Ixico Regulatory News (IXI)

19 December 2012

Posting of Annual Report

Phytopharm plc announces that it has published is Annual Report and Accounts 2012

Copies of the Annual Report and Accounts 2012 will shortly be available to view on the Company's website www.phytopharm.com

Hard copies of the Annual Report and Accounts 2012 have been sent to those shareholders who have elected to continue to receive paper communications.

A copy has also been filed with the UKLA's National Storage Mechanism at www.hemscott.com/nsm.do

The unaudited preliminary results for the year ended 30 September 2012 were announced on 22 November 2012.

The information contained in Appendix 1 (Principal Risks and Uncertainties) and Appendix 2 (Statement of Directors' Responsibilities), which is extracted from the Annual Report and Accounts 2012, is also included in this announcement for sole purpose of complying with Rule 6.3.5 of the Disclosure and Transparency Rules of the UK Financial Services Authority. Page numbers and cross-references in the extracted information refer to page numbers and cross-references in the Annual Report and Accounts 2012 which were approved by the Board of Directors on 30 November 2012.

Zoe McGowanCompany Secretary

Appendix 1

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. This comprehensive review is undertaken as part of the review of internal controls as set out on pages 32 and 33.

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. A full review of the programmes is given in the Business Review on pages 6 to 10.

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.

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 until 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.

Appendix 2

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and parent company financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and accounting estimates that are reasonable and prudent; and

·; state whether applicable IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

Each of the Directors, whose names and functions are listed in the Board of Directors on page 16, confirm that, to the best of their knowledge:

·; the Group financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and

·; the information contained in the Business Highlights, Chairman's Review, Chief Executive's Review, Business Review, Financial Review, Principal risks and uncertainties and Directors' report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

By order of the Board

Mrs Z McGowanCompany Secretary30 November 2012