Ixico Regulatory News (IXI)

8 Nov 2006 07:01

Phytopharm PLC08 November 2006 8th November 2006 Preliminary Results for the year ended 31 August 2006 Phytopharm plc (PYM: London Stock Exchange) ("Phytopharm" or the "Company", orthe "Group") today announces its preliminary results for the year ended 31August 2006. Key Points - Pharmaceutical Products • Good overall safety and tolerability demonstrated in 256 patient Phase IIa clinical study for CoganeTM in mild to moderate Alzheimer's disease patients. • Demonstration of a trend for slower disease progression in patients with more moderate Alzheimer's disease taking CoganeTM compared with placebo. • Detailed assessments and due diligence now in progress for CoganeTM and MyoganeTM with suitable licensing partners. Key Points - Functional Foods • Successful completion of the first stage and progression into second stage of the Joint Development Agreement with Unilever for our weight management product, Hoodia gordonii extract. Clinical studies underway. • Commitment by Unilever to pay up to £3.5 million (£0.66 million already received) to support the second stage of the development programme. The balance of this payment is expected during the next financial period (FY 2007). • Exclusive global marketing and distribution agreement for PhytopicaTM with Schering-Plough Animal Health (Schering-Plough). Product launched in UK and plans underway to launch in multiple European territories. Key Points - Financial • Revenue of £1.88 million (2005 £7.38 million) • Loss of £5.64 million (2005 £3.33 million) • Cash balance of £6.00 million (2005 £11.64 million) Key Points - Board • Appointment of Mr Sandy Morrison and Dr Peter Blower as Non-Executive Directors • Retirement of Mr Gordon Stevens as Chairman and Dr Trevor Flanagan as Non-Executive Director • Appointment of Dr Paul Whitney as Chairman Dr Richard Dixey, Chief Executive of Phytopharm, said: "The highlights of the year were the successful progression of our functionalfood products with our partners Unilever and Schering-Plough. The market launchof PhytopicaTM is a real milestone for us. Our business strategy of combiningthe development of functional foods with speciality pharmaceuticals isconsolidating rapidly, and we look forward to positive developments in bothsides of the business over the coming period." Enquiries: Phytopharm plc Tel: 01480 437697Dr Richard Dixey, Chief Executive Tel: 01480 437697Dr Daryl Rees, Chief Operating Officer Mobile: 07710 479626Financial DynamicsDavid Yates / Ben Atwell Tel: 0207 831 3113 Operational Review Phytopharm is a pharmaceutical development and functional food company whoseproduct leads are generated from medicinal plant extracts. The Company'sstrategy is to develop these products through 'proof of principle' clinicaltesting, and then secure partners for late stage development, sales andmarketing. This business model generates a lean cash burn and all laboratory, manufacturingand clinical work is outsourced to specialists while core competencies such asstrategy and management are kept in-house. This operational structure allowsaccess to advanced research techniques whilst maintaining low fixed overheadsand a lower development cost structure. Pharmaceutical Products The progress of our pharmaceutical products over the period, each at differentstages of development, is described below. Alzheimer's disease CoganeTM (coded PYM50028) is being developed as a potential disease modifyingagent for Alzheimer's and Parkinson's diseases. This novel synthetic chemicalis orally active and has neuroprotective and neurotrophic properties. CoganeTMrestores the learning and memory ability in Alzheimer's disease pre-clinicalmodels and thereby offers the potential to arrest or reverse the symptoms ofAlzheimer's disease. In late November 2005 we announced the preliminary results obtained from thePhase IIa clinical study of CoganeTM in mild and moderate Alzheimer's diseasepatients. The Oxford Project to Investigate Memory and Ageing (OPTIMA) was thelead clinical centre and 15 other sites in the UK participated in the study. Two hundred and fifty-six subjects with Alzheimer's disease ranging in severityfrom mild to moderate were randomly allocated to receive either 120 mg CoganeTM(n = 127) or a placebo (n = 129), orally once daily for 12 weeks. The majorityof patients enrolled had mild disease. The baseline demography data confirmedthat the treatment groups were well balanced for factors such as age, gender andseverity of disease. The overall safety data confirmed that CoganeTM administered orally once dailyfor up to 12 weeks is well tolerated and has a good overall clinical safetyprofile. There were no substantial differences in the adverse event andlaboratory safety data for each group. The prospectively defined primary efficacy measures were cognitive assessmentsmeasured using CANTAB-PAL and the Hopkins verbal learning test. The baselinescores and changes over time were not significantly different between thegroups. Although the Phase IIa clinical trial was not of a sufficient duration toobserve deterioration in cognitive function in the group of Alzheimer's patientswhose disease severity included both mild and moderate disease, a subsetanalysis on the smaller number of patients with moderate Alzheimer's diseaseshowed a trend towards deterioration in the placebo group, with no significantdeterioration observed in the CoganeTM group. This encouraging trend for slower disease progression in more moderateAlzheimer's patients with CoganeTM coupled with its excellent tolerability,confirms the need for longer term studies for efficacy determination. Furtherwork has now been initiated in preparation for further clinical studies anddiscussions with potentially suitable licensees have progressed to detailedevaluations and due diligence assessments of the full data set. Motor neurone disease MyoganeTM (coded PYM50018) is being developed for amyotrophic lateral sclerosis(ALS; also known as Lou Gehrig's disease). ALS is the most common motor neuronedisease and results from progressive degeneration of both upper and lower motorneurones. This condition has a high unmet medical need. Although the precisemolecular pathways that cause the death of motor neurones in ALS remain unknown,possible mechanisms include mitochondrial alterations and glutamate mediatedexcitotoxicity. In pre-clinical studies, the single chemical MyoganeTM protectsagainst neuronal damage, reverses the decrease of neuronal growth factors andreverses neuronal degeneration observed in motor neurones. MyoganeTM alsoincreases neurite outgrowth, reverses oxidative damage and reverses neuronalapoptosis in vitro. When administered orally to a transgenic preclinical modelof ALS, MyoganeTM delays the loss of muscle strength and extends survival time. In 2004, we successfully completed a Phase Ia clinical study to evaluate thesafety, tolerability and pharmacokinetic profile of MyoganeTM. This residentialclinical study was conducted under an investigational new drug (IND) filed withthe United States Food and Drug Administration (FDA) and confirmed that theproduct was well absorbed with an excellent safety profile. We also announcedthat the FDA had granted Orphan Drug and Fast Track designation to MyoganeTM forthe treatment of ALS. Building on this success we have further developed a newliquid formulation suitable for ALS patients and are completing safety studiesto support further clinical studies planned for calendar H1 2007. Initialdiscussions with potentially suitable licensees have now led to detailedassessments and due diligence evaluations of the full data set. Parkinson's disease, niche and orphan neurodegenerative diseases PYM50028 has potential utility as a treatment for Parkinson's disease as well asniche and orphan neurodegenerative diseases. A consistent feature of Parkinson'sdisease is the loss of dopamine-containing cells in the substantia nigra area ofthe brain. Current drugs can mitigate many of the symptoms for a while but donot alter the prognosis of steady decline. One important mechanism involved inneuronal degeneration of the substantia nigra is the production of toxic freeradicals. Phytopharm has generated data demonstrating that PYM50028 reverses theneurotoxicity in dopaminergic neurones and reverses the decrease of neuronalgrowth factors and dopamine receptors in the brain. In a pre-clinical model ofParkinson's disease, PYM50028 restores dopaminergic terminals in the striatumand protects dopaminergic cell bodies in the substantia nigra, providingencouraging evidence that PYM50028 has a disease modifying effect in this modeland as such is a promising novel treatment for Parkinson's disease. The neuroprotective and neurotrophic actions of PYM50028 suggest potentialbeneficial effects in niche and orphan neurodegenerative diseases includingdiabetic and mitotic neuropathies, Friedrich's ataxia, progressive supranuclearpalsy, Huntington's disease and multiple system atrophy. In pre-clinicalmodels, PYM50028 protects against sensory and motor neuronal damage, increasesneurite outgrowth, reverses oxidative damage and reverses neuronal apoptosis invitro. Asthma and other inflammatory disorders Asthma is a chronic inflammatory disorder of the airways that causes recurrentepisodes of wheezing, breathlessness, chest tightness and coughing. Inaddition, asthma is usually associated with widespread but variable airflowobstruction. Inhibition of inflammation and opening of the airways aretherefore key components of asthma treatment. Steady progress has been made inidentifying novel synthetic molecules that can be developed as a pharmaceuticalmedicine for the treatment of asthma and other inflammatory disorders.Pre-clinical studies have demonstrated anti-inflammatory and anti-spasmodicactivity in several models of asthma and inflammation. We plan to conductfurther proof of concept studies in pre-clinical models of asthma during thecoming year. Obesity and metabolic syndrome Obesity leads to a cluster of metabolic alterations and as a result is a majorrisk factor for insulin resistance, type 2 diabetes, coronary artery disease,hypertension, stroke, osteoarthritis and certain forms of cancer. Weight isgained when energy intake exceeds energy expenditure. The excess energy isstored as fat, and if there is an extended period of positive energy balance,obesity will result. The mechanism of action of the chemical series based onthe active components of our Hoodia gordonii extract (see below) is underinvestigation. Proteomic research is helping to define novel targets and thedesign of new molecules as pharmaceutical candidates for metabolic syndrome. Functional Foods The progress of our functional food products over the year is described below. Obesity Our obesity functional food product is based on an extract of the succulentplant, Hoodia gordonii, which contains a novel appetite suppressant that reducescaloric intake in overweight subjects, as demonstrated in our double-blind,placebo-controlled clinical study announced in December 2001. Extracts ofHoodia gordonii and the active molecules therein are the subject of a globalpatenting programme, with major patents granted in the US, UK and Japan andpending in Europe and all other major territories. In December 2004, we announced that we had granted an exclusive global licencefor the Hoodia gordonii extract to Unilever plc. Under the terms of theagreement, Phytopharm and Unilever are collaborating on a five-stage researchand development programme of safety and efficacy studies with a view to bringingnew weight management products to market. In April 2006, we announced that we had successfully completed the first stageof our Joint Development Agreement. We also announced that we are nowprogressing through the second stage which includes clinical studies. As part of the agreement, Unilever committed to initial payments ofapproximately £6.5 million for the first stage and in April 2006 committed up to£3.5 million for the second stage, out of a potential total of up to £21 millionin payments to Phytopharm. In addition, Phytopharm will receive an undisclosedroyalty on sales of all products containing the extract. Unilever is alsomanaging a separate agronomy programme and supporting the international patentprogramme for the products. Phytopharm and Unilever have also become aware of many companies that areselling products over the Internet and in some stores claiming to contain Hoodiaand causing weight loss. Analysis of these products has demonstrated that thegreat majority of them contain little or no Hoodia. Phytopharm and Unilever havemade contact with the relevant authorities concerning this development and aresatisfied with the progress being made in these key discussions. Canine skin health PhytopicaTM is a natural three plant product that provides a novel 3 in 1approach to help maintain a normal healthy immune system, support normal whitecell function and provide anti-oxidant benefits. Following the success in 2004of our European multi-centre study in canine atopic dermatitis, we launchedPhytopicaTM as a complementary pet food. Canine dermatological disorders arewell recognised by veterinarians to be a major problem in small animal practice,with an estimated 15% of the UK dog population (around 900,000 dogs) affected byskin conditions due to allergy (source: Animal Pharm). Maintenance of a healthyskin and coat and alleviation of itching are of major importance to caninegeneral health and quality of life. In January 2006, we announced that we had entered into an exclusive globalmarketing and distribution agreement with Schering-Plough Animal Health forPhytopicaTM. Under the terms of the agreement, Phytopharm is responsible for themanufacture and sale of PhytopicaTM to Schering-Plough. Schering-Plough isresponsible for the global sales, marketing and distribution of PhytopicaTM. InApril 2006, we announced the UK launch by Schering-Plough of PhytopicaTM. PhytopicaTM has been proven extensively in clinical trials and enjoys strongsupport from veterinary dermatologists in the UK. Launched at the world'slargest companion animal congress, the British Small Animal VeterinaryAssociation (BSAVA) in Birmingham, 20-23 April 2006, PhytopicaTM has anexcellent safety profile and is recognised as suitable for all dogs whateversize or breed. Following the UK launch, Schering-Plough will market anddistribute PhytopicaTM in multiple European territories during 2007 and plans tomarket the product in the USA during 2008. With Schering-Plough's globalpresence we look forward to strong growth from this product. Canine joint health In June 2004, we announced the launch of ZanthofenTM for the maintenance ofcanine joint mobility. Pre-clinical studies have demonstrated that thecomponents of ZanthofenTM maintain normal white cell function and haveanti-oxidant properties that help maintain joint mobility. Income from thisproduct has been small and sales growth will require expansion intointernational markets. The rights to the product are being assigned to itsIndian manufacturer and a proportion of any future revenue will be transferredto Phytopharm. Board Changes In September, we announced that Gordon Stevens (non-executive Chairman) andTrevor Flanagan (non-executive Director) retired from the Board and that PaulWhitney (previously Deputy Chairman) stepped up to the role of non-executiveChairman. This reorganisation followed the earlier appointments of twonon-executive Directors - Dr Peter Blower, former Director of New Neuroscienceproducts at SmithKline Beecham, and Sandy Morrison, former CEO of Lipton Ltd, aUnilever subsidiary. Outlook Phytopharm is making good progress in developing a broad portfolio of productswith substantial potential value. We are progressing through the second stage ofour obesity programme with Unilever and Schering-Plough has launched PhytopicaTMin the UK for canine skin health as a part of its global marketing deal. Our functional food products are now generating revenue and we continue toinvest in the pharmaceutical development of the Company. Overall, with growingrevenues from our marketed product, PhytopicaTM, a major licensing partner inplace for Hoodia gordonii and licensing discussions underway for theneurodegeneration products in our portfolio, Phytopharm is well placed tocontinue its progress during the coming year. Furthermore, the recent appointments to the Board bring significant benefits tothe Company, in particular the strengthening of our neuroscience pharmaceuticaldevelopment and functional food expertise. The Company is currently seeking toappoint a Chief Financial Officer as a main board director to further strengthenthe management team. Financial review Phytopharm is a pharmaceutical development and functional food company whichcontinues to invest in the development of its product portfolio. This isreflected in the financial performance of the Group for the twelve months to 31August 2006. These unaudited financial statements are the first annual results for which theGroup is required to adopt International Financial Reporting Standards (IFRS).Previously, the Group has prepared its financial statements under UK GenerallyAccepted Accounting Practice ("UK GAAP"). In accordance with IFRS1 thecomparative financial statements for the year ended 31 August 2005 have beenrestated to comply with IFRS. The most notable change for the Group is the adoption of IFRS2 'Share-basedPayment', which requires the fair value of equity based compensation to berecognised in the income statement. Income statement Revenue of £1.66 million for the period was generated from Unilever for thedevelopment of the Hoodia gordonii programme. This includes £0.66 million out ofa total of up to £3.5 million which has been committed by Unilever to supportthe second stage of the development programme. The balance of this payment isexpected during the next financial period (FY 2007). Further revenue of £0.22 million was generated from sales of PhytopicaTM as acompanion animal health product. This compares with product sales of £0.13million in the corresponding period. PhytopicaTM was licensed to Schering-Ploughin January 2006 and formally launched in April 2006. Losses are slightly greater and revenue lower than anticipated due to timingvariations on income arising from these contracts. Despite these timing issuesthe development programme with Unilever remains on target as does the launchprogramme with Schering-Plough. Revenue for the comparable period (twelve monthsto 31 August 2005) included a final £4 million (£3.6 million net of Japanesewithholding tax) milestone payment by Yamanouchi Pharmaceutical Company Ltd(Yamanouchi) following acknowledgement that the safety data in relation to thefirst sixty patients treated with CoganeTM in the Phase IIa study had fulfilledthe criteria set out in the licensing agreement. Following the successful fundraising in May 2005, expenditure on research anddevelopment has continued as planned for the twelve months ended 31 August 2006.A total of £6.54 million was spent during the period compared to £8.91 millionfor the twelve months ended 31 August 2005. 53% of this expenditure has beenincurred on the Alzheimer's and motor neurone disease programmes. This includesthe completion of the CoganeTM Phase IIa study, safety studies for MyoganeTM andpharmaceutical development work for both products. A further 27% of expenditurehas been incurred on the development of Hoodia gordonii extract which has nowprogressed into the second stage of development. The remaining expenditureincludes pre-clinical work on the asthma and metabolic syndrome programmes. Expenditure on administrative expenses for the twelve months ended 31 August2006 decreased to £1.63 million (FY 2005 £2.01million). This is after a chargeof £0.30 million (FY 2005 £0.76 million) representing the non-cash cost for theperiod of share options awarded to employees. As a result of the successful fundraising in May 2005, interest receivable hasincreased to £0.38 million (FY 2005 £0.34 million). The income statement shows a taxation credit of £0.60 million (FY 2005 £0.67million) relating to the research and development tax relief in respect ofqualifying expenditure. Balance sheet Current assets at 31 August 2006 amounted to £8.01 million and comprisedinventories of £0.84 million, amounts receivable of £1.17 million and cash andcash equivalents of £6.00 million. Inventories decreased in the twelve months to 31 August 2006 due to productsales and provision for short-dated finished goods and raw materials. Trade andother receivables continue to include an R & D tax credit receivable of £0.60million (FY 2005 £0.67 million). The decrease in cash resources of £5.64 million between 31 August 2005 and 31August 2006 reflects the expenditure on developing the Group's product portfoliooffset by income generated from licensing activities and product sales. Cashresources described as cash and cash equivalents are initially invested for aperiod of 90 days or less. Current liabilities of £1.74 million at 31 August 2006 comprise trade and othercreditors and include £0.46 million of deferred revenue (FY 2005 £0.29 million). Cash flow The net cash used in operating activities for the twelve months to 31 August2006 was £5.85 million (FY 2005 £3.79 million). The net cash generated frominvesting activities arises from interest received of £0.38 million and the saleof fixed assets £0.61 million, offset by purchases of fixed assets of £0.24million. In the twelve months ended 31 August 2005 additional cash was generatedof £0.61 million arising from the repayment by Unilever of advances to certainsuppliers made by the Group in 2004. Financial outlook Phytopharm will continue to invest in its pharmaceutical and functional foodproducts and work with its licensing partners to continue the development of theHoodia gordonii programme and to roll out the launch of Phytopica TM interritories across Europe. The Group currently has cash resources in excess oftwelve months of operations. The Group's business development activities willfocus on the out-licence of products to partners who will share in the cost andrisk of product development thus contributing to cash flows in future years. TheGroup also intends to pursue in-licensing opportunities to strengthen theexisting product portfolio but does not expect a significant increase inadministrative expenses to arise from in-licensing activities. Unaudited consolidated income statementFor the year ended 31 August 2006 31 August 31 August 2006 2005 (restated) note £ £Revenue 1,882,501 7,378,110Cost of sales (341,067) (399,842) _____ _____Gross profit 1,541,434 6,978,268Research and development expenses (6,540,173) (8,910,005)Selling, general and administrative expenses (1,624,779) (2,006,794) _____ _____Operating loss (6,623,518) (3,938,531)Interest receivable and similar income 380,484 338,212Interest payable and similar charges - (295) _____ _____ Loss on ordinary activities before taxation (6,243,034) (3,600,614)UK tax credit on loss/ on ordinary activities 2 604,421 674,341Foreign tax charge 2 - (400,000) _____ _____ Loss for the period (5,638,613) (3,326,273) _____ _____ Basic and diluted loss per share (pence) 3 (11.0) (7.3) All revenue and expenses shown above were generated from continuing operations. Unaudited consolidated statement of changes in shareholders' equityFor the year ended 31 August 2006 Share Share premium Other Retained Total capital reserves deficit £ £ £ £ £Balance at 1 September 2004 427,488 38,134,657 (204,211) (33,079,538) 5,278,396Loss for the period - - - (3,326,273) (3,326,273)Issue of equity share capital 84,321 9,022,051 - - 9,106,372Equity share options charge - - - 755,230 755,230 _____ _____ _____ _____ ______ Balance at 31 August 2005 511,809 47,156,708 (204,211) (35,650,581) 11,813,725Loss for the period - - - (5,638,613) (5,638,613)Equity share options charge - - - 302,492 302,492 _____ _____ _____ _____ _____ Balance at 31 August 2006 511,809 47,156,708 (204,211) (40,986,702) 6,477,604 _____ _____ _____ _____ _____ Unaudited consolidated balance sheetAs at 31 August 2006 31 August 31 August 2006 2005 (restated) note £ £Non-current assetsProperty, plant and equipment 201,521 146,002 _____ _____Non-current assets 201,521 146,002 Current assetsInventories 4 842,899 947,221Trade and other receivables 5 1,173,303 1,339,430Cash and cash equivalents 5,997,428 11,640,739 _____ _____Current assets 8,013,630 13,927,390 _____ _____Current liabilitiesTrade and other payables 6 (1,737,547) (2,259,667) _____ _____Net current assets 6,276,083 11,667,723 _____ _____ Net assets 6,477,604 11,813,725 _____ _____ Share capital 511,809 511,809Share premium 47,156,708 47,156,708Other reserves (204,211) (204,211)Retained deficit (40,986,702) (35,650,581) _____ _____Shareholders' funds 6,477,604 11,813,725 _____ _____ Unaudited consolidated cash flow statementFor the year ended 31 August 2006 31 August 31 August 2006 2005 (restated) £ £Cash flow from operating activitiesOperating loss (6,623,518) (3,938,531)Depreciation 108,259 89,605Loss/(gain) on disposal of property, plant and equipment 10,068 (1,150)Option charge 302,492 755,230 _____ _____ (6,202,699) (3,094,846)Changes in working capitalDecrease/(increase) in trade and other receivables 96,207 (317,552)Decrease in trade and other payables (520,725) (14,612)Decrease/(increase) in inventories 104,325 (596,687) _____ _____ Cash used in operations (6,522,892) (4,023,697)Taxation received 674,341 630,300Foreign taxation paid - (400,000)Interest paid - (295) _____ _____ Net cash used in operating activities (5,848,551) (3,793,692)Cash flows from investing activitiesPurchase of tangible fixed assets (234,596) (62,845)Sale of tangible fixed 60,750assets - 9,000Repayment of advances to suppliers - 613,929Interest received 380,484 338,212 _____ _____ Net cash generated from investing activities 206,638 898,296Cash flows from financing activitiesIssue of shares - 10,259,384Share issue costs - (1,153,012)Capital element of finance leases (1,398) (1,397) _____ _____ Net cash (used in)/generated from financing activities (1,398) 9,104,975 _____ _____ Movements in cash and cash equivalents in the period (5,643,311) 6,209,579Cash and cash equivalents at the beginning of the period 11,640,739 5,431,160 _____ _____ Cash and cash equivalents at end of period 5,997,428 11,640,739 _____ _____ Notes to the unaudited financial statementsFor the year ended 31 August 2006 1 Basis of preparation The preliminary announcement for the year ended 31 August 2006 is unaudited andhas been prepared in accordance with International Financial Reporting Standards(IFRS) as adopted by the European Union as at 31 August 2006. On 8 May 2006,along with its interim results, the Group reported on the impact of IFRS on itsresults for the year ended 31 August 2005, and set out its principal accountingpolicies under IFRS. The financial information in this preliminary announcement does not constitutethe Group's statutory accounts for the year ended 31 August 2006 or the yearended 31 August 2005, but is derived from those accounts. The Group's statutory accounts for the year ended 31 August 2005, prepared underUK GAAP have been delivered to the Registrar of Companies; the report of theauditors on these accounts was unqualified and did not contain a statement undersection 237(2) or (3) of the Companies Act 1985. 2 Tax on loss on ordinary activities 31 August 31 August 2006 2005 £ £United KingdomCorporation tax credit 604,421 674,341Foreign taxationWithholding tax suffered - (400,000) _____ _____ 604,421 274,341 _____ _____ Foreign tax relates to the 10% Japanese withholding tax suffered in the yearended 31 August 2005 on the £4 million income from the Yamanouchi milestone. There is no corporation tax charge because of the incidence of tax losses. TheCompany has taken advantage of the Research and Development corporation taxcredits introduced in the Finance Act 2000 whereby a company may surrendercorporation tax losses incurred on research and development expenditure for acorporation tax refund at the rate of 24 pence on the pound of actualexpenditure. 3 Loss per share The loss per share is based on losses from continuing operations of £5,638,613and 51,180,893 ordinary shares, being the weighted average number of shares inissue during the period. As the Group was loss-making in the year ended31 August 2006 and the year ended31 August 2005, there were no dilutive potential ordinary shares. 4 Inventory 31 August 31 August 2006 2005 £ £Raw materials and consumables 360,843 525,916Work in progress 482,056 293,025Finished goods and goods for resale - 128,280 _____ _____ 842,899 947,221 _____ _____ 5 Trade and other receivables 31 August 31 August 2006 2005 £ £Trade receivables 324,396 226,076 & D tax credit 604,421 674,341Other receivables 34,740 227,743Prepayments and accrued income 209,746 211,270 _____ _____ 1,173,303 1,339,430 _____ _____ 6 Trade and other payables 31 August 31 August 2006 2005 £ £ Trade payables 522,222 589,922Obligations under finance leases - 1,398Other payables 73 18,494Other taxation and social 61,598 58,998securityAccruals and deferred income 1,153,654 1,590,855 _____ _____ 1,737,547 2,259,667 _____ _____ 7 Related party transactions The Group was obliged during the financial year ended 31 August 2005, to pay theInland Revenue £157,731 arising in respect of personal tax on the exercise bythe Chief Executive Officer of 288,889 share options on 3 December 2004, nearthe end of the exercise period. At 31 August 2005, Dr Dixey was accordinglyobliged to reimburse such amount to the Company including interest charges at5%, being the Inland Revenue Approved Rate. Subsequent to 31 August 2005 theRemuneration Committee agreed to waive the repayment of the amount due from DrDixey, who will instead receive no bonus for the 2005 and 2006 financial years.The Company has therefore recognised in the income statement for the year ended31 August 2006 a charge of £314,170 in respect of this arrangement, being theimpairment of the receivable relating to the original tax on share option gainsand the additional tax liability on the benefit arising from the waiver. At 31August 2006, there is no outstanding balance with a related party relating tothese arrangements. This information is provided by RNS The company news service from the London Stock Exchange