevant category is as follows:
Fair value through profit or loss: The group does not currently have any
derivative financial instruments.
Other financial liabilities: Other financial liabilities include the following
items:
Trade payables and other short term monetary liabilities, which are initially
recognised at fair value and subsequently at amortised cost using the effective
interest method.
Share capital
Financial instruments issued by the group are treated as equity only to the
extent that they do not meet the definition of a financial liability. The
group's ordinary shares are classified as equity instruments.
Retirement benefits: Defined Contribution Schemes
Contributions to defined contribution pension schemes are charged to the
consolidated income statement in the year to which they relate.
Share-based payments
The group has applied the requirements of IFRS 2 Share-based payments. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments that were unvested as of 1 August 2006.
Where equity settled share options are awarded to employees, the fair value of
the options at the date of grant is charged to the consolidated income statement
over the vesting period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each balance
sheet date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually vest. Market
vesting conditions are factored into the fair value of the options granted. As
long as all other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are satisfied. The
cumulative expense is not adjusted for failure to achieve a market vesting
condition.
Where the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and after
the modification, is also charged to the consolidated income statement over the
remaining vesting period.
Where equity instruments are granted to persons other than employees, the
consolidated income statement is charged with the fair value of goods and
services received.
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a
leased asset have been transferred to the group (a 'finance lease'), the asset
is treated as if it had been purchased outright. The amount initially recognised
as an asset is the lower of the fair value of the leased property and the
present value of the minimum lease payments payable over the term of the lease.
The corresponding lease commitment is shown as a liability. The lease payments
are analysed between capital and interest. The interest element is charged to
the consolidated income statement over the period of the lease and is calculated
so that it represents a constant proportion of the lease liability. The capital
element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to ownership are not
transferred to the group (an 'operating lease'), the total rentals payable under
the lease are charged to the consolidated income statement on a straight line
basis over the lease term. The aggregate benefit of lease incentives is
recognised as a reduction of the rental expense over the lease term on a
straight line basis.
The land and buildings element of property leases are considered separately for
the purposes of lease classification.
Internally Generated Intangible Assets (Research and Development Costs)
Expenditure on internally developed 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 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 the group expects
to benefit from selling the products developed. The amortisation expense is
included within the administrative expenses line in the consolidated income
statement.
Development expenditure not satisfying the above criteria and expenditure on the
research phase of internal projects are recognised in the consolidated income
statement as incurred.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of
an asset or liability in the balance sheet differs from its tax base, except for
differences arising from:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting or taxable profits; 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 profit 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 balance sheet date and are expected
to apply when the deferred tax liabilities/(assets) are settled/(recovered).
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 either to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts
of deferred tax assets or liabilities are expected to be settled or recovered.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well
as the purchase price, cost includes directly attributable costs and the
estimated present value of any future unavoidable costs of dismantling and
removing items. The corresponding liability is recognised within provisions.
Items of property, plant and equipment are carried at depreciated cost.
Depreciation is provided on all items of property, plant and equipment so as to
write off the carrying value of items over their expected useful economic lives.
It is applied at the following rates:
Computer equipment - 3 years
Laboratory equipment - 5 years
2. Critical Accounting Estimates and Judgements
The group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are
discussed below.
Impairment of Non-Current Assets
Property, plant and equipment is depreciated over the useful lives of the
assets. Useful lives are based on the management's estimates of the period that
the assets will generate revenue, which are periodically reviewed for continued
appropriateness.
Share-based payments
The group has equity settled share-based remuneration schemes for employees. The
fair value of share options is estimated by using the Black-Scholes valuation
model, on the date of grant based on certain assumptions. These assumptions
include, among others, expected volatility, expected life of the options and
number of options expected to vest.
Income taxes
The group is recognising research & development tax credits receivable in the
consolidated income statement in respect of the significant expenditure on
research and development activity during the period. The amount recognised is an
estimate of the amount which the group believes it is entitled to claim. Until
the claim is submitted to the tax authorities and the amounts are actually
received there is a risk that the tax credit claim could be challenged by the
tax authorities. The group believes that the receivable for income tax
repayments is appropriate based on its assessment of several factors including
past experience and interpretations of tax law. To the extent that the final tax
outcome is different from the amounts recorded, such differences will impact on
the income tax expense in the period in which such determination is made.
3. Segmental information
The Group has one business segment - the research and development of
pharmaceutical products, with all activities taking place in the UK.
Consequently, there are no reportable segments in accordance with IAS 14.
4. Earnings per share
The calculation of basic and diluted loss per share is based upon the loss after
tax divided by the weighted average number of shares in issue during the period.
Due to the losses incurred there is no dilutive effect from the issue of share
options.
Loss after Weighted
tax average EPS
number
Basic and diluted loss per share £ of shares (pence)
6 months ended 31 January 2008 (894,207) 5,732,601 (15.6p)
6 months ended 31 January 2007 (678,225) 5,683,981 (11.9p)
12 months ended 31 July 2007 (1,740,692) 5,697,035 (30.6p)
At 31 January 2008, there were 426,298 share options granted but not yet
exercised.
5. Explanation of transition to IFRS
The Group's financial statements for the year ending 31 July 2008 will be the
first financial statements that comply with International Financial Reporting
Standards (IFRS). The Group's financial statements prior to and including 31
July 2007 had been prepared in accordance with Generally Accepted Accounting
Principles in the United Kingdom (UK GAAP).
As required by IFRS 1, the impact of the transition from UK GAAP to IFRS is
explained below. The accounting policies set out above have been applied
consistently to all periods presented in this interim financial information and
in preparing an opening IFRS balance sheet at 1 August 2006 for the purposes of
transition to IFRS.
IAS 1 - Presentation of Financial Statements. The form and presentation in the
UK GAAP financial statements has been changed to be in compliance with IAS 1.
There are no adjustments arising from the transition to IFRS and therefore there
is no impact on the reported Income Statement or Balance Sheet. Consequently, no
reconciliation between IFRS and UK GAAP has been provided.
IAS 7 - Cash Flow Statements. The IFRS Cash Flow Statement, prepared under IAS
7, presents cash flows in three categories: cash flows from operating
activities, cash flows from investing activities and cash flows from financing
activities. Other than the reclassification of cash flow into the new disclosure
categories, there are no significant differences between the Group's Cash Flow
Statement under UK GAAP and IFRS. Consequently, no cash flow reconciliations are
provided. Purchases of tangible fixed assets under UK GAAP have been
reclassified to purchases of property, plant and equipment under IFRS.
The Group has elected not to apply IFRS 3 to business combinations that occurred
prior to the date of transition.
This information is provided by RNS
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