Preliminary Results

RNS Number : 7449R

Phytopharm PLC

22 November 2012

 



22 November 2012

Phytopharm plc

Preliminary Results

Phytopharm plc (PYM: London Stock Exchange) ("Phytopharm", the "Group", or the "Company") announces today its preliminary results for the year ended 30 September 2012. 

Business highlights

Operational

·      Recruitment into CONFIDENT-PD Phase II clinical trial of Cogane™ in untreated patients with early stage Parkinson's disease was completed in April 2012 and the last patient is expected to complete the trial in late November 2012. Headline results from the trial remain on track to be available in February 2013.

·      Cogane™ demonstrated efficacy in the "gold standard" preclinical model of amyotrophic lateral sclerosis ("ALS"), the most common form of motor neurone disease. Positive data have now been obtained in four models of ALS, providing a strong rationale for Cogane™ as a potential treatment for this devastating condition.

·      A Phase I clinical trial to evaluate Cogane™ solid dose oral formulations for up to 28 days has been initiated.

·      A study of Myogane™ in a preclinical model of glaucoma was inconclusive due to an unexpectedly low neuronal cell loss in the control group which prevented evaluation of a neuroprotective effect of Myogane™.

Corporate

·      Dr Ian Tulloch was appointed as a non-executive Board director in February 2012. As planned, Mr Sandy Morrison stepped down from the Board following the Company's Annual General Meeting in March 2012.

Financial

·      Loss after tax of £7.77 million in line with expectations reflects ongoing focus on the development of our pharmaceutical programmes (2011: £7.66 million).

·      Cash and money market investments of £8.89 million (2011: £17.57 million). Based on our current expectations Phytopharm is financed to at least the end of Q1 2014.

Mr Tim Sharpington, CEO commented: "Over the past year the Group has continued to focus on the development of its pharmaceutical pipeline whilst retaining tight financial control. Operationally, good progress has been made on the development of our lead program, Cogane™. Patient recruitment was completed in the CONFIDENT-PD Phase II clinical trial in Parkinson's disease and the preclinical study of Cogane™ in ALS (motor neurone disease) was successfully completed, the results being supportive of progression into clinical trials.

The results from CONFIDENT-PD, expected in February 2013, represent an important milestone for the Group and are eagerly awaited. Initial discussions have been held with potential partners and plans put in place for the next steps in the development of our pipeline assets, be that alone or in partnership with other companies, to ensure that we are well positioned to extract maximum value for our shareholders."

Enquiries Phytopharm plc Tim Sharpington, CEO Roger Hickling, R & D Director [phone]

Broker Peel Hunt LLP James Steel Vijay Barathan [phone]

U.K.  Investor Relations FTI Consulting Limited Ben Atwell John Dineen [phone]

For further information about Phytopharm, please see our website at http://www.phytopharm.com

 

Business Review

Strategy

Phytopharm plc ("Phytopharm") is a development stage pharmaceutical Group 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, amyotrophic lateral sclerosis ("ALS") and glaucoma.

Phytopharm operates as a virtual Group ensuring the majority of our financial resources are focussed on our pharmaceutical pipeline. We utilise a network of external scientific and clinical experts to help guide our development programmes with our experienced pharmaceutical managers overseeing operations.

Our commercially focused development programmes 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 which the Group 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/or commercial partners as appropriate.

Overview

We continue to progress our strategy of focussing on our pharmaceutical programmes, specifically on the development of Cogane™ for Parkinson's disease, and headline results from the CONFIDENT-PD clinical trial are expected in February 2013.

	Programme	2012 Key highlights
Cogane™	Parkinson's disease	CONFIDENT-PD: April 2012 - completion of recruitment	CONFIDENT-PD: Late November 2012 - last patient expected to complete
		A Phase I bioavailability clinical trial of new solid dose oral formulations initiated
	ALS	Positive data from preclinical evaluation	Charitable funding opportunities being evaluated
Myogane™	Glaucoma	Inconclusive results in a preclinical model which prevented evaluation of a neuroprotective action
P61	Inflammatory diseases	Characterisation of lead compound ongoing

Business Review (continued)

Pharmaceutical programmes

Neurodegeneration

Neurodegeneration is the umbrella term for the progressive death or loss of structure and function of neurones. Many neurodegenerative diseases, e.g. 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 Cogane™ and Myogane™, could be beneficial in more than one of these diseases.

Indication	Opportunity
Parkinson's disease	Second largest neurodegenerative disease(1)
	Estimated to affect more than 4 million people globally(1)
	Estimated to reach 8.3 to 9.3 million people by 2030(2) across the world's most populous countries(a)
	$3.0 billion market in 2011(3)
Motor neurone disease/ALS	Estimated to affect more than 400,000 people globally(4)
	Approximately 120,00 new cases diagnosed annually(5)
	Designated orphan disease
	Estimated market $211 million in 2012(6). Potential market size forecast of $2 billion(4) for effective treatment
Glaucoma	Currently the second leading cause of blindness worldwide(6)
	Estimated to affect 70 million people globally(6)
	Estimated market $3 billion in 2010(6)

(Sources: (1) Business Insights 2010; (2) European Parkinson's Disease Association 2012; (3) ASD Reports 2012; (4) ALS-TDI 2012; (5) International Alliances of ALS/MND Associations 2012; (6) Global Data 2011.)

(a)  Bangladesh, Brazil, China, France, Germany, India, Italy, Indonesia, Japan, Nigeria, Russia, Spain, UK and USA.

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 in an area of the brain, the striatum, responsible for the control of movement. This is caused by degeneration of dopaminergic neurones that project from the substantia nigra to the striatum, 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.

Motor neurone disease/ALS

ALS, also known as Lou Gehrig's disease, is the most prevalent form of motor neurone disease which generally occurs in 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 with only 50% of patients surviving 18 months  from diagnosis and only 20% surviving beyond five years from diagnosis⁽⁷⁾. There is an urgent need for the development of new approaches to treat this devastating condition.

(Source: (7) ALS-TDI 2012)

Business Review (continued)

Glaucoma

Current pharmacological treatments for glaucoma are predominantly focused 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. It is therefore believed that there is a major unmet need and a commercial opportunity for products which could successfully treat the underlying neurodegenerative process in glaucoma.

The sapogenins

Cogane™ and Myogane™ are structurally related, small molecule, chemical entities and members of the sapogenin class of compounds.

Cogane™	Myogane™
Orally bioavailable neurotrophic factor modulators that readily cross the blood-brain barrier
Demonstrated neuroprotective effects in a range of preclinical models
Induce and modulate the production of neurotrophic factors
Completed long-term toxicology studies
Formulated as once daily, orally administered therapies with good bioavailability and safety profiles
Currently being evaluated in a Phase II trial of untreated patients with early stage Parkinson's disease (CONFIDENT-PD)	Evaluated in a preclinical model of glaucoma. Data from this study will be further evaluated
Evaluated for safety and tolerability in patients with Alzheimer's disease
Positive results in preclinical models of ALS which provides strong support for the utility of Cogane™ in the treatment of this condition

Mode of action

Cogane™ and Myogane™ are therapies which are administered orally. Once absorbed by the body they readily cross the blood-brain barrier and concentrate in the central nervous system ("CNS"). Once delivered to the brain and CNS it is hypothesised that they exert their beneficial actions by modulating the production of neurotrophic factors. 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 neurotrophic factors are proteins, they cannot themselves 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.

Direct infusion 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™ therefore has the potential to overcome many of the difficulties associated with GDNF administration, whilst retaining its therapeutic promise. In preclinical models, Cogane™ modulated 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, Cogane™ modulated neurotrophic factor production and reversed the loss of dopaminergic neurones in the substantia nigra, the area of the brain most affected in Parkinson's disease.

Business Review (continued)

Cogane™ in Parkinson's disease - progress to date

The preclinical neuroprotective profile of Cogane™ suggests that it will have benefit on both motor and non-motor symptoms of Parkinson's disease. In addition its effect on restoring damaged neurones to a functioning state implies that it might result in a delay in the progression of disease in recently diagnosed patients.

Cogane™ is currently being evaluated in a multi-national Phase II, randomised, double blind, placebo controlled, dose ranging trial (CONFIDENT-PD). The trial is comparing the safety, tolerability and efficacy of three doses of Cogane™ and placebo when administered for 28 weeks to untreated patients with early-stage Parkinson's disease. The trial will assess the efficacy of Cogane™ in the treatment of both motor and non‑motor symptoms of Parkinson's disease. Recruitment into the trial completed in April 2012 and the last patient is expected to complete the trial in late November 2012. It is anticipated that headline data from the trial will be available in February 2013.

Data from preclinical models also indicates that in addition to its effectiveness as a monotherapy, Cogane™ administered in conjunction with L‑DOPA, a commonly used symptomatic treatment of Parkinson's disease, shows additional benefit over L‑DOPA alone. Other data suggests that Cogane™ co-administration reduces the side effects associated with L‑DOPA. If these effects of improved efficacy and reduced side effects of L‑DOPA by co-administration of Cogane™ are also observed in patients, this will have significant benefit in the management of patients with more severe, later stage disease.

Cogane™ is administered in a liquid formulation in the current CONFIDENT-PD clinical trial. In parallel to this trial the Group has been developing solid dose oral formulations which it believes will be a more commercially attractive proposition to take forward into Phase III registration trials and onto the market. A Phase I bioavailability clinical trial has been initiated to assess the bioavailability of these solid dose formulations of Cogane™ in healthy volunteers for a period of up to 28 days. The results of the trial are expected in early 2013.

Cogane™ in motor neurone disease/ALS - progress to date

A study of Cogane™ in the genetic "gold standard" preclinical model of ALS was completed during the period. The model has a mutation in the SOD1 gene (SOD1^G93A); mutation of the SOD1 gene is a known cause of ALS in humans. In this study, Cogane™ was administered orally for 50 days, commencing after ALS‑type symptoms had manifested. This is therefore considered to be a model of severe, late-stage ALS. The main findings from the study are:

·      administration of Cogane™ resulted in a 30 - 50% improvement in muscle strength in one muscle type compared to both the untreated control group and a group treated with riluzole (the only currently approved treatment of ALS);

·      treatment with Cogane™ also resulted in an increase in the number of motor units (a measure of functional motor neurones) compared with both the untreated and riluzole treated groups;

·      treatment effects were less clear in a second muscle type which was more severely damaged in the model, though the group treated with Cogane™ again showed an improvement in strength compared to the riluzole treated group; and

·      histopathology data shows that administration of Cogane™ reduced the loss of spinal cord motor neurones by 39% compared with the number damaged in the untreated group (a statistically significant difference; p=0.008). Treatment with riluzole resulted in a 29% but not statistically significant reduction. Additionally, microscopic examination showed that Cogane™ protected muscle composition, supporting the results on muscle strength.

This study was performed by Professor Linda Greensmith's group at University College London with the financial support of the Motor Neurone Disease Association, a UK based charitable organisation which provided a grant to cover the costs of the study.

These results support those reported previously by Phytopharm in which Cogane™ showed benefit in an environmental (toxin-induced) model of ALS, in a progressive motor neuropathy model and in a nerve crush model. Collectively the results from these four different models of motor neuron damage provide strong support for the utility of Cogane™ in the treatment of this condition.

As Cogane™ is already in clinical trials for Parkinson's disease, rapid progression into efficacy indicating trials would be possible, subject to funding.

Cogane™ has been granted Orphan Drug status by both the European Commission and by the US Food & Drug Administration for development in ALS and this will allow significant access to the regulatory authorities for advice and expedited clinical progression as well as providing financial advantages.

Business Review (continued)

Myogane™ in glaucoma - progress to date

Myogane™ has demonstrated neuroprotective effects in a range of preclinical models of neurodegenerative diseases. Specifically, Myogane™ has been shown to modulate the production of neurotrophic factors in a number of cell types and to have beneficial neuroprotective and neurorestorative effects on retinal ganglion cells, the cells which degenerate in glaucoma.

The Company has completed a study with Myogane™ in an animal model of glaucoma that was inconclusive. The study did not yield a valid result because of an unexpectedly low level of neuronal cell death in the control group which prevented evaluation of the neuroprotective effect of Myogane™.

The study was designed to evaluate the neuroprotective effects of treatment with Myogane™ in an established model of glaucoma. In this model intraocular pressure is elevated in order to induce neuronal cell loss in the retina. The endpoint was a comparative measurement of neuronal cell loss. However, the extent of induced neuronal cell loss was much less than anticipated (from literature precedent) in the control group. While there were some indications of a neuroprotective effect following Myogane™treatment, it was not possible to draw definitive conclusions because of the limited neurodegeneration in the control group. Pharmacokinetic evaluation indicated that levels of Myogane™ in the plasma were broadly in line with that expected from previous studies and that Myogane™ was present in the retina. This study was performed with the financial support of the UK Technology Strategy Board. Further tests will be conducted in glaucoma when resources permit.

P61 programme - progress to date

The P61 programme was established to investigate the known pharmacological properties of curcumin and gingerol. P61 is a series of novel new chemical entities ("NCEs") which exhibit anti-inflammatory, anti-remodelling, anti-spasmodic and TRPV1 modulating activities. This range of activity within single molecules could provide attractive therapeutic options for a number of inflammatory diseases. A lead compound has been identified and is being characterised to better understand its pharmaceutical potential.

Legacy products

Hoodia

The Council for Scientific and Industrial Research, South Africa, is continuing its evaluation of Hoodia gordonii as an appetite suppressant.

Phytopica^®

During the year we signed a global licence agreement for Phytopica^®, a natural product for canine skin health, with a Chinese company, Hebei Meiwei Chinese Medicinal Herbs Co. Limited ("Hebei Meiwei"). We have retained a commercial interest in the project and will receive a proportion of any future commercial milestones and royalties from the project following a period of further development by Hebei Meiwei.

Financial Review

The financial performance for the year ended 30 September 2012 reflects the Group's ongoing pharmaceutical development activities, particularly the progress of our pharmaceutical development programmes in neurodegenerative diseases.

During the year we have continued to progress our pharmaceutical programmes as planned whilst maintaining our lean operating structure. Alongside the development work on Cogane™ in Parkinson's disease and ALS, we have continued discussions with potential partners. We have also benefited from changes in the research and development corporation tax credit system which were confirmed during the year. Based on our current expectations, we have sufficient cash resources to at least the end of Q1 2014.

Revenue

Revenue from continuing operations for the year of £0.02 million (2011: £0.07 million) was principally generated from activities on the Group's legacy programmes.

Other income of £0.08 million (2011: £nil) has been received in respect of a grant towards the preclinical development programme for Myogane™ in glaucoma.

Research and development expenses

Our research and development expenses are in line with our expectations at £8.29 million, an increase from £7.46 million in 2011. The increase in our research and development expenses over the last two financial years reflects the investment in our development programmes, in particular the ongoing CONFIDENT-PD clinical study.

Administrative expenses

Our virtual business model allows us to operate with a low cost base which is reflected in our administrative expenses of £1.10 million (2011: £1.15 million).

Finance income

Finance income decreased to £0.21 million for the year (2011: £0.38 million) and represents interest received and receivable from our cash balances. The reduction reflects the utilisation of cash resources on our research and development programmes.

Taxation

During the year a number of changes to the research and development corporation tax credit system were confirmed. These changes included the removal of the cap on the level of refund payable at the level of PAYE and NIC paid in each year. This change has resulted in a substantial increase in the corporation tax refund for the year to £1.32 million (2011: £0.51 million). This refund is expected to be received in 2013.

Balance sheet

Non-current assets

Non-current assets representing property, plant and equipment amounted to £0.06 million at 30 September 2012 (2011: £0.08 million).

Current assets

Current assets at 30 September 2012 amounted to £10.53 million compared to £18.51 million at the same time last year. The movement during the year principally comprised the increased research and development tax credit receivable for the year of £1.32 million (2011: £0.48 million) offset by a reduction in our cash balances representing the investment in our pharmaceutical programmes.

Cash balances of £8.89 million (2011: £17.57 million) comprise money market investments and cash and cash equivalents. Money market investments represent fixed-rate, short-term deposits placed with a range of financial institutions at fixed terms with a maturity date of more than three months. Cash and cash equivalents are invested with a similar range of financial institutions for a period of 90 days or less.

Current liabilities

Our current liabilities principally comprise trade and other payables of £2.22 million at 30 September 2012, a slight decrease from £2.63 million last year.

Financial Review (continued)

Equity

Share capital and share premium amounted to £3.47 million and £77.29 million respectively at the year end and have increased slightly during the year due to the exercise of share options under which the Group issued 99,777 new ordinary shares for cash.

Cash flow

We continue to utilise our cash to fund the development of our pharmaceutical programmes and the net cash used in operating activities was £9.00 million (2011: £6.42 million). We expect to continue utilising our cash resources to fund our ongoing programmes as planned.

We expect our cash outflow to continue as we continue the progression of our pharmaceutical programmes, primarily Cogane™ in the CONFIDENT-PD clinical trial which we expect will provide us with headline data in February 2013.

Outlook

Our CONFIDENT-PD clinical study is expected to generate clinical data in February 2013, which, if positive, will allow us to maximise shareholder value by seeking late-stage development and/or commercial partners as appropriate. We are also evaluating opportunities following the successful completion of our investigations into the effects of Cogane™ in ALS which may, funding dependent, allow us to investigate further efficacy-indicating clinical trials in this indication. We will continue to evaluate funding opportunities as they arise. We also expect to complete the current phase of the P61 programme.

In line with our virtual operational structure, we will continue to outsource the majority of our operations to specialist external organisations enabling us to operate with a low headcount and minimal infrastructure. This lean operational structure confers substantial cost and technical benefits. Efficiency and cost control continue to be a key focus. Our lean operational structure continues to provide substantial cost and technical benefits as the nature and range of our activities evolve in tandem with our programmes' progress through the various stages of development.

At 30 September 2012, the Group had cash resources (being cash and cash equivalents and money market investments) of £8,887,220 (2011: £17,574,476). These cash resources are sufficient for the Group to complete the CONFIDENT-PD trial and any other ongoing research and development studies and to fund, entirely from its own existing resources, the Group's ongoing activities to at least the end of Q1 2014. Thus, 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.

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 results of operations and financial conditions, market estimates, the Group's plans and objectives for future operations, including future revenues, financial plans and expected expenditures and divestments. All forward-looking statements in this report are based on information known to the Group on 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 or results of the Group.

Principal risks and uncertainties

The nature of pharmaceutical development is such that there are significant inherent risks due to the long 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 where possible.

Industry risk

In common with other research and development stage businesses, Phytopharm's business risks relate principally to the success of its development programmes and to the need to fund its operations through these. The success of the Group's programmes depends upon the quality of the design and the implementation of each programme. The Group utilises a range of external scientific and clinical experts to help guide its development programmes. The progress of the development programmes therefore represents the best indicator of the Group's performance.

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 conclusions of the Group's research and may require further testing or withhold approval altogether. The Group manages its clinical and regulatory risk by working closely with its expert regulatory advisors and, where appropriate, seeking advice from regulatory authorities on the design of key development plans for its preclinical and clinical programmes.

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 may derive revenue or financial support from collaborators and 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. Where appropriate the Group will assess third party organisations to establish that such organisations have the required capability, expertise and financial stability to perform relevant services for the Group.

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 and overall cost effectiveness of the product. The Group works closely with its legal advisors and obtains, where necessary, opinions on the intellectual property landscape relevant to the Group's product development programmes.

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. The Group invests in maintaining and protecting this intellectual property to reduce risks over the enforceability and validity of the Group's patents. The Group works closely with its legal advisors and obtains, where necessary, opinions on the intellectual property landscape relevant to the Group's programmes and activities.

Principal risks and uncertainties (continued)

Financial risk

Cash flow

The Group has a history of operating losses which are anticipated to continue until the Group is able to generate sufficient revenues from its development programmes. However, the Group may need to seek further capital through equity or debt financings in the future and if this is not successful, the financial condition of the Group may be adversely affected. As at 30 September 2012, the Group had cash resources of £8,887,220 which the Group considers sufficient to finance its operational activities to at least the end of Q1 2014.

Counterparty credit risk

The Group is exposed to credit-related losses on cash deposits in the event of non-performance by counterparties.

With the current economic uncertainty, counterparty risk is a key consideration when placing cash funds on deposit. The Group's policy is to minimise the risks associated with cash deposits by placing them with institutions with a recognised high rating (typically A or above assigned by international credit-rating agencies) or with one of the major clearing banks. If any counterparty were to experience financial difficulties, this may impact on the Group's liquidity in the future.

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 US dollar and euro, 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.

Return on investment

The drug development process is inherently risky and is conducted over several years and consequently is extremely costly. Many drug candidates fail in development due to the clinical and regulatory risks, and even in those circumstances where drugs are approved, sales levels can be disappointing due to competition, healthcare regulation and/or intellectual property challenges. As a result the returns achieved may be insufficient to cover the costs incurred. The Group looks to mitigate the development and commercial risk of its development programmes by partnering drug candidates for late stage development and commercialisation. By partnering in this way, part of the programmes' value can be realised whilst retaining a potential upside through future milestones and royalty payments from commercial sales.

Unaudited consolidated statement of comprehensive income

for the year ended 30 September 2012

		2012		2011
		Unaudited		Audited
	Note	£		£
Revenue	2	18,717		66,659
Cost of sales		-		-
Gross profit		18,717		66,659
Other income		77,400		-
Operating expenses	3	(9,392,016)		(8,613,800)
Operating loss		(9,295,899)		(8,547,141)
Finance income		211,481		375,685
Loss before taxation		(9,084,418)		(8,171,456)
Taxation	4	1,318,109		513,126
Loss and total comprehensive losses for the year		(7,766,309)		(7,658,330)
Basic and diluted loss per ordinary share (pence)	5	(2.2)		(2.2)

All of the loss is attributable to the owners of the parent.

Unaudited consolidated balance sheet

as at 30 September 2012

		2012		2011
		Unaudited		Audited
	Note	£		£
Assets
Property, plant and equipment		62,284		83,646
Non-current assets		62,284		83,646
Trade and other receivables	6	321,562		459,954
Current tax receivable		1,318,109		479,229
Money market investments		8,600,507		14,500,000
Cash and cash equivalents		286,713		3,074,476
Current assets		10,526,891		18,513,659
Total assets		10,589,175		18,597,305
Liabilities and equity
Trade and other payables	7	2,215,453		2,633,307
Total Current liabilities		2,215,453		2,633,307
Equity attributable to owners of the parent
Ordinary shares	8	3,469,017		3,468,019
Share premium	8	77,286,854		77,283,731
Merger reserve		(204,211)		(204,211)
Accumulated losses		(72,177,938)		(64,583,541)
Total equity		8,373,722		15,963,998
Total liabilities and equity		10,589,175		18,597,305

 

 

Unaudited consolidated statement of changes in equity
for the year ended 30 September 2012

		Unaudited ordinary shares	Unaudited share premium		Unaudited merger reserve		Unaudited accumulated losses		Unaudited Total
		£		£	£		£	£
Balance at 1 October 2010		3,466,774	77,278,113		(204,211)	(57,062,371)			23,478,305
Comprehensive income
Loss attributable to owners of the parent		-	-		-	(7,658,330)			(7,658,330)
		-	-		-	(7,658,330)			(7,658,330)
Transactions with owners:
Issue of ordinary shares		1,245	5,618		-	-			6,863
Purchase of shares in Phytopharm plc		-	-		-	(373)			(373)
Credit in respect of share options		-	-		-	137,533			137,533
Transactions with owners		1,245	5,618		-	137,160			144,023
Balance at 30 September 2011 and 1 October 2011		3,468,019	77,283,731		(204,211)	(64,583,541)			15,963,998
Comprehensive income
Loss attributable to owners of the parent		-	-		-	(7,766,309)			(7,766,309)
						(7,766,309)			(7,766,309)
Transactions with owners:
Issue of ordinary shares		998	3,123		-	-			4,121
Purchase of shares in Phytopharm plc		-	-		-	(4,171)			(4,171)
Credit in respect of share options						176,083			176,083
Transactions with owners		998	3,123		-	171,912			176,033
Balance at 30 September 2012		3,469,017	77,286,854		(204,211)	(72,177,938)			8,373,722

Unaudited consolidated cash flow statement

for the year ended 30 September 2012

	Unaudited		Audited
	2012		2011
	£		£
Cash flow from operating activities
Loss for the year	(7,766,309)		(7,658,330)
Finance income	(211,481)		(375,685)
Taxation	(1,318,109)		(513,126)
Depreciation	26,905		49,804
Loss/(gain) on disposal of property, plant and equipment	383		(24,743)
Share option charge	176,083		137,533
	(9,092,528)		(8,384,547)
Changes in working capital
Decrease in trade and other receivables	35,778		17,052
(Decrease)/increase in trade and other payables	(417,854)		1,498,392
Cash used in operations	(9,474,604)		(6,869,103)
Taxation received	479,229		445,068
Net cash used in operating activities	(8,995,375)		(6,424,035)
Cash flows from investing activities
Purchase of property, plant and equipment	(5,926)		(20,800)
Sale of property, plant and equipment	-		24,997
Interest received	314,095		379,653
Net cash generated from investing activities	308,169		383,850
Cash flows from financing activities
Issue of shares	4,121		6,863
Investment in shares of Phytopharm plc	(4,171)		(373)
Movement in money market investments	5,899,493		8,000,000
Net cash generated from financing activities	5,899,443		8,006,490
Movements in cash and cash equivalents in the year	(2,787,763)		1,966,305
Cash and cash equivalents at the beginning of the year	3,074,476		1,108,171
Cash and cash equivalents at end of the year	286,713		3,074,476
Money market investments at the end of the year	8,600,507		14,500,000
Total cash, cash equivalents and money market investments	8,887,220		17,574,476

Notes to the unaudited financial information

for the year ended 30 September 2012

1.       Key accounting policies and basis of preparation

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

The principal accounting policies adopted in the preparation of this condensed consolidated financial information are set out below. These policies have been consistently applied to both years presented, unless otherwise stated. 

Basis of preparation

This condensed consolidated financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on a historical cost basis.

The results shown for 2012 are unaudited. The results shown for 2011 are audited. The consolidated financial information contained in this announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts of the Company in respect of the year ended 30 September 2011 were approved by the Board of directors on 9 December 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain an emphasis of matter paragraph nor any statement under Section 498 of the Companies Act 2006.

Going concern

Having completed patient recruitment into the CONFIDENT-PD clinical trial in patients with early-stage Parkinson's disease during the financial year, the Group expects to receive the results from the trial in February 2013. Once the trial has been completed, the Group's research and development expenditure is expected to fall substantially while the Group evaluates the results of this important milestone. Initial discussions have been held with potential partners and plans put in place for the next steps in the development of the Group's pipeline assets, be that alone or in partnership with other companies, to ensure that the Group is well positioned to extract maximum value from its programmes.

At 30 September 2012, the Group had cash resources (being cash and cash equivalents and money market investments) of £8,887,220 (2011: £17,574,476). These cash resources are sufficient for the Group to complete the CONFIDENT-PD trial and any other ongoing research and development studies and to fund, entirely from its own existing resources, the Group's ongoing activities to at least the end of Q1 2014. Thus, 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.

Basis of consolidation

The consolidated financial statements include the financial statements of Phytopharm plc (the "Company") and all its subsidiary undertakings (together the "Group"), made up to 30 September 2012.

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Accounting policies

The results for 2012 reflect the accounting policies as stated in Note 1 to the financial statements in the Annual Report and Accounts filed with Companies House in the United Kingdom for the financial year ended 30 September 2011.

Notes to the unaudited financial information

for the year ended 30 September 2012

1.         Key accounting policies and basis of preparation (continued)

Accounting developments

Current financial year

There are no IFRS or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 October 2011 that would be expected to have a material impact on the Group.

Future financial years

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 October 2011, and have not been applied in preparing these consolidated financial statements.  None of these is expected to have a significant effect on the consolidated financial statements of the Group. The following amendments to standards and new standards may impact the Group in the future:

·      Amendment to IAS 1, 'Financial statement presentation' regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' ("OCI") on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The Group is yet to assess the full impact of the amendment to IAS 1 and intends to adopt this no later than the accounting period beginning on or after 1 October 2013.

·      IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 October 2015, subject to endorsement by the EU.  The Group will also consider the impact of the remaining phases of IFRS 9 when issued.

·      IFRS 13, 'Fair value measurement', aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS or US GAAP. The Group is yet to assess IFRS 13's full impact and intends to adopt IFRS 13 no later than the accounting period beginning on or after 1 October 2013.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group.

Notes to the unaudited financial information

for the year ended 30 September 2012

2.       Segmental information

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. This also applies to the Group's marketed products. 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, being the research and development of pharmaceutical products.

The Group is domiciled in the UK. The revenue and other income from external customers in the UK is £77,400 (2011: £4,761) and the total revenue and other income from external customers in other countries is £18,717 (2011: £61,898).

Revenue analysis

The revenue analysis in the table below is based on the country of registration of the fee paying party:

	2012		2011
	Unaudited		Audited
	£		£
Revenue
Europe	17,474		4,761
Asia	1,243		-
South Africa	-		61,898
	18,717		66,659
Other income
United Kingdom (i)	77,400		-
	96,117		66,659

(i)             Represents grant income recognised

 

3.       Operating expenses

	2012		2011
	Unaudited		Audited
	£		£
Research and development	8,290,976		7,461,246
Administrative expenses	1,101,040		1,152,554
	9,392,016		8,613,800

Notes to the unaudited financial information

for the year ended 30 September 2012

4.       Taxation

	2012		2011
	Unaudited	Audited
	£		£
Current tax :
UK corporation tax
Current UK corporation tax credit on loss for the year	1,318,109		479,229
Adjustment in respect of prior year	-		33,897
Total current UK corporation tax credit on loss for the year	1,318,109		513,126

No liability to UK corporation tax arose during the year due to the loss incurred (2011: £nil).

The Group 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 12.5% to 31 March 2012 and 11% from 1 April 2012.

5.       Loss per ordinary share

	2012		2011
	Unaudited	Audited
Attributable loss (£)	(7,766,309)		(7,658,330)
Weighted average number of shares in issue	346,654,352		346,619,213
Basic and diluted loss per ordinary share (pence)	(2.2)		(2.2)

The loss per share is based on the weighted average number of shares in issue during the period. IAS 33, 'Earnings per Share', 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. No adjustment has been made to the basic loss per share, as the exercise of share options would have the effect of reducing the loss per ordinary share, and therefore is not dilutive.

Notes to the unaudited financial information

for the year ended 30 September 2012

6.       Trade and other receivables

	2012		2011
	Unaudited		Audited
	£		£
Trade receivables	-		5,581
Other receivables	103,227		86,395
Prepayments and accrued income	218,335		367,978
	321,562		459,954

7.       Trade and other payables

	2012		2011
	Unaudited		Audited
	£		£
Trade payables	523,968		665,109
Other taxation and social security	38,921		37,945
Other payables	11,541		10,662
Accrued expenses	1,641,023		1,919,591
	2,215,453		2,633,307

8.       Share capital

	Ordinary shares of 1 pence each				Share premium
	Number		£		£
At 1 October 2010	346,677,433		3,466,774		77,278,113
Issued under share option scheme	124,539		1,245		5,618
At 30 September 2011 and 1 October 2011	346,801,972		3,468,019		77,283,731
Issued under share option scheme	99,777		998		3,123
At 30 September 2012	346,901,749		3,469,017		77,286,854

Issue of shares

In the year ended 30 September 2012, the Company issued 99,777 new ordinary shares of 1 pence each for a total cash consideration of £4,121 following the exercise of share options. The nominal value of these shares was £998.

In the year ended 30 September 2011, the Company issued 124,539 new ordinary shares of 1 pence each for a total cash consideration of £6,863 following the exercise of share options. The nominal value of these shares was £1,245.

Phytopharm Share Incentive Plan 2007

Netted against the accumulated loss are purchases of shares in Phytopharm plc, which relate to the Phytopharm Share Incentive Plan 2007, under which the Company issued one "Matching Share" for every one "Partnership Share" purchased by the employee. All shares are held by the scheme Trustees until the shares vest unconditionally with the employee. During the year ended 30 September 2012, the Group purchased 55,251 (2011: 5,171) ordinary shares of 1 pence at a total cost of £4,171 (2011: £373). As at 30 September 2012, 176,851 (2011: 121,600) ordinary shares of 1 pence were held by the scheme Trustees.

Notes to the unaudited financial information

for the year ended 30 September 2012

9.       Post balance sheet events

A number of changes to the UK corporation tax system were announced in the March 2012 Budget Statement. Certain of these tax changes were substantively enacted in the Finance Act 2012 in July 2012. The impact of this has been reflected in the unrecognised potential deferred tax asset.

Certain other changes are expected to be enacted in future Finance Acts, including a reduction in the main rate of corporation tax to 22% on 1 April 2014. As at 30 September 2012, there is an unrecognised deferred tax asset of £12,671,010. If these changes were applied to this, the impact would be to reduce the potential deferred tax asset by £551,000.

10.     Related party transactions

Identity of related parties

The Group consists of a parent, Phytopharm plc, a wholly-owned trading subsidiary, Phytotech Limited, and a dormant subsidiary, Phytodevelopments Limited.

The parent company is responsible for financing and setting Group strategy. Phytotech Limited carries out the Group's research and development strategy, employs all the staff including the executive directors and manages the Group's intellectual property. The proceeds of the issue of shares by the parent are passed from Phytopharm plc to Phytotech Limited as a loan and Phytotech Limited manages the Group's funds and makes payments, including managing the payments of the parent company.

Group

Under IAS 24, 'Related Party Disclosures' the Group is not required to disclose intra-group transactions which are eliminated on consolidation.

Company

The Company has been charged £529,771 (2011: £548,148) for corporate services provided by subsidiary undertakings. The Company provides financing to its subsidiary undertakings.

 

END

 

 

FR FEEFUFFESEFF