Plethora Solutions Holdings Plc Regulatory News (PLE)

PLETHORA SOLUTIONS HOLDINGS PLC

("Plethora" or the "Company")

Final Results for the year ended 31 December 2014

The Company announces its abbreviated audited results for the financial year ended 31 December 2014. The full version of its audited results are contained in the Company's Annual Report for 2014, which will be uploaded to the Company's web-site later today.

Highlights

Financial

· Reported revenues of £3.9m (2013: £nil)

· Loss before tax and pre-exceptional costs of £0.3m

· Loss from continuing operations for the year (post exceptional costs*) of £15.7m (2013: loss of £8.8m)

· Loss per share 3.2p (2013: loss of 2.6p)

· Cash and cash equivalent of £5.1m (2013: £3.1m)

* exceptional costs relate to termination and release agreements with each of Shionogi and Paul Capital and a patent assignment agreement with the original patent holder, such that Plethora now owns the entire economic benefit of all future revenue streams generated from the 'out licensing' of PSD502™ on a global basis.

Operational

· Licensing agreement signed with Recordati in September 2014. Plethora expected to receive milestone receipts of up to €46m plus royalties.

· Initial milestone receipt of €5m received from Recordati in November 2014.

· Placing and subscription raising £18.2m from new and existing institutional investors

· Pathway for PSD502™ to obtain FDA approval established

Developments in 2014

Progress has been made during the year to develop PSD502™ towards the commercial launch of the product in the EU and other key markets around the world.

In response to advice received from the Group's marketing consultants, a decision was made to explore the possibility to redesign the existing approved 20 dose canister to a smaller six dose container. This was done to consider the option to reduce the unit cost of each dispensing unit to a more economical and commercially optimal price point. This change would represent a variant to the existing EMA approval necessitating a new application to the regulator following tests and stability studies which are subject to fixed regulatory timescales. A feasibility study in relation to the new canister was successfully completed enabling further development work to be carried out in 2014 and during the first quarter of 2015.

In January 2014, a successful guidance meeting took place with the FDA in the USA to establish a defined pathway to secure regulatory approval to commercialise PSD502™ as a prescribed treatment for premature ejaculation in the USA. The agreed pathway will require supplementary clinical trials to be carried out to facilitate the completion of a new dossier for approval. We estimate that these trials will commence later this year and take approximately five months to complete at cost of approximately US$5 million.

In March 2014, Pharmaserve North West (PSNW) was engaged as the Company's European-based manufacturing partner to establish a dedicated production line and assist in the development of a new six dose canister. Tests by PSNW on the first two GMP batches of the six dose canister identified variances outside the permitted specifications in the composition of the combined compound, which are the subject of an ongoing investigation. In order to avoid the sunset date of 14 November 2016 for an EU launch, a decision was taken to instruct PSNW and Plethora's existing approved US-based manufacturing partner Catalent, to proceed in the manufacture of a 20 dose product in compliance with the existing EMA approval. The decision to dual source the product was taken to minimize the risk of any delay in the supply of a compliant product for the purposes of launching PSD502™ in the EU for preserving the sunset date and commencing the clinical trials for the completion of the New Drug Application with the USA Food and Drug Administration (FDA). The dual source strategy will also address the need to comply with the sunset date of 14 November 2016 where the EMA market authorization will expire if PSD502™ is not launched in the EU. The Group remains committed to the commercial sale of a six dose canister and is confident that with the assistance of the development teams at both Catalent and PSNW, a solution will be found during this year to overcome the issues affecting the ability to produce a lower dose product for commercial sale.

On 16 September 2014, Plethora entered into its first commercialisation agreement with the pharmaceutical group Recordati S.p.A (Recordati), a €1.2 billion turnover fully integrated pharmaceutical group dedicated to the research, development, manufacturing and marketing of pharmaceuticals. The agreement covers the commercialisation of PSD502™ in Europe, Russia and the CIS, Turkey and certain countries in North Africa. The contract facilitated an initial €5 million milestone receipt which was received by Plethora in November 2014, a €6 million receipt upon EMA approval of the new six dose canister and up to €35 million in future milestone receipts conditional upon agreed sales targets being achieved. In addition to the milestone payments, percentage royalties will be receivable varying from the mid-teens to the mid-twenties applied to gross sales. The commercial launch of the product is expected to take place during 2016 to coincide with the availability of the first commercial production batches and Recordati's pre-launch marketing processes.

At the same time, Plethora settled with parties with interests in PSD502™ in relation to royalties payable from future sales of the product at a cost of US$25 million. Plethora also secured exclusive rights to all the intellectual property rights of PSD502™, including the patent rights. Within the consideration payable, US$250,000 was deferred, pending the formal completion of the transfer of the patents and Supplementary Protection Certificates (SPC) in the name of the Group. This payment was financed by a £18.2 million equity placement. Following the completion of this agreement, the Group now has full unfettered control over the development and commercialisation of PSD502™ on a global basis. The Company's forecasts indicate that the future benefits of this agreement will have a significant positive impact on shareholder value. Despite the anticipated benefits, the cost of acquiring these rights have been expensed in the financial statements in order to comply with current International Financial Reporting Standards and classified as an exceptional item.

The process to establish the design and structure of the new clinical trials has been completed subject to final FDA approval. The Company aims to commence the trials later this year. Submission of the new dossier to the FDA is anticipated to be made during Q1 2016. Based on a maximum 10 month assessment period under the protocol defined by the Prescription Drug User Fee Act, a target launch of PSD502™ in the USA is anticipated to take place during the first part of 2017.

Discussions and negotiations are currently taking place with:

(i) A global pharmaceutical company for 'out licensing' the grant of rights by Plethora in respect of PSD502™ for certain countries in LATAM, Asia Pacific (including Australia) and South Africa. The parties have entered into non-binding heads of terms and have moved into discussions on the licence agreement which anticipate an up-front payment to Plethora followed by additional payments upon the achievement of certain milestones plus royalties linked to sales. 

(ii) A multinational pharmaceutical company for 'out licensing' the grant of rights by Plethora in respect of PSD502™ for countries in the Middle East region. The parties have entered into non-binding heads of terms and have moved into discussions on the licence agreement which anticipate an up-front payment to Plethora followed by additional payments upon the achievement of certain milestones plus royalties linked to sales.

Negotiations continue for licensing out PSD502™ with both these pharmaceutical companies and with other strategic commercial marketing partners on normal commercial terms. However, it is not possible to determine with accuracy the timing of completion of such agreements and no assurance can be given that negotiations will lead to a binding licensing agreement(s) as described in (i) and/or (ii) above or at all. The Company hopes to be in a position to make further announcements during the course of 2015 relating to its out licensing activities.

EXCEPTIONAL ITEM

In September 2014, the Company entered into termination and release agreements with each of Shionogi and Paul Capital and a patent assignment agreement with the original patent holder in relation to residual royalty interests PSD502™, such that Plethora owns the entire economic benefit of all future revenue streams generated from the 'out licensing' of PSD502™ in the future on a global basis (the "Agreements").

As an extension to these Agreements, it was also agreed that all of the intellectual property rights of PSD502™ including the patent rights would be transferred to the Group. The total consideration of the Agreements was $25 million, of which payment of US$250,000 to the original patent holder has been deferred pending the formal completion of the transfer of the patents and SPC's in the name of the Group. The cost of securing these rights has been expensed in the financial statements and has been classified as an exceptional item.

In 2013, the Group reclassified all its borrowings as convertible debt in line with the revised loan agreements. As a result of these changes, the Group recognised a gain of £293,000 in the Consolidated Statement of Comprehensive Income, which related to the extinguishment of the existing loans in exchange for the new loans.

PLACING

On 29 August 2014 the Company announced a conditional agreement to raise £15.9 million through the placing of 177.0 million ordinary shares at a price of 9p per share. Shortly thereafter, a further £2.3 million was raised through the placing of 25.3 million shares at 9p per share with one of the Company's existing shareholders Regent Pacific Group. The terms of the placings included the issue of warrants to the subscribing shareholders to subscribe for a further 101.3 million shares at an option price of 15p per share. The proceeds of the placings were used to finance the buy-out of the remaining minority participating interests in the intellectual and commercial rights in PSD502™ for $25m and fund the ongoing working capital and development needs of the Group.

BORROWINGS

At 31 December 2014 the Group had total borrowings of £7,425,000 (2013: £9,267,000), full details of which are set out in Note 5.

All the Company's loans are repayable on 31 March 2015. Under the terms of the refinancing agreements entered into during March 2013, the loan note holders have an option to convert these loans together with the associated accrued interest and redemption premium into ordinary shares at a rate of 2p per share. On the basis that the conversion option price is significantly less than the current market price, the board anticipates most of the Group's debt will be settled on or around 31 March 2015 through the issue of new ordinary shares.

2015 Outlook

The next financial year is expected to be an exciting period to prepare for the initial commercial launch of PSD502™ in the EU and other territories. A decision was taken to instruct PSNW and Catalent to proceed in the manufacture of a 20 dose can incompliance with the existing EMA approval for preserving the sunset date of 14 November 2016. In the meantime, the Company will continue to work with its manufacturing partners to perfect the manufacturing process to develop a six dose canister, which will release a further €6 million milestone receipt from the Company's commercial partner Recordati on receipt of EMA approval.

A number of discussions are taking place with other potential licensing partners covering other territories outside of Recordati's territory. The Company anticipates that further announcements regarding new licensing agreements will be made in 2015, which should facilitate the receipt of further upfront payments provided that the six dose canister can be commercially produced. An announcement regarding a commercial partner for the US market is not expected to take place until the Company is further along the process of securing FDA approval.

In relation to the FDA approval process, a new clinical trial will commence in the latter half of 2015, which will allow the new clinical dossier to be submitted in early 2016. In accordance with the protocol prescribed by the Prescription Drug User Fee Act, the FDA will be required to respond to the dossier within a 10 month timescale which would facilitate a commercial launch in the USA in the first part of 2017.

PLETHORA SOLUTIONS HOLDINGS PLC

Consolidated statement of comprehensive income

For the year ended 31 December 2014

PLETHORA SOLUTIONS HOLDINGS PLC

CONSOLIDATED BALANCE SHEET

For the year ended 31 December 2014

PLETHORA SOLUTIONS HOLDINGS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2014

PLETHORA SOLUTIONS HOLDINGS PLC

CONSOLIDATED cash flow statement

For the year ended 31 December 2014

Notes to the consolidated financial statements

1 general information

Plethora Solutions Holdings plc and its subsidiaries' principal activities are the development and commercialisation of a pharmaceutical treatment of premature ejaculation in the area of men's sexual health.

Plethora Solutions Holdings plc, a public limited company, is incorporated and domiciled in the United Kingdom. Its shares are registered on the Alternative Investment Market (AIM) at the London Stock Exchange.

The financial statements for the year ended 31 December 2014 (including the comparative information for the year ended 31 December 2013) were approved by the board of directors on 30 March 2015. Amendments to the financial statements are not permitted after they have been approved.

The financial statements for the year ended 31 December 2014 will be uploaded to the website, www.plethorasolutions.co.uk later today.

2 accounting policies

Basis of preparation

The consolidated financial statements have been prepared under the historical cost convention as modified by financial liabilities at fair value through profit or loss using the required measurement bases specified under International Financial Reporting Standards (IFRS) and in accordance with applicable IFRS as adopted by the European Union, IFRS Interpretations Committee interpretations and with those parts of the Companies Act 2006 applicable to Companies reporting under IFRS. Accounting policies have been applied consistently other than where new policies have been adopted.

The financial information set out in this audited preliminary statement includes comparative figures that have been prepared on the same basis. The auditors have reported on the financial statements for the year ended 31 December 2014, which were prepared under IFRSs as endorsed by the EU. Their report which, whilst unmodified, contains reference to the significant uncertainty disclosed in note 2 below. The auditors' report does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

This preliminary statement was approved by the board on 30 March 2015.

Overall considerations

The significant accounting policies that have been used in the preparation of the consolidated financial statements are contained in the full Annual Report which can be found on the Company's website. .

The consolidated financial statements from which this announcement has been extracted have been prepared using the measurement bases specified by IFRS for each type of asset, liabilities, income and expense.

The accounting estimates and assumptions are consistent with the Group's latest approved budget forecast where applicable. Judgements are based on the information available at each balance sheet date. All estimates are based on the best information available to management.

The Group can classify as discontinued operations only those operations which meet the criteria set out in IFRS 5 as at the Balance Sheet date. The Urology Company Limited, which was placed into administration in February 2013, is shown as a discontinued operation.

Exceptional items, namely items that are material either because of their size or their nature, and which are non-recurring, are presented within their relevant Statement of Comprehensive Income category, but highlighted through separate disclosure. The separate reporting of exceptional items helps provide a full understanding of the Group's underlying performance.

Going concern

In considering the appropriate basis on which to prepare the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

As at 31 December 2014, the Group had £5,066,000 of cash and cash equivalents and net liabilities of £2,857,000.

Given the current stage in the development of PSD502™, the Group did not generate any revenues during the year, with exception of a €5 million milestone receipt from its first commercialisation partner. The Group has no bank debt or any other senior debt facilities. It is anticipated that most of the outstanding investor debt in the business will be settled in 2015 through the issue of new shares as opposed to a significant cash commitment to fund the repayments. The Directors have prepared detailed cash flow forecasts through to the end of the 2016 that show that the Group has adequate working capital to meet its immediate needs as a result of the expected future milestone and royalty revenues from the commercialisation of PSD 502™, following approval of six dose canister.

Consequently, the Directors have concluded that it is appropriate to prepare the Group's financial statements on the going concern basis, which assumes that the Group will continue in operational existence for the foreseeable future. Nevertheless, there are uncertainties in relation to the timing of the approval of the new six dose canister, the timing and extent of upfront milestone receipts relating to other territories, the costs associated in setting up GMP production lines in the EU and USA and the costs associated with the New Drug Application with the FDA. Consequently, there is material uncertainty as to whether the Group's current cash reserves will be sufficient to enable the Group to discharge its liabilities in the normal course of business, including meeting its development objectives, and if not whether further shareholder support could be relied upon to meet any shortfall. This may cast significant doubt on the Group's ability to continue as a going concern which may lead to it being unable to realise its assets and discharge its liabilities in the normal course of business.

3 Exceptional items

In September 2014, the Company entered into termination and release agreements with each of Shionogi and Paul Capital and a patent assignment agreement with the original patent holder in relation to residual royalty interests PSD502™, such that Plethora owns the entire economic benefit of all future revenue streams generated from the 'out licensing' of PSD502™ in the future on a global basis (the "Agreements").

As an extension to these Agreements, it was also agreed that all of the intellectual property rights of PSD502™ including the patent rights would be transferred to the Group. The total consideration of the Agreements was $25 million, of which payment of US$250,000 to the original patent holder has been deferred pending the formal completion of the transfer of the patents and SPC's in the name of the Group. The cost of securing these rights has been expensed in the financial statements and has been classified as an exceptional item.

In the prior year, the Group recorded an exceptional credit of £293,000.This relates to a debt restructuring that took place in 2013 where the Group has reclassified all its borrowings as convertible debt in line with the revised loan agreements. As a result of these changes, the Group recognised a gain in the Consolidated Statement of Comprehensive Income, which related to the extinguishment of the existing loans in exchange for the new loans. There was no tax impact owing to the losses in the Group.

4 LOSS PER ORDINARY SHARE

The calculation of the basic and diluted loss per share is based on the loss for the year and on the weighted average number of ordinary shares in issue during the year. The losses and weighted average number of shares used in the calculations are set out below:

Basic loss per share is calculated based on a weighted average number of shares in issue of 489,279,789 (2013: 320,551,106). Diluted loss per share takes into account the dilutive effect of share options to the extent they are in the money and convertible loan notes. The dilutive effect on the loss per share in 2014 and 2013 is not shown as the effect on the loss per share of share options and convertible loans is anti-dilutive on the loss.

5 borrowings

The terms of the Company's loan agreements are summarized as follows:

(i) Convertible Loan Notes Due 2014

As part of the Debt Restructuring Agreement entered into on 18 March 2013, the Group agreed with the holders of £800,000 Convertible Loan Notes, which had a maturity date of 31 December 2012, to extend the maturity date to 31 December 2014. In addition, interest accrued on the Convertible Loan Notes to 28 February 2013 being £351,707 was paid through the issue of 17,585,342 New Ordinary Shares at 2p per share. Furthermore, the interest rate from 1 March 2013 was increased to 14 per cent per annum and will accrue to maturity. Finally, the conversion price of the Convertible Loan Notes was changed to 2p per share from 12.5p per share.

In 2013, the Group recognised a gain of £99,000 on the extinguishment of the existing loan notes as the existing loan notes were deemed to have been replaced by new convertible loan notes. The Group applied a competitive market discount rate in calculating the fair value of the loan notes in compliance with IAS 32.

On 29 September 2014, the holder of the Convertible Loan Notes exercised its option to redeem all amounts due under the loan agreement through the issue of 48,806,575 new Ordinary Shares.

(ii) CfE Loan Due 2015

In accordance with the Debt Restructuring Agreement entered into on 18 March 2013, the Capital for Enterprise Fund A LP ("CfE") Loan, which was repayable on 30 June 2015, is now repayable on 31 March 2015. As with the Convertible Loan Notes, interest accrued to 28 February 2013 of £128,384, was settled in April 2013 through the issue of 6,419,190 new Ordinary Shares. The interest rate from 1 March 2013 to maturity was reset to 14% per annum and will accrue to the date of maturity. The CfE loan carries a redemption premium of 25%. It was also agreed that the loan, redemption premium and the accrued interest are convertible into new Ordinary Shares at 2p per share at the option of the Lender. As part of the agreement, the CfE Fund was granted a warrant to subscribe, at a price of 1p per Ordinary Share, for Ordinary Shares representing up to 3% of the fully diluted ordinary share capital of the Company. The expiry date of the warrant is 31 March 2023 but exercisable at any time up to the expiry date at the discretion of CfE Fund. Consequently, the warrant is presented as a current liability.

In 2013, the Group recognised a loss of £67,000 on the extinguishment of CfE Loan in connection with the Debt Restructuring Agreement. The Group applied a discount rate in calculating the fair value of the Loan and deemed 85% of the existing loan to be extinguished by the inclusion of the conversion option. The resultant loss is included within "Exceptional item - finance income" on the face of the 2013 Consolidated Statement of Comprehensive Income.

On 3 December 2013, CfE completed the conversion of £200,000 in principal of the loan note into new Ordinary Shares. Interest and redemption premium on the loan note was accrued in accordance with the Debt Restructuring Agreement. This was settled by the issue of 13,566,300 new ordinary shares were issued at 2p per share to satisfy the aggregate of liability of £271,326 arising on the conversion.

Following the closure of The Urology Company Limited (the "Urology Co"), The liquidator of the Urology Co advised CfE that it intended to make a full and final distribution from the net proceeds of the liquidation to CfE  of £43,068 in its capacity as senior secured lender. This sum was accounted for as a partial repayment of the outstanding CfE loan after taking into account the contracted redemption premium and accrued yield that applies to this repayment.

On 8 September 2014, the Company received notice on behalf of CfE to convert a further £200,000 of the fund's holdings in convertible loan notes, at a conversion price of 2p per ordinary share, in accordance with the terms of the Debt Restructuring Agreement. The liability to be converted inclusive of principal, redemption premium and accrued interest from 1 March 2013 was £292,652 giving rise to an issue of 14,632,600 new Ordinary Shares. The revised amount of principal outstanding under the CfE loan is £569,595, excluding accrued interest and redemption premium.

The loan continues to be managed by Maven Capital Partners (UK) LLP.

(iii) Galloway Loan Due 2015

In accordance with the Debt Restructuring Agreement entered into on 18 March 2013, the maturity on the Galloway Loan facility of £850,000 was amended to 31 March 2015. In addition, the interest accrued on the loan to 28 February 2013 of £78,014 was paid through the issue of 3,900,685 new Ordinary Shares in April 2013 at 2p per share. The interest rate from 1 March 2013 to maturity was reset at 14% per annum and will accrue to maturity. The Galloway Loan carries a redemption premium of 25%. It has been agreed that the Galloway Loan, redemption premium and the accrued interest are convertible into new Ordinary Shares at 2p per share at any time up to the date of maturity at the option of the Lender.

As part of the arrangements, Galloway was granted a warrant to subscribe, at a price of 1.25p per Ordinary Share, for Ordinary Shares representing up to 5% of the fully diluted ordinary share capital of the Company. The expiry date of the warrant is 31 March 2023. The warrant is exercisable at any time up to the expiry date at the discretion of Galloway. Consequently, the warrant instrument is presented as a current liability.

In 2013, the Group recognised a loss of £68,000 on the extinguishment of the existing Galloway Loan in connection with the 2013 Debt Restructuring Agreement. The Group applied a discount rate in calculating the fair value of the Loan and deemed 95% of the existing loan to be extinguished by the inclusion of the conversion option. The resultant loss is included within "Exceptional item - finance income" on the face of the 2013 Consolidated Statement of Comprehensive Income.

(iv) Mellon Bridge Loans

Mellon Bridge Loan 1

In accordance with the Debt Restructuring Agreement entered into on 18 March 2013, it was agreed that the loan will mature on 31 March 2015. In addition, the interest accrued on the loan to 28 February 2013, being £15,342 was paid through the issue of 767,123 new Ordinary Shares in April 2013 at 2p per share. The interest rate from 1 March 2013 to maturity will remain unchanged at 10% per annum and will accrue to maturity. The Mellon Bridge Loan 1 carries a redemption premium of 75%. It was agreed that the loan, the redemption premium and the accrued interest are convertible into new Ordinary Shares at 2p per share at any time up to the date of maturity at the option of the Lender.

In 2013, the Group recognised a gain of £295,000 on the extinguishment of the Loan in connection with the Debt Restructuring Agreement. In calculating the fair value of the Loan, the Group applied a discount rate taking into account the fact that the facility accrues interest at a rate of 10% and carries a 75% redemption premium. The resultant gain is included within "Exceptional item - finance income" on the face of the 2013 Consolidated Statement of Comprehensive Income.

Mellon Bridge Loan 2: 

In accordance with the Debt Restructuring Agreement entered into on 18 March 2013, this loan together with the interest accrued and the applicable 33% redemption premium on the loan was rolled up and is repayable on 31 March 2015. It was agreed that the loan, the redemption premium and the accrued interest are convertible into new Ordinary Shares at 2p per share which can be exercised at any time up to the date of maturity at the option of the Lender.

In 2013, the Group recognised a gain of £34,000 on the extinguishment of the previous Loan in connection with the Debt Restructuring Agreement. In calculating the fair value of the Loan, the Group applied a discount rate taking into account that the facility accrues interest at a rate of 10%, carries a 33% redemption premium and a conversion price of 2p per share. The resultant gain is included within "Exceptional item - finance income" on the face of the 2013 Consolidated Statement of Comprehensive Income.

The future contractual payments of principal for convertible loan notes and third party borrowings are as follows: