Aura Renew Acq Regulatory News (ARA)

13 Dec 2005 07:00

Ardana PLC13 December 2005 Ardana: Interim Results for the six months ended 30 September 2005 Ardana plc (LSE: ARA) the emerging pharmaceutical company focused on improvinghuman reproductive health, today announces its Interim Results for the sixmonths ended 30 September 2005. Highlights Year to Date • Teverelix Long Acting (LA) - prostate cancer - Positive results in Phase II trial - Pre-Investigational New Drug (IND) application meeting with the United States Food & Drug Administration (FDA) • Teverelix LA - benign prostatic hyperplasia - Positive results in Phase II trial - Pre-Investigational New Drug (IND) application meeting with the FDA - Projected development time reduced by up to two years with potential launch in 2010 • Oral Growth Hormone Secretagogue - Positive results in Phase I trial • StriantTM SR - Launch in Germany through Cytochemia AG - Launch in Republic of Ireland through Mode Medical - Agreement with Pharmacuro ApS for marketing in Scandinavia Key Financials • Operating loss for the six months ended 30 September 2005 of £4,185,000 (2004: £4,094,000) • Total cash and available-for-sale investments of £24.8 million (2004: £13.5 million) Dr Maureen Lindsay, CEO, commented "During the first half of the financial yearwe have made significant progress across all aspects of Ardana's business. Inaddition to the UK, StriantTM SR has now been launched in Germany and theRepublic of Ireland and a marketing partner has been appointed in Scandinavia.Our second commercial-stage product, InvicorpTM, an injectable treatment forerectile dysfunction, is proceeding well towards an anticipated launch in thesecond half of 2006. In clinical development, our compounds are advancing and,in particular, we are pleased with the positive outcomes of our discussions withthe US Food and Drug Administration in relation to Teverelix LA for bothprostate cancer and BPH. We are also progressing our development of TeverelixLA for the indication of endometriosis. We are confident that we will be ableto continue to deliver good news on a number of fronts during the remainder ofthe financial year." Enquiries For more information contact: Maureen Lindsay + 44 (0) 131 226 8550Ardana Julia Phillips/Davina Langdale +44 (0)20 7831 3113Financial Dynamics(corporate and financial media relations): Nicki Brimicombe + 44 (0)1883 732353NB Public Relations(trade and technical media relations): About Ardana Ardana plc is a pharmaceutical company focused on the discovery, development andmarketing of innovative products to improve human reproductive health, a $23.8billion market*. Since its foundation, Ardana has maintained a broad and balanced portfolio tomanage risk and actively pursues product and technology in-licensing andout-licensing to maintain a robust pipeline. Ardana's four lead products are summarised below: • StriantTM SR, a testosterone replacement therapy that has already been launched by Ardana through its own sales force in the UK as a treatment for men with hypogonadism and for which Ardana has marketing rights in Europe; • Teverelix LA, in development for three initial indications (prostate cancer, benign prostatic hyperplasia and endometriosis); • Testosterone cream, a trans dermal testosterone delivery system in development for the treatment of male hypogonadism, has now commenced Phase II trials; • Invicorp, an injectable combination drug treatment for erectile dysfunction, for which Ardana has marketing and manufacturing rights in Europe. In addition, Ardana has a strong portfolio of follow-on products in development. Ardana completed its IPO on the London Stock Exchange in March 2005 raising £21million. For further information please see www.ardana.co.uk *Source: IMS Retail Drug Monitor October 2004: key drug purchases in the 12months to October 2004 for the Genito-Urinary and Hormone classes Statements contained within this press release may contain forward-lookingcomments which involve risks and uncertainties that may cause actual results tovary from those contained in the forward-looking statements. In some cases, youcan identify such forward-looking statements by terminology such as 'may', 'will', 'could', 'forecasts', 'expects', 'plans', 'anticipates', 'believes', 'estimates', 'predicts', 'potential', or 'continue'. Predictions andforward-looking references in this press release are subject to the satisfactoryprogress of research which is, by nature, unpredictable. Forward projectionsreflect management's best estimates based on information available at the timeof issue. CHIEF EXECUTIVE'S STATEMENT Introduction I have great pleasure in presenting Ardana's first interim report for the sixmonths to 30 September 2005. During the first half of the financial year we have made progress across allaspects of Ardana's business. In addition to the UK, StriantTM SR has now beenlaunched in Germany and the Republic of Ireland and a marketing partner has beenappointed in Scandinavia. The commercial development of InvicorpTM, ourinjectable treatment for erectile dysfunction, is proceeding towards ouranticipated launch in the second half of 2006. Our compounds in clinicaldevelopment are advancing well and, in particular, we are pleased with theoutcome of our discussions with the FDA in relation to Teverelix LA for bothprostate cancer and BPH. We are also progressing our development of TeverelixLA for the indication of endometriosis. Operational Review Product Portfolio StriantTM SR During June 2005 we announced that Ardana had signed an agreement grantingCytochemia AG exclusive rights to market StriantTM SR in Germany, and in Octoberwe announced that Cytochemia had commenced marketing the product. Ardanareceived initial revenues during the period and will receive future revenues forthe supply of StriantTM SR to Cytochemia. The German launch of StriantTM SR was announced at the 57th Congress of theGerman Society of Urology meeting in Dusseldorf, which was attended byapproximately 3,000 urologists. StriantTM SR is now available on prescriptionin Germany which, with an estimated market size of €15.2 million per annum, isthe largest market for testosterone replacement therapies in Europe. Cytochemiawill target all 3,500 urologists plus andrologists in the country. StriantTM SR is a mucoadhesive buccal (gum surface) testosterone replacementtherapy for confirmed male hypogonadism (i.e. those suffering from a deficiencyor absence of testosterone). StriantTM SR is the first-to-market buccal adhesivetablet and marketing to urologists and endocrinologists in the UK by Ardana'sown sales force continues to progress. Cytochemia has considerable experience inGermany selling to the same specialists through their targeted sales force,which has a strong track record in the education of physicians on product usage.Cytochemia has a very complementary portfolio to Ardana and its productImmuCyst, which has been on the market for 13 years, is an established agent forthe treatment and prevention of superficial bladder cancer. StriantTM SRrepresents an excellent fit with Cytochemia's product portfolio and will be animportant addition. As the biggest and most developed market in Europe for testosterone replacement,Germany is key for StriantTM SR. In partnering with Cytochemia we believe thatthe product is in the best hands to ensure a successful introduction there.Striant's novel and effective delivery of testosterone has received high levelsof acceptance from both patients and prescribers. We continue to develop our distribution capability around Europe with thegranting of exclusive rights to market StriantTM SR in the Nordic region toPharmacuro ApS. Pharmacuro, established in 2003, is a young, dynamic, pharmaceutical marketingand distribution company that provides the medical communities of Denmark,Sweden, Norway and Finland with a range of products. Pharmacuro is an excellent strategic partner for Ardana: its focused sales andmarketing force targets endocrinologists and it has already established strongrelationships in the Nordic region. The market size for testosteronereplacement in the Nordic region is estimated at approximately €3 million perannum. Pharmacuro expects to launch StriantTM SR in the Nordic market in H1 2006. Testosterone Cream Testosterone Cream is a transdermal testosterone delivery system based on ourBi-Gel technology, which is in development for the treatment of malehypogonadism. On 31 October 2005 we announced positive results of a secondPhase I study. The study was in healthy female subjects to provide a control group equivalentto hypogonadal men with low testosterone levels. The study not only providedproof of concept on the delivery technology but also clear evidence thattestosterone can be effectively delivered through the skin to bring testosteronelevels to within the normal range observed in healthy males, using this cream.These Phase I results are very encouraging. A Phase II dose-finding study inhypogonadal men has recently been initiated. We expect the Testosterone Cream to have high patient acceptability. The creamis fast drying, has low alcohol content, and only requires application to asmall area of the body. The new formulation of testosterone as a cream complements our current portfolioand will offer additional choice for the patient. Also, based upon the knowledgewe have gained on the technology, Ardana can develop not only additionalcompounds to market ourselves but also offer this to other companies and therebygenerate licensing income. In 2004, the testosterone replacement market in Europe and in the US wasestimated to be approximately $600 million. The US market is by far the mostattractive with sales of $537million, growing at 40%, of which $422 million weresales of testosterone gels (IMS Health). Other therapies for male hypogonadism include injectable formulations oftestosterone, oral preparations, transdermal patches, topical gels andsub-cutaneous implants. InvicorpTM InvicorpTM is an injectable treatment for erectile dysfunction. Marketingauthorisation for InvicorpTM has been granted in Denmark and we intend toinitiate European Mutual Recognition proceedings in the first half of 2006 witha view to launching the product in the second half of 2006. Teverelix LA - Prostate Cancer Recent results from two Phase II studies in patients with prostate cancer wereoutlined in our last Annual Report. In these studies Teverelix LA, agonadotrophin releasing hormone antagonist, successfully suppressed serumtestosterone to the required levels for treatment. On 7 September we announced that Ardana had a pre-Investigative New Drugapplication meeting with the FDA to discuss the development for prostate cancerof our lead compound Teverelix LA. The FDA has confirmed that serum testosterone levels can serve as a reliablesurrogate marker for efficacy in the treatment of prostate cancer. The meetingreached agreement on the path forward for the development of Teverelix LA forthe treatment of prostate cancer, which should allow us to meet our registrationtimelines and previously announced launch target of the end of 2009. We areplanning to submit to the FDA the first study to be performed under an IND inthe pursuit of this indication within the next few months. An additional Phase II study has commenced, and results from this study shouldbe available in the first half of 2006. Teverelix LA - Benign Prostatic Hyperplasia (BPH) On 21 September 2005 we announced that the launch of Teverelix LA in BPH couldbe advanced by up to two years, following a pre-IND application meeting with theFDA at which consensus on the company's development plan for the therapy wasreached. We now expect that Teverelix LA in BPH could reach the market by 2010. In a recent Phase II study in patients with BPH, Teverelix LA demonstrated astatistically significant improvement in symptoms of BPH as measured by theInternational Prostate Symptom Score (IPSS). The FDA has confirmed thatimprovements in symptoms according to IPSS can serve as a single endpoint fortherapeutic and regulatory review. We are planning to submit the first study under this IND to the FDA within thenext few months. Another European Phase II study in patients with BPH hascommenced. If all future development goes to plan, we anticipate that TeverelixLA may now be launched up to two years earlier than previously anticipated. Other compounds Our other compounds in earlier stage development continue to make progress; ofwhich the following are key: • Oral Growth Hormone Secretagogue (GHS), which is potentially useful as a treatment for growth hormone deficiency disorders and metabolic complications associated with critical illness; and • Terbutaline, a bio-adhesive vaginal gel for use as a treatment for infertility linked to endometriosis. Financial Review Key financials Total product sales of StriantTM SR for the six months ended 30 September 2005were £164,000 (2004: £22,000). Operating loss for the six months ended 30September 2005 was £4,185,000 (2004: £4,094,000). On 30 September 2005, Ardanahad available cash and cash equivalents of £14.7 million (2004: £13.5 million)and an available-for-sale investment (see note 4) of £10.1 million (2004: £nil). International Financial Reporting Standards ("IFRS") Recent years have seen considerable momentum towards establishing commoninternational accounting standards, intended to benefit companies, shareholdersand analysts alike. Following the European Union's adoption of IFRS, companieslisted within member states are required to prepare financial statements underIFRS for all accounting periods commencing on or after 1 January 2005.Previously, and in the 2005 Annual Report, we reported our financial resultsunder UK GAAP. This interim statement, which is unaudited, has been prepared ona basis that is consistent with the accounting policies and presentationexpected to be used in the Group's annual report and financial statements forthe year ending 31 March 2006, which will comply with IFRS as required byInternational Accounting Standard (IAS) 1. IFRS 2 (Share-based payment) has the most significant impact on the financialresults reported. The comparative financial information for the six months ended 30 September 2004and the year ended 31 March 2005 have been restated in accordance with the basisof preparation as set out in note 1 to the interim financial information. Outlook We are very encouraged by the feedback we have received from the FDA forTeverelix LA in the treatment of both prostate cancer and BPH. The clinicaldevelopment and launch for prostate cancer is on track according to our originalschedule in this multi-billion dollar prostate cancer market, and theopportunity to bring forward the launch date for BPH is very exciting forourselves and potential partners. We look forward to announcing furtherprogress with the Teverelix programme including the development of a thirdindication for the treatment of endometriosis. Operationally we continue to manage risk in the business by looking for asignificant co-development partner for Teverelix, through our flexible and lowcost business model, and by developing a mix of products in our pipeline. Weintend actively to pursue product and technology in-licensing and acquisitionopportunities, and look to create value by out-licensing other compounds we ownwhich are not core to our strategy. By these activities we aim to retain andincrease maximum value for our shareholders. I am pleased to report that all our plans continue to progress on schedule andwe expect to announce significant future newsflow. Group income statement (unaudited)6 months ended 30 September 2005 Notes 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2005 2004* 2005* £'000 £'000 £'000 RevenueProduct revenue 164 22 60Revenue from sale of services 106 51 75 _____ _____ _____Total revenue 270 73 135 Cost of product sales (66) (5) (11)Research and development expenses (2,363) (1,672) (3,977)Other operating expenses (2,026) (2,490) (5,163) _____ _____ _____Total operating expenses (4,455) (4,167) (9,151) _____ _____ _____Operating loss 5 (4,185) (4,094) (9,016) Interest received 623 241 523 _____ _____ _____Loss before tax (3,562) (3,853) (8,493) Tax 254 221 479 _____ _____ _____Loss for the period (3,308) (3,632) (8,014) _____ _____ _____ Basic loss per share 3 (5.9p) (22.0p) (20.7p) _____ _____ _____ All of the revenue and loss for the period above is derived from continuingoperations. * During the year ended 31 March 2005, the Group carried out a corporaterestructuring including the introduction of a new holding company. The incomestatement has been prepared using merger accounting and the comparativefinancial information is presented on a proforma basis as if the new holdingcompany had been in existence and had been the parent of all group subsidiariesthroughout the comparator periods. Group balance sheet (unaudited)At 30 September 2005 Notes 30 September 30 September 31 March 2005 2004* 2005 £'000 £'000 £'000Non-current assetsProperty, plant and equipment 26 39 33 _____ _____ _____Current assetsInventories 38 112 107Trade and other receivables 1,522 1,564 1,308Available-for-sale investment 4 10,118 - -Cash and cash equivalents 14,721 13,465 29,182 _____ _____ _____ 26,399 15,141 30,597 _____ _____ _____Total assets 26,425 15,180 30,630 _____ _____ _____Current liabilitiesTrade and other payables (2,750) (3,654) (3,841) _____ _____ _____Non-current liabilitiesTrade and other payables (1,363) (3,089) (1,373) _____ _____ _____Total liabilities (4,113) (6,743) (5,214) _____ _____ _____Net assets 22,312 8,437 25,416 _____ _____ _____ EquityShare capital 556 182 556Other equity 173 44 93Share premium account 26,949 5,954 26,949Merger reserve 34,451 34,451 34,451Own shares (95) (44) (101)Retained earnings (39,722) (32,150) (36,532) _____ _____ _____Total equity 22,312 8,437 25,416 _____ _____ _____ * During the year ended 31 March 2005, the Group carried out a corporaterestructuring including the introduction of a new holding company. This balancesheet has been prepared using merger accounting and is presented as if the newholding company had been in existence and had been the parent of all groupsubsidiaries throughout the current and prior periods. As such, the balancesheet as at 30 September 2004 is presented on a proforma basis. Group cash flow statement (unaudited)6 months ended 30 September 2005 Notes 6 months 6 months Year ended 30 ended 30 ended 31 September September March 2005 2004* 2005* £'000 £'000 £'000 Cash flows from operating activitiesNet cash used by operations 5 (5,271) (4,437) (10,305)Corporation tax received 267 383 384 _____ _____ _____Net cash used by operating activities (5,004) (4,054) (9,921) _____ _____ _____Investing activitiesInterest received 546 241 523Proceeds on disposal of property, plant andequipment - 9 8Purchases of property, plant and equipment (9) (27) (36)Investment in available-for-sale investment 4 (10,000) - - _____ _____ _____Net cash (used in)/from investing activities (9,463) 223 495 _____ _____ _____Financing activitiesIssue of shares - 5,980 27,349Purchase of own shares 6 162 105 _____ _____ _____Net cash from financing activities 6 6,142 27,454 _____ _____ _____ Net (decrease)/increase in cash and cashequivalents (14,461) 2,311 18,028 Cash and cash equivalents at beginning of period 29,182 11,154 11,154 _____ _____ _____Cash and cash equivalents at end of period 14,721 13,465 29,182 _____ _____ _____ * During the year ended 31 March 2005, the Group carried out a corporaterestructuring including the introduction of a new holding company. The cashflow statement has been prepared using merger accounting and the comparativefinancial information is presented on a proforma basis as if the new holdingcompany had been in existence and had been the parent of all group subsidiariesthroughout the comparator periods. Group statement of recognised income and expense (unaudited)6 months ended 30 September 2005 £'000 Loss for the period (3,308)Unrealised gain on revaluation of available-for-sale investment 118 _____Total recognised income and expense (3,190) _____ There was no recognised income or expense in either the 6 months ended 30September 2004 or the year ended 31 March 2005 other than the loss for theseperiods and so no proforma group statement of recognised income and expense ispresented for those periods. Group reconciliation of shareholders' equity (unaudited)6 months ended 30 September 2005 Share Other Share Merger Retained Own Total Capital Equity Premium Reserve Earnings Shares £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 556 93 26,949 34,451 (36,532) (101) 25,416 _____ _____ _____ _____ _____ _____ _____Recognised directly in equityMovement in own shares - - - - - 6 6Share-based payment - 80 - - - - 80 _____ _____ _____ _____ _____ _____ _____Net change directly in - 80 - - - 6 86equity _____ _____ _____ _____ _____ _____ _____Total recognised income and - - - - (3,190) - (3,190)expense _____ _____ _____ _____ _____ _____ _____Total movements - 80 - - (3,190) 6 (3,104) _____ _____ _____ _____ _____ _____ _____Equity at the end of the 556 173 26,949 34,451 (39,722) (95) 22,312period _____ _____ _____ _____ _____ _____ _____ Group reconciliation of shareholders' equity (unaudited)6 months ended 30 September 2004 * Share Other Share Merger Retained Own Total Capital Equity Premium Reserve Earnings Shares £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 156 25 - 34,451 (28,588) (135) 5,909 _____ _____ _____ _____ _____ _____ _____Recognised directly in equityNew share capital subscribed 26 - 5,954 - - - 5,980Movement in own shares - - - - - 91 91Gain on sale of EBT shares - - - - 70 - 70Share-based payment - 19 - - - - 19 _____ _____ _____ _____ _____ _____ _____Net change directly in 26 19 5,954 - 70 91 6,160equity _____ _____ _____ _____ _____ _____ _____Total recognised income and - - - - (3,632) - (3,632)expense _____ _____ _____ _____ _____ _____ _____Total movements 26 19 5,954 - (3,562) 91 2,528 _____ _____ _____ _____ _____ _____ _____Equity at the end of the 182 44 5,954 34,451 (32,150) (44) 8,437period _____ _____ _____ _____ _____ _____ _____ * During the 6 months ended 30 September 2004, the Group carried out a corporaterestructuring including the introduction of a new holding company. Thisreconciliation of shareholders' equity has been prepared using merger accountingand is presented on a proforma basis as if the new holding company had been inexistence and had been the parent of all group subsidiaries throughout theperiod. Group reconciliation of shareholders' equity (unaudited)Year ended 31 March 2005* Share Other Share Merger Retained Own Total Capital Equity Premium Reserve Earnings Shares £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 156 25 - 34,451 (28,588) (135) 5,909 _____ _____ _____ _____ _____ _____ _____Recognised directly inequityNew share capital subscribed 400 - 26,949 - - - 27,349Movement in own shares - - - - - 34 34Gain on sale of EBT shares - - - - 70 - 70Share-based payment - 68 - - - - 68 _____ _____ _____ _____ _____ _____ _____Net change directly in 400 68 26,949 - 70 34 27,521equity _____ _____ _____ _____ _____ _____ _____Total recognised income and - - - - (8,014) - (8,014)expense _____ _____ _____ _____ _____ _____ _____Total movements 400 68 26,949 - (7,944) 34 19,507 _____ _____ _____ _____ _____ _____ _____Equity at the end of the 556 93 26,949 34,451 (36,532) (101) 25,416period _____ _____ _____ _____ _____ _____ _____ * During the year ended 31 March 2005, the Group carried out a corporaterestructuring including the introduction of a new holding company. Thisreconciliation of shareholders' equity has been prepared using merger accountingand is presented on a proforma basis as if the new holding company had been inexistence and had been the parent of all group subsidiaries throughout theperiod. Notes to the Interim Financial Information (unaudited)6 months ended 30 September 2005 1. Basis of Preparation The financial information for the 6 months ended 30 September 2005 does notconstitute statutory accounts for the purposes of Section 240 of the CompaniesAct 1985 and has not been audited. No statutory accounts for the period havebeen delivered to the Registrar of Companies. The financial information in respect of the year ended 31 March 2005 has beenproduced using extracts from the statutory accounts under UK GAAP for thisperiod and amended by adjustments arising from the implementation ofInternational Financial Reporting Standards (IFRS). Consequently, this does notconstitute the statutory information for the year ended 31 March 2005 which wasaudited. The statutory accounts for this period have been filed with theRegistrar of Companies. The auditors' report on these accounts was unqualifiedand did not contain a statement under Sections 237 (2) or (3) of the CompaniesAct 1985. The interim financial information has been prepared on the basis of IFRS andInternational Accounting Standards (IAS) as set out in note 2 and, whereappropriate, standing interpretations issued by the International AccountingStandards Board (IASB) and its committees expected to be effective for the yearending 31 March 2006. It is possible that the IFRS, IAS and relatedinterpretations will be subject to amendment by the IASB and subsequentendorsement by the European Commission. As a result the accounting policiesused to prepare the interim financial information may need to be updated andamended for any subsequent changes or new standards that are effective orapplied by the Group in the year ending 31 March 2006. The Group has opted notto prepare the interim financial information under IAS 34 "Interim FinancialReporting". The interim financial information has been prepared on the historical costbasis, except for the revaluation of certain financial instruments. Theprincipal accounting policies are set out below. 2. Accounting Policies The Group's consolidated financial statements were prepared in accordance withUK Generally Accepted Accounting Principles (UK GAAP) until 1 April 2005. UKGAAP differs in some respects to IFRS. In preparing the 2005 consolidatedinterim financial information, management has made certain amendments to the UKGAAP basis to comply with the recognition and measurement criteria of IFRS. The2004 comparative figures have been restated to reflect these adjustments. The accounting policies set out below have been applied consistently to all ofthe periods covered in the interim financial information. Application of IFRS 1 The Group's financial statements for the year ending 31 March 2006 will be thefirst financial statements to be prepared in accordance with IFRS. The interimfinancial information has been prepared as described above including theprinciples set out in IFRS 1. Under the first time adoption procedures set out in IFRS 1, the Group isrequired to establish its IFRS accounting policies as at 1 April 2005 and toapply these retrospectively in the determination of prior period comparatives to1 April 2004, the date of transition. There are a number of optional exemptionsto this general principle, the most significant of which are set out below. • IFRS 2, Share-based Payment The Group has elected to apply IFRS 2 to all share-based awards and options granted post 7 November 2002 but not vested at 1 January 2005.• IFRS 3, Business Combinations The Group has elected not to restate business combinations prior to the date of transition.• IAS 16, Property, Plant and Equipment The Group has elected, where appropriate, to use fair value at the date of transition as the "deemed" cost of plant, property and equipment. Consequently any historic asset revaluations will not be updated. • IAS 32, Financial Instruments: Disclosure and Presentation and IAS 39, Financial Instruments: Recognition and Measurement The Group has elected to adopt IAS 32 and IAS 39 from 1 April 2005 and not torestate prior period comparatives. Consequently the comparative financialinformation in respect of financial instruments is presented in accordance withUK GAAP. Tables setting out the reconciliation of opening UK GAAP balances to IFRS,together with the effect on the Group's equity, net income and cash flows, areprovided in note 6. Basis of consolidation During the year ended 31 March 2005, the Group carried out a corporaterestructuring consisting of the introduction of a new holding company. Therestructuring represented a change in identity of the holding company ratherthan an acquisition of the business. Consequently, the restructuring has beenaccounted for using merger accounting principles. Therefore, although Ardanaplc did not become the parent company of the Group until May 2004, the financialinformation is presented as if the Company and its subsidiaries had always beenpart of the same group. As such, the comparative financial information for theperiods ended 30 September 2004 and 31 March 2005 is presented on a proformabasis. The results and cash flows of the entities are combined from the beginning ofthe year in which the merger occurred and their assets and liabilities arecombined at the amounts at which they were previously recorded. In accordancewith sections 131 and 133 of the Companies Act 1985, the Company has taken noaccount of any premium on the shares issued and has recorded the cost of theinvestment at the nominal value of the shares issued. The resulting differencearising on consolidation has been credited to a merger reserve. The interim financial information incorporates the results, cashflows andfinancial position of the Company and its subsidiaries for the 6 months ended 30September 2005. On acquisition, the assets and liabilities of a subsidiary are measured at theirfair value at the date of acquisition. Any excess of the cost of acquisitionover the fair value of the identifiable net assets acquired is recorded asgoodwill. Goodwill is reviewed for impairment at least annually and anyimpairment is recognised immediately in the income statement. Any deficiency ofcost of acquisition below the fair value of the identifiable net assets acquiredis credited to the income statement on acquisition. Goodwill recorded onbusiness combinations prior to IFRS transition has not been restated and hasbeen written off to reserves according to the UK GAAP accounting standards thenin force. On disposal or closure of a previously acquired business, theattributable amount of goodwill previously written off to reserves is notincluded in determining the profit or loss on disposal. All intra-grouptransactions, balances, income and expenses are eliminated on consolidation. Fixed asset investments Fixed asset investments are shown at cost less provisions for impairment. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable from the sale of goods and services provided in the normal course ofbusiness, net of value added tax and discounts, and is recognised as follows: i) Product revenue Product revenue is recognised when the significant risks and rewards of ownership of the product have been transferred to a third party.ii) Revenue from sale of services Revenue from sale of services is recognised in the period in which the services are rendered. Interest income is recognised on an accruals basis. Research and development Research expenditure is charged against income in the period in which it isincurred. Development expenditure is charged to income in the period in which it isincurred unless it meets the recognition criteria of IAS 38 'Intangible Assets'.Regulatory and other uncertainties generally mean that such criteria are notmet. Where, however, the recognition criteria are met, intangible assets arecapitalised and amortised over their useful economic lives from product launch.Payments to in-license products and compounds from external third parties,generally taking the form of up-front payments and milestones, are capitalisedand amortised over their economic lives from launch. Property, plant and equipment Property, plant and equipment are shown at cost, net of depreciation and anyprovision for impairment. Depreciation is provided on all property, plant andequipment at varying rates calculated to write-off cost over the useful lives.The principal rates employed are: Plant and machinery 10% - 50% straight line basis Leases Rentals under leases classified as operating leases are charged to the incomestatement on a straight-line basis over the lease term. Operating loss Operating loss is stated after charging research and development and otheroperating costs but before finance costs. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowance for estimated irrecoverable amounts. Trade payables Trade payables are not interest-bearing and are stated at their nominal value. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on the taxable loss for the period. Taxableloss differs from net loss as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if thetemporary difference arises from goodwill or from the initial recognition (otherthan in a business combination) of other assets and liabilities in a transactionthat affects neither the tax loss nor the accounting loss. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Share-based payment The Group issues equity-settled share-based benefits to certain employees.Subject to the transition arrangements set out above, these share-based paymentsare measured at their fair value at the date of grant and the fair value ofexpected shares is expensed to the income statement on a straight-line basisover the vesting period. Fair value is measured by use of the Black-Scholesmodel, as amended to take account of management's best estimate of probableshare vesting and exercise. Foreign currencies Transactions in currencies other than Sterling are recorded at the rates ofexchange prevailing on the dates of the transactions. At each balance sheetdate, monetary assets and liabilities that are denominated in foreign currenciesare retranslated at the rates prevailing on the balance sheet date. Gains andlosses arising on retranslation are included in net profit or loss for theperiod. On consolidation, the assets and liabilities of the Group's overseas operationsare translated at exchange rates prevailing on the balance sheet date. Incomeand expense items are translated at the average exchange rates for the periodunless exchange rates fluctuate significantly. Exchange differences arising, ifany, are classified as equity and transferred to the Group's translationreserve. Such translation differences are recognised as income or as expensesin the period in which the operation is disposed of. Inventories Inventories are stated at the lower of cost and net realisable value. Provisionis made for obsolete and slow-moving items where appropriate. Available-for-sale investment The available-for-sale investment is measured at cost and is revalued at fairvalue at subsequent reporting dates. Gains and losses arising from changes infair value are recognised directly in equity until the investment is disposed ofor is determined to be impaired at which time the cumulative gain or losspreviously recognised in equity is included in the net profit or loss for theperiod. Interest receivable is credited to the income statement in the periodin which it is earned. 3. Loss per Share Basic loss per share is calculated by dividing the loss for the financial periodafter taxation by the weighted average number of ordinary shares in issue duringthe period. The basic loss per share is calculated as follows:- 6 months ended 6 months ended 30 Year ended 31 30 September September March 2005 2004 2005 Loss after taxation (£'000) (3,308) (3,632) (8,014)Weighted average number of ordinary shares in issue 55,562,806 16,528,038 38,717,240 _____ _____ _____Basic loss per share (pence) (5.9) (22.0) (20.7) _____ _____ _____ 4. Available-for-sale investment On 15 August 2005, Ardana invested £10 million in a corporate bond fund.Interest is received quarterly in arrears. The capital value of this investmentis subject to market fluctuations. The funds can be withdrawn, in whole or inpart, at any time. 5. Reconciliation of operating loss to net cash used by operations 6 months 6 months Year ended 30 ended 30 ended 31 September September March 2005 2004 2005 £'000 £'000 £'000 Operating loss (4,185) (4,094) (9,016) Depreciation 16 14 29Decrease/(increase) in stock 69 (112) (107)Increase in debtors (150) (698) (184)(Decrease)/increase in creditors (1,101) 434 (1,095)Share-based payment 80 19 68 _____ _____ _____Net cash used by operations (5,271) (4,437) (10,305) _____ _____ _____ 6. Explanation of transition to IFRS Cash flow The cash flow differences between UK GAAP and IFRS, for each financial period,are presentational. There is no impact on the final cash position nor themovement in the period. The IFRS cash flow statement with comparativeinformation is presented on page 10. a) Effect on proforma group income statement for the 6 months to 30 September 2004 The effect of the changes to the Group's accounting policies on the proformagroup income statement was as follows:- UK GAAP in Effect of IFRS IFRS transition to £'000 format IFRS (i) £'000 £'000RevenueProduct revenue 22 - 22Revenue from sale of services 51 - 51 _____ _____ _____Total revenue 73 - 73 Cost of product sales (5) - (5)Research and development expenses (1,672) - (1,672)Other operating expenses (2,471) (19) (2,490) _____ _____ _____Total operating expenses (4,148) (19) (4,167) _____ _____ _____Operating loss (4,075) (19) (4,094) Interest received 241 - 241 _____ _____ _____Loss before tax (3,834) (19) (3,853) Tax 221 - 221 _____ _____ _____Loss for the period (3,613) (19) (3,632) _____ _____ _____ b) Effect on proforma group income statement for the year ended 31 March 2005 The effect of the changes to the Group's accounting policies on the proformagroup income statement was as follows:- UK GAAP in Effect of IFRS IFRS transition to £'000 format IFRS (i) £'000 £'000RevenueProduct revenue 60 - 60Revenue from sale of services 75 - 75 _____ _____ _____Total revenue 135 - 135 Cost of product sales (11) - (11)Research and development expenses (3,977) - (3,977)Other operating expenses (5,095) (68) (5,163) _____ _____ _____Total operating expenses (9,083) (68) (9,151) _____ _____ _____Operating loss (8,948) (68) (9,016) Interest received 523 - 523 _____ _____ _____Loss before tax (8,425) (68) (8,493) Tax 479 - 479 _____ _____ _____Loss for the period (7,946) (68) (8,014) _____ _____ _____ c) Effect on proforma group balance sheet as at 1 April 2004 (date of transition to IFRS) The effect of the changes to the Group's accounting policies on the equity ofthe Group at 1 April 2004 was as follows:- UK GAAP in Effect of IFRS IFRS transition to £'000 format IFRS (i) £'000 £'000Non-current assetsProperty, plant and equipment 34 - 34 _____ _____ _____Current assetsTrade and other receivables 1,029 - 1,029Cash and cash equivalents 11,154 - 11,154 _____ _____ _____ 12,183 - 12,183 _____ _____ _____Total assets 12,217 - 12,217 _____ _____ _____Current liabilitiesTrade and other payables (3,302) - (3,302) _____ _____ _____Non-current liabilitiesLong term provisions (3,006) - (3,006) _____ _____ _____ Total liabilities (6,308) - (6,308) _____ _____ _____Net assets 5,909 - 5,909 _____ _____ _____EquityShare capital 156 - 156Other equity - 25 25Merger reserve 34,451 - 34,451Own shares (135) - (135)Retained earnings (28,563) (25) (28,588) _____ _____ _____Total equity 5,909 - 5,909 _____ _____ _____ d) Effect on group balance sheet as at 30 September 2004 The effect of the changes to the Group's accounting policies on the equity ofthe Group at 30 September 2004 was as follows:- UK GAAP in Effect of IFRS IFRS transition to £'000 Format IFRS(i) £'000 £'000Non-current assetsProperty, plant and equipment 39 - 39 _____ _____ _____Current assetsInventories 112 - 112Trade and other receivables 1,564 - 1,564Cash and cash equivalents 13,465 - 13,465 _____ _____ _____ 15,141 - 15,141 _____ _____ _____Total assets 15,180 - 15,180 _____ _____ _____Current liabilitiesTrade and other payables (3,654) - (3,654) _____ _____ _____Non-current liabilitiesLong term provisions (3,089) - (3,089) _____ _____ _____ Total liabilities (6,743) - (6,743) _____ _____ _____Net assets 8,437 - 8,437 _____ _____ _____EquityShare capital 182 - 182Other equity - 44 44Share premium account 5,954 - 5,954Merger reserve 34,451 - 34,451Own shares (44) - (44)Retained earnings (32,106) (44) (32,150) _____ _____ _____Total equity 8,437 - 8,437 _____ _____ _____ e) Effect on group balance sheet as at 31 March 2005 (date of last UK GAAP financial statements) The effect of the changes to the Group's accounting policies on the equity ofthe Group at 31 March 2005 was as follows:- UK GAAP in Effect of IFRS IFRS transition to £'000 Format IFRS (i) £'000 £'000Non-current assetsProperty, plant and equipment 33 - 33 _____ _____ _____Current assetsInventories 107 - 107Trade and other receivables 1,308 - 1,308Cash and cash equivalents 29,182 - 29,182 _____ _____ _____ 30,597 - 30,597 _____ _____ _____Total assets 30,630 - 30,630 _____ _____ _____Current liabilitiesTrade and other payables (3,841) - (3,841) _____ _____ _____Non-current liabilitiesLong term provisions (1,373) - (1,373) _____ _____ _____ Total liabilities (5,214) - (5,214) _____ _____ _____Net assets 25,416 - 25,416 _____ _____ _____EquityShare capital 556 - 556Other equity - 93 93Share premium account 26,949 - 26,949Merger reserve 34,451 - 34,451Own shares (101) - (101)Retained earnings (36,439) (93) (36,532) _____ _____ _____Total equity 25,416 - 25,416 _____ _____ _____ Footnote: (i) Charge for share-based payment Under IFRS 2 a charge must be recognised for any share-based payment includingawards under the Group's share option schemes. The cost of the option is basedon the fair value of the option at the date of grant and is charged to theincome statement over the vesting period. A charge has been recognised in theincome statement for all the awards granted since 7 November 2002. Anequivalent amount is credited to reserves in the balance sheet, resulting in anil effect on net assets. 7. Interim Results Copies of this statement are being circulated to shareholders and are availableat the offices of Ardana plc, 38 Melville Street, Edinburgh, EH3 7HA. They willalso be available on our website, www.ardana.co.uk. This information is provided by RNS The company news service from the London Stock Exchange