Interim Results

Ardana PLC 09 October 2007 Ardana: Interim Results for the six months ended 30 September 2007 Ardana plc (LSE: ARA) the pharmaceutical company focused on improving human reproductive health, today announces its Interim Results for the six months ended 30 September 2007. Highlights in the period • Teverelix Long Acting (LA) - Positive preliminary results of a further Phase II trial demonstrating extended duration of action in patients with prostate cancer - Licensing discussions are progressing well with several potential partners at different stages of negotiation. In addition, discussions have broadened with approaches from new parties interested in the opportunity following the recent Phase II results. • ARD-07, oral Growth Hormone Secretagogue (GHS) - Orphan Drug status granted by US Food and Drug Administration (FDA) - Commencement of pivotal registration study in the US for the diagnosis of growth hormone deficiency • Emselex(R) - Favourable assessment from the Scottish Medicines Consortium (SMC) which means that Emselex(R) is approved for use in NHS Scotland Key Financials • Total cash and cash equivalents at 30 September 2007 of £11.0 million (31 March 2007: £16.6 million) • The development programme will be managed and scheduled in line with available funds. Outlicensing deals and/or financing will be required to support the company's development programme as currently planned over the next twelve months. • Loss before tax for the six months ended 30 September 2007 of £6.9 million (six months ended 30 September 2006: £5.5 million) Post period events • Dr Maureen Lindsay steps down as CEO • Dr Huw Jones is appointed CEO with immediate effect. Please see separate press release issued on 8 October 2007 for details. Simon Best, Chairman, commented 'The last six months have seen us make good progress across all aspects of Ardana's business. We continue to discuss with potential partners an out-licensing deal for Teverelix LA. Concluding a deal that will allow us to maintain the company's planned development programmes across our range of products remains management's top priority. Our product pipeline has continued to make progress in clinical development. During the last six months we have reached the important milestone of entering Testosterone Cream and Oral GHS into Phase III clinical development. Subject to successful completion of the on-going pivotal studies, we have five potential regulatory filings in the US and EU in the next twenty four months.' Enquiries For more information contact: Simon Best/Huw Jones + 44 (0) 131 226 8550 Ardana Julia Phillips/John Gilbert +44 (0) 20 7831 3113 Financial Dynamics (corporate and financial media relations) About Ardana Ardana plc is a pharmaceutical company focused on the discovery, development and marketing of innovative products to improve human reproductive health, a $25.5 billion market*. Since its foundation, Ardana has built a broad and balanced portfolio to manage risk and actively pursue product and technology in-licensing and out-licensing to maintain a robust pipeline. Ardana's key products are summarised below: • Teverelix LA, in development for three initial indications (prostate cancer, benign prostatic hyperplasia and endometriosis); • ARD-07 a growth hormone secretagogue in Phase III development for the diagnosis of growth hormone deficiency in adults; • Testosterone Cream, a trans dermal testosterone delivery system in development for the treatment of male hypogonadism, in Phase III trials; • InvicorpTM, an injectable combination drug treatment for erectile dysfunction, for which Ardana has marketing and manufacturing rights in Europe and has been launched in Denmark; • Emselex(R), a once a day treatment for the symptoms of overactive bladder syndrome, for which Ardana has exclusive UK marketing and promotion rights and is being distributed in collaboration with Novartis UK Limited; and • StriantTM SR, a testosterone replacement therapy that has been launched by Ardana through its own sales force in the UK and through marketing partners in certain European countries, as a treatment for men with confirmed hypogonadism. In addition, Ardana has a strong portfolio of follow-on products in development. Ardana is listed on the Main Market of the London Stock Exchange. For further information please see www.ardana.co.uk *Source: IMS Retail Drug Monitor November 2005. Statements contained within this press release may contain forward-looking comments which involve risks and uncertainties that may cause actual results to vary from those contained in the forward-looking statements. In some cases, you can identify such forward-looking statements by terminology such as 'may', ' will', 'could', 'forecasts', 'expects', 'plans', 'anticipates', 'believes', ' estimates', 'predicts', 'potential', or 'continue'. Predictions and forward-looking references in this press release are subject to the satisfactory progress of research which is, by nature, unpredictable. Forward projections reflect management's best estimates based on information available at the time of issue. RESPONSIBILITY STATEMENT We confirm that to the best of our knowledge: a. the condensed set of financial statements has been prepared in accordance with IAS 34; b. the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and c. the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosures of related party transactions and changes therein). By order of the Board Chief Executive Officer 9 October 2007 INTERIM MANAGEMENT STATEMENT Introduction I am pleased to report that the last six months have seen us make good progress across all aspects of Ardana's business. Concluding an out-licensing deal for Teverelix LA remains management's top priority, and we are at different stages of negotiation with several potential partners. In addition, following the recent publication of the positive Phase II data on prostate cancer the discussions have broadened with approaches from other new parties interested in the opportunity. In the meantime, the development programmes will be managed and scheduled in line with available funds. Outlicensing deals and/or financing will be required to support the company's planned development activities as outlined below over the next twelve months. Clinical development has progressed satisfactorily across our product pipeline. During the last six months we have commenced our first Phase III studies for Testosterone Cream and Oral GHS. Subject to successful completion of these on-going pivotal studies, we have five potential regulatory filings in the US and EU in the next twenty four months. Product Pipeline Teverelix LA - Overview Ardana is developing the long acting formulation of its Gonadotrophin Releasing Hormone (GnRH) antagonist, Teverelix LA, to treat three indications; prostate cancer, benign prostatic hyperplasia (BPH) and endometriosis. We continue to discuss with potential partners an out-licensing deal for Teverelix LA. Teverelix LA - Prostate Cancer During September 2007 we announced positive preliminary results from a further Phase II study in patients with prostate cancer, demonstrating a new dose regimen extended to 8 weeks from 4 weeks. The progression of prostate cancer is driven by male sex hormones (androgens) such as testosterone. It is widely accepted that reducing levels of these hormones in advanced stage disease can help slow the growth of the cancer and prolong survival. The production of testosterone can be reduced surgically by the removal of the testes, or through medicines that affect the production of testosterone. Previous Phase II studies have confirmed that Teverelix LA can attain and maintain suppression of testosterone to castration level for at least 4 weeks in patients with prostate cancer. The preliminary data from this new study has demonstrated a dosage regimen that can extend this duration of action to at least 8 weeks. Our other Phase II study evaluating a 4-weekly repeat dose regimen is on-going but preliminary data is anticipated Q1 2008. Teverelix LA - Benign Prostatic Hyperplasia (BPH) The Phase II studies of Teverelix LA in the indication of BPH are completed and the analyses are on-going. Teverelix LA - Endometriosis Teverelix LA is currently in Phase I development in the indication of endometriosis. Data from Phase I studies indicate that Teverelix LA can reduce oestrogen levels to a desired level at the lower end of the normal range which should help to avoid menopausal signs and symptoms including bone loss. These studies provide data to support the further development of Teverelix LA in endometriosis, a condition with an unmet medical need. A pre-IND meeting has been arranged with the FDA for 7th November 2007 and a Phase II study in the US is currently planned for 2008. ARD-07, oral Growth Hormone Secretagogue ARD-07 (Oral GHS) is an oral formulation of a growth hormone secretagogue (GHS). This is a novel small molecule size peptidomimetic agent (a compound that mimics the biological action of a peptide). Based on clinical results to date we believe that Oral GHS can stimulate growth hormone secretion from the pituitary gland directly and/or indirectly via stimulation of growth hormone releasing peptide (GHRP) from the hypothalamus. Ardana is developing Oral GHS for the diagnosis of growth hormone deficiency (GHD) in adults. The pivotal registration study is ongoing. Recruitment of patients has been continuing according to plan however the availability of the closely matched subjects defined for the trial, a specific requirement for a diagnostic agent, is proving very challenging. We have been opening up additional centres to speed up the recruitment of the matched controls. If development activity is maintained as planned, management expect that the NDA for registration of Oral GHS in the US would be likely to be in the first half of 2008. Ardana believes that GHS' oral formulation will give clinicians a simpler and more effective test for GHD. During May 2007 we announced that the FDA has granted Orphan Drug status for Oral GHS as a diagnostic for growth hormone deficiency in adults. We are delighted with this grant, which confers a number of advantages such as eligibility to apply to the FDA for grants towards clinical development and the waiving of the User Registration Fee of approximately $900,000. Furthermore, as well as being developed as a diagnostic for GHD, potential applications for Oral GHS include the diagnosis and treatment of GHD disorders and frailty of the elderly, as well as metabolic complications associated with critical illness, such as cachexia, trauma, uremia and lipodystrophy. The current worldwide market for growth hormone products is approximately US$3.1 billion, and forecast to grow to US$3.87 billion by 2010, (Wood Mackenzie Product View, April 2006). The market is currently served by injectable recombinant human growth hormone. We believe our compound has the potential to be the first oral product in this market. It is expected that market entry of Oral GHS as a diagnostic would provide Ardana with a strong platform from which to develop Oral GHS as a therapeutic agent. Testosterone Cream Testosterone Cream is a transdermal testosterone delivery system based on our Bi-Gel technology, which is in development for the treatment of male hypogonadism. A pivotal Phase III registration study in the US is ongoing. Patient recruitment is slower than expected due to a combination of higher screen-failure rate than anticipated compounded and prolongation of the time to stabilize on treatment. We are finding that a high proportion of potential patients currently on treatment have normal testosterone levels even after washout, making them ineligible for the study. However, we are working with the investigational sites to maximize all efforts on recruiting suitable subjects, including treatment naive patients. If development activity is maintained as planned and the current rate of screening failure remains the same, we would expect that the application for registration of Testosterone Cream would be likely to be in H2 2008. Further Phase II studies to support registration are ongoing. Management believes that Testosterone Cream has the potential to offer a number of advantages over existing gel-based testosterone products; including more efficient delivery, reduced alcohol content and overall more patient-friendly, lotion-like consistency. We continue to be optimistic about the market potential for our novel Testosterone Cream both in the US and Europe. InvicorpTM InvicorpTM is an injectable treatment for erectile dysfunction. Marketing Authorisations for InvicorpTM have been granted in Denmark and Ardana launched there during December 2006. The product is also supplied on a named patient basis, under a Specials licence in the UK. The European Mutual Recognition Procedure (MRP) to obtain marketing authorisations in other European territories is expected to commence shortly, with Denmark acting as the Reference Member State. Management believes that the potential competitive advantages (e.g. less pain associated with the injection) over existing alprostadil-based products means that InvicorpTM should be able to establish a significant market position. Marketed Products Emselex(R) Ardana launched Emselex(R) (darifenacin hydrobromide) in October 2006 in the UK and it is marketed in collaboration with Novartis Pharmaceuticals UK Limited (' Novartis'). During June 2007 we announced positive advice from the Scottish Medicines Consortium (SMC) about Emselex. The OAB market is currently estimated to be approximately £90 million per annum, of which Scotland contributes £10.5 million (source: IMS Health). Emselex(R) is an oral once-daily muscarinic M3 selective receptor antagonist (M3 SRA) for the treatment of overactive bladder ('OAB'). Symptoms of OAB include urinary urgency (a sudden and compelling desire to pass urine) with, or without, urge urinary incontinence (involuntary leakage accompanied or immediately preceded by urgency), usually with urinary frequency (voiding the bladder too often), and nocturia (waking at night one or more times to void the bladder). Emselex(R) has shown favourable efficacy, a low incidence of cardiovascular adverse events and in elderly healthy volunteers did not significantly impair memory function. We believe that Emselex(R) offers health professionals an effective and well tolerated new treatment option for patients who experience overactive bladder symptoms. The SMC opinion, along with other formulary acceptance, has contributed to increasing growth in Emselex(R) revenue. StriantTM SR StriantTM SR is a mucoadhesive buccal (gum surface) testosterone replacement therapy for confirmed male hypogonadism. StriantTM SR is marketed to urologists and endocrinologists in the UK by Ardana's own sales force and in Germany, the Nordic Region and the Republic of Ireland by our partners. We will continue to develop our distribution capability around Europe with the appointment of further strategic partners. Financial review The unaudited financial information for the six months ended 30 September 2007 is prepared in accordance with the group's accounting policies based on International Financial Reporting Standards (IFRSs) as adopted by the European Union. On 30 September 2007, Ardana had cash and cash equivalents of £11.0 million (31 March 2007: £16.6 million). Net cash used by operating activities in the six months ended 30 September 2007 was £5.9 million (six months ended 30 September 2006: £5.8 million) due principally to the investment in research and development during the period. Total product sales of StriantTM SR for the six months ended 30 September 2007 were £56,000 (six months ended 30 September 2006: £130,000). Like for like sales of StriantTM SR in the UK and Republic of Ireland have increased. Overall sales are down due to the timing of bulk sales to European partners, which are not evenly spaced across periods. Total revenue from sale of services for the six months ended 30 September 2007 were £91,000 (six months ended 30 September 2006: nil). Research and development expenditure for the six months ended 30 September 2007 was £4.9 million (six months ended 30 September 2006: £4.1 million). This increase in costs reflects the additional clinical activity undertaken across the portfolio during this period outlined above. Operating loss for the six months ended 30 September 2007 was £7.2 million (six months ended 30 September 2006: £5.8 million), which is driven by increased sales and marketing activity related to the promotion of EmselexTM. Risks and uncertainties There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. Industry Risk The nature of pharmaceutical development is such that drug candidates may not be successful due to an inability to demonstrate in a timely manner the necessary safety and efficacy in a clinical setting to the satisfaction of appropriate regulatory bodies. The Group may be unable to attract, by itself or from partners, the funding necessary to meet the high cost of developing its products through to successful commercialisation. Financial Risk Ardana is currently a loss making business which is not sustained by product revenues alone. For the remainder of the year and the foreseeable future, as Ardana continues to invest in its development pipeline, the Group will require external funds such as income from a range of potential collaboration deals and/ or further financing. The ability of the Group to generate such external financing, and thereby to maintain its development activities at their currently planned levels and timelines, is discussed below. Outlook Ardana is in discussions with potential partners to collaborate on the future development and commercialisation of Teverelix LA, and concluding these discussions is management's top priority. On the strength of interest shown to date by external parties in the product, and taking into account the stage of current discussions, management firmly believes that completing a deal is achievable. However, the timing and value of any deal is uncertain and Ardana's existing cash resources are unlikely to be sufficient to fund all of the company's development activities for the next twelve months as currently planned. Therefore, until such a deal is concluded, the Directors will manage the Group's resources prudently and where appropriate reschedule its activities in line with available funds. We look forward with confidence to building on the achievements of the first six months and to our new CEO Dr Huw Jones reporting on our plans for commercialisation, outlicensing and development of our products. INDEPENDENT REVIEW REPORT TO ARDANA PLC 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 30 September 2007 which comprises the income statement, the balance sheet, the cash flow statement, the statement of changes in equity, and related notes 1 to 8. 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. This report is made solely to the company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. 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 3, 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. 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 inquiries, 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 accompanying interim financial information 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. Deloitte & Touche LLP Chartered Accountants and Registered Auditor 9 October 2007 Edinburgh, United Kingdom Condensed consolidated income statement 6 months ended 30 September 2007 Notes 6 months ended 30 6 months ended 30 Year ended 31 September September March 2007 2006 2007 £'000 £'000 £'000 Revenue: continuing operations Product revenue 66 130 240 Revenue from sale of services 91 - 17 _____ ____ ____ Total revenue 4 157 130 257 Operating expenses Cost of product sales (16) (34) (69) Research and development (4,870) (4,094) (8,889) Other operating expenses (2,478) (1,829) (4,324) ____ ____ ____ Total operating expenses (7,364) (5,957) (13,282) ____ ____ ____ Operating loss: continuing operations 7 (7,207) (5,827) (13,025) Interest receivable 352 358 817 ____ ____ ____ Loss on ordinary activities before taxation (6,855) (5,469) (12,208) Taxation 469 291 837 ____ ____ ____ Loss for the financial year (6,386) (5,178) (11,371) ____ ____ ____ Basic and diluted loss per share 6 (9.7p) (9.3p) (18.9p) ____ ____ ____ Condensed consolidated balance sheet At 30 September 2007 Notes 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Non-current assets Intangible assets 5 554 600 585 Property, plant and equipment 19 9 14 ____ ________ ____ 573 609 599 Current assets Inventories 54 40 298 Trade and other receivables 652 926 738 Research and development tax credits 469 960 837 receivable Cash and cash equivalents 10,984 13,737 16,576 ____ ____ ____ 12,159 15,663 18,449 ____ ____ ____ Total assets 12,732 16,272 19,048 ____ ____ ____ Current liabilities Trade and other payables (2,466) (3,811) (2,510) ____ ____ ____ Total liabilities (2,466) (3,811) (2,510) ____ ____ ____ Net assets 10,266 12,461 16,538 ____ ____ ____ Equity Share capital 655 557 655 Other equity 489 290 375 Share premium account 37,135 27,048 37,135 Merger reserve 34,451 34,451 34,451 Own shares (13) (13) (13) Retained earnings (62,451) (49,872) (56,065) ____ ____ ____ Total equity 10,266 12,461 16,538 ____ ____ ____ Condensed consolidated cash flow statement 6 months ended 30 September 2007 Notes 6 months ended 6 months Year 30 September ended 30 September ended 31 March 2007 2006 2007 £'000 £'000 £'000 Cash flows from operating activities Cash used by operations 7 (6,771) (6,258) (14,212) Corporation tax received 837 491 1,160 ____ ____ ____ Net cash used by operating activities (5,934) (5,767) (13,052) ____ ____ ____ Investing activities Interest received 352 344 817 Purchases of property, plant and equipment (10) (3) (13) Purchase of product rights - - (600) ____ ____ ____ Net cash from investing activities 342 341 204 ____ ____ ____ Financing activities Issue of shares - 30 11,023 Cost of share issue - - (1,068) Equity share options exercised - - 330 Sale of own shares - 82 88 ____ ____ ____ Net cash from financing activities - 112 10,373 ____ ____ ____ Net decrease in cash and cash equivalents (5,592) (5,314) (2,475) Cash and cash equivalents at beginning of period 16,576 19,051 19,051 ____ ____ ____ Cash and cash equivalents at end of period 10,984 13,737 16,576 ____ ____ ____ Condensed consolidated statement of changes in equity 6 months ended 30 September 2007 Share Other Share premium Merger Own Retained Total capital equity reserve shares earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 1 April 2007 655 375 37,135 34,451 (13) (56,065) 16,538 _____ _____ _____ _____ _____ _____ _____ Recognised directly in equity Share-based payment - 114 - - - - 114 _____ _____ _____ _____ _____ _____ _____ Net change directly in - 114 - - - - 114 equity _____ _____ _____ _____ _____ _____ _____ Loss for the period - - - - - (6,386) (6,386) _____ _____ _____ _____ _____ _____ _____ Total movements - 114 - - - (6,386) (6,272) _____ _____ _____ _____ _____ _____ _____ Equity at the end of the 655 489 37,135 34,451 (13) (62,451) 10,266 period _____ _____ _____ _____ _____ _____ _____ Condensed consolidated statement of changes in equity 6 months ended 30 September 2006 Share Other Share Merger Own Retained Total capital equity premium reserve shares earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 1 April 2006 556 240 26,949 34,451 (95) (44,700) 17,401 _____ _____ _____ _____ _____ _____ _____ Recognised directly in equity Issue of shares 1 - 99 - - - 100 Movement in own shares - - - - 82 - 82 Gain on sale of EBT shares - - - - - 6 6 Share-based payment - 50 - - - - 50 _____ _____ _____ _____ _____ _____ _____ Net change directly in 1 50 99 - 82 6 238 equity _____ _____ _____ _____ _____ _____ _____ Loss for the period - - - - - (5,178) (5,178) _____ _____ _____ _____ _____ _____ _____ Total movements 1 50 99 - 82 (5,172) (4,940) _____ _____ _____ _____ _____ _____ _____ Equity at the end of the 557 290 27,048 34,451 (13) (49,872) 12,461 period _____ _____ _____ _____ _____ _____ _____ Condensed consolidated statement of changes in equity 12 months ended 31 March 2007 Share Other Share Merger Own Retained Total capital equity premium reserve shares earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 1 April 2006 556 240 26,949 34,451 (95) (44,700) 17,401 _____ _____ _____ _____ _____ _____ _____ Recognised directly in equity Issue of shares 96 - 10,927 - - - 11,023 Cost of share issue - - (1,068) - - - (1,068) Equity share options 3 - 327 - - - 330 exercised Movement in own shares - - - - 82 - 82 Gain on sale of EBT shares - - - - - 6 6 Share-based payment - 135 - - - - 135 _____ _____ _____ _____ _____ _____ _____ Net change directly in equity 99 135 10,186 - 82 6 10,508 _____ _____ _____ _____ _____ _____ _____ Loss for the period - - - - - (11,371) (11,371) _____ _____ _____ _____ _____ _____ _____ Total movements 99 135 10,186 - 82 (11,365) (863) _____ _____ _____ _____ _____ _____ _____ Equity at the end of the period 655 375 37,135 34,451 (13) (56,065) 16,538 _____ _____ _____ _____ _____ _____ _____ Notes to the condensed consolidated financial information 6 months ended 30 September 2007 1. General information The comparative financial information for the year ended 31 March 2007 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. Basis of preparation Going concern Ardana is currently a loss making business which is not sustained by product revenues alone. For the foreseeable future and over the next year, as Ardana continues to invest in its development pipeline, the company's activities will require external funds such as income from collaboration deals, and/or further financing. The 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 30 September 2007 Ardana had cash resources of £11.0 million. The Directors have reviewed the working capital requirements of the Group over the next twelve months. The Group's working capital requirements are sensitive to future events such as collaboration deals, which typically result in upfront and milestone cash receipts. Ardana is in discussions with potential partners to collaborate on the future development and commercialisation of Teverelix LA and other products in its portfolio. Management believes that completing a deal on Teverelix LA is achievable, but the timing and value of any deal is uncertain. Until such a deal is concluded the Directors will manage the Group's resources prudently and where appropriate reschedule its activities in line with available funds. The directors continue to consider other options for funding the business. 3. Accounting policies The condensed set of financial statements has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting'. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. Change in accounting policies In the current financial year, the Group will adopt International Financial Reporting Standard 7 'Financial Instruments: Disclosures' (IFRS7) for the first time. As IFRS7 is a disclosure standard, there is no impact of that change in accounting policy on the half-yearly financial report. Full details of the change will be disclosed in our annual report for the year ended 31 March 2008. 4. Business and Geographical Segments Primary reporting format - business segments The Directors consider that the primary reporting format is by business segment. The Group discovers, develops and markets a range of pharmaceutical products. The Directors consider that there is only one business segment, being pharmaceuticals. A key part of the Company's strategy is to realise the value of its intellectual property portfolio through co-development and outlicensing opportunities which may generate significant revenue in the future, however, at present this does not represent a separate segment for reporting. Secondary reporting market - geographical segments The Group's operations are located in the UK, with commercialisation and development activities being carried out in the UK and the Rest of Europe. The following table provides an analysis of the Group's revenue by geographical market. Revenue from external customers by geographical market 6 months ended 6 months ended 30 Year 30 September September ended 31 March 2007 2006 2007 £'000 £'000 £'000 UK 153 51 131 Rest of Europe 4 79 126 ____ ____ ____ 157 130 257 ____ ____ ____ The following table is an analysis of the carrying amount of segment assets. Total assets by geographical market 6 months ended 6 months ended 30 Year 30 September September ended 31 March 2007 2006 2007 £'000 £'000 £'000 UK 10,266 12,461 16,538 Rest of Europe - - - ____ ____ ____ 10,266 12,461 16,538 ____ ____ ____ 5. Intangible assets Product rights and other intangible assets acquired are initially recorded at cost and amortised over their useful life on a straight line basis from the date of the commercial launch. In the year ended 31 March 2007 £0.6 million was capitalised in relation to the acquired product rights for Emselex(R) in the UK. 6. Loss per share Basic loss per share is calculated by dividing the loss for the financial period after taxation by the weighted average number of ordinary shares in issue during the year. The basic loss per share is calculated as follows:- 6 months ended 6 months ended 30 Year 30 September September ended 31 March 2007 2006 2007 £'000 £'000 £'000 Loss after taxation (£'000) (6,386) (5,178) (11,371) Weighted average number of ordinary shares in issue 65,511,729 55,570,020 60,158,787 ____ ____ ____ Basic loss per share (9.7p) (9.3p) (18.9p) ____ ____ ____ IAS requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss making company with outstanding share options, net loss per share would only be increased by the exercise of out-of-money options. Since it seems inappropriate to assume that option holders would exercise out-of-money options, no adjustment has been made to diluted loss per share for out-of-money share options. 7. Cash used by operations 6 months ended 6 months ended 30 Year 30 September September ended 31 March 2007 2006 2007 £'000 £'000 £'000 Operating loss (7,207) (5,827) (13,025) Depreciation 5 9 14 Amortisation of intangible assets 31 - 15 Decrease in inventories 244 36 (222) Increase in trade and other receivables 86 (383) (279) Decrease in trade and other payables (44) (149) (850) Share-based payments 114 50 135 Gain on sale of EBT shares - 6 - ____ ____ ____ Cash used by operations (6,771) (6,258) (14,212) ____ ____ ____ 8. Related party transactions There have been no related party transactions entered into by the Group during the first six months of the current financial year. This information is provided by RNS The company news service from the London Stock Exchange

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