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Phytopharm PLC (IXI)

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Thursday 26 May, 2011

Phytopharm PLC

Half Yearly Report

RNS Number : 3123H
Phytopharm PLC
26 May 2011
 



26 May 2011

 

Company Contact:

Phytopharm plc

Tim Sharpington CEO

Roger Hickling R & D Director

+44 1480 437 697

www.phytopharm.com


U.K. Investor Relations Contact:

FD

John Dineen

Ben Atwell

+44 207 831 3113

 

 

Interim Results for the six months ended 31 March 2011

 

Phytopharm plc (PYM: London Stock Exchange) ("Phytopharm" or the "Company", or the "Group") today announces its interim results for the six months ended 31 March 2011 reflecting accelerated progression of the pharmaceutical programmes.

 

Financial summary

 

·      Loss after tax of £3.60 million (HY 2010: £1.91 million).

·      Cash and money market investments balance of £20.38 million (HY 2010: £26.31 million).

 

Operational summary

 

·      Recruitment of patients with Parkinson's disease (PD) into the multi-national Cogane™ Phase II dose ranging study (CONFIDENT-PD) commenced in November 2010

·      Achieved positive preclinical results demonstrating that Cogane™ reduced side effects associated with L-dopa treatment in a preclinical model; data to be presented at the forthcoming Movement Disorders Conference in June 2011

·      Positive data achieved in a toxin-induced preclinical model of amyotrophic lateral sclerosis (ALS) with Cogane™ and initiated "gold standard" genetic in-vivo model with the support of the Motor Neurone Disease Association with results Q4 2011

·      Encouraging early data reported from the recently initiated programme investigating the effect of Cogane™ and Myogane™ in glaucoma. Results from further preclinical models Q4 2011

·      P61 anti-inflammatory project re-activated

·      Co-operation agreement on Hoodia gordonii signed with the Council for Scientific and Industrial Research, South Africa

·      Research and development activity on legacy functional food programmes ceased. Reduction in headcount and cost base associated with these programmes

 

Tim Sharpington, CEO, commented "Good progress has been made in the development and expansion of our pharmaceutical programmes in neurodegenerative diseases and we are particularly pleased that Cogane™ proved to be effective in a model of ALS. We are moving forward with further work in this area and are grateful for the support of the Motor Neurone Disease Society in this endeavour. Cogane™ and Myogane™ have now been shown to be effective in a wide range of neurodegenerative disease models and show great promise to be important new treatments for these diseases. We will continue our strategy of focussing investment on the development of these pharmaceutical assets."

 

 

Business Review

 

 

Operational review

 

Strategy

 

Phytopharm is a development stage pharmaceutical company developing novel treatments targeting diseases with high levels of unmet need. Our lead series of compounds, the Sapogenins (including Cogane™ and Myogane™), has the potential to be a new class of therapy for neurodegenerative diseases including Parkinson's disease, ALS and glaucoma.

 

Phytopharm's strategic direction has evolved from developing products extracted from natural botanical sources to investigating single chemical entities.

 

Phytopharm operates as a virtual company. We utilise a network of scientific and clinical experts to help guide our development projects with our experienced pharmaceutical managers overseeing operations.

 

Our commercially focussed development projects have the potential to produce significant treatment advances in our target areas of neurodegeneration and inflammatory disease. Our products are single chemical entities with novel mechanisms of action protected by strong patent families. Our pipeline has been sourced from our own research activities and from licensing activities, particularly from leading research institutions in China with whom the company has long-standing relationships.

 

Our objective is to develop products aimed at major markets with high unmet medical need to key value inflection points before seeking late-stage development and commercial partners as appropriate. We will consider retaining certain rights to products targeting orphan indications.

 

Overview

 

We continue to progress our strategy of focussing on our pharmaceutical programmes, specifically on the development of Cogane™ for Parkinson's disease. During the period, we reported recruitment of patients with Parkinson's disease into the multi-national Cogane™ Phase II dose ranging study (CONFIDENT-PD) which commenced in November 2010. The study is being conducted in leading movement disorder centres in North America and Europe.

 

Pharmaceutical programmes

 

Neurodegeneration

 

Neurodegeneration is the umbrella term for the progressive loss of structure, function or death of neurones. Many neurodegenerative diseases including Parkinson's disease, ALS, glaucoma and Alzheimer's disease occur as a result of neurodegenerative processes that exhibit many similarities suggesting that these diseases are related on a sub-cellular level.  Because of the similarities in neurodegeneration across this range of diseases, there is hope that therapeutic advances, such as Phytopharm's lead pharmaceutical programmes CoganeTM and MyoganeTM, could be beneficial in more than one of these diseases.

 

The Sapogenins

 

CoganeTM and MyoganeTM are structurally related, small molecule, chemical entities and members of the Sapogenin class of compounds. They are orally bioavailable neurotrophic factor inducers that readily cross the blood-brain barrier. Both compounds have demonstrated neuroprotective effects in a range of preclinical models. Specifically, CoganeTM and MyoganeTM have been shown to induce and modulate the production of neurotrophic factors.

 

Both compounds have completed long term toxicology studies, have been formulated as once daily, orally administered therapies and have completed Phase I studies demonstrating good bioavailability and safety profiles.

 

CoganeTM is being studied in a Phase II trial of early stage Parkinson's disease and in preclinical models of amyotrophic lateral sclerosis ("ALS", also known as Lou Gehrig's disease). It has also been evaluated for safety and tolerability in patients with Alzheimer's disease.

 

Additionally, CoganeTM and MyoganeTM are being assessed in preclinical models of glaucoma, a neurodegenerative disease of the eye and if results are encouraging, they have the potential to be progressed rapidly into clinical proof of concept studies.

 

The neuroprotective and neurotrophic actions of CoganeTM and Myogane™ suggest potential beneficial effects in other orphan neurodegenerative diseases.

 

Cogane™in Parkinson's disease

 

Parkinson's disease is a movement disorder characterised by muscle rigidity, tremor and a slowing of physical movement (bradykinesia) and, in extreme cases, a loss of physical movement (akinesia).The primary symptoms are the result of altered signalling of an area of the brain, the striatum, responsible for the control of movement. This is caused by degeneration of dopaminergic neurones between the substantia nigra and the striatum parts of the brain, leading to insufficient formation and action of dopamine. Parkinson's disease is therefore termed a neurodegenerative disease. The disease is slow in onset and the appearance of symptoms reflects the gradual loss of dopaminergic neurones.

 

The prevalence of Parkinson's disease is estimated at being 0.3% in the whole population in industrialised countries, rising to 1% in those over 60 years of age and to 4% of the population over 80. The market size for Parkinson's disease was $3.2 billion in 2009 (Source; Datamonitor) and is forecast to grow to $4.6 billion by 2012 Source; Visiongain).

 

Mode of action

 

Glial cell-derived neurotrophic factor ("GDNF") and brain derived neurotrophic factor ("BDNF") are naturally occurring proteins in the brain that have been shown to be effective in re-growing damaged nerves. As they are proteins, they cannot be given orally (in tablet or liquid form) because they are degraded in the stomach and intestine, and also do not readily cross the blood-brain barrier. GDNF and BDNF can work only when injected into, or when produced by, the brain. Direct injection of GDNF into the area of the brain involved in Parkinson's disease has shown evidence of being clinically effective in restoring the control of movement but requires highly complex and difficult surgical procedures. Cogane ™ has the potential to overcome many of the difficulties associated with GDNF administration.

 

In preclinical models, CoganeTM stimulated the release of GDNF and BDNF in the brain and increased neurite outgrowth. When administered orally in several different preclinical models of Parkinson's disease CoganeTM reversed the decrease of neurotrophic factors and reversed the loss of dopaminergic neurones in the striatum, the area of the brain most affected in Parkinson's disease.

 

Progress to date

 

We have made significant progress demonstrating that in preclinical models of Parkinson's disease CoganeTM reverses the damage to dopamine-containing neurones and elevates levels of GDNF and BDNF in the area of the brain involved in Parkinson's disease. In a preclinical study, oral administration of CoganeTM over eighteen weeks significantly reduced parkinsonian disability by 43% in the gold standard preclinical model of Parkinson's disease research (MPTP-induced Parkinson's disease model), which we believe will be clinically highly relevant if repeated in Parkinson's disease patients. Encouragingly, in this study a statistically significant reduction in parkinsonian symptoms was reached after nine weeks of administration with CoganeTM. The magnitude of the effect increased over the subsequent nine weeks of administration and was still increasing at the end of the study (week eighteen). Data from this study suggests that the mechanism underlying these effects is considerably more complex than originally envisaged. This study was supported by the Michael J Fox Foundation and further work in this area is ongoing.

 

We have recently shown in preclinical models that administration of CoganeTM in conjunction with L-dopa (the standard treatment for Parkinson's disease) resulted in improved control of symptoms compared to those treated with L-dopa alone.  We have also now demonstrated that CoganeTM also reduced the side-effects of L-dopa, this data will be presented at the International Congress of Parkinson's Disease and Movement Disorders being held in June 2011 in Toronto, Canada.  Together, these results demonstrate the potential of Cogane™ to be used, not only as a monotherapy for Parkinson's disease, but also in combination with L-dopa to widen the therapeutic window of L-dopa. These data continue to support the development of CoganeTM as an exciting new and potentially disease-modifying therapy for Parkinson's disease. In addition to its effects in preclinical models of Parkinson's disease, CoganeTM has shown efficacy in preclinical models of cognitive impairment and so may have utility in treating the non-motor symptoms of Parkinson's disease. 

 

Clinical

 

CoganeTM is currently being evaluated in a 400 patient multi-national Phase II, randomised, double blind, placebo controlled, dose ranging study (CONFIDENT-PD). The study is comparing the safety, tolerability and efficacy of three doses of CoganeTM and placebo when administered for 28 weeks to untreated patients with early stage Parkinson's disease. Patient recruitment commenced in November 2010. Our target remains to have results from the study available at the end of 2012.

 

Four Phase I studies have evaluated CoganeTM in healthy adults and Parkinson's disease patients for up to 28 days. In these studies, daily, oral administration of CoganeTM was well tolerated with a good overall safety profile. In a recently completed Phase Ib safety, tolerability and pharmacokinetic clinical study in both healthy volunteers and Parkinson's disease patients, CoganeTM was shown to be safe and generally well tolerated over the 28 day study period. Importantly at day 28, plasma levels of Cogane™ in Parkinson's disease patients reached levels associated with efficacy in the preclinical efficacy study.

 

Cogane™ in motor neurone disease / ALS

 

ALS, also known as Lou Gehrig's disease, is the most prevalent form of motor neurone disease which generally strikes people between 40 and 60 years of age. It is characterised by progressive loss of both lower (spinal cord and brain stem) and upper (cerebral cortex) motor neurones, which leads to severe muscle weakness and wasting, followed by paralysis and death, generally caused by respiratory failure. There is an urgent need for the development of new approaches to this devastating condition.

 

It is estimated that over 30,000 patients are diagnosed with ALS in the seven major markets. ALS is classified as an orphan disease and, as such, offers the potential for expedited development.

 

Progress to date

 

ALS is the most common form of Motor Neurone Disease, a neurodegenerative disease with limited treatment options and poor prognosis. Cogane™ has previously shown promising activity in preliminary in vitro and in vivo models of ALS.  In a recently completed preclinical study using a toxin-induced model of ALS, Cogane™ protected motor neurones and demonstrated anti-inflammatory effects compared to the control animals. We have initiated a study of Cogane™ in the genetic "gold standard" in vivo model of ALS, with the support of the Motor Neurone Disease Association, a UK based charitable organisation which has provided a grant to cover the costs of the study. Results from the study are expected in Q4 2011. As Cogane™ is already in clinical trials for Parkinson's disease, rapid progression into efficacy indicating trials will be possible, subject to funding, if results from this preclinical study are positive. ALS is an orphan indication which also supports expedited clinical development.

 

As noted in the Parkinson's disease section, CoganeTM has been evaluated in a number of Phase I studies and shown to be generally safe, well tolerated and orally bioavailable.

 

Glaucoma

 

A programme investigating the effect of Cogane™ and Myogane™ in glaucoma, a neurodegenerative condition of the eye, has recently been initiated. Current pharmacological treatments of glaucoma are predominantly focussed on reducing the elevated intra ocular pressure (IOP) in the eye, which is often associated with glaucoma. However, a significant number of patients with glaucoma do not exhibit raised IOP and, in addition, a significant number of patients whose IOP is successfully reduced still experience ongoing neurodegeneration resulting in deterioration of sight.  We therefore believe there is a major unmet need and a commercial opportunity for products which could successfully treat the underlying neurodegenerative process in glaucoma.

 

There is a growing body of scientific literature describing the neuroprotective effects of neurotrophic factors, specifically brain derived neurotrophic factors (BDNF) and glial-cell derived neurotrophic factors (GDNF) in models of glaucoma. Both Cogane™ and Myogane™ have been shown to modulate the production of BDNF and GDNF in a number of cell types. The first stage of this project investigated the effects of Cogane™ and Myogane™ on retinal ganglion cells, the cells which degenerate in glaucoma. In vitro models, in which retinal ganglion cells are stressed, demonstrated that Cogane™ and Myogane™ exhibited encouraging neuroprotective and neurorestorative effects.

 

In light of these encouraging data we are moving forward with an assessment of the efficacy using in vivo models of glaucoma. Results from these pre-clinical models will be available in Q4 2011. As both compounds have already been tested in standard pre-clinical safety studies and have completed Phase I studies, proving to be suitable to be administered as a once-daily oral product with a good safety profile, we believe that, subject to funding, we will be able to progress the project rapidly into Phase II studies if the in-vivo models provide positive data.

 

Alzheimer's disease

 

CoganeTM and MyoganeTM protect cortical neurones from glutamate and β-amyloid induced neuronal damage and increase neurite outgrowth in vitro.  CoganeTM and MyoganeTM also increase the density of muscarinic receptors both in vitro and in vivoIn vivo, CoganeTM and MyoganeTM improve cognition in the aged rat and β-amyloid/ibotenic acid rat model of Alzheimer's disease.

 

The safety, tolerability and pharmacokinetics of orally administered Cogane™ in patients with Alzheimer's disease has previously been assessed in a 12 week study. Cogane™ was generally well tolerated in this patient group. Further work may be undertaken in this area if additional resources become available.

 

P61 Programme

 

During the period we reactivated the P61 programme which was established to investigate the known pharmacological properties of curcumin and gingerol. P61 is a series of novel new chemical entities (NCE's) which exhibit anti-inflammatory, anti-remodelling, anti-spasmodic and TRPV1 modulating activities. This range of activity within single molecules could provide attractive therapeutic options in a number of inflammatory diseases including chronic obstructive pulmonary disease, asthma, atopic dermatitis, psoriasis, gastrointestinal inflammatory conditions and pain.

 

Legacy Products

 

Research and development activities on Phytopharm's legacy functional food projects have been concluded. A co-operation agreement was signed with the Council for Scientific and Industrial Research, South Africa, who will fund the future development and commercialisation of Hoodia gordonii as an appetite suppressant. Phytopharm retains a commercial interest in the project and will receive a proportion of any future commercial milestones and royalties from the project.

 

The sales and distribution agreement with Intervet/Schering Plough Animal Health for Phytopica®, our canine animal health product, came to an end in December 2010. We are in discussion with a number of animal health companies with a potential interest in taking over the commercialisation of Phytopica®.

 

 

Financial review

 

The financial performance for the six month period reflects the Group's ongoing pharmaceutical development activities, particularly the continued progress of our pharmaceutical development programmes in neurodegenerative diseases.

 

Cash flow

 

Net cash used in operating activities for period was £3.35 million, an increase from £1.77 million from the previous period reflecting the Group's continued focus on the development pharmaceutical programmes.

 

We expect our net cash outflow to continue to increase as we progress the development of our pharmaceutical programmes, primarily Cogane™ in the Phase II proof of concept and dose range finding clinical study (CONFIDENT-PD) that commenced in November 2010. We also intend to maintain our strong relationships with disease specific charities which may result in additional funding being available.

 

Income statement

 

The revenue from continuing operations for period of £0.06 million (HY 2010: £0.11 million) was principally generated from residual activities on our functional food programmes.

 

Research and development costs for the period amounted to £3.60 million compared to £1.62 million for the six months ended 31 March 2010 reflecting the progression of Cogane™ into the CONFIDENT-PD clinical study.

 

Our administrative expenses for the period have reduced by £0.11 million to £0.55 million following our focus on our pharmaceutical programmes.

 

Finance income for the period increased to £0.18 million compared to £0.09 million in the previous period arising from interest on the Group's cash resources.

 

Our overall loss before tax was £3.90 million compared to £2.07 million for the previous period

 

The tax credit of £0.30 million for the period represents amounts that are expected to be received under current legislation on research and development tax credits. The increase in the period is due to increased expenditure on unfunded development activities primarily in relation to the Cogane™ development programme. The increase in the Group's loss and total comprehensive income for the period is principally due to an increase in expenditure on developing the Group's pharmaceutical programmes.

 

Balance sheet

 

Non-current assets representing property, plant and equipment amounted to £0.09 million compared to £0.11 million at 30 September 2010 and £0.08 million at 31 March 2010.

 

Current assets comprise inventories, trade and other receivables, tax receivable, money market investments and cash and cash equivalents which decreased to £21.11 million at 31 March 2011 (30 September 2010: £24.50 million, 31 March 2010: £26.94 million).

 

Money market investments and cash and cash equivalents at 31 March 2011 amounted to £20.38 million compared to £23.61 million at 30 September 2010 and £26.31 million at 31 March 2010 reflecting net cash outflows from operating activities. Money market investments represent fixed-rate, short-term deposits placed with a range of banks at fixed terms with a maturity date of more than three months. Cash and cash equivalents are invested for a period of ninety days or less.

 

At 31 March 2011 we did not hold any inventories following the sale of our inventory of raw materials and the write off of our inventory of work in progress during the previous financial year following the termination of our agreement with Intervet/Schering-Plough.

 

Our current tax receivable at 31 March 2011 increased to £0.26 million compared to £0.16 million at 31 March 2010 (30 September 2010: £0.41 million). The increase in the current tax receivable reflects an increase in expenditure on the Group's unfunded pharmaceutical programmes.

 

Our current liabilities have remained broadly constant and represent trade and other payables amounting to £1.26 million at 31 March 2011 (30 September 2010: £1.13 million: 31 March 2010: £1.68 million).

 

Share capital and share premium at 31 March 2011 have broadly remained unchanged at £3.47 million and £77.28 million respectively. A total of 56,163 ordinary shares have been issued during the six months ended 31 March 2011 for cash consideration of £2,672. These share issues relate to share option exercised under the Group's 2007 Share Option Plan and the 2007 Save As You Earn Plan.

 

Outlook

 

Throughout the remainder of 2011 we look forward to advancing progress across our pharmaceutical pipeline including the continued recruitment of patients with Parkinson's disease into the multi-national CONFIDENT-PD clinical study, as well as investigating the effects of Cogane™ in ALS, Myogane™ in glaucoma and completing the current phase of the P61 programme.

 

 

Forward looking statements

 

Certain information included in these statements is forward looking and involves risk and uncertainties that could cause results to differ materially from those expressed or implied by the forward looking statements.

 

Forward looking statements include, without limitation, projections relating to the Group's plans and objectives for future operations, including future revenues, financial plans and expected expenditure and divestments. All forward looking statements on this report are based upon information known to the Group at the date of this release. The Group undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.

 

It is not reasonably possible to itemise all of the many factors and specific events that could cause the Group's forward looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations of the Group.

 

 

Principal risks and uncertainties

 

The nature of pharmaceutical development is such that there are significant inherent risks due to the long term and complex development process.

 

Below are those principal risks and uncertainties that the Board considers could have a material impact on the Group's operational results, financial condition and prospects. These risks are not in any particular order of priority and there may be other risks that are either currently unknown or not considered material which could have a similar impact on the Group's business in the future.

 

The Board reviews each area of the business at least annually to identify material risks and the controls in place to manage these risks. This comprehensive review is undertaken as part of the Group's review of internal controls set out on page 32 of the 2010 Annual Report.

 

Industry risk

 

In common with other development stage businesses, Phytopharm's business risks relate principally to the success of its development stage programmes and to the need to fund its operations through these. The progress of the development programmes therefore represents the best indicator of the Group's performance and a full review of the programmes is given in the Business Review on pages 2 to 5.

 

Financial risk

 

The Group expects to continue to make losses until it is able to increase its revenues sufficiently. Additional funds such as charitable income, collaboration deals and/or further financing may be required to allow further scope for product development. The availability and timing of such additional external funds represent a material uncertainty, although the Group currently has sufficient funds to finance its operational activities for at least the next twelve months.

 

Clinical and regulatory risk

 

Successful commercialisation of the Group's products is likely to depend on successful progress through clinical studies and registration. Development of product candidates involves a lengthy and complex process, and products may not meet the necessary requirements in terms of toxicity, efficacy or safety, or the relevant regulators may not agree with the results of the Group's research and may require further testing or withhold approval altogether.

 

Competition risk

 

The Group's success depends on acceptance of the Group's products by the markets, including physicians and third party payers, and consequently the Group's progress may be adversely affected if it is unable to achieve market acceptance of its products. Factors which may affect the rate and level of market acceptance of any of the Group's products include the existence or entry on to the market of superior competing products or therapies and the price of the Group's products compared to competing products.

 

Intellectual property risk

 

The Group's success depends in part on its ability to obtain and maintain protection for its intellectual and proprietary information, so that it can stop others from making, using or selling its inventions or proprietary rights, The Group's patent applications may not be granted and its existing patent rights may be successfully challenged and revoked.

 

Counterparty risk

 

The Group relies on third party organisations to conduct its clinical trials and to manufacture its products. If the relationship with, or performance of, any of these partners is adversely affected, the Group's results or operations may be adversely impacted.

 

The Group also derives revenue or financial support from its collaborators and expects to derive additional support from partnering with certain charitable organisations. If these relationships are adversely affected, or if the products involved fail to continue to make satisfactory progress, the Group's results or operations may be adversely impacted.

 

Foreign exchange risk

 

The Group records its transactions and prepares its financial statements in sterling. Where possible the Group maintains natural hedges by matching foreign currency income with foreign currency expenditure. The Group incurs expenditure in foreign currency relating principally to clinical trials which may exceed any revenues in foreign currencies. To the extent that income and expenditure in foreign currencies are not matched, fluctuations in exchange rates between sterling and foreign currencies, principally USD and EUR, may result in realised or unrealised foreign exchange gains and losses. Where there is certainty of the amount and timing of expenditure of foreign currencies, the Group may purchase financial instruments to minimise any foreign exchange gains or losses. Where the timing and / or the amount to be received is uncertain, risk management is more difficult and the Group will use financial instruments wherever possible. To the extent that financial instruments are not utilised, any fluctuations in foreign exchange movements may have a material adverse impact on the results from operating activities.

 

 

Responsibility statement

 

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R namely:

 

Ÿ an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

Ÿ material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

 

The Directors of Phytopharm plc are listed in the Phytopharm plc Annual Report for the year ended 30 September 2010. There have been no changes in Directors since the Annual Report was issued.

 

By order of the Board

 

Zoe McGowan
Company Secretary
25 May 2011

 

 

Independent review report to Phytopharm plc

 

Introduction

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2011, which comprises the consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

PricewaterhouseCoopers LLP
Chartered Accountants
Cambridge
25 May 2011

 

Notes:

a.  The maintenance and integrity of the Phytopharm plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website.

b.  Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

 

 

Consolidated statement of comprehensive income

for the six months ended 31 March 2011

 



 Unaudited

Unaudited



Six months ended

Six months ended


Note

31 Mar 2011

31 Mar 2010



£

£

Revenue

2

61,392

 110,860

Cost of sales


-

 (6,721)

Gross profit


61,392

 104,139

Other income

2

-

 11,413

Operating expenses

3

(4,143,370)

 (2,276,111)

Operating loss


(4,081,978)

 (2,160,559)

Finance income


180,083

89,855

Loss before taxation


(3,901,895)

 (2,070,704)

Taxation

4

297,446

 159,476

Loss and total comprehensive income for the period


(3,604,449)

 (1,911,228)

Basic and diluted loss per ordinary share (pence)

5

(1.0)

 (0.9)

 

All revenues and expenses shown above were generated from continuing activities. All of the loss is attributable to the owners of the parent.

 

The notes on pages 15 to 19 form an integral part of these condensed consolidated interim financial statements.

 

 

Consolidated balance sheet

at 31 March 2011

 



 Unaudited

 Unaudited

 Audited



At

At

At



31 Mar 2011

31 Mar 2010

30 Sep 2010


 Notes

£

£

£

Non-current assets





Property, plant and equipment


94,317

 75,139

112,904

Non-current assets


94,317

 75,139

112,904

Current assets





Inventories

 6

-

 201,228

-

Trade and other receivables

 7

467,956

 270,242

480,974

Current tax receivable


263,548

 159,476

411,171

Money market investments


16,500,000

 -

22,500,000

Cash and cash equivalents


3,878,517

 26,311,285

1,108,171

Current assets


21,110,021

 26,942,231

24,500,316

Total assets


21,204,338

 27,017,370

24,613,220

Liabilities and equity





Trade and other payables

 8

1,259,624

 1,682,627

1,134,915

Current liabilities


1,259,624

1,682,627

1,134,915

Equity attributable to the owners of the parent





Ordinary shares

 9

3,467,336

 3,466,774

3,466,774

Share premium


77,280,223

 77,278,113

77,278,113

Merger reserve


(204,211)

 (204,211)

(204,211)

Accumulated loss


(60,598,634)

 (55,205,933)

(57,062,371)

Total equity


19,944,714

25,334,743

23,478,305

Total liabilities and equity


21,204,338

27,017,370

24,613,220

 

The notes on pages 15 to 19 form an integral part of these condensed consolidated interim financial statements.

 

 

Consolidated statement of changes in equity

for the six months ended 31 March 2011

 





Unaudited



 Unaudited

 Unaudited

Unaudited

Accumulated

 Unaudited


Ordinary shares

Share premium

Merger reserve

losses

Total


 £

 £

 £

 £

 £

Balance at 1 October 2009

945,484

55,709,052

(204,211)

(53,312,914)

3,137,411

Comprehensive income






Loss for the period attributable to owners of the parent

 -

 -

 -

 (1,911,228)

 (1,911,228)


 -

 -

 -

 (1,911,228)

 (1,911,228)

Transactions with owners:






Issue of ordinary shares

2,521,290

21,569,061

-

-

24,090,351

Purchase of shares in Phytopharm plc

 -

 -

-

 (2,550)

 (2,550)

Credit in respect of share options

 -

 -

-

 20,759

 20,759


2,521,290

21,569,061

-

18,209

24,108,560

Balance at 31 March 2010

3,466,774

77,278,113

(204,211)

(55,205,933)

25,334,743

Balance at 1 April 2010

3,466,774

77,278,113

(204,211)

(55,205,933)

25,334,743

Comprehensive income






Loss for the period attributable to owners of the parent

-

-

-

(1,890,286)

(1,890,286)


-

-

-

(1,890,286)

(1,890,286)

Transactions with owners:






Purchase of shares in Phytopharm plc

-

-

-

(1,335)

(1,335)

Credit in respect of share options

-

-

-

35,183

35,183


-

-

-

33,848

33,848

Balance at 30 September 2010 (audited)

3,466,774

77,278,113

(204,211)

(57,062,371)

23,478,305

Balance at 1 October 2010

3,466,774

77,278,113

(204,211)

(57,062,371)

23,478,305

Comprehensive income






Loss for the period attributable to owners of the parent

-

-

-

(3,604,449)

(3,604,449)


-

-

-

(3,604,449)

(3,604,449)

Transactions with owners:






Issue of ordinary shares

562

2,110

-

-

2,672

Purchase of shares in Phytopharm plc

-

-

-

(375)

(375)

Credit in respect of share options

--

-

-

68,561

68,561


562

2,110

-

68,186

70,858

Balance at 31 March 2011

3,467,336

77,280,223

(204,211)

(60,598,634)

19,944,714

 

The notes on pages 15 to 19 form an integral part of these condensed consolidated interim financial statements.

 

 

Consolidated cash flow statement

for the six months ended 31 March 2011

 


 Unaudited

Unaudited


Six months

Six months


ended

ended


31 Mar 2011

31 Mar 2010


£

 £

Cash flow from operating activities



Operating loss

(4,081,978)

(2,160,559)

Depreciation

28,201

 33,348

Impairment of intangible assets

-

99,400

Gain on disposal of property, plant and equipment

(15,239)

 -

Share option charge

68,561

 20,759


(4,000,455)

 (2,007,052)

Changes in working capital



Decrease / (increase) in trade and other receivables

79,745

 (42,223)

Increase / (decrease) in trade and other payables

124,709

 (64,193)

Decrease in inventories

-

 48,246

Cash used in operations

(3,796,001)

 (2,065,222)

Taxation received

445,069

 294,855

Net cash used in operating activities

(3,350,932)

 (1,770,367)

Cash flows from investing activities



Purchase of property, plant & equipment

(9,807)

 (6,121)

Sale of property, plant & equipment

15,432

 -

Investment in shares of Phytopharm plc

(375)

 (2,550)

Interest received

113,356

 89,855

Net cash generated from investing activities

118,606

 81,184

Cash flows from financing activities



Issue of ordinary shares

2,672

 25,212,904

Share issue costs

-

 (1,122,553)

Movement in money market investments

6,000,000

 -

Net cash generated from financing activities

6,002,672

 24,090,351

Movements in cash and cash equivalents in the period

2,770,346

 22,401,168

Cash and cash equivalents at the beginning of the period

1,108,171

 3,910,117

Cash and cash equivalents at the end of the period

3,878,517

 26,311,285

Money market investments at the end of the period

16,500,000

-

Total cash, cash equivalents and money market investments

20,378,517

26,311,285

 

The notes on pages 15 to 19 form an integral part of these condensed consolidated interim financial statements.

 

 

Notes to the unaudited financial statements

for the six months ended 31 March 2011

 

1.       General information, accounting policies and basis of preparation

 

Phytopharm plc is a public limited company incorporated and domiciled in the UK, with a listing on the London Stock Exchange. The address of its registered office is Lakeview House, 2 Lakeview Court, Ermine Business Park, Huntingdon, Cambridgeshire PE29 6UA.

 

Phytopharm is a development stage pharmaceutical company developing novel treatments targeting diseases with high levels of unmet need.

 

This condensed consolidated financial information was approved for issue on 25 May 2011 and comprises the consolidated interim balance sheets as at 31 March 2011 and 31 March 2010 and the year end balance sheet at 30 September 2010 together with the related consolidated interim statements of comprehensive income, cash flows and changes in equity for the periods then ended of Phytopharm plc.

 

In preparing this condensed consolidated financial information in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim financial reporting" as adopted by the European Union, management has used the principal accounting policies set out in the Group's annual financial statements for the year ended 30 September 2010, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The condensed consolidated interim financial information has not been audited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 but has been reviewed by the auditors in accordance with ISRE 2410 (UK and Ireland) issued by the Auditing Practices Board. The Group's statutory accounts for the year ended 30 September 2010 were approved by the Board of directors on 21 December 2010 and have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

Going concern

 

This interim financial information has been prepared on a going concern basis which assumes that the Company will continue in operational existence for the foreseeable future. As at 31 March 2011 the Company had cash and money market investments of £20,378,517 (31 March 2010: £26,311,285).

 

After making enquiries and taking into account management's estimate of future expenditure, the Directors have a reasonable expectation that the Group will have adequate financial resources to continue in operation for the foreseeable future.

 

Critical accounting policies

 

The preparation of the consolidated interim financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The main accounting judgement relates to the share option charge and the underlying assumptions. The Directors have assessed the inputs into the share option charge calculation and there is not considered to be a reasonable change to a metric that would result in a material change to the share option charge.

 

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

 

Accounting policies

 

The accounting policies adopted are consistent with those of the financial statements for the year ended 30 September 2010, as described in those financial statements on pages 42 to 47, except for those matters relating to the adoption of new Standards as set out below.

 

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 October 2010 but are not currently relevant to the Group:

 

IFRIC 18, 'Transfer of assets from customers' (effective 1 July 2009 but EU-endorsed for use from 31 October 2009)

Annual improvements 2009 (effective 1 January 2010)

Amendment to IFRS 1, 'First time adoption' on additional exemptions (effective 1 January 2010)

Amendment to IFRS 2, 'Share-based payments' on group cash-settled transactions (effective 1 January 2010)

Amendment to IAS 32, 'Financial instruments: Presentation' on classification of rights issues (effective 1 February 2010)

Amendment to IFRS 1, 'First time adoption' on 'Financial instrument disclosures' (effective 1 July 2010)

IFRIC 19, 'Extinguishing financial liabilities with equity instruments' (effective 1 July 2010)

The following new standards, amendments to standards or interpretations have been issued but are not effective for the financial year beginning 1 October 2010 and have not been early adopted:

Amendment to IAS 24, 'Related party disclosures' (effective 1 January 2011)

Annual improvements 2010 (effective 1 January 2011, although not yet EU-endorsed)

Amendment to IFRIC 14, 'Prepayments of minimum funding requirement' (effective 1 January 2011)

Amendments to IFRS 7, 'Financial instruments: Disclosures' on derecognition (effective 1 July 2011, although not yet EU-endorsed)

IFRS 9, 'Financial instruments' on 'classification and measurement' (effective 1 January 2013, although not yet EU-endorsed)

IFRS 10, 'Consolidation' (effective 1 January 2013, although not yet EU endorsed)

IFRS 11, 'Joint arrangements' (effective 1 January 2013, although not yet EU endorsed)

IFRS 12, 'Disclosure of interests in other entities' (effective 1 January 2013, although not yet EU endorsed)

IFRS 13, 'Fair value measurement' (effective 1 January 2013, although not yet EU endorsed)

Amendment to IAS 27, 'Separate financial statements' (effective 1 January 2013, although not yet EU endorsed)

Amendment to IAS 28, 'Investments in associates and joint ventures' (effective 1 January 2013, although not yet EU endorsed)

 

The Directors do not anticipate that the adoption of these standards will have a significant impact on the financial statements of the Group when they come into effect for periods commencing on or after 1 October 2010.

 

2.       Business and geographical segments

 

The Group's development and other functions operating across all the Group's research programmes, are managed centrally and are reported internally as a single business. The chief operating decision-maker has been identified as the Executive Directors of Phytopharm plc.  The Executive Directors review the Group's internal reporting in order to assess performance and allocate resources.  Management has determined the operating segment based on these reports.  Accordingly, the Directors consider that there is only one reporting segment.

 

Revenue by destination of the sale is as follows:

 


 Unaudited

Unaudited


Six months ended

Six months ended


31 Mar 2011

31 Mar 2010


£

 £

Revenue



Rest of Europe

4,761

 65,497

Asia

-

 45,363

South Africa

56,631

-


61,392

 110,860

Other income



USA(i)

-

 11,413


61,392

 122,273

 

(i)Represents grant income received

 

All non-current assets are located in the United Kingdom (2010: All).

 

3.       Operating expenses

 


 Unaudited

 Unaudited


Six months ended

Six months ended


31 Mar 2011

31 Mar 2010


£

£

Research and development

3,597,198

 1,619,940

Administrative expenses

546,172

 656,171


4,143,370

 2,276,111

 

4.       Tax on loss on ordinary activities

 

No corporation tax liability arises on the results for the period due to the loss incurred (2010: £nil). The Company has taken advantage of the Research and Development corporation tax credits introduced in the Finance Act 2000 whereby a company may surrender corporation tax losses incurred on research and development expenditure for a corporation tax refund at the rate of 24.5 pence on the pound of actual expenditure.

 

5.       Loss per ordinary share

 

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period after the deduction of the weighted average number of the ordinary shares held by the employee benefit trust during the period.

 

For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has no dilutive potential ordinary shares in issue because it is loss making.

 


 Unaudited

 Unaudited


Six months ended

Six months ended


31 Mar 2011

31 Mar 2010


£

£

Attributable loss (£)

(3,604,449)

 (1,911,228)

Weighted average number of shares in issue

346,586,466

 221,998,236

Basic and diluted loss per ordinary share (pence)

(1.0)

 (0.9)

 

6.       Inventories

 


 Unaudited

 Unaudited

 Audited


31 Mar 2011

31 Mar 2010

30 Sep 2010


£

£

£

Work in progress

-

 126,292

-

Raw materials and consumables

-

 74,936

-


-

 201,228

-

 

7.         Trade and other receivables

 


 Unaudited

Unaudited

 Audited


31 Mar 2011

31 Mar 2010

30 Sep 2010


£

 £

£

Trade receivables

10,290

 -

-

Other receivables

50,063

 78,877

59,926

Prepayments and accrued income

407,603

 191,365

421,048


467,956

 270,242

480,974

 

8.       Trade and other payables

 


 Unaudited

 Unaudited

 Audited


31 Mar 2011

31 Mar 2010

30 Sep 2010


£

£

£

Trade payables

327,050

 414,754

354,219

Other taxation and social security

35,001

38,831

36,364

Other payables

10,625

7,087

11,502

Accruals and deferred income

886,948

 1,221,955

732,830


1,259,624

 1,682,627

1,134,915

 

9.       Share capital

 


 Unaudited

Unaudited

 Audited


31 Mar 2011

31 Mar 2010

30 Sep 2010


£

 £

£

Allotted, called-up and fully paid




346,733,596 (31 March 2010: 346,677,433; 30 September 2010: 346,677,433 Ordinary Shares of 1 pence each)

3,467,336

 3,466,774

3,466,774

 

In the six months ended 31 March 2011, 56,163 shares were exercised under the Phytopharm Share Option Plan 2007 and the Phytopharm Save As You Earn Plan 2007 for cash consideration of £2,672.

 

In the year ended 30 September 2010, the Company issued 252,129,042 new Ordinary Shares of 1 pence each at a price of 10 pence per share for total cash consideration of £24,090,351 after the expenses of the issue. The nominal value of these shares was £2,521,290.

 

Purchase of shares in Phytopharm plc relates to the Phytopharm Share Incentive plan whereby the Company issued one "Matching Share" for every "Partnership Share" purchased by the employee. All shares are held by the scheme Trustees until the shares vest unconditionally with the employee. During the period, the Group purchased 5,171 Ordinary Shares of one pence (30 September 2010: 39,296; 31 March 2010: 25,072) at a total cost of £375 (30 September 2010: £3,885; 31 March 2010: £2,550).

 

10.     Related party transactions

 

During the six months ended 31 March 2010, £71,840 was paid in consultancy costs for the services of the Interim Chief Operating Officer, Keith Thomson. This amount was paid to Thomson Business Consultancy Limited of which Keith Thomson is a Director.

 

There have been no related party transactions in the six months ended 31 March 2011.

 

11.     Seasonality

 

The Group's financial results have not historically been subject to any significant seasonal trends.

 

12.     Post balance sheet events

 

·      A number of changes to the UK corporation tax system were announced in the March 2011 Budget Statement. Certain of these tax changes were substantively enacted on 29 March 2011. These changes included a reduction to the main rate of corporation tax by 1% to 26% from 1 April 2011.

 

Certain other changes are expected to be enacted in future Finance Bills, including further reductions to the main rate of corporation tax by 1% per annum to 23% by 1 April 2014.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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