Futura Medical Regulatory News (FUM)

Futura Medical plc

("Futura" or "the Company")

Interim Results for the six months ended 30 June 2016

Futura Medical plc (AIM: FUM), the innovative healthcare company focused on advanced transdermal technology, is pleased to announce its interim results for the six months ended 30 June 2016.

Highlights

· MED2002 Eroxon® (treatment for erectile dysfunction) - pivotal efficacy study completed with breakthrough results in US$5 billion market

· MED2002 Eroxon® - peak estimated annual sales potential in excess of US$500 million

· CSD500 (erectogenic condom) - commercial order manufactured for licensee partner ready for Q4 2016 launch

· CSD500 - two new licensing agreements signed, manufacturing agreement signed for second facility with regulatory approval expected shortly

· Pain relief products TPR100 (diclofenac) and TIB200 (ibuprofen) - strong commercial interest for both products with discussions at advanced stage

· Net loss of £1.89 million in the period (H1 2015: net loss £2.47 million), reflecting planned reduction in R&D expenditure

· Cash resources of £2.90 million at 30 June 2016 (30 June 2015: £7.23 million)

James Barder, Futura's Chief Executive, commented: "We continue to make good progress in the clinical and commercial development of our portfolio of product opportunities. This was highlighted last week with the announcement of positive clinical study results for MED2002. We are increasingly excited about MED2002's commercial potential as well as the first partner launch of CSD500 later in the year and the first pain relief out-licensing deal."

Analyst meeting and webcast

A meeting for analysts will be held at 10am this morning, 13 September 2016, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. There will be a live webcast of the analyst presentation. To listen to the webcast, please log on to the following web address approximately 5 minutes before 10.00am: http://vm.buchanan.uk.com/2016/futuramedical130916/registration.htm

A recording of the webcast will also be made available at www.futuramedical.com and www.buchanan.uk.com following the results meeting.

For any further information please contact:

Notes to Editors

Futura Medical plc

Futura Medical is a pharmaceutical group that develops innovative products for consumer healthcare. The Company is developing a portfolio of products and its strategy is to license their manufacture and distribution to major pharmaceutical and healthcare groups.

Futura is based in Guildford, Surrey, and its shares trade on the AIM market of the London Stock Exchange.

www.futuramedical.com

Chairman's and Chief Executive's Review

During the first half of our financial year we continued to make good progress in the clinical and commercial development of our portfolio of product opportunities. The pace of progress has continued in the second half, highlighted last week with the announcement of positive clinical study results for MED2002, our topical gel for erectile dysfunction. Since announcing the results, we have continued to analyse the data and the full study report will be issued later in the year. We are increasingly excited about MED2002's commercial potential and research commissioned in the USA by Futura indicated that MED2002 could achieve peak annual sales in excess of US$500 million.

We have made considerable progress throughout our portfolio. CSD500, our novel erectogenic condom, is close to regulatory approval for a longer shelf life and partner launch. Our two pain relief products have attracted a high level of interest from potential commercial partners and we anticipate signing at least one agreement this year.

This progress has been enabled by the £12 million fundraising in March 2014, one of the major benefits of which was allowing us to develop our three core product opportunities in parallel rather than sequentially.

As previously indicated, the shelf life of CSD500 has been holding back the launch of the product by our commercial partners. It is very pleasing to be able to confirm that this hurdle has been overcome through modifications to the manufacturing process. Regulatory submissions to enable an extended shelf life of at least 18 months have been filed for both our European manufacturer and for TTK Protective Devices Limited ("TTK"), the Indian manufacturer with whom we have also signed a distribution agreement. In the past week we have heard from the regulators that there are no major outstanding issues on the TTK submission and we therefore anticipate the first approval of these submissions shortly.

Blue Diamond®, our own brand of the CSD500, has been available in the Netherlands since October 2014 under the 12 month shelf life approval. The product, which has limited marketing support, continues to provide valuable feedback and data from users. Up to 40% of users report that they experience a benefit from using Blue Diamond® and we are very pleased with the product's quality and safety. This is very encouraging and supports our view that CSD500 can achieve at least a 10 per cent share of the international condom market given appropriate marketing support.

Our two non-steroidal, anti-inflammatory drug ("NSAID") pain relief products both showed statistically significant pain relief in a pivotal clinical study completed last year. Our focus with these products in the first half has been on advancing their out-licensing. We appointed an adviser to assist us in the out-licensing process and we are pleased to report that we are at the heads-of-terms stage with a number of potential partners.

In March 2016, we announced the appointment of Ken James, the former head of consumer healthcare R&D at GlaxoSmithKline, as a Non-Executive Director. Mr James brought more than 200 innovative consumer healthcare products to market during an executive career spanning four decades. We are already benefiting from his input to the Company.

Having completed the MED2002 study in the first half of this year, and the pain relief clinical study last year, our costs are now significantly lower than a year ago. Our balance sheet remains strong with cash resources of £2.90 million at 30 June 2016 (30 June 2015: £7.23 million).

Portfolio updates - Sexual healthcare

CSD500: Condom containing the erectogenic Zanifil® gel

CSD500 benefits from three clinically proven claims: the maintenance of a firmer erection, maximised penile size and a longer lasting sexual experience for women. CSD500, which gained CE marking in 2013, represents real innovation in an industry where there has been limited new product development. Futura's unique intellectual property position for CSD500 has been protected throughout the world. We are continuing to progress a further patent application worldwide based on our extended shelf life manufacturing process, which we anticipate will extend patent protection for CSD500 through to 2033.

CSD500 has been out-licensed on a territorial basis worldwide and our existing licensee partners cover a total of 39 countries including major commercial markets in North America and Europe. During the first half, we signed a licensing agreement with Milsing for the marketing and distribution of CSD500 in seven territories in Southeast Europe including Croatia and Serbia and also with TTK for marketing and distribution within India. TTK owns the fastest growing condom brand in India, SKORE®, and it is intended that CSD500 will be part of the SKORE® brand.

We continue in discussion with potential licensing partners for areas where we have not yet licensed the product, including South America and further regulatory submissions are underway in a number of territories worldwide including the Middle East, Asia and South America.

Commercial manufacture of product for the launch of CSD500 in the first Middle East country, where regulatory approval has already been granted, has already taken place with the launch expected later this year. The initial royalty payment has already been received for this and will be recognised upon launch. We anticipate further launches of the product in other territories during 2017.

Considerable progress was also made during the first half with the manufacturing strategy for CSD500. In June, we announced that India's TTK, a pioneer in condom manufacture, will also produce CSD500 for worldwide supply. It is intended that TTK will be complementary to our existing European manufacturer and a regulatory filing has been made with EU regulatory authorities to grant TTK the relevant authorisation to manufacture the product.

MED2002: Eroxon® Treatment for erectile dysfunction

MED2002, which uses our DermaSys® drug delivery system, is the development name for our topical gel for the treatment of men with erectile dysfunction ("ED"). We hold worldwide rights to the product and have registered the brand name Eroxon®.

Whilst MED2002 shares the same active ingredient as our consumer healthcare product CSD500, we have been developing MED2002 as a prescription-only product. This is because it is addressing the medical indication of ED whereas CSD500 has been developed for healthy men who are sometimes unable to maintain an erection whilst using a condom.

In Europe, MED2002 has patent protection until 2025 and in the USA it has patent protection until 2028.

The ED market is dominated by PDE5 inhibitors, such as Viagra®, which are taken orally and take around an hour or more to take effect. In market research commissioned by Futura, a survey conducted in the US involving 200 physicians and 400 ED patients found that the top three characteristics patients and physicians desired in a new ED treatment were: fast onset, safety, and ability to be used by all ED patients. As a topical treatment, MED2002 has been developed to meet these requirements of physicians and patients by offering a safe and effective treatment with a rapid speed of onset and no contraindications for ED sufferers.

Currently, approximately 7.5% of ED sufferers are unable to be prescribed PDE5 inhibitors due to contraindications with nitrate medicines taken by them for cardiovascular conditions. These patients are a target market for MED2002 as its active ingredient, glyceryl trinitrate, is unlikely to be contraindicated.

In October 2015, the Company signed an agreement with Quantum Pharma Plc under which MED2002 is available for prescription as a special. Specials are medicines that have not been authorised and which are requested and prescribed on a named patient basis by appropriately qualified doctors under their own authority. It is intended that MED2002 will remain available as a special until it gains marketing authorisation.

Our primary focus during the half year for the development of MED2002 has been on the pivotal clinical study, whose positive results were announced last week. In summary, the study met its primary endpoint and MED2002 showed efficacy, safety and speed of onset.

The study, which began in June 2015, comprised a total of 232 randomised males and it measured, as its primary endpoint, improvement in the erectile function ("EF") domain score of the International Index of Erectile Function ("IIEF"), the scoring system used for the approval of PDE5 inhibitors. The study, which used one dosage of 0.2% w/w glyceryl trinitrate gel, was of a placebo-controlled, double blind, home use, crossover design.

The study which included mild, moderate and severe ED patients, achieved its primary endpoint in demonstrating a statistically significant improvement in erectile function (p-value = < 0.0132) in the EF domain score, averaged across the entire patient set, when using MED2002 compared with placebo.

The study also achieved statistical significance (p-value = < 0.0272) in its secondary endpoint for the number of patients with an increase from baseline in the EF domain greater than or equal to 4, which is published as a minimally clinically important difference ("MCID").

The results for the MCID analysis in the mild ED patient sub-group were highly statistically significant (p-value = < 0.0001) with over twice as many patients reporting an MCID greater than or equal to 4 when using MED2002 compared with placebo.

The results for the MCID analyses in the moderate and severe ED patient sub-groups were not found to be statistically significant, however a higher dose may provide increased efficacy in these groups.

The speed of onset of action of MED2002 was rapid, partly reflecting the method of application with the gel being applied directly to the penis. 82% of patients with mild ED had an onset of action within 10 minutes and 54% of mild ED patients had an onset of action within 5 minutes. This rapid onset of action means that MED2002 has the potential to be the world's fastest-acting treatment for ED.

No major safety concerns were identified. No serious adverse events or serious adverse reactions were recorded and there were no drop-outs from the study owing to side-effect issues. Fewer than 2% of patients reported mild side-effects of a headache, which is considered a very low percentage in pharmaceutical terms.

The study results give us great confidence in the future development of the product. Professor David Ralph (former president of European Society for Sexual Medicine) stated "The positive data from this study provides an exciting new innovation with the potential to be a first line therapy in erectile dysfunction. MED2002 has the required efficacy, speed of onset and safety profile consistent for an over-the-counter as well as prescription use product. MED2002, for the first time in the treatment of ED, has the potential to meet the needs of primary care providers and of patients."

In parallel to our commercial out-licensing discussions we are continuing to develop the commercial strategy and have assumed the requirement for a second pivotal clinical study in line with the standard requirements of regulatory authorities. A scientific advice meeting within the EU has already been requested and we intend to request a pre-investigational new drug ("IND") meeting also with US regulators later in the year to confirm the requirements for marketing authorisation.

The total worldwide market for all ED treatments is estimated at US$5.0 billion. Current sales for oral treatments are approximately US$4.3 billion worldwide. Research commissioned by Futura in the USA estimated that the contraindicated market for MED2002 could be worth over US$0.3 billion. The balance of US$0.4 billion is made up of other treatments: intra-urethral, injections and non-invasive devices. With superior speed of onset, compelling safety profile and the potential to switch to over-the-counter we believe that MED2002 as a first line therapy could achieve peak annual sales in excess of US$500 million.

Portfolio updates - Pain relief management

Topical pain relief

The rapid skin permeation rates offered by Futura's transdermal delivery system, DermaSys®, have created a major opportunity in topical pain relief. Rapid skin permeation offers potential benefits in pain management including: improved onset of action, duration and degree of pain relief. DermaSys® also allows the potential to have a twice a day dosing regimen which provides a compelling commercial proposition for ibuprofen which is currently dosed three to four times per day.

During 2015, Futura demonstrated statistically significant results from its two NSAID programmes, TPR100 (2% diclofenac gel) and TIB200 (10% ibuprofen gel), in a clinical study.

The clinical study of a total of 60 subjects compared Futura's products against a placebo. It also compared them against currently marketed products to show equivalence, which is a strategy frequently used in the consumer healthcare industry as it gives the potential for strong marketing claims, such as superior delivery of drug (through the skin) whilst reducing the clinical requirements for regulatory approval. No comparator product, topical or oral outperformed our two NSAID products.

Our objective is for our products to be best in class. The rationale for this is that the National Institute for Health and Care Excellence (NICE) gives clear guidance to physicians to prescribe topical NSAIDs in the first instance for joint pain associated with osteoarthritis, in preference to oral NSAIDs, owing to concerns on the long term use of oral NSAIDs. This means that the best-in-class topical treatment should be the first choice for doctors in the initial treatment of pain and therefore represents a substantial opportunity in a market with global sales estimated at US$2.9 billion.

We continue to work on regulatory submissions for territories within the EU for both products though anticipate that in due course these submissions will be taken over by commercial partners.

In Europe we believe that the two products could be launched over-the-counter and potentially, depending on the indication, on a prescription basis. In the US, we expect that TPR100 only is likely to be made available on a prescription only basis and will require additional clinical data. A pre-IND meeting has been requested with the US Food & Drug Administration.

During the first half of 2016, our focus has been on the commercialisation of these two products. We appointed an adviser to assist us in the out-licensing process and we are now at the heads-of-terms stage with a number of potential partners. It is a reflection of the robustness of the clinical data generated last year that the two products have attracted considerable interest from major pharmaceutical and consumer healthcare companies. In the current year, we anticipate signing at least one of a number of potential regional licensing deals.

Finance

Cash and cash equivalents at 30 June 2016 were £2.90 million (30 June 2015: £7.23 million) with a net cash outflow of £1.29 million in the period.

In the period under review, we earned royalty and milestone payments of £67k (H1 2015: £16k). The loss for the period ended 30 June 2016 was £1.89 million (H1 2015: £2.47m). Research and development ("R&D") costs of £1.79 million were lower than for the corresponding period (H1 2015: £2.48 million), as the rate of development expenditure on the relevant clinical studies was concentrated in 2015. Other administrative costs of £549k were slightly lower than that for the corresponding period (H1 2015: £558k) as we continue to manage our financial resources carefully.

Outlook

We continue to make good progress in the clinical and commercial development of our portfolio of product opportunities. This was highlighted last week with the announcement of positive clinical study results for MED2002. We are increasingly excited about MED2002's commercial potential as well as the first partner launch of CSD500 later in the year and the first pain relief out-licensing deal.

Group Statement of Comprehensive Income

All amounts relate to continuing activities.

The notes form part of the Group interim financial information.

Group Statement of Changes in Equity

Share premium represents amounts subscribed for share capital in excess of nominal value, less the related costs of share issues.

Merger reserve represents the reserve arising on the acquisition of Futura Medical Developments Limited in 2001 via a share for share exchange accounted for as a group reconstruction using merger accounting under UK GAAP.

Retained losses represent cumulative net losses recognised in the Group Statement of Comprehensive Income. The total comprehensive loss for the year represents the total recognised income and expense for the year.

The notes form part of the Group interim financial information.

Group Statement of Financial Position

The notes form part of the Group interim financial information.

Group Statement of Cash Flows

The notes form part of the Group interim financial information.

Notes to the Group Interim Financial Information

1. Accounting policies

1.1 Basis of preparation

The unaudited Interim Report was approved by the Board of Directors on 12 September 2016.

The interim financial information for the six months ended 30 June 2016 and for the six months ended 30 June 2015 does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 and is unaudited.

The Group financial information for the year ended 31 December 2015 which has been extracted from the financial statements of the statutory accounts ("Annual Report") of Futura Medical plc, which were prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that were applicable for the year ended 31 December 2015, does not constitute the full statutory accounts for that period. The Annual Report for 2015 has been filed with the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

1.2 Going concern

The Group had cash balances of £2.90 million at 30 June 2016, with a net cash outflow of £1.29 million in the period.

The Interim Report has been prepared on the going concern basis which assumes that the Group will continue in operational existence for the foreseeable future. The financial statements do not reflect any adjustments that would be required if they were to be prepared on a basis other than the going concern basis.

1.3 Accounting developments

The following amendments have been adopted in the period however the Directors do not expect them to have a material effect on the Group financial statements:

· Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation 

· Disclosure Initiative: Amendments to IAS 1 Presentation of Financial Statements

The following new standards, amendments and interpretations, which are not yet effective and have not been adopted early in these financial statements, will or may have an effect on the Group's future financial statements:

· IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)

· IFRS 9 Financial Instruments (effective 1 January 2018)

· IFRS 16 Leases (effective 1 January 2019)

1.4 Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business, so as to obtain benefits from its activities, it is classified as a subsidiary. The Group financial information present the results of the Company and its subsidiaries Futura Medical Developments Limited and Futura Consumer Healthcare Limited as if they formed a single entity ("the Group"). Intra-group transactions and balances are eliminated in preparing the Group financial information.

1.5 Revenue

Revenue comprises the fair value received or receivable for: exclusivity arrangements, consultancy fees, milestone income or royalties, net of value added tax.

The accounting policies for the principal revenue streams of the Group are as follows:

(i) Exclusivity arrangements and similar agreements are recognised as revenue in the accounting period in which the related services, or required activities, are performed or specified conditions are fulfilled in accordance with the terms of completion of the specific transaction.

(ii) Consultancy fees are recognised as revenue in the accounting period in which the revenue becomes receivable.

(iii) Non-refundable milestone income is recognised as revenue in the accounting period in which the milestones are achieved. If any milestone income is creditable against royalty payments then it is deferred and released to the Group Statement of Comprehensive Income over the accounting periods in which the royalties would otherwise be receivable.

(iv) Royalty income relating to the sale by a licensee of licensed product is recognised on an accruals basis in accordance with the substance of the relevant agreement and based on the receipt from the licensee of the relevant information to enable calculation of the royalty due.

1.6 Leased assets

Leases which contain terms whereby the Group does not assume substantially all the risks and rewards incidental to ownership of the leased item are classified as operating leases. Operating lease rentals are charged to the Group Statement of Comprehensive Income on a straight-line basis over the lease term. The Group does not hold any assets under finance leases. 

1.7 Intangible assets

Research and development ("R&D")

Expenditure incurred on the development of internally generated products is capitalised if it can be demonstrated that:

● it is technically feasible to develop the product for it to be sold;

● adequate resources are available to complete the development;

● there is an intention to complete and sell the product;

● the Group is able to out-license or sell the product;

● sale of the product will generate future economic benefits; and

● expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods in which the Group expects to benefit from selling the products developed but not exceeding five years. The amortisation expense is included in R&D costs recognised in the Group Statement of Comprehensive Income. The useful life and the value of the capitalised development cost are assessed for impairment at least annually. The value is written down immediately if impairment has occurred and the unimpaired cost amortised over the reduced useful life. The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to that product being commercially launched in at least one country.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are included in R&D costs recognised in the Group Statement of Comprehensive Income as incurred.

Patents and trademarks

The costs incurred in establishing patents and trademarks are either expensed or capitalised in accordance with the corresponding treatment of the development expenditure for the product to which they relate.

1.8 Plant and equipment

Plant and equipment is initially recognised at cost, and subsequently at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is charged to the Group Statement of Comprehensive Income at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over its estimated useful life.

The assets' residual values and useful lives are determined by the Directors and reviewed and adjusted if appropriate at each Group Statement of Financial Position date.

1.9 Impairment of non-financial assets

Assets that are subject to depreciation are reviewed for impairment on a half-yearly basis and when events or circumstances suggest that the carrying amount may not be recoverable. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). An impairment loss is recognised immediately in the Group Statement of Comprehensive Income for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of fair value, less disposal costs, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in the Group Statement of Comprehensive Income.

1.10 Inventories

Inventories are materials and supplies to be consumed in the course of R&D and are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost includes materials, related contract manufacturing costs and other direct costs. Cost is calculated using the first-in, first-out method. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and disposal.

A provision is recognised immediately in the Group Statement of Comprehensive Income in respect of obsolete, slow-moving or defective items, where appropriate.

1.11 Financial instruments

Financial assets

The Group classifies its financial assets in the category of loans and receivables, comprising 'trade and other receivables' and 'cash and cash equivalents'. They are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest rate method, less an estimate made for impairment based on a review of all past due amounts at the year end. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due. If an impairment loss is required the carrying amount of the trade or other receivable is reduced through the use of an allowance account and the amount of the loss recognised immediately in the Group Statement of Comprehensive Income in administrative costs.

Cash and cash equivalents are financial assets and comprise cash in hand and sterling fixed rate deposits which are held by the Group so as to be available to meet short-term cash commitments.

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

Financial liabilities

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

1.12 Taxation

Income tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively enacted at the Group Statement of Financial Position date. R&D tax credits are recognised on an accruals basis and are included as an income tax credit under current assets.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability on the Group Statement of Financial Position date differs from its tax base, except for differences arising on:

· the initial recognition of an asset or liability in a transaction which is not a business combination and which at the time of the transaction affects neither accounting profit nor taxable profit; and

· investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profits will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the Group Statement of Financial Position date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

· the same taxable group company; or

· different group entities which intend to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, on each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

1.13 Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Group Statement of Comprehensive Income in the period in which they arise.

1.14 Employee benefits

(i) Defined contribution plans

The Group provides retirement benefits to all employees and Executive Directors who wish to participate in defined contribution pension schemes. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to the Group Statement of Comprehensive Income in the period in which they become payable.

(ii) Accrued holiday pay

Provision is made at each Group Statement of Financial Position date for holidays accrued but not taken at the salary of the relevant employee at that date. The expected cost of compensated short-term absence (i.e. holidays) is charged to the Group Statement of Comprehensive Income on an accruals basis.

(iii) Share-based payment transactions

The Group operates an equity-settled share-based compensation plan. For all share options awarded to employees, and others providing similar services, the fair value of the share options at the date of grant is charged to the Group Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Group Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of share options that eventually vest. There are no market vesting conditions. If the terms and conditions of share options are modified before they vest, the change in the fair value of the share options, measured immediately before and after the modification, is also charged to the Group Statement of Comprehensive Income over the remaining vesting period. The proceeds received when share options are exercised, net of any directly attributable transaction costs, are credited to share capital (nominal value) and the remaining balance to share premium. All employee share option holders enter into an HMRC joint election to transfer the employers' national insurance contribution potential liability to the employee, therefore no Group asset or liability arises.

(iv) Long-term incentive scheme

The Group operates a long-term incentive plan for staff and the Directors. The quantum of any awards receivable will depend on the Group achieving set milestones and the share price at the time relative to targets set in advance. The Group can exercise discretion in settling any award in equity or in cash.

1.15 Finance income

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

1.16 Critical accounting estimates and judgements

Critical accounting estimates, assumptions and judgements are continually evaluated by the Directors based on available information and experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates.

Judgements

(i) Revenue recognition

Fees invoiced in respect of non-refundable milestones have been recognised as revenue in the Group Statement of Comprehensive Income in the period when all criteria for revenue recognition have been met.

(ii) Intangible asset recognition

The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to that product being commercially launched in at least one country.

(iii) Deferred tax recognition

The Directors consider that, given the current stage of development of the business, deferred tax assets should not be recognised before the Group is generating recurring royalty revenue.

Estimates and assumptions

 (iv) Fair value of financial instruments

The Group determines the fair value of financial instruments using valuation techniques which can be significantly affected by the assumptions used, including interest and discount rates and estimates of future cash flows.

(v) Inventories

The Group reviews the net realisable value of its inventories on a half-yearly basis to provide assurance that recorded inventories are stated at the lower of cost or net realisable value. Factors that could impact realisable value include: the timing and success of future technological innovations in relation to product R&D, competitor and Government actions, supplier prices and economic trends.

(vi) Share-based payments

The Group operates an equity-settled share-based compensation plan. Employee (and similar) services received and the corresponding increase in equity are measured by reference to the fair value of the equity instruments as at the date of grant.

2. Segment reporting

The Group is organised and operates as one business segment, being the development of pharmaceutical drugs and medical devices and their commercial exploitation. The main area of R&D continues to be in the field of innovative products for the consumer healthcare market with the focus being on sexual healthcare and pain relief management. The Group manages any overseas R&D from the UK, the primary business segment. Segment revenue is based on the geographical location of the Group's customers. Since there is currently only one business segment and one geographical segment, no separate segment reporting has been prepared.

3. Loss per share (pence)

The calculation of the loss per share is based on a loss of £1,891,164 (six months ended 30 June 2015: loss of £2,466,450; year ended 31 December 2015: loss of £5,081,442) and on a weighted average number of shares in issue of 99,092,318 (six months ended 30 June 2015: 99,022,600; year ended 31 December 2015: 99,022,600). The loss attributable to equity holders of the Company for the purpose of calculating the fully diluted loss per share is identical to that used for calculating the basic loss per share. The exercise of share options, or the issue of shares under the long-term incentive scheme, would have the effect of reducing the loss per share and is therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'.

4. Trade and other receivables

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

5. Cash and cash equivalents

6. Related party transactions

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