Interim Results

RNS Number : 4575Y

Futura Medical PLC

09 September 2015

 

For immediate release

9 September 2015

Futura Medical plc

("Futura" or the "Company")

Interim Results for the six months ended 30 June 2015

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 2015.

Highlights

·      Considerable progress across the Company's product development portfolio

·      CSD500 (erectogenic condom) - modified manufacturing process indicating an extended shelf life

·      MED2002 (erectile dysfunction) - pivotal clinical study underway with data expected by end of H1 2016

·      Plans to make MED2002 available as an unlicensed medicine ("special") on track for H2 2015

·      Topical pain relief - the NSAID-based gels TPR100 (diclofenac) and TIB200 (ibuprofen) both achieved primary endpoints in a clinical study with potential to be best-in-class

·      Net loss of £2.47 million in the period (H1 2014: net loss £1.45 million), reflecting planned increase in R&D expenditure

·      Cash resources of £7.23 million at 30 June 2015 (30 June 2014: £11.21 million)

James Barder, Futura's Chief Executive, commented: "Significant progress is being made across our product portfolio. On the manufacturing optimisation of CSD500 we have growing confidence of making a regulatory filing later this year of an extended shelf life product that meets our commercial partners' requirements. In the current half year we expect to receive regulatory approval for a second manufacturing site for CSD500 for security of commercial supply. In addition we believe the potential for our NSAID pain relief gel to be best in class has been further supported by the recent clinical study results and anticipate that MED2002 will be made available as a special in the UK this year."

Analyst meeting and webcast:

A meeting for analysts will be held at 9.30am this morning, 9 September 2015, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. There will be a live webcast of the analyst presentation. If you would like to listen to the webcast, please log on to the following web address approximately 5 minutes before 9.30am:

http://vm.buchanan.uk.com/2015/futuramedical090915/registration.htm

A recording of the webcast will be made available at www.futuramedical.com and www.buchanan.uk.com following the results meeting.

For further information please contact:

Futura Medical plc
James Barder, Chief Executive	Tel: [phone]
Email to: [e-mail]	www.futuramedical.com
N+1 Singer (Nominated Adviser and Broker)
Aubrey Powell / Liz Yong / Tom Smale - Corporate Finance	Tel:[phone]
For media enquiries please contact:
Buchanan
Mark Court / Sophie Cowles / Stephanie Watson	Tel: [phone]

Notes to Editors

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

During the first half of the year we made progress across our portfolio of product opportunities, particularly in advancing our clinical programmes and in preparing for the international roll-out of CSD500, our novel condom.

Optimising the manufacture of CSD500 to extend the product's shelf life has been a major area of focus during the period. The optimisation work is now almost complete and we have growing confidence of making a regulatory filing later this year of an extended shelf life product that meets our commercial partners' requirements. In addition to better meeting the requirements of the established condom supply chain, this optimised product is expected to form the basis of a new manufacturing patent which has the potential to extend the patent protection of CSD500 through to 2033. A regulatory filing of this optimised product is expected later this year.

To ensure continued, uninterrupted production of CSD500, a second manufacturing facility is being brought on stream.  The regulatory submission to obtain CE Mark approval for products manufactured at the new site has been submitted to our Notified Body and we anticipate gaining approval for the new site before the end of the year.

Blue Diamond^®, our own brand of the CSD500 condom, was launched in the Netherlands and Belgium almost a year ago as an online-only product by the Company's Benelux distribution partner. In June this year, the product was also stocked by two of the largest drug store chains in the Netherlands. The customer feedback and pharmaco-vigilance data generated from retail sales has been very useful for our product development and for sharing with our worldwide licensing partners who remain our primary focus for revenue generation for CSD500.

We continue in discussions for the out-licensing of CSD500 in territories where a licensing partner has not already been appointed.

Clinical work in the period included successfully completing a 60-subject study of our pain relief portfolio, which delivered encouraging results in that our two non-steroidal anti-inflammatory (NSAID) programmes met their primary clinical endpoints, as announced on 14 July 2015. Further analysis of the study data has confirmed our belief that the two programmes, which combine well-characterised NSAIDs with our DermaSys^® topical delivery system, have the potential to be highly competitive commercially. We are currently awaiting feedback from regulators to identify the remaining steps needed for marketing approval in Europe and are also seeking clarity on the options for regulatory approval in the USA.

We also began a pivotal clinical study of MED2002, the Company's topical gel for the treatment of erectile dysfunction (ED) in June and continue to expect study results in H1 2016. Our plans remain on track for MED2002 to be made available in the UK as an unlicensed medicine, or "special", later this year.

The R&D team within the Company was strengthened during the half year by establishing two separate teams, one focusing on clinical development and the other on chemistry, manufacturing and controls. This structure is working well and is providing additional resource for progressing our current pipeline and for the development of new product opportunities.

Portfolio updates - Sexual healthcare

CSD500: Condom containing the erectogenic Zanifil^® gel

CSD500 benefits from three clinically proven claims: the maintenance of a firmer erection, maximised penile size and a longer lasting sexual experience for women. CSD500, which gained CE marking in 2013 on the basis of a one year shelf life, represents real innovation in an industry where there has been limited new product development. 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 and which shall remain in force until 2023.

Much of our focus during the first half has been on optimising the manufacturing of CSD500 to achieve a longer shelf life. We have now successfully completed a series of scale-up trials on the modified manufacturing process to extend the shelf life of CSD500 to meet condom industry supply chain requirements. The initial results are very encouraging.

Full stability studies have been initiated on the condoms produced during the trials to confirm the shelf life of the modified product. Initial results are positive but further results from the accelerated stability studies currently in progress are required to confirm this. We remain confident that the regulatory submission for the extended shelf life product can be made before the end of this year.

As mentioned above, to ensure continued, uninterrupted production of CSD500, a second manufacturing facility is being brought on stream. The regulatory submission to obtain CE Mark approval for products manufactured at the new site has been submitted to our Notified Body. We anticipate gaining approval for the new site before the end of the year.

The optimisation work has generated new intellectual property associated with the manufacturing of CSD500 which has the potential to extend patent protection until 2033. This new patent application has now been filed in many key territories throughout the world.

The product has been out-licensed on a territorial basis covering a total of 31 countries. Regulatory approval has been granted for all 28 EU countries and our distributor has recently received regulatory approval in Saudi Arabia - the first approval for a major market outside the EU. Regulatory filings have also been made in further countries in the Middle East, Asia and South America.

With the progress on optimisation work, our focus is now mainly on the commercialisation of the product. We have been working with our licensees on launch timetables.

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. We hold worldwide rights to the product, which shares the same active ingredient as CSD500. We anticipate that MED2002, which will be branded Eroxon^®, is likely to be a prescription-only product.

Towards the half-year end, we began a pivotal study of MED2002 in a total of 192 patients, marking an important step in the development of the product for a wider ED market. The primary endpoint of the study is the efficacy of MED2002 in male subjects self-diagnosed with ED using the erectile function domain of the International Index of Erectile Function (IIEF). The IIEF is a well validated measure of erectile function and was used for the approval of PDE5 inhibitors, such as Viagra^®. Secondary endpoints in the trial include the speed of onset.

Recruitment has already commenced and plans to expand recruitment are progressing well. Subject to remaining regulatory clearances it is expected that this additional recruitment will start in November. The study remains on track to report by the end of H1 2016.

The current MED2002 trial is expected to be one of two pivotal trials required for the regulatory filing of the product. The commercialisation strategy, including design of the second pivotal trial, will be decided following the results of the current trial.

MED2002 meets the criteria required within the UK for an unlicensed medicine because of the estimated 7.5% of ED sufferers who cannot be prescribed PDE5 inhibitors due to contraindications with other medications taken by them. We have already identified a specials manufacturer and we remain on track to make MED2002 available to UK doctors as a special later this year.

In Europe, MED2002 has patent protection until August 2025 and in the USA it has protection until August 2028.

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 who launched the product in the USA under the name EPIC^®. The product is designed to take effect rapidly and to delay male ejaculation, thereby offering enhanced sexual control. Whilst EPIC^® was made available in stores throughout the USA, its sales have been modest to the extent that it is no longer stocked by a major US retailer. We believe that the sales performance reflects a lack of promotional activity and we continue to explore how to take the product forwards.

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 onset of action, duration and degree of pain relief. In addition, topical pain relief creates the opportunity to avoid the potential systemic side effects of orally taken medication.

Futura's pain relief franchise advanced considerably in the first half in that a clinical study of three products was completed. Two were based on the NSAIDs diclofenac and ibuprofen and the third on methyl salicylate. Our focus is now on the two NSAIDs which achieved their primary endpoints and present exciting product opportunities.

The clinical study of a total of 60 subjects compared each of the products against a placebo. It also compared them against currently marketed products to show equivalence, which is a regulatory strategy frequently used in the consumer healthcare industry as it gives the potential for strong marketing claims whilst reducing the clinical requirements and therefore the costs, time and risk for regulatory approval.

The headline results of the study were announced on 14 July 2015. Further analysis has reinforced our confidence in the potential of the products. No comparator product, topical or oral outperformed our two NSAID products.

Our objective is for our products to be best in class against other comparable topical products. The rationale for this is that the National Institute for Health and Care Excellence (NICE) gives clear guidance to physicians to prescribe topical NSAIDs in the first instance for joint pain associated with osteoarthritis, in preference to oral NSAIDs, owing to concerns on the long term use of oral NSAIDs. This means that the best-in-class topical treatment should be the first choice for doctors in the initial treatment of pain and therefore represents a substantial opportunity in a market with global sales of in excess of US$4 billion.

We are currently awaiting feedback from regulators to identify the remaining steps needed for marketing approval in Europe and we are also seeking clarity on the potential regulatory approval pathway in the USA.

Whilst some out-licensing discussions have already taken place our focus has been on building value into TPR100 and TIB200 through progressing development work prior to entering into out-licensing agreements.

Finance

Cash and cash equivalents at 30 June 2015 were £7.23 million (30 June 2014: £11.21 million) with a net cash outflow of £2.26 million in the period. The equity fundraising in 2014 facilitates the ongoing clinical development of Futura's product portfolio to enhance shareholder value prior to commercialisation.

In the period under review, we earned royalty payments of £16k (H1 2014: £2k). The loss for the period ended 30 June 2015 was £2.47 million. Research and development costs of £2.48 million were higher than for the corresponding six month period ended 30 June 2014 (£1.07 million), as we utilised a portion of the new capital raised in 2014 by investing in developing the products in the pipeline. Other administrative costs of £558k were slightly lower than that for the corresponding six month period ended 30 June 2014 (£581k) as we continue to manage our financial resources carefully.

Outlook

Significant progress is being made across our product portfolio. On the manufacturing optimisation of CSD500 we have growing confidence of making a regulatory filing later this year of an extended shelf life product that meets our commercial partners' requirements. In the current half year we expect to receive regulatory approval for a second manufacturing site for CSD500 for security of commercial supply. In addition we believe the potential for our NSAID pain relief gel to be best in class has been further supported by the recent clinical study results and anticipate that MED2002 will be made available as a special in the UK this year.

John Clarke                                         James Barder

Chairman                                              Chief Executive

The financial information set out below does not constitute the Company's full statutory accounts for the period ended 30 June 2015 (or 30 June 2014) and is unaudited. Statutory accounts for 2014 have been delivered to the Registrar of Companies and the independent auditors have reported on those accounts; their report was unqualified, did not include an emphasis of matter statement and did not contain any statements under section 498 of the Companies Act 2006.

Group Statement of Comprehensive Income

For the period ended 30 June 2015

		Unaudited 6 months ended 30 June 2015	Unaudited 6 months ended 30 June  2014	Audited  year  ended 31 December 2014
	Notes	£	£	£
Revenue	1	16,141	2,262	43,929
Research and development costs	5	(2,480,175)	(1,072,794)	(2,365,678)
Administrative costs		(558,078)	(581,240)	(1,205,078)
Operating loss		(3,022,112)	(1,651,772)	(3,526,827)
Finance income		20,068	12,477	48,257
Loss before tax		(3,002,044)	(1,639,295)	(3,478,570)
Taxation		535,594	192,958	480,689
Total comprehensive loss for the period attributable to owners of the parent company		(2,466,450)	(1,446,337)	(2,997,881)
Loss per share (pence)	3	(2.49p)	(1.81p)	(3.35p)

Group Statement of Changes in Equity

For the period ended 30 June 2015

		Share  Capital	Share  Premium	Merger  Reserve	Retained Losses	Total    Equity
		£	£	£	£	£
At 1 January 2014 - 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
Total comprehensive loss for the period		-	-	-	(1,551,544)	(1,551,544)
Share-based payment		-	-	-	95,557	95,557
Shares issued during the period		81	25,467	-	-	25,548
At 31 December 2014 - audited		198,045	33,028,735	1,152,165	(24,657,134)	9,721,811
Total comprehensive loss for the period		-	-	-	(2,466,450)	(2,466,450)
Share-based payment		-	-	-	47,159	47,159
At 30 June 2015 - unaudited		198,045	33,028,735	1,152,165	(27,076,425)	7,302,520

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

As at 30 June 2015

		Unaudited    30 June          2015	Unaudited    30 June          2014	Audited 31 December          2014
	Notes	£	£	£
Assets
Non-current assets
Plant and equipment		22,550	7,342	11,115
Total non-current assets		22,550	7,342	11,115
Current assets
Inventories		194,757	47,901	141,517
Trade and other receivables	4	253,228	128,324	204,600
Current tax asset		535,594	192,958	480,689
Cash and cash equivalents	5	7,234,528	11,214,946	9,491,776
Total current assets		8,218,107	11,584,129	10,318,582
Liabilities
Current liabilities
Trade and other payables		(938,137)	(439,221)	(607,886)
Total liabilities		(938,137)	(439,221)	(607,886)
Total net assets		7,302,520	11,152,250	9,721,811
Capital and reserves attributable to owners of the parent company
Share capital		198,045	197,964	198,045
Share premium		33,028,735	33,003,268	33,028,735
Merger reserve		1,152,165	1,152,165	1,152,165
Retained losses		(27,076,425)	(23,201,147)	(24,657,134)
Total equity		7,302,520	11,152,250	9,721,811

Group Statement of Cash Flows

For the period ended 30 June 2015

	Unaudited 6 months ended         30 June                2015	Unaudited       6 months               ended         30 June                 2014	Audited year  ended    31 December               2014
	£	£	£
Cash flows from operating activities
Loss before tax	(3,002,044)	(1,639,295)	(3,478,570)
Adjustments for:
Depreciation	3,304	2,099	4,527
Finance income	(20,068)	(12,477)	(48,257)
Share-based payment charge	47,159	81,486	177,043
Cash flows from operating activities before changes  in working capital	(2,971,649)	(1,568,187)	(3,345,257)
Increase in inventories	(53,240)	(12,894)	(106,510)
Increase in trade and other receivables	(68,603)	(2,720)	(58,524)
Increase/(decrease) in trade and other payables	330,251	(38,777)	129,888
Cash used in operations	(2,763,241)	(1,622,578)	(3,380,403)
Income tax received	480,689	313,677	313,677
Net cash used in operating activities	(2,282,552)	(1,308,901)	(3,066,726)
Cash flows from investing activities
Purchase of plant and equipment	(14,739)	(1,592)	(7,793)
Interest received	40,043	5,543	20,851
Cash generated by investing activities	25,304	3,951	13,058
Cash flows from financing activities
Issue of ordinary shares	-	12,067,500	12,093,048
Expenses paid in connection with share issues	-	(538,171)	(538,171)
Cash generated by financing activities	-	11,529,329	11,554,877
(Decrease)/increase in cash and cash equivalents	(2,257,248)	10,224,379	8,501,209
Cash and cash equivalents at beginning of period	9,491,776	990,567	990,567
Cash and cash equivalents at end of period	7,234,528	11,214,946	9,491,776

Notes to the Group Interim Financial Information

For the period ended 30 June 2015

1.       Accounting policies

1.1 Basis of preparation

The unaudited Interim Report was approved by the Board of Directors on 8 September 2015.

The interim financial information for the six months ended 30 June 2015 and for the six months ended 30 June 2014 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 2014 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 2014 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 £7.23 million at 30 June 2015, with a net cash outflow of £2.26m 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 have been adopted in the year, however the Directors do not expect them to have a material effect on the Group financial statements:

·      Defined Benefit Plans: Employee Contributions: Amendments to IAS 19

The following new standards and interpretations, which are not yet effective and have not been adopted early in these financial statements, will or may have an effect on the Group's future financial statements:

·      Accounting for Acquisitions of Interests in Joint Operations: Amendments to IFRS 11 (effective 1 January 2016)

·      Clarification of Acceptable Methods of Depreciation and Amortisation: Amendments to IAS 16 and IAS 38 (effective 1 January 2016)

·      Equity Method in Separate Financial Statements (Amendments to IAS 27) (effective 1 January 2016)

·      Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28) (effective 1 January 2016)

·      IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)

·      IFRS 9 Financial Instruments (effective 1 January 2018)

·      Disclosure Initiative: Amendments to IAS 1 (effective 1 January 2016)

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 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 £2,466,450 (six months ended 30 June 2014: loss of £1,446,337; year ended 31 December 2014: loss of £2,997,881) and on a weighted average number of shares in issue of 99,022,600 (six months ended 30 June 2014: 79,764,442; year ended 31 December 2014: 89,452,302). 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          2015	Unaudited    30 June          2014	Audited 31 December          2014
	£	£	£
Amounts receivable within one year:
Other receivables	114,094	32,079	111,350
Prepayments and accrued income	139,134	96,245	93,250
	253,228	128,324	204,600

Trade and other receivables do not contain any 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          2015	Unaudited    30 June          2014	Audited 31 December          2014
	£	£	£
Cash at bank and in hand	8,921	33,498	176,914
Sterling fixed rate short-term deposits	7,225,607	11,181,448	9,314,862
	7.234.528	11,214,946	9,491,776

6.       Related party transactions

Related parties, as defined by IAS 24 'Related Party Disclosures', are the wholly owned subsidiary companies, Futura Medical Developments Limited, Futura Consumer Healthcare Limited and the Board. Transactions between the Company and the wholly owned subsidiary companies have been eliminated on consolidation and are not disclosed.

 

END

 

 

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