Interim Results Replacement

RNS Number : 4068R

Futura Medical PLC

11 September 2014

 



The following replaces the announcement released 11 September 2014 at 07.00 (RNS No. 3648R). 

The announcement did not include full financial tables. The financial tables are now included below in the amended announcement. All other information remains unchanged. 

The full amended text appears below.

Futura Medical plc

("Futura" or the "Company")

Interim Results for the six months ended 30 June 2014

Futura Medical plc (AIM: FUM), the innovative healthcare company focused on advanced transdermal technology, is pleased to announce its interim results for the six months ended 30 June 2014.

Highlights

·      Significant evolution in Futura's strategy following a £12 million fundraising in March 2014 allowing the Company to build further value in its product pipeline prior to out-licensing through robust clinical data and regulatory work

·      CSD500 - Condom containing an erectogenic gel. Major commercial progress with initial launch anticipated later this year under the Futura-owned brand Blue Diamond™

·      MED2002 - Topical treatment for erectile dysfunction. Protocol for a Phase II/III clinical study nearing finalisation and planning under way to launch the product initially as a special product in 2015

·      PET500 - Topical spray for enhanced performance. Early stage of commercial availability throughout the USA under the Ansell brand EPIC^® 

·      Pain Relief Portfolio - Clinical trial to begin shortly with headline results expected in H1 2015

·      Net loss of £1.45 million in the period (H1 2013: net loss £0.88 million)

·      Cash resources of £11.21 million at 30 June 2014 (30 June 2013: £2.12 million) to fund Futura through key value inflexion points across its product portfolio and to support out-licensing discussions

James Barder, Futura's Chief Executive, said: "We have made significant progress in the year to date and are close to starting clinical trials with the pain relief portfolio and MED2002. We are also preparing for the initial launch next year of MED2002 as a special product. CSD500 will be launched under the Futura brand Blue Diamond™ in several European countries later this year with an expected wider roll-out of the product during 2015.

"The successful equity fundraising earlier this year will support the clinical development of Futura's earlier-stage product portfolio through to key value inflexion points, thereby creating major opportunities to deliver shareholder value."

For further information:

Futura Medical plc	+ 44 (0) 1483 685 670
James Barder, Chief Executive Officer
Mail to: [e-mail]	www.futuramedical.com
N+1 Singer (Nominated Adviser and Broker)	+ 44 (0) 20 7496 3000
Aubrey Powell - Corporate Finance Brough Ransom - Sales
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 REVIEW

The first half of 2014 has been significant for Futura in that the Company successfully raised £12 million in gross proceeds from new and existing shareholders. This fundraising has allowed Futura's strategy to evolve considerably. Most importantly, it is allowing the Company to build greater value in its product pipeline by funding clinical trials and regulatory work. It is also giving the Company greater leverage in its commercial out-licensing discussions and is allowing certain products to be launched, in some instances, under Futura brands. Brand ownership is significant in consumer healthcare because the brand name extends in perpetuity, whereas patent life is finite.

The date has been set in 2014 when we expect our novel condom CSD500 to be launched under the Futura owned brand Blue Diamond™, which will initially be made available online in certain EU countries. We consider the longer term opportunity for online sales is substantial and will also, in the initial stages, provide useful feedback for driving sales in other regions for both Futura and our distribution partners. We expect MED2002, our erectile dysfunction treatment, to be available in 2015 within the UK to doctors to supply on a named patient basis (known as a "special"). Further details are given in the portfolio updates below.

The commercialisation of CSD500 has remained our core focus in the half year and discussions continued on the out-licensing of the product in geographic regions where we have not already licensed it. We were pleased to announce earlier this month that Kwang Dong Pharmaceutical Co Ltd ("Kwang Dong Pharmaceutical") will market and distribute the product in South Korea under the Blue Diamond™ brand.

In total, distribution agreements are now in place for CSD500 in 33 countries through six different distributors covering all of North America and substantial parts of Europe, Middle East and Asia. Out-licensing discussions are continuing in a number of other territories throughout the world.

The majority of our commercial partners have indicated that they require a minimum shelf life of two years prior to their launch of CSD500 which will influence the timing of the global roll-out of the product.

There are frequently challenges with any product when scaling up for industrial production and CSD500 is no exception, particularly in the extension of the current one year shelf life. Whilst CSD500 will be launched initially with a one year shelf life under the Blue Diamond™ brand we are seeking to extend the shelf life to at least two years to comply with accepted practice in the condom industry for a product, such as CSD500,  containing an active pharmaceutical substance. 

In a laboratory setting, we have achieved up to four years' shelf life. We are continuing to make progress on transferring these results to industrial production and we expect this work to conclude by the end of the year to enable us to manufacture product with a shelf life of at least two years.  We therefore anticipate further launches during 2015.

Our innovative spray for enhanced sexual control, PET500, became available in stores throughout the USA during the first half, and is also available online, under the brand name EPIC^®. Initial sales have been modest, which we believe reflects the early stages of commercial availability and the lack of promotional activity supporting the product.

The fundraising announced in March this year has also allowed us to advance our pain relief portfolio and MED2002 (our topical gel for the treatment of erectile dysfunction) towards clinical studies. As mentioned above, MED2002 is expected to be launched in 2015 as a special product but we are also finalising the protocol for a clinical study, the details of which will be announced later this year. We are also close to beginning a clinical study of the three compounds in our pain relief portfolio. The headline results from this study are expected to be available by the end of June 2015.

We continue to hold out-licensing discussions on both MED2002 and the pain relief portfolio but, at the moment, our principal focus is to build the value of the products through completion of the clinical programme thereby substantiating the value that we believe these products represent.

The proceeds from the fundraising have also allowed us to build up our internal resource with the addition of two new members to the team including a manufacturing specialist focused on product delivery. This role seeks to ensure the optimal route from proof of concept to commercialisation. We also are in the process of recruiting an additional member of staff to further strengthen the development team.

In summary, our strategy to build value in the company has advanced significantly in the year to date. We are close to starting clinical trials with the pain relief portfolio and MED2002; and the launch of CSD500 is imminent under the Futura brand Blue Diamond™. Our commercial partners' requirement for a longer shelf life is currently determining the pace of the wider commercial rollout of CSD500 but our ability to close new licensing deals for the product continues to underline its commercial attractiveness.

Portfolio updates - Sexual healthcare

CSD500: Condom containing the erectogenic Zanifil^® gel

CSD500 benefits from three marketing claims, which have been clinically proven and approved by EU regulatory authorities: the maintenance of a firmer erection, maximised penile size and a longer lasting sexual experience for women. CSD500, which gained CE marking last year, represents real innovation in an industry where there has been very little new product development. Moreover a recent consumer study of CSD500, conducted by a potential distribution partner with whom we remain in discussions, has reported similar results to those shown in our original clinical study.  In summary, at least 55% of men and women reported an increase in their (or their sexual partner's) penile firmness along with a longer lasting and improved sexual experience.

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 in 37 countries.

Our strategy is to license CSD500 on a territorial basis, with our most recent licensing deal announced on 8 September for South Korea. To date we have licensed exclusive rights to CSD500 as follows:

Company	Territorial Licensing Rights
Church & Dwight Co Inc	North America and certain European countries
Saudi Pharmacy Group	Key countries in the Middle East and North Africa
RFSU	The Nordic region
Ansell Undisclosed condom distributor Kwang Dong Pharmaceutical	China Certain European countries South Korea

Discussions are ongoing in connection with further geographic regions.

In addition to out-licensing CSD500 to companies that will launch the product under their own brand names we have also created our own condom brand, Blue Diamond™, which will be used by some of our licensing partners. Blue Diamond™ will be launched during 2014 by our licensing partner who has rights to some of the European countries not included in the Church & Dwight or RFSU  agreements. It will initially be made available online.

The branding, positioning, pricing and packaging of the product have all been finalised and launch plans are well advanced with a launch day set.  For commercial reasons we have been asked not to disclose this date ahead of launch. A further announcement will be made as soon as Blue Diamond™ is launched.

We are very pleased that the Blue Diamond™ brand will also be launched in South Korea by our most recent licensing partner, Kwang Dong Pharmaceutical.

The decision to create our own brand is in line with our strategic objective of building value wherever possible within Futura. Having our own brand gives us greater flexibility in our licensing discussions but the key attraction of brand ownership in consumer healthcare is that the brand is owned in perpetuity whereas patent protection usually expires twenty years after application. We are fortunate with CSD500 to have an extensive patent with a remaining life of up to nine years and this could potentially be extended through the new intellectual property that we create through our ongoing R&D work by a further ten years.

As highlighted above, we have had a particular focus in the year to date on the shelf life of CSD500. We look forward to providing an update on the work we have been carrying out with our manufacturing partners in due course.

MED2002 - Eroxon^®: Treatment for erectile dysfunction

MED2002, which uses our DermaSys^® drug delivery system, is the development name for our topical gel for the treatment of men with erectile dysfunction ("ED"). We hold worldwide rights to the product, which shares the same active ingredient as CSD500. We anticipate that MED2002 is likely to be a prescription-only product and branded Eroxon^®.

We have made major progress with the development of MED2002 in the year to date. In addition to being close to finalising the protocol for the clinical study we have also established that it can be prescribed initially as a special product. Special products, or unlicensed medicines, are medicines that have already been approved in one indication, giving doctors the authority, subject to certain conditions, to prescribe them in other indications and formats provided that other options have been exhausted and until such time as the product achieves regulatory approval in the applicable territory.

MED2002 meets the criteria required within the UK for special product status because of the estimated 7.5% of ED sufferers who cannot be prescribed PDE5 inhibitors (products such as Viagra^®) due to contra-indications with other medications taken by them.

We have already identified a specials distributor and we expect that MED2002 will be available to UK doctors as a special product in 2015. Moreover the specials distributor believes MED2002 will also be sought out by doctors in other EU countries, where the distributor foresees no significant regulatory barriers to the product becoming available as a special.  We expect to provide shareholders with a further update later this year.

In addition to MED2002's role as a special product we believe that it has significant potential amongst a much wider patient base. We have previously carried out market research that highlighted the potential benefits of the product when compared with PDE5 inhibitors including a faster onset of action and a favourable safety profile.

We are currently exploring an adaptive design clinical programme so that the study can move quickly from Phase II to Phase III to reduce the timeline for completion of the clinical development programme. Further details of the study will be announced once the protocol is finalised in the coming months ahead of pre-screening of patients.

PET500: Enhanced sexual control

PET500 is a topical spray that combines our highly efficient DermaSys^® AquaFree delivery system with a well-known mild topical anaesthetic. PET500 is licensed to Ansell, one of the world's major sexual health companies, who have worldwide rights to the product and have launched the product in the USA under the name EPIC^® as part of their well-known LifeStyles^® brand. Under the terms of the licensing agreement Futura will receive a significant royalty rate on sales.

EPIC^® is designed to take effect rapidly and to delay male ejaculation, thereby offering enhanced sexual control. EPIC^® is now available in stores throughout the USA and online. As mentioned above, initial sales have been modest. We receive sales data each quarter and we intend to monitor this closely as well as discussing promotional activity with Ansell. It is still early in the product's commercial availability and we will provide a further update on sales in due course.

Portfolio updates - Pain relief management

Topical pain relief

The rapid skin permeation rates offered by Futura's transdermal delivery system, DermaSys^®, have created a major opportunity in topical pain relief. Rapid skin permeation offers potential benefits in pain management including: improved speed of onset, greater depth of penetration and longer duration of pain relief.

Graphs showing the superior skin penetration of Futura's three pain relief programmes are available at this link: www.futuramedical.com/archive/painreliefclinicalgraphs.pdf.

Our recent fundraising has strengthened our position for the remaining clinical development of the three products and it is our intention to build greater value in the portfolio prior to making a licensing decision. It is encouraging to note that a significant number of companies have expressed interest in the portfolio, and individual products in the portfolio, for various territories worldwide.

A European based research organisation has already been appointed to carry out the study, which will be a single-blind, randomised, placebo-controlled, comparative induced pain model design performed on healthy volunteers to ensure a controlled clinical environment.  The study will compare the clinical effectiveness of Futura's three pain relief compounds against commercially available products. Headline results are expected during the first half of 2015 and a more detailed update regarding the study will be provided at the time of pre-screening of patients later this year.

The topical pain relief portfolio comprises three compounds:

TPR100: Topical diclofenac

A topical gel combining the Non-Steroidal Anti-Inflammatory Drug diclofenac with the DermaSys^® delivery system. TPR100 has been shown to achieve in excess of eight times higher permeation through human skin and 35 times greater bioavailability than achieved by the UK's best-selling topically applied diclofenac-based pain relief product, Voltaren^® gel.

TIB200: Topical ibuprofen

A topical gel combining the well-known analgesic ibuprofen with the DermaSys^® delivery system. TIB200 has been shown to achieve in excess of twenty times higher permeation through isolated human skin compared with the UK's best-selling topically applied ibuprofen-based topical pain relief product, Nurofen^® gel.

SPR300: Sensory pain relief

A topical gel combining methyl salicylate and menthol with the DermaSys^® delivery system. SPR300 has been shown to achieve in excess of four times higher permeation through isolated human skin compared with the UK's best-selling topically applied methyl salicylate/menthol-based topical pain relief product, Deep Heat^®. In addition SPR300 was directly compared with the best-selling over-the-counter topically applied gels sold in the USA, Icy Hot^® and Bengay^®, and showed similarly improved permeation rates.

Finance

Cash and cash equivalents at 30 June 2014 was £11.21 million (30 June 2013: £2.12 million) with a net cash inflow of £10.22 million in the period. The equity fundraising earlier this year will support the clinical development of Futura's earlier-stage product portfolio through to key value inflexion points. We continue to manage our financial resources carefully.

In the period under review, we earned royalty payments of £2k from the initial launch of PET500 (six months ended 30 June2013: £321k from milestone payments for CSD500). The retained loss for the six months ended 30 June 2014 was £1.45 million. Research and development ("R&D") costs of £1.07 million were higher than that for the corresponding six month period ended 30 June  2013: £0.89 million as we start to utilise a portion of the new capital raised by investing in developing new products to add to the pipeline. Other administrative costs of £581k were higher than that for the corresponding six month period ended 30 June  2013: £472k.

Outlook

We have made significant progress in the year to date and are close to starting clinical trials with the pain relief portfolio and MED2002. We are also preparing for the initial launch next year of MED2002 as a special product. CSD500 will be launched under the Futura brand Blue Diamond™ in several European countries later this year with the wider roll-out of the product during 2015. The commercial attractiveness of CSD500 is underlined by the success of our out-licensing activities and we continue in discussions in connection with the remaining key regions throughout the world.

The successful equity fundraising earlier this year will support the clinical development of Futura's earlier-stage product portfolio through to key value inflexion points, thereby creating major opportunities to deliver future shareholder value.

John Clarke	James Barder
Chairman	Chief Executive

Group Statement of Comprehensive Income

		Unaudited 6 months ended 30 June              2014	Unaudited 6 months ended 30 June              2013	Audited  year  ended 31 December              2013
	Notes	£	£	£
Revenue	1.5	2,262	320,513	370,902
Research and development costs		(1,072,794)	(886,524)	(1,976,322)
Administrative costs		(581,240)	(471,689)	(926,123)
Operating loss		(1,651,772)	(1,037,700)	(2,531,543)
Finance income		12,477	5,830	9,534
Loss before tax		(1,639,295)	(1,031,870)	(2,522,009)
Taxation		192,958	146,880	313,677
Total comprehensive loss for the period attributable to owners of the parent company		(1,446,337)	(884,990)	(2,208,332)
Loss per share (pence)	3	(2.77p)	(1.14p)	(2.85p)

All amounts relate to continuing activities.

Group Statement of Changes in Equity

		Share  Capital	Share  Premium	Merger  Reserve	Retained Losses	Total    Equity
		£	£	£	£	£
At 1 January 2013 - audited		154,896	21,335,678	1,152,165	(19,769,463)	2,873,276
Total comprehensive loss for the period		-	-	-	(884,990)	(884,990)
Share-based payment		-	-	-	69,986	69,986
Shares issued during the period		284	59,604	-	-	59,888
At 30 June 2013 - unaudited		155,180	21,395,282	1,152,165	(20,584,467)	2,118,160
Total comprehensive loss for the period		-	-	-	(1,323,342)	(1,323,342)
Share-based payment		-	-	-	71,513	71,513
Shares issued during the period		439	121,002	-	-	121,441
At 31 December 2013 - audited		155,619	21,516,284	1,152,165	(21,836,296)	987,772
Total comprehensive loss for the period		-	-	-	(1,446,337)	(1,446,337)
Share-based payment		-	-	-	81,486	81,486
Shares issued during the period		42,345	12,025,155	-	-	12,067,500
Cost of share issues		-	(538,171)	-	-	(538,171)
At 30 June 2014 - unaudited		197,964	33,003,268	1,152,165	(23,201,147)	11,152,250

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 in 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 the year represents the total recognised income and expense for the year.

Group Statement of Financial Position

		Unaudited    30 June          2014	Unaudited    30 June          2013	Audited 31 December          2013
	Notes	£	£	£
Assets
Non-current assets
Plant and equipment		7,342	7,285	7,849
Total non-current assets		7,342	7,285	7,849
Current assets
Inventories		47,901	4,765	35,007
Trade and other receivables	4	128,324	128,890	118,670
Current tax asset		192,958	146,880	313,677
Cash and cash equivalents	5	11,214,946	2,116,224	990,567
Total current assets		11,584,129	2,396,759	1,457,921
Liabilities
Current liabilities
Trade and other payables		(439,221)	(285,884)	(477,998)
Total liabilities		(439,221)	(285,884)	(477,998)
Total net assets		11,152,250	2,118,160	987,772
Capital and reserves attributable to owners of the parent company
Share capital		197,964	155,180	155,619
Share premium		33,003,268	21,395,282	21,516,284
Merger reserve		1,152,165	1,152,165	1,152,165
Retained losses		(23,201,147)	(20,584,467)	(21,836,296)
Total equity		11,152,250	2,118,160	987,772

Group Statement of Cash Flows

	Unaudited 6 months ended 30 June 2014	Unaudited 6 months ended 30 June 2013	Audited year ended 31 December 2013
	£	£	£
Cash flows from operating activities
Loss before tax	(1,639,295)	(1,031,870)	(2,522,009)
Adjustments for:
Depreciation	2,099	1,697	3,783
Finance income	(12,477)	(5,830)	(9,534)
Share-based payment charge	81,486	69,986	141,499
Cash flows from operating activities before changes  in working capital	(1,568,187)	(966,017)	(2,386,261)
(Increase)/decrease in inventories	(12,894)	2,459	(27,783)
Increase in trade and other receivables	(2,720)	(12,287)	(3,750)
(Decrease)/increase in trade and other payables	(38,777)	(49,069)	143,045
Cash used in operations	(1,622,578)	(1,024,914)	(2,274,749)
Income tax received	313,677	260,791	260,791
Net cash used in operating activities	(1,308,901)	(764,123)	(2,013,958)
Cash flows from investing activities
Purchase of plant and equipment	(1,592)	(2,398)	(5,048)
Interest received	5,543	5,830	11,217
Cash generated by investing activities	3,951	3,432	6,169
Cash flows from financing activities
Issue of ordinary shares	12,067,500	59,888	181,329
Expenses paid in connection with share issues	(538,171)
Cash generated by financing activities	11,529,329	59,888	181,329
Increase/(decrease) in cash and cash equivalents	10,224,379	(700,803)	(1,826,460)
Cash and cash equivalents at beginning of period	990,567	2,817,027	2,817,027
Cash and cash equivalents at end of period	11,214,946	2,116,224	990,567

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 11 September 2014.

The interim financial information for the six months ended 30 June 2014 and for the six months ended 30 June 2013 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 2013 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 2013 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 £11.21 million at 30 June 2014, with a net cash inflow of £10.22m 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 standard, which is not yet effective and has not been adopted early in these financial statements, will or may have an effect on the Group's future financial statements:

·      IFRS 9 'Financial Instruments'

Accounting policies (continued)

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 Income over 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 Income on 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 Income as 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 Income at 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 Income for 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 Income in 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, comprising '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 year 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 Income in administrative costs.

Cash and cash equivalents are financial assets and comprise cash in hand and sterling fixed rate deposits with original maturities of twelve 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 Income in 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 Income in 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 Income on 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 Income over 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 Income over 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 HMRC joint election to transfer the employers' national insurance contribution potential liability to the employee, therefore no Group asset or liability arises.

(iv) Long-term incentive scheme

The Group operates a long-term incentive scheme. The quantum of any awards receivable 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 as all criteria for revenue recognition have been met.

(ii) Intangible asset recognition

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.

(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 recurring royalty 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 £1,446,337 (six months ended 30 June 2013: loss of £884,990; year ended 31 December 2013: loss of £2,208,332) and on a weighted average number of shares in issue of 79,764,442 (six months ended 30 June 2013: 77,500,251; year ended 31 December 2013: 77,591,370).

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          2014	Unaudited    30 June          2013	Audited 31 December          2013
	£	£	£
Amounts receivable within one year:
Trade receivables	-	-	12,000
Other receivables	32,079	23,774	27,307
Prepayments and accrued income	96,245	105,116	79,363
	128,324	128,890	118,670

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          2014	Unaudited    30 June          2013	Audited 31 December          2013
	£	£	£
Cash at bank and in hand	33,498	140,047	63,835
Sterling fixed rate short-term deposits	11,181,448	1,976,177	926,732
	11,214,946	2,116,224	990,567

6.      Share capital and share premium

On 27 January 2014 share options over 120,000 new ordinary shares were exercised generating additional funds of £67,500 for the Group.

The Group raised £12.0 million (before expenses) following a placing of 21,052,632 shares at 57 pence per share on 7 March 2014 and approved by shareholders in a general meeting on 25 March 2014.

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.

 

END

 

 

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