Interim Results

RNS Number : 3127S

Futura Medical PLC

08 September 2010

 



For immediate release

8 September 2010

Futura Medical plc

("Futura" or "the Group" or "the Company")

Interim Results for the six months ended 30 June 2010

Futura Medical plc (AIM: FUM), the pharmaceutical group that develops innovative products for consumer healthcare, is pleased to announce its interim results for the six months ended 30 June 2010.

Highlights

·      Significant progress in commercial negotiations and product development including the addition of a new product opportunity, TPR100-Rx

·      CSD500 - Additional information for CE mark submitted by SSL in March 2010 with approval expected later this year, clearing the way for launch as a Durex^® branded condom

·      TPR100 - Development agreement signed with GlaxoSmithKline in June 2010

·      PET500 - Commercial negotiations ongoing with multiple potential partners

·      TPR100-Rx - New potential product opportunity, a prescription pain relief product targeting North American markets

·      Reduced net loss of £0.44 million (H1 2009: Net loss of £0.66 million)

·      Cash resources of £1.32 million at 30 June 2010 (30 June 2009: £0.96 million)

James Barder, Futura's Chief Executive, said: "We continue to make excellent progress in our product pipeline and in our commercial negotiations. CSD500 is moving steadily towards launch, commercial discussions on PET500 are progressing well and we have a new product opportunity in TPR100-Rx, which has the potential to take us into the substantial prescription pharmaceutical market of the USA. "

For any further information please contact:

Futura Medical plc
James Barder, Chief Executive	Tel: [phone]
mail to: [e-mail]	www.futuramedical.com
Nomura Code Securities Limited
Phil Walker / Giles Balleny	Tel:[phone]
For media enquiries please contact:
Buchanan Communications
Mark Court / George Prassas	Tel: [phone]

Chairman's and Chief Executive's Joint Review

The six months to 30 June 2010 was a period in which we made demonstrable progress both in advancing our pipeline of product opportunities and in our commercial relationships. Key events during the half year included the submission of additional information for the CE mark approval of CSD500 by SSL, the signing of a development agreement with GlaxoSmithKline plc for TPR100, encouraging progress in our commercial discussions for PET500 and the identification of a new opportunity in TPR100-Rx, a higher strength topical pain relief product.

TPR100-Rx is similar to TPR100 in that it combines our DermaSys^® drug delivery technology with a non-steroidal anti-inflammatory drug ("NSAID"). The NSAID is at a significantly higher dose in TPR100-Rx creating the opportunity to address serious conditions such as osteoarthritis and rheumatic pain.

Our commercial agreement with GlaxoSmithKline Consumer Healthcare on TPR100 has endorsed our topical pain relief platform and we would expect the higher dose version to attract interest from potential pharmaceutical partners. As TPR100-Rx will look to treat profound indications such as osteoarthritis and rheumatic pain it will be a prescription product.

TPR100-Rx is the sixth product in our development portfolio and we are seeking to add further products as our late stage products near commercial launch. We only include products in our development pipeline if we believe the commercial opportunity is compelling.

Our cash burn during the half year remained modest and we continue to manage our financial resources carefully to ensure that we achieve our goal of becoming a profitable, revenue-generating company in receipt of recurring royalties from multiple products. We are close to that goal. The award of the CE mark for CSD500, which we expect later this year, will be a key milestone for Futura, paving the way for its commercial launch as a Durex^® branded condom. Also, commercial discussions are ongoing with multiple partners on PET500, which, subject to the signing of a commercial agreement, could also be launched in the foreseeable future as no further clinical data is needed for a launch in the USA.

SSL International plc, our commercial partner for CSD500, announced on 21 July 2010 that its board had agreed to be acquired by Reckitt Benckiser plc ("RB") in a transaction that it expected to complete later this year subject to RB obtaining the necessary level of acceptances from SSL shareholders. We believe that the distribution strength and brand-building capabilities of RB can only be viewed positively for the Durex^® brand and for CSD500. We continue to work closely with the team at SSL to manage the project during the expected transition in ownership of SSL.

Portfolio updates - Sexual healthcare

CSD500: Condom safety device

The additional information required for CSD500's marketing authorisation was submitted at the end of March 2010 by SSL to the relevant Notified Body and we continue to expect the award of the CE mark during this calendar year. There have been ongoing discussions between SSL and the relevant Notified Body to address a small number of points ahead of CE mark approval, none of which we consider material.

CSD500 has already satisfied the majority of the requirements for CE marking including gaining a positive regulatory opinion, in November 2008, from the Competent Authority in the European Union ("EU") with respect to the pharmaceutical aspects of the product, which confirmed that CSD500 is a Class III medical device with an ancillary medicinal substance.

Preparations are underway at SSL for the commercial launch of CSD500 as a Durex^® branded condom but it is not the practice of SSL to comment publicly about its new products ahead of their launch.

As previously announced Futura commissioned a user study involving 108 couples in which CSD500 met its endpoints of: demonstrating the maintenance of a firmer erection in healthy men during intercourse whilst wearing a condom, increased penile size and a longer lasting sexual experience for women.

In addition to positive clinical data, the results of our market research reinforce the commercial potential of CSD500 with men and women who already use condoms as well as with men and women who do not currently use them. Market research, conducted by an internationally recognised research company, showed that 88% of existing condom users would be interested in purchasing CSD500 and that 49% of non-condom users would be interested in purchasing the product. The research also showed that 46% of men had experienced some loss of sensitivity when using a condom during sexual intercourse, which can lead to loss of erection. This is one reason why some men avoid condoms, thereby increasing the risks of unwanted pregnancies and contracting or spreading sexually transmitted infections ("STIs").

STIs are a serious and growing problem. In the UK, a Government report from the Health Protection Agency¹, published in August 2010, indicated that the number of new cases of STIs in the UK continues to rise and that over the past 10 years there has been a substantial increase in diagnoses of most STIs.

We have protected CSD500's unique intellectual property position throughout the world including the principal consumer markets within Europe, the USA and Canada through patents now granted or proceeding to grant in 35 countries and applications pending in a further two.

MED2002: Treatment for erectile dysfunction

MED2002, our topical gel for the treatment of men with erectile dysfunction, is also licensed to SSL and has the potential to become the world's first non-prescription pharmaceutical treatment for men with erectile dysfunction, a condition that affects, to some degree, as many as 52% of men aged 40 or over².

A simplified development plan has been outlined for MED2002, which shares the same active compound as CSD500, and it is expected that this product will be progressed after CSD500 receives CE mark approval.

PET500: Enhanced sexual control

Significant progress was made during the half year in our discussions with potential commercial partners for PET500, our enhanced sexual control product which combines our DermaSys^® AquaFree delivery system with a well-known mild topical anaesthetic compound. These discussions, with a number of potential partners, are progressing well and we look forward to updating the market on the outcome of these discussions in due course.

In considering how to market PET500, and subject to local regulatory requirements, we believe that 'enhanced sexual control' is a more attractive marketing positioning for the product. Many men that, if medically assessed, would be diagnosed as suffering from premature ejaculation would never consider themselves as suffering from this condition or seek medical treatment due to the stigma associated with the indication of premature ejaculation. We believe that a clinically proven product to treat premature ejaculation but which is marketed as a product to 'enhance sexual control' will provide a much wider potential market for the product and have greater acceptability from sufferers of premature ejaculation. It is pleasing to report that the potential commercial partners we are in discussions with share our belief that 'enhanced sexual control' represents a significant market opportunity.

We have previously announced positive results from a Phase I clinical study of 20 healthy volunteers in which PET500 was shown to give a rapid and controlled reduction in penile sensitivity, thereby having the potential to prolong the sexual experience. PET500 is designed to take effect rapidly once applied and to delay ejaculation for a period of approximately eight minutes.

PET500 has been designed to comply with the current USA Food and Drug Administration ("FDA") monograph for male genital desensitisers. The product can therefore be marketed immediately in the USA without any further regulatory approval or clinical data, a position confirmed by independent regulatory consultants based in the USA.

Portfolio updates - Pain relief management

TPR100: Topical pain relief

In June 2010, we signed an important development agreement with GlaxoSmithKline Consumer Healthcare for TPR100, our topical pain relief product. Under the terms of the agreement GSK will fully fund and be responsible for all clinical and regulatory development. GSK will also make modest annual payments to Futura whilst development work proceeds. Subject to satisfactory clinical outcomes and regulatory approvals both parties expect to enter into a commercial distribution agreement in due course.

The agreement with GSK broadens our commercial relationships and sources of potential royalty income. In addition it provides further endorsement of our DermaSys^® drug delivery technology, of our strengths in product development and of our ability to negotiate deals.

TPR100 leverages one of our key proprietary assets, DermaSys^®, a highly efficient transdermal delivery system which facilitates rapid absorption of pharmacologically active compounds through the skin. In TPR100 we are using DermaSys^® for the topical delivery of an NSAID for pain relief. Clinical tests carried out by Futura have shown that TPR100 achieves between 30 to 40 times higher bioavailability than those achieved by the market-leading product. TPR100's speed of permeation brings potential benefits including the rapid onset of action of pain relief.

We have previously consulted with relevant regulatory authorities and believe the regulatory pathway for TPR100 in a number of key commercial territories is relatively straightforward as the active compound is well-characterised and has already been approved in both oral and topical form for the indication of pain relief. The remaining clinical and regulatory work will be carried out by GSK.

TPR100-Rx: Higher strength topical pain relief for prescription based indications

When we conducted the low dose in vitro and clinical permeation studies for TPR100 we also included within these studies a significantly higher dose of the same NSAID. These studies gave positive results, showing an excellent dose-related response which offers us the potential to treat indications such as osteoarthritis and rheumatic pain that generally require a higher dose of NSAID to give an appropriate level of pain relief. TPR100-Rx, with its targeted delivery through the skin, has the potential benefit of avoiding the systemic side-effects seen in the use of oral NSAIDs.

As this will be a prescription product, which is to an extent outside of our current area of expertise, we have decided to appoint external consultants to assist us to progress TPR100-Rx commercially, which we believe represents a substantial market opportunity. It is our intention to seek a commercial partner for this product, initially targeting the North American markets of the USA and Canada.

RAD100: Rapid anaesthetic delivery

RAD100 was conceived in a similar way to TPR100-Rx in that the success of a low dose of topical anaesthetic compound in PET500 prompted us to explore the potential of a higher dose to provide rapid topical anaesthesia prior to injection, vaccination or cannulation. Demand in this market is already well developed but poorly served with treatments taking at least 30 to 45 minutes to take effect. We believe that there is clear commercial potential for a product in which the speed of onset of skin desensitisation is significantly faster. In common with TPR100-Rx, RAD100 would be a prescription product.

In early in vitro work, previously reported, we have shown a 250% increase in the rate of permeation of a topical anaesthetic across the skin using RAD100 and the DermaSys^® AquaFree delivery system when compared with an established product. This substantial increase in skin permeation is expected to equate to a more rapid onset of skin desensitisation compared to existing products.

Finance

Our retained loss for the six months ended 30 June 2010 was £441,619. Research and development ("R&D")  costs of £380,836 are slightly higher than that for the corresponding six month period ended 30 June 2009: £376,804 (year ended 31 December 2009: £810,188). Other administrative costs of £354,151 are lower than that for the corresponding six month period ended 30 June 2009: £368,274 (year ended 31 December 2009: £796,186).

The cumulative R&D spend since formation of the business in 1997 totals £10.4 million, 54.8% of total operating costs. We continue to maintain tight control over expenditure and cash and our current burn rate is approximately £90,000 per month.

Outlook

We continue to make excellent progress in our product pipeline and in our commercial negotiations. CSD500 is moving steadily towards launch, commercial discussions on PET500 are progressing well and we have a new product opportunity in TPR100-Rx, which has the potential to take us into the substantial prescription pharmaceutical market of the USA. With the proximity to commercial launch of our late-stage products we intend to add further products to our portfolio, generated from our low-cost but highly effective in-house research team.

Dr W D Potter                                                               J H Barder

Executive Chairman                                                       Chief Executive

Group Statement of Comprehensive Income

		Unaudited 6 months ended 30 June              2010	Unaudited      6 months       ended    30 June              2009	Audited  year  ended 31 December              2009
	Notes	£	£	£
Revenue	1.5	125,000	-	50,000
Grant income		-	30,000	30,000
Research and development costs		(380,836)	(376,804)	(810,188)
Administrative costs		(354,151)	(368,274)	(796,186)
Operating loss		(609,987)	(715,078)	(1,526,374)
Finance income		12,219	9,446	14,398
Loss before tax		(597,768)	(705,632)	(1,511,976)
Taxation		156,149	47,182	119,289
Total comprehensive loss for the period attributable to owners of the parent company		(441,619)	(658,450)	(1,392,687)
Loss per share (pence)	3	(0.65p)	(1.09p)	(2.24p)

All amounts relate to continuing activities.

Group Statement of Changes in Equity

		Share  capital	Share  premium	Merger  reserve	Retained losses	Total    equity
	Note	£	£	£	£	£
At 1 January 2009 - audited		115,238	13,261,376	1,152,165	(13,642,427)	886,352
Total comprehensive loss for the period		-	-	-	(658,450)	(658,450)
Share-based payment		-	-	-	14,467	14,467
Shares issued during the period	6	10,000	990,000	-	-	1,000,000
Costs of share issue		-	(81,750)	-	-	(81,750)
At 30 June 2009 - unaudited		125,238	14,169,626	1,152,165	(14,286,410)	1,160,619
Total comprehensive loss for the period		-	-	-	(734,237)	(734,237)
Share-based payment		-	-	-	29,677	29,677
Shares issued during the period	6	9,729	1,449,612	-	-	1,459,341
Costs of share issue		-	(62,591)	-	-	(62,591)
At 1 January 2010 - audited		134,967	15,556,647	1,152,165	(14,990,970)	1,852,809
Total comprehensive loss for the period		-	-	-	(441,619)	(441,619)
Share-based payment		-	-	-	22,085	22,085
At 30 June 2010 - unaudited		134,967	15,556,647	1,152,165	(15,410,504)	1,433,275

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 on 6 June 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 each period represents the total recognised income and expense for that period.

Group Statement of Financial Position

		Unaudited    30 June          2010	Unaudited    30 June          2009	Audited 31 December          2009
	Notes	£	£	£
Assets
Non-current assets
Plant and equipment		6,335	14,396	10,293
Total non-current assets		6,335	14,396	10,293
Current assets
Inventories		9,430	11,093	10,825
Trade and other receivables	4	170,457	87,944	147,761
Income tax asset		76,798	212,708	119,289
Cash and cash equivalents	5	1,321,351	964,553	1,789,173
Total current assets		1,578,036	1,276,298	2,067,048
Liabilities
Current liabilities
Trade and other payables		(151,096)	(130,075)	(224,532)
Total liabilities		(151,096)	(130,075)	(224,532)
Total net assets		1,433,275	1,160,619	1,852,809
Capital and reserves attributable to owners of the parent company
Share capital	6	134,967	125,238	134,967
Share premium	6	15,556,647	14,169,626	15,556,647
Merger reserve		1,152,165	1,152,165	1,152,165
Retained losses		(15,410,504)	(14,286,410)	(14,990,970)
Total equity		1,433,275	1,160,619	1,852,809

Group Statement of Cash Flows

	Unaudited     6 months       ended    30 June                2010	Unaudited 6 months ended 30 June 2009	Audited  year ended    31 December               2009
	£	£	£
Cash flows from operating activities
Loss before tax	(597,768)	(705,632)	(1,511,976)
Adjustments for:
Depreciation	4,402	6,097	11,178
Finance income	(12,219)	(9,446)	(14,398)
Share-based payment charge	22,085	14,467	44,144
Cash flows from operating activities before changes  in working capital	(583,500)	(694,514)	(1,471,052)
Decrease/(increase) in inventories	1,395	(658)	(390)
Increase in trade and other receivables	(23,131)	(26,986)	(84,904)
(Decrease)/increase in trade and other payables	(73,436)	(22,301)	72,157
Cash used in operations	(678,672)	(744,459)	(1,484,189)
Income tax received	198,640	-	165,526
Net cash used in operating activities	(480,032)	(744,459)	(1,318,663)
Cash flows from investing activities
Purchase of plant and equipment	(444)	-	(978)
Interest received	12,654	8,509	11,561
Cash generated by investing activities	12,210	8,509	10,583
Cash flows from financing activities
Issue of ordinary shares	-	1,000,000	2,459,341
Expenses paid in connection with share issues	-	(81,750)	(144,341)
Cash generated by financing activities	-	918,250	2,315,000
(Decrease)/increase in cash and cash equivalents	(467,822)	182,300	1,006,920
Cash and cash equivalents at beginning of period	1,789,173	782,253	782,253
Cash and cash equivalents at end of period	1,321,351	964,553	1,789,173

Notes to the Group Interim Financial Information

1.            Accounting policies

1.1          Basis of preparation

The unaudited Interim Report was approved by the Board of Directors on 7 September 2010.

The interim financial information for the six months ended 30 June 2010 and for the six months ended 30 June 2009 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 2009 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 as adopted by the European Union ("IFRSs"), does not constitute the full statutory accounts for that period. The Annual Report for 2009 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 £1.3 million at 30 June 2010, and a net cash outflow of £0.5 million 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, amendments to standards or interpretations, effective for the first time from 1 January 2010, have not had a material effect on the Group financial statements:

·      IFRS 3 (Revised) 'Business Combinations' effective 1 July 2009

·      IAS 27 (Amendment) 'Consolidated and Separate Financial Statements' effective 1 July 2009

The following new standards, amendments to standards or interpretations have been issued but are not effective for the year ending 31 December 2010 and have not been adopted early as the Directors do not expect these amendments, standards or interpretations to have a material effect on the Group financial statements:

·      'Improvements to IFRSs (2010)'

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 receiving marketing authorisation for sale 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, they comprise '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 period 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 short-term deposits with original maturities of three months or less which are held by the Group so as to be available to meet short-term cash commitments.

The Group assesses at each Statement of Financial Position date whether there is objective evidence that a financial asset is impaired.

Financial liabilities

The Group's financial liabilities comprise 'trade and other payables' recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

1.12        Government grants

Government grants are recognised at fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs defrayed are accrued and recognised in the Group Statement of Comprehensive Income over the period required to match them with the costs which they reimburse.

1.13        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.

1.14 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.

1.15        Employee benefits

(i)            Defined contribution plans

The Group provides retirement benefits to all employees and Executive Directors (except the Chairman) 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 HM Revenue & Customs joint election to transfer the employers' national insurance contribution potential liability to the employee, therefore no asset or liability arises.

(iv)          Long-term incentive scheme

The Group operates a long-term incentive scheme for the Executive Directors. The quantum of any awards receivable by the Executive Directors 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        Finance income

Interest income is recognised on a time-proportion basis using the effective interest rate method.

1.17        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

The fees invoiced in respect of the TPR100 exclusivity agreement have been recognised as revenue on an accruals basis in the Group Statement of Comprehensive Income over the period of the agreement.

(ii)          Intangible asset recognition

The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to receiving marketing authorisation for sale 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 significant 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 which at this stage is solely the UK. 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 £441,619 (six months ended 30 June 2009: loss of £658,450; year ended 31 December 2009: loss of £1,392,687) and on a weighted average number of shares in issue of 67,483,311 (six months ended 30 June 2009: 60,657,514; year ended 31 December 2009: 62,219,312).

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          2010	Unaudited    30 June          2009	Audited 31 December          2009
	£	£	£
Amounts receivable within one year:
Trade receivables	88,125	-	57,500
Other receivables	5,660	11,034	9,559
Prepayments and accrued income	76,672	76,910	80,702
	170,457	87,944	147,761

Trade receivables that are under three months past due are not considered impaired. As of each period end there were no trade receivables past due but not impaired.

The other classes within trade and other receivables do not contain impaired assets. The Group does not hold any collateral as security and the maximum exposure to credit risk at the Group Statement of Financial Position date is the fair value of each class of receivable.

5.         Cash and cash equivalents

	Unaudited    30 June          2010	Unaudited    30 June          2009	31 December          2009
	£	£	£
Cash at bank and in hand	39,564	62,918	13,961
Sterling fixed rate short-term deposits of up to three months maturity	1,281,787	901,635	1,775,212
	1,321,351	964,553	1,789,173

6.         Share capital and share premium

There were no shares issued in the six month period ended 30 June 2010.

7.       Related party transactions

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

Included within prepayments and accrued income is an amount of £618 each in respect of 'Cycle to Work Scheme' loans to J H Barder and D B Davies, Directors of the Company. The loans of £742 each were taken out in April 2010 and are repayable by twelve equal monthly instalments.

W D Potter, a Director of the Company, provides consulting services to the wholly owned subsidiary, Futura Medical Developments Limited, through Stapleford Scientific Services Limited. Of the total fees and expenses, excluding VAT, invoiced during the period of £43,527 (six months ended 30 June 2009: £42,798; year ended 31 December 2009: £86,736), the amount outstanding at 30 June 2010 including VAT was £8,549 (six months ended 30 June 2009: £8,131; year ended 31 December 2009: £8,535), which has since been settled in cash.

8.       Post statement of financial position date event

On 6 July 2010 options over 840,000 new ordinary shares were granted to employees, including Directors. Following these changes there were 2,595,000 options over new ordinary shares outstanding.

 

END

 

 

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