Plethora Solutions Holdings Plc Regulatory News (PLE)

26 Sep 2007 07:02

Plethora Solutions Holdings PLC26 September 2007 Plethora Solutions Holdings PLC (AIM:PLE) Interim Results for the six months ended 30 June 2007 Plethora Solutions Holdings PLC ("Plethora") the specialist developer ofproducts for the treatment and management of urological disorders, todayannounced interim results for the six months ended 30 June 2007. Highlights • Revenues up 16% to £2.8m (H1 2006 £2.4m) • Cash outflow from operating activities £4.1m (H1 2006: £2.0m) • Cash and cash equivalents at 30 June 2007 £7.5m (30 June 2006: £6.6m) Licensing: • $7m equity investment received from Sciele Pharma, Inc. ("Sciele") for US rights to PSD502 for Premature Ejaculation (PE) at £2 per share • Plethora retains co-promotion rights in the US • Non-US rights to PSD502 for PE in negotiation Product Sales and Marketing: • Sales of ErecAid(R) vacuum erection devices increased • Gross margin on ErecAid(R) sales increased to 86% in the reporting period (H1 2006 77%) following transfer of key component manufacture to China • Timm Medical sales force expanded • New products added to Timm Medical portfolio - Acticuf(R) and Cleancatch (R) Development: • IND opened for PSD502 for PE • Successful completion of PSD502 clinical study in the US as a precursor to Phase III • Successful completion (post reporting period) of a PSD597 Phase II study for Interstitial Cystitis/Painful Bladder Syndrome Dr Steven Powell, CEO said: "The transformation of Plethora into a sustainable urology business continues togather momentum. 2007 is a year of investment in clinical development andalready two studies have been completed successfully in the first half of theyear. We also signed a licensing agreement with Sciele Pharma, Inc., whichprovides Plethora with a platform to begin the transition from a development-ledorganisation to a more balanced group with revenues derived from both licensingand product sales. The positive results from PSD597, announced earlier thismonth, further demonstrate our ability to move products through clinicaldevelopment and on towards commercial development and we will now initiatelicensing discussions for this product. "During the second half of the year, licensing activity will focus on PSD502 andPSD597, whilst in parallel we will continue to grow revenues from our portfolioof Timm products, and move PSD502 and PSD510 into Phase III studies. We are inconstant discussions with commercial partners to take these products forward andto ensure that we maximise the value of our portfolio." For further information contact: Plethora Solutions Tel : 020 7269 8630Steven Powell Collins Stewart Tel : 020 7523 8350Tim Mickley City/Financial Enquiries Tel : 020 7379 5151MaitlandBrian Hudspith/Liz Morley About Plethora: Plethora is focused on the development and marketing of products for thetreatment of urological disorders. The Company has products in clinicaldevelopment for the treatment of overactive bladder, stress urinaryincontinence, interstitial cystitis, gynaecological pain, erectile dysfunctionand premature ejaculation. Plethora has a Minneapolis (Mn) based subsidiary,Timm Medical Technologies Inc, which markets products for the treatment oferectile dysfunction (ED) to urology clinics through a US-based specialty salesteam. The Company is headquartered in the UK and is listed on the London StockExchange (AIM:PLE) Further information is available atwww.plethorasolutions.co.uk A meeting for equity analysts will take place at 9:30 a.m. today at Collins Stewart, 9th Floor, 88 Wood Street, London EC2V 7QR. Chairman and Chief Executive's Statement Plethora's strategy is to build a urology business based on three coreactivities: • Sales and marketing of urology products; • Product licensing; and • Therapeutic product development. We are pleased to report that we have made significant progress in all threeactivities and continue towards our goal of creating a sustainable urologybusiness. Product Sales and Marketing Plethora markets a range of Vacuum Erection Devices (VEDs) through itssubsidiary, Timm Medical, for the treatment of erectile dysfunction (ED).Products are marketed in the USA via a newly expanded field sales force callingon specialist urology clinics. Their efforts are supplemented by an in-housesupport team interacting directly with patients and products are marketedinternationally via an extensive distributor network. In the first half of 2007, Timm Medical reported sales of £2.8m (H1 2006: £2.4m)from sales of the ErecAid(R) VED and the ErecAid(R) gross margin increased from77% to 86% as a result of the Board's decision to transfer component manufactureto China in the latter part of 2006. We continue to see a growth in ErecAid(R)sales achieved by demonstrating the effectiveness of the product in treating EDpatients who are either excluded from, or choose not to use, oral therapeuticsfor the treatment of ED. We expect that the continued demonstration of thesafety and clinical efficacy of ErecAid(R) in patients post radicalprostatectomy and failed medical management (e.g diabetes patients) will lead tocontinued organic growth in Timm Medical revenues in the second half of theyear. Two new products, Acticuf(R), for male incontinence, and, Cleancatch(R), forobtaining midstream urine samples, were added to the Timm portfolio in May. Itis too early for these products to have made an impact on the sales line in thisreporting period, but initial market feedback is encouraging. The Board'sobjective is to develop Timm Medical from a single product marketing operationinto more diverse urology business. Licensing Activity In May 2007 we signed an exclusive agreement with Sciele Pharma, Inc., licensingcommercial rights to PSD502 for premature ejaculation in the USA together withan agreement for Sciele to purchase a $7m equity stake in Plethora. Under theterms of the license we will receive milestone payments on the achievement ofregulatory and sales milestones. Plethora will also receive royalty payments onsales after product approval and launch. Negotiations are continuing withpotential partners for PSD502 for territories outside of the USA and for thesecondary indication of wound pain. Within the license agreement with Sciele, Plethora has retained co-promotionrights that will leverage our existing Timm Medical sales and marketinginfrastructure. By retaining co-promotion rights in the US and negotiatingnon-US rights separately, Plethora aims to maximise the value of thisdevelopment asset. Sciele's equity investment in Plethora reflects the potentialthat exists in our product development pipeline particularly in women's health,an area of clinical focus for Sciele. In addition to PSD502 we have now initiated discussions with potential licensingpartners for PSD597 following the successful completion of a Phase II clinicalstudy for the treatment of interstitial cystitis and painful bladder syndrome.We look forward to updating shareholders on the progress of these discussions indue course. Development Pipeline Significant advances have been made across the Plethora development portfolioduring the first half of fiscal year 2007. While PSD502 and PSD510 are nowprogressing towards Phase III studies, four Phase II projects for treatment offemale urinary incontinence and gynaecological pain are expected to havecompleted their current stage of clinical development by mid 2008 giving risepotentially to further new out-licensing opportunities for Plethora. Male Sexual Dysfunction Plethora is both marketing and developing products for the treatment of malesexual dysfunction in the form of erectile dysfunction and the unmet medicalneed of premature ejaculation. Table 1: Plethora Male Sexual Health Portfolio Product Indication Category Status------------- ------------ ------------- -------------- ErecAid (R) ED Device Marketed PSD502 PE Therapeutic Phase III PSD510 ED Therapeutic Phase II/III PSD502: A Topical treatment for premature ejaculation Epidemiological surveys indicate that Premature Ejaculation (PE) is the mostcommonly reported form of sexual dysfunction in men, with prevalence of 25 to30%. Unlike ED, the prevalence of PE does not appear to correlate withincreasing age and there are no approved pharmaceutical treatments. PSD502, Plethora's product in development for the treatment of PE, hassuccessfully completed a Phase II clinical study with patients with primary PE.In February 2007 the Group filed an Investigational New Drug submission (IND)with US regulatory authorities, completing its filing with the FDA ahead ofmoving the product into Phase III. A manufacturing and supply agreement has beenconcluded with a US manufacturer to supply active drug for both the Phase IIIstudy and subsequent commercial product and the licensing agreement with Scielefor rights to PSD502 in the US means that the project is on track to move to itsfinal stage of clinical development before the end of 2007. The programme for PSD502 in pain management continues to advance and coulddeliver significant additional value. PSD510 (Invicorp(R)) Erectile dysfunction (ED), the inability to attain and maintain an erectionsufficient to permit satisfactory sexual intercourse, afflicts almost one-fifthof men. It can be treated by either pharmacological or non-pharmacological meansor a combination of treatments. A number of oral phosphodiesterase type 5 (PDE5)inhibitors are approved as first-line treatments for ED. Overall, while EDmarket expansion has been driven by oral drugs, the current generation of PDE5inhibitors is not effective in around 30% of ED sufferers. Invicorp(R) is a non-oral treatment for erectile dysfunction. Completed Phase IIand III studies have shown that, in contrast to current, marketed non-oraltherapeutics where pain is a common adverse event experienced by more than 30%of users, the reported incidence of pain associated with Invicorp(R) in clinicalstudies to date is substantially less with fewer other side effects. The productis already approved in the UK, Denmark and New Zealand. Following discussionswith the US Food & Drug Administration (FDA), Plethora will initiate the finalcomponent of the North American clinical development programme for Invicorp(R),a Phase III programme, at up to 30 sites in the USA later in 2007. The programmeis expected to last 15 months with the product launch anticipated by the end of2009. Invicorp(R) is a strong complement to the Timm Medical ED franchise and willleverage Timm's current access to a key prescriber group, namely urologistsactive in ED management in those men failing oral ED drugs. We believe that thesuperior adverse event profile and clinical efficacy of Invicorp(R) will enablethis product to not only compete for market share but also to attract and retainnew users. Female Health Plethora's development activities in female health are focussed on treatment ofurinary incontinence and gynaecological pain. Both clinical fields encompasssubstantial patient populations and poorly met clinical needs. Table 2: Plethora Female Health Portfolio Product Indication Description Status--------- ------------ -------------- --------------PSD503 SUI Therapeutic Phase IIPSD506 OAB (LUTS) Therapeutic Phase IIPSD597 Interstitial cystitis Therapeutic Phase II/IIIPSD508 Dysmenorrhea Therapeutic Phase IIPSD509 Uterine pain Therapeutic Pre Phase II Urogynaecological Pain PSD597 PSD597 is a proprietary formulation of a marketed analgesic drug for thetreatment of interstitial cystitis and painful bladder syndrome (IC/PBS). A 2006Datamonitor report, "Interstitial Cystitis - Few Treatments, Poor Outcomes"(04.2006), stated that IC prevalence translated to a global patient populationof 16 million with 6.4 million patients in the US alone. Post the reporting period we announced the successful conclusion of a PSD597Phase II clinical study in North America in patients suffering from interstitialcystitis and painful bladder syndrome. Preliminary analysis of the data showed aclinically and statistically significant improvement in patient symptoms asmeasured by the primary endpoint of Global Response Assessment (GRA). This isthe first study conducted in a double blind placebo controlled setting usingwell recognized endpoints to report a positive outcome. These results werefurther supported by positive outcomes for the secondary endpoints, includingsymptom and problem indices. Importantly, the treatment effect appeared to bemaintained for several weeks and the drug was safe, well tolerated and devoid ofsystemic side effects. Discussions will now be initiated with regulatoryauthorities to confirm the requirements for the remaining component of theregistration programme for this product. Full data from the blinded and openlabel studies will be available later in the year and we look forward toupdating shareholders as this development programme and associated partneringdiscussions advance. PSD508/509 In 2006, Plethora acquired exclusive licenses to two clinical-stage productcandidates and access to an underlying platform drug delivery technology fromMetris Therapeutics Limited. This technology effects local delivery of drugactives which have established or potential benefit in women's healthindications to the reproductive system via the vaginal wall. This may enabledelivery of higher doses of drug than might be achieved through oral deliverywhile minimising systemic exposure. PSD508 is a locally-delivered formulation of a well-characterised non-steroidalanti-inflammatory drug (NSAID) for the treatment of dysmenorrhoea; a painful,often incapacitating, menstrual cramp which afflicts more than 50% of women ofreproductive age. PSD508 is scheduled to enter Phase II development towards theend of 2007. PSD509 is a locally-delivered formulation of a well-characterised sodium channelblocker thought to have potential in the treatment of chronic gynaecologicalpain. Urinary Incontinence Urinary incontinence (UI) is a condition where involuntary loss of urine is asocial or hygienic problem. UI may be broadly divided into two types: stress UI(SUI) and urge UI (or overactive bladder, OAB), although "mixed" incontinence isnot uncommon. PSD503: Topical therapy for SUI Plethora has developed PSD503 to provide a viable 'on demand' treatmentinitially for the treatment of women suffering from mild to moderate SUI. Theproduct has a potential patient population of around 22 million in North Americaand Western Europe. A Phase II clinical study has been initiated which is enrolling women withconfirmed SUI. Study endpoints include safety and objective assessments ofurodynamic improvement. Study results are expected before the end of the year. PSD506: An oral treatment for OAB in both men and women Plethora is undertaking clinical development of a novel, selective, muscarinicreceptor antagonist ("antimuscarinic") PSD506 as an oral treatment for OAB andrelated symptoms in men and women. Based on preclinical and Phase I clinicalstudies undertaken by Hoffman La Roche, PSD506 may have a superior side effectprofile; specifically a reduced propensity to cause dry mouth than currentlyavailable antimuscarinics. Plethora has initiated two Phase II clinical studiesin spinal injury patients experiencing spontaneous contraction of the bladdermuscles causing incontinence and in women with OAB. Preliminary results of thesestudies are expected before the end of the year. Financial Review The unaudited financial information for the six months ended 30 June 2007 isprepared in accordance with the Group's accounting policies and is in accordancewith International Financial Reporting Standards ("IFRS") as adopted by theEuropean Union. In the first six months of 2007 the Group recorded revenues of £2.8m (six monthsended 30 June 2006: £2.4m) a 16% increase. In the same period the Group absorbedthe negative impact of a 10% deterioration in the US dollar exchange rate. Thegross margin on ErecAid(R) sales in the period improved significantly from 77%to 86% as a result of transfer of the manufacture of key components to China. The first half of 2007 saw an increase in clinical activity across the portfolioand this has resulted in an increase in development expenditure in the first sixmonths to £3.6m (six months ended June 2006: £1.7m), reflecting progress made inproduct development, particularly with PSD502, Invicorp(R) (PSD510) and PSD597. Administrative expenses for the period were £3.4m (six months ended 30 June2006: £2.2m) and include sales and marketing expenses for the period of £2.0m(six months ended 30 June 2006: £1.4m). The increase of £0.6m related toexpansion of the field force and increased marketing spend to drive revenuegrowth. Administrative expenses also include a charge for share-basedcompensation in the period of £0.3m (six months ended 30 June 2006: £0.1m). Theremaining charge for share-based compensation of £0.2m (six months ended 30 June2006: £0.1m) is included within development expenditure. Cash and cash equivalents were £7.5m at 30 June 2007 (£6.6m at 30 June 2006). Inthe six months ended 30 June 2007, we received a $7m equity investment fromSciele for the US rights to PSD502 and £4m in a secured loan from ETV CapitalS.A. to fund the completion of the clinical development and filing for US marketapproval of Invicorp(R) (PSD510). Net cash outflow from operating activities for the period was £4.1m (six monthsended 30 June 2006: £2.0m) reflecting the increase in product developmentactivity in the first half of 2007. Summary and Outlook 2007 is a year of investment in clinical development and already two studieshave been completed successfully in the first half of the year. The licensingagreement with Sciele provides Plethora with a platform to begin the transitionfrom a development-led organisation to a more balanced group with licences andsales from products providing revenue. The positive results from PSD597,announced earlier this month, further demonstrate our ability to move productsthrough clinical development, into commercial development to realise values forthese development assets. During the second half of 2007 we will focus licensing activities on PSD502 andPSD597, continue to develop revenue growth through our portfolio of Timmproducts, and move PSD502 and PSD510 into Phase III studies. We are in constantdiscussions with commercial partners to take these products forward and toensure that we maximise the value of our product portfolio. Stuart Wallis Steven PowellChairman Chief Executive Officer Condensed Consolidated Interim Income Statement Note 6 months 6 months Year ended ended ended 31 30 June 30 June December 2007 2006 2006 Unaudited Unaudited Unaudited £'000 £'000 £'000 Sales 3 2,783 2,406 5,158Cost of sales (390) (562) (1,071) ------- ------- -------Gross profit 2,393 1,844 4,087Administrative expenses- research and development expenses (3,586) (1,669) (5,402)- other administrative expenses (3,421) (2,205) (4,759)- amortisation of intangibles (232) (186) (418) ------- ------- ------- (7,239) (4,060) (10,579) ------- ------- -------Operating loss (4,846) (2,216) (6,492) Finance costs (54) - - Finance income 78 137 253 ------- ------- -------Loss for the period before taxation (4,822) (2,079) (6,239) Tax credit 46 56 344 ------- ------- -------Loss for the period 3 (4,776) (2,023) (5,895) ------- ------- -------Attributable to equity shareholders (4,776) (2,023) (5,895) ------- ------- -------Loss per ordinary shareBasic loss per share 6 (18.3) (8.2) (23.3) ------- ------- -------Diluted loss per share 6 (18.3) (8.2) (23.3) ------- ------- ------- Condensed Consolidated Interim Statement of Recognised Income and Expenditure 6 months 6 months Year ended ended ended 31 30 June 30 June December 2007 2006 2006 Unaudited Unaudited Unaudited £'000 £'000 £'000 Loss for the period (4,776) (2,023) (5,895) Exchange difference on translation offoreign operations (24) 14 (113) Total recognised income and expenditure ------- ------- -------for the period (4,800) (2,009) (6,008) ------- ------- -------Attributable to equity shareholders (4,800) (2,009) (6,008) ------- ------- ------- Condensed Consolidated Interim Balance Sheet At 31 At 30 June At 30 June December 2007 2006 2006 Unaudited Unaudited Unaudited £'000 £'000 £'000AssetsNon currentGoodwill 1,463 2,270 1,463Other intangible assets 4,424 4,888 4,656Property, plant and equipment 193 162 199Deferred tax asset 353 - 353Long term other debtor 21 35 35 ------- ------- ------- 6,454 7,355 6,706 ------- ------- -------CurrentInventory 290 246 186Trade and other receivables 693 915 1,133Cash and cash equivalents 7,507 6,573 3,439 ------- ------- ------- 8,490 7,734 4,758 ------- ------- -------Total assets 14,944 15,089 11,464 ------- ------- -------LiabilitiesCurrentTrade and other payables 1,959 1,606 2,027Borrowings 4 1,254 - - ------- ------- ------- 3,213 1,606 2,027 Non-currentBorrowings 4 3,275 815 671Deferred tax provision 1,327 1,466 1,397 ------- ------- ------- 4,602 2,281 2,068 ------- ------- -------Total liabilities 7,815 3,887 4,095 ------- ------- -------Net assets 7,129 11,202 7,369 ------- ------- -------EquityShare capital 7 280 258 258Share premium 7 20,153 16,068 16,072Other reserves 7 4,908 4,908 4,908Share based payment reserve 7 1,021 170 564Profit and loss account 7 (19,233) (10,202) (14,433) ------- ------- -------Total equity 7 7,129 11,202 7,369 ------- ------- ------- Condensed Consolidated Interim Cash Flow Statement 6 months 6 months Year ended ended ended 31 30 June 30 June December 2007 2006 2006 Unaudited Unaudited Unaudited £'000 £'000 £'000 Cash flows from operating activitiesLoss after taxation (4,776) (2,023) (5,895)Adjustment for foreign exchange 3 14 (9)Employee equity settled share options 457 170 332Depreciation of plant and equipment 46 16 69Amortisation 232 186 418Change in inventories (104) (25) 84Change in trade and other receivables (108) (341) (160)Change in trade and other payables (176) 50 418Taxation income per profit and loss account (46) (56) (344) ------- ------- -------Cash utilised from operations (4,472) (2,009) (5,087)Interest paid - - (2)Income taxes received/(paid) 403 - (117) ------- ------- ------- Net cash outflows from operating activities (4,069) (2,009) (5,206) ------- ------- -------Cash flows from investing activitiesPurchases of property, plant and equipment (44) (67) (142)Acquisition of subsidiary undertaking - (5,007) (5,009)Cash received acquired on acquisition - - 23Interest received 78 152 265 ------- ------- -------Net cash from / (used in) investing activities 34 (4,922) (4,863) ------- ------- -------Cash flows from financing activitiesProceeds from issue of shares 4,145 7,790 7,790Proceeds from issue of loans 4,000 - -Share issue costs (42) (499) (495) ------- ------- -------Net cash from financing activities 8,103 7,291 7,295 Net increase/(decrease) in cash andcash equivalents 4,068 360 (2,774) Cash and cash equivalents at beginning ofperiod 3,439 6,213 6,213 ------- ------- -------Cash and cash equivalents at end of period 7,507 6,573 3,439 ------- ------- ------- Notes to the Condensed Interim Report Six months ended 30 June 2007 1. GENERAL INFORMATION Plethora Solutions Holdings plc and its subsidiaries principal activities arethe development and sale of drugs and medical devices for the diagnosis,treatment and management of urological disorders. Plethora Solutions Holdings plc, a Public Limited Company, is incorporated anddomiciled in the United Kingdom. The financial statements for the period ended 30 June 2007 (including thecomparatives for the periods ended 30 June 2006 and 31 December 2006) wereapproved by the board of directors on 25 September 2007. Under the securityregulations act of the EU, amendments to the financial statements are notpermitted after they have been approved. The financial information set out in this interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. TheGroup's statutory financial statements for the year ended 31 December 2006,prepared under UK GAAP, have been filed with the Registrar of Companies. Theauditor's report on those financial statements was unqualified and did notcontain any statements under Section 237(2) of the Companies Act 1985. 2. ACCOUNTING POLICIES Basis of preparation These interim condensed consolidated financial statements are for the six monthsended 30 June 2007. They have been prepared in accordance with IAS 34 "InterimFinancial Reporting" and the requirements of IFRS 1 "First-time Adoption ofInternational Financial Reporting Standards" relevant to interim reports,because they are part of the period covered by the Group's first IFRS financialstatements for the year ended 31 December 2007. They do not include all of theinformation required for full annual financial statements, and should be read inconjunction with the consolidated financial statements of the Group for the yearended 31 December 2006. These consolidated interim financial statements (the interim financialstatements) have been prepared in accordance with the accounting policies setout below which are based on the recognition and measurement principles of IFRSin issue as adopted by the European Union (EU) and are effective at 31 December 2007 or are expected to be adopted and effective at 31 December 2007, our first annual reporting date at which we are required to use IFRS accounting standards adopted by the EU. Plethora Solutions Holdings plc's consolidated financial statements wereprepared in accordance with United Kingdom Accounting Standards (United KingdomGenerally Accepted Accounting Practice) until 31 December 2006. The date oftransition to IFRS was 1 January 2006. The comparative figures in respect of2006 have been restated to reflect changes in accounting policies as a result ofadoption of IFRS. The disclosures required by IFRS 1 concerning the transitionfrom UK GAAP to IFRS are given in the reconciliation schedules, presented andexplained in note 7. The acquisition of Timm Medical Technologies Inc occurred during the transitionperiod to IFRS. The acquisition has been considered in line with IFRS3 ontransition to IFRS. All assets and liabilities acquired as part of thetransaction, including intangible assets (patents, trademarks and anti competecontracts), have been valued at fair value. All purchase consideration has beenrecorded at fair value. The main change caused from the movement to IFRS from UKGAAP is the recognition of intangible assets of £5,074,000 on acquisition with acorresponding reduction in the value of goodwill recognised under UK GAAP. Adeferred tax provision of £1,522,000 was recognised on acquisition based on thefair value of intangible assets acquired, with a corresponding entry to goodwillon consolidation. Further details on this change can be found in note 8. The accounting policies have been applied consistently throughout the Group forthe purposes of preparation of these consolidated interim financial statements.The principal accounting policies of the Group are set out below: Consolidation and investments in subsidiaries Subsidiaries are all entities over which the Group has the power to control thefinancial and operating policies. The Group obtains and exercises controlthrough voting rights. The consolidated financial statements of the Groupincorporate the financial statements of the parent company as well as thoseentities controlled by the Group by full consolidation. In addition, acquired subsidiaries are subject to application of the purchasemethod. This involves the revaluation at fair value of all identifiable assetsand liabilities, including contingent liabilities of the subsidiary, at theacquisition date, regardless of whether or not they were recorded in thefinancial statements of the subsidiary prior to acquisition. On initialrecognition, the assets and liabilities of the subsidiary are included in theconsolidated balance sheet at their revalued amounts, which are also used as thebasis for subsequent measurement in accordance with the Group accountingpolicies. Goodwill represents the excess of acquisition cost over the fair valueof the Group's share of the identifiable net assets of the acquired subsidiaryat the date of acquisition. Material intra-group balances and transactions, and any unrealised gains orlosses arising from intra-group transactions, are eliminated in preparing theconsolidated financial statements. Income recognition Revenue is measured by reference to the fair value of consideration received orreceivable by the group for goods supplied and services provided, excluding VATand trade discounts. Revenue is recognised upon the performance of services ortransfer of risk to the customer. The recognition of income received, such as license fees, contract researchfees, up front payments and milestone payments is dependent on the terms of therelated arrangement, having regard to the ongoing risks and rewards of thearrangement, and the existence of any performance or repayment obligations withany third party. The Group recognises turnover when persuasive evidence of an arrangement exists;delivery has occurred or services have been rendered; the fee fixed anddeterminable; and collectability is reasonably assured. Amounts received arerecognised immediately as turnover where there are no substantial risks, thereare no ongoing performance obligations and amounts received are not refundable.Amounts are deferred over an appropriate period where these conditions are notmet. Inventory Inventories are stated at the lower of cost and net realisable value. Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary at the date of acquisition. Goodwill isinitially recognised as an asset at cost and is subsequently measured at costless any accumulated impairment losses. Goodwill which is recognised as an assetis reviewed for impairment at least annually. Any impairment is recognisedimmediately in profit or loss and is not subsequently reversed. Impairment The Group's goodwill, plant and equipment are subject to impairment testing. For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generatingunits). As a result, some assets are tested individually for impairment and someare tested at cash-generating unit level. Goodwill is allocated to thosecash-generating units that are expected to benefit from synergies of the relatedbusiness combination and represent the lowest level within the Group at whichmanagement controls the related cash flows. Individual intangible assets or cash-generating units that include goodwill withan indefinite useful life are tested for impairment at least annually. All otherindividual assets or cash-generating units are tested for impairment wheneverevents or changes in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognised for the amount by which the asset's orcash-generating unit's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell and value in use, based on an internal discounted cash flowevaluation. Impairment losses recognised for cash-generating units, to whichgoodwill has been allocated, are credited initially to the carrying amount ofgoodwill. Any remaining impairment loss is charged pro rata to the other assetsin the cash generating unit. With the exception of goodwill, all assets aresubsequently reassessed for indications that an impairment loss previouslyrecognised may no longer exist. Intangible assets acquired as part of a business combination In accordance with IFRS 3 Business Combinations, an intangible asset acquired ina business combination is deemed to have a cost to the group of its fair valueat the acquisition date. The fair value of the intangible asset reflects marketexpectations about the probability that the future economic benefits embodied inthe asset will flow to the group. Where an intangible asset might be separable,but only together with a related tangible or intangible asset, the group ofassets is recognised as a single asset separately from goodwill where theindividual fair values of the assets in the group are not reliably measurable.Where the individual fair value of the complimentary assets are reliablymeasurable, the group recognises them as a single asset provided the individualassets have similar useful lives. Intangible amortisation Intangible assets are amortised over the following periods: - Patents and licences 10 years- Trademarks 15 years- Non compete contract value 3 years Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling atthe date of the transaction. Monetary assets and liabilities in foreigncurrencies are translated at the rates of exchange ruling at the balance sheetdate. Exchange differences are dealt with through the profit and loss account. The results of overseas subsidiary undertakings are translated at the averageexchange rates and the balance sheets of such undertakings are translated at theyear end exchange rates. Exchange differences arising on the retranslation ofopening net assets of overseas subsidiary undertakings are taken to reserves. Property, plant and equipment Leasehold property improvements, computer equipment and fixtures and fittingsare carried at acquisition cost less subsequent depreciation and impairmentlosses. Depreciation is charged on these assets on a straight line basis overthe estimated useful economic life of each asset. The useful lives of leasehold property improvements and equipment can besummarised as follows: Leasehold property improvements Period of the leaseComputer equipment 3 yearsFixtures and fittings 3 years Leases In accordance with IAS 17 (revised 2003), the economic ownership of a leasedasset is transferred to the lessee if the lessee bears substantially all therisks and rewards related to the ownership of the leased asset. The relatedasset is recognised at the time of inception of the lease at the fair value ofthe leased asset or, if lower, the present value of the lease payments plusincidental payments, if any, to be borne by the lessee. A corresponding amountis recognised as a finance leasing liability, irrespective of whether some ofthese lease payments are payable up-front at the date of inception of the lease. Subsequent accounting for assets held under finance lease agreements, i.e.depreciation methods and useful lives, correspond to those applied to comparableacquired assets. The corresponding finance leasing liability is reduced by leasepayments less finance charges, which are expensed to finance costs. Financecharges represent a constant periodic rate of interest on the outstandingbalance of the finance lease liability. All other leases are treated as operating leases. Payments on operating leaseagreements are recognised as an expense on a straight-line basis. Associatedcosts, such as maintenance and insurance, are expensed as incurred. The Groupdoes not act as a lessor. Taxation Current income tax assets and/or liabilities comprise those obligations to, orclaim from, fiscal authorities relating to the current or prior reportingperiod, that are unpaid at the balance sheet date. They are calculated accordingto the tax rates and tax laws applicable to the fiscal periods to which theyrelate, based on the taxable profit for the year. Deferred income taxes are calculated using the liability method on temporarydifferences. This involves the comparison of the carrying amounts of assets andliabilities in the consolidated financial statements with their respective taxbases. However, in accordance with the rules set out in IAS 12, no deferredtaxes are recognised in conjunction with goodwill. This applies also totemporary differences associated with shares in subsidiaries if reversal ofthese temporary differences can be controlled by the Group and it is probablethat reversal will not occur in the foreseeable future. In addition, tax lossesavailable to be carried forward as well as other income tax credits to the Groupare assessed for recognition as deferred tax assets. Deferred tax liabilities are always provided for in full. Deferred tax assetsare recognised to the extent that it is probable that they will be able to beoffset against future taxable income. Deferred tax assets and liabilities arecalculated, without discounting, at tax rates that are expected to apply totheir respective period of realisation, provided they are enacted orsubstantively enacted at the balance sheet date. Most changes in deferred tax assets or liabilities are recognised as a componentof tax expense in the income statement. Only changes in deferred tax assets orliabilities that relate to a change in value of assets or liabilities that ischarged directly to equity are charged or credited directly to equity. Employee benefits Defined contribution pension scheme Pensions to employees are provided through contributions to individual personalpension plans. A defined contribution plan is a pension plan under which theGroup pays fixed contributions into an independent entity. The Group has nolegal or constructive obligations to pay further contributions after payment ofthe fixed contribution. The contributions recognised in respect of personal pension plans are expensedas they fall due. Liabilities and assets may be recognised if underpayment orprepayment has occurred and are included in current liabilities or currentassets as they are normally of a short term nature. Other employee benefits Short-term employee benefits, including holiday entitlement are included incurrent pension and other employee obligations at the undiscounted amount thatthe group expects to pay as a result of the unused entitlement. Financial assets The Group's financial assets include cash and trade receivables. All financial assets are recognised on their settlement date. All financialassets are initially recognised at fair value, plus transaction costs. Interest and other cash flows resulting from holding financial assets arerecognised in profit or loss when received, regardless of how the relatedcarrying amount of financial assets is measured. Trade receivables are provided against when objective evidence is received thatthe Group will not be able to collect all amounts due to it in accordance withthe original terms of the receivables. The amount of the write-down isdetermined as the difference between the assets' carrying amount and the presentvalue of estimated future cash flows. No general provisions are made againsttrade receivables. Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand as well as short termhighly liquid investments such as money market instruments and bank deposits. Equity Share capital is determined using the nominal value of shares that have beenissued. The share premium account represents premiums received on the initial issuing ofthe share capital. Any transaction costs associated with the issuing of sharesare deducted from share premium, net of any related income tax benefits. Retained earnings include all current and prior period results as disclosed inthe income statement. Share based employee remuneration All share-based payment arrangements are recognised in the consolidatedfinancial statements. The Group operates equity-settled share-based remunerationplans for remuneration of its employees. All employee services received in exchange for the grant of any share-basedremuneration are measured at their fair values. These are indirectly determinedby reference to the fair value of the share options awarded. Their value isappraised at the grant date and excludes the impact of any non-market vestingconditions (for example, profitability and sales growth targets). All share-based remuneration is ultimately recognised as an expense in profit orloss with a corresponding credit to the share based payment reserve, net ofdeferred tax where applicable. If vesting periods or other vesting conditionsapply, the expense is allocated over the vesting period, based on the bestavailable estimate of the number of share options expected to vest. Non-marketvesting conditions are included in assumptions about the number of options thatare expected to become exercisable. Estimates are subsequently revised, if thereis any indication that the number of share options expected to vest differs fromprevious estimates. No adjustment is made to the expense recognised in priorperiods if fewer share options ultimately are exercised than originallyestimated. Upon exercise of share options, the proceeds received net of any directlyattributable transaction costs up to the nominal value of the shares issued areallocated to share capital with any excess being recorded as share premium. Financial liabilities The Group's financial liabilities include a convertible loan, bank loan andtrade and other payables. Financial liabilities are recognised when the Group becomes a party to thecontractual agreements of the instrument. All interest related charges arerecognised as an expense in "finance cost" in the income statement. The convertible loan note was issued as part of the consideration for anacquisition and was recorded at its fair value. The bank loan was recorded atits fair value. Finance charges, including premiums payable on settlement orredemption and direct issue costs, are charged to profit or loss on an accrualsbasis using the effective interest method and are added to the carrying amountof the instrument to the extent that they are not settled in the period in whichthey arise. Trade payables are recognised initially at their nominal value and subsequentlymeasured at amortised cost less settlement payments. Dividend distributions to shareholders are included in 'other short termfinancial liabilities' when the dividends are approved by the shareholders'meeting. Research costs Expenditure on research (or the research phase of an internal project) isrecognised as an expense in the period in which it is incurred. Development costs incurred on specific projects are capitalised when all thefollowing conditions are satisfied: - completion of the intangible asset is technically feasible so that it will be available for use or sale- the group intends to complete the intangible asset and use or sell it- the group has the ability to use or sell the intangible asset- the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits- there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and- the expenditure attributable to the intangible asset during its development can be measured reliably. Development costs not meeting the criteria for capitalisation are expensed asincurred. Research costs, including license fees, constitute pure research. Atthe point the research is incurred there is no certain future income stream forthe project therefore the expenditure is written off as it is incurred. 3. SEGMENTAL REPORTING The Group's sales and loss on ordinary activities after tax were all derivedfrom the principal activity of development and sale of products for thediagnosis, treatment and management of urological disorders. These activitiescan be segmented by research and development and sale of products which matchthe Groups' geographic segments, the UK and the USA. All of the sales of thegroup have been derived from external customers. These activities may be analysed as follows: UK USA Total £'000 £'000 £'000 6 months to 30 June 2007------------------------Sales 13 2,770 2,783(Loss)/profit after tax (5,097) 321 (4,776) ------- ------- -------6 months to 30 June 2006------------------------Sales - 2,406 2,406(Loss)/profit after tax (2,419) 396 (2,023) ------- ------- -------Year to 31 December 2006------------------------Sales 12 5,146 5,158(Loss)/profit after tax (6,349) 454 (5,895) ------- ------- ------- 4. BORROWINGS 6 months 6 months Year ended ended 30 ended 30 31 December June 2007 June 2006 2006 £'000 £'000 £'000Current borrowingsLoan note 678 - -Bank loan 576 - - ------- ------- ------- 1,254 - - ------- ------- -------Non current borrowingsLoan note - 815 671Bank loan 3,275 - - ------- ------- ------- 3,275 815 671 ------- ------- ------- The loan note was issued as part of the acquisition fee for Timm MedicalTechnologies Inc. The loan can be converted into shares in Plethora SolutionsHoldings plc up to 10 February 2008. On conversion, shares will be issued to thevalue of the carrying value of the loan at the conversion date. Interest ischarged at 5.00% compound on the loan and is payable on maturity on 10 February2008. If the loan is not converted into shares it will be settled in cash on 10February 2008. The value of the liability was recorded at fair value inacquisition balance sheet and interest is charged to the profit and loss accountat an effective rate. The £4,000,000 bank loan is repayable in 33 equal instalments commencing January2008. Interest is charged at 7.25% above the three year swap rate on the date ofthe loan draw down. The loan is recorded at fair value in the balance sheet withinterest charged at an effective rate over the life of the loan. 5. SHARES ISSUED During the period to 30 June 2007, shares were issued as detailed below. Share Share Number capital premium £'000 £'0006 months to 30 June 2007------------------------At 1 January 2007 25,797,416 258 16,072Issue of shares 2,216,949 22 4,081 ----------- ------- -------At 30 June 2007 28,014,365 280 20,153 ----------- ------- -------6 months to 30 June 2006------------------------At 1 January 2006 22,222,421 222 8,813Issue of shares 3,574,995 36 7,255 ----------- ------- -------At 30 June 2006 25,797,416 258 16,068 ----------- ------- -------Year to 31 December 2006------------------------At 1 January 2006 22,222,421 222 8,813Issue of shares 3,574,995 36 7,259 ----------- ------- -------At 31 December 2006 25,797,416 258 16,072 ----------- ------- ------- In the six months to 30 June 2007, 1,772,505 ordinary shares were issued at 200pto Sciele Pharma Inc as consideration for an exclusive licence agreement signedbetween Sciele Pharma Inc and Plethora Solutions Holdings plc for the marketingof PSD502 for premature ejaculation in America. 444,444 ordinary shares were issued under an option agreement in the six monthsto 30 June 2007 at 135p per share. 6. EARNINGS PER SHARE The weighted average number of outstanding shares used for basic earnings pershare have been adjusted as follows: 6 months 6 months Year ended ended 30 ended 30 31 December June 2007 June 2006 2006 £'000 £'000 £'000BasicLoss (£'000) (4,776) (2,023) (5,895)Weighted average number of shares (no.) 26,114,690 24,756,811 25,279,300Loss per share (pence) (18.3) (8.2) (23.3) ----------- ----------- ----------- No diluted loss per share is shown as the share options and convertible debt areanti dilutive. 7. CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY Share based Profit Share Share Other payment and loss capital premium reserves reserve account Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1January 2006 222 8,813 4,908 232 (8,425) 5,750 Issue of new shares 36 7,754 - - - 7,790Cost of issue ofnew shares - (495) - - - (495)Loss for the year - - - - (5,895) (5,895)Exchange movement - - - - (113) (113)Employee sharebased compensation - - - 332 - 332Balance at 31December 2006 ---- ------- ------ ---- ------- ------ 258 16,072 4,908 564 (14,433) 7,369 Issue of new shares 22 4,123 - - - 4,145Cost of issue ofnew shares - (42) - - - (42)Loss for the period - - - - (4,776) (4,776)Exchange movement - - - - (24) (24)Employee sharebased compensation - - - 457 - 457Balance at 30 June2007 ---- ------- ------ ---- ------- ------ 280 20,153 4,908 1,021 (19,233) 7,129 ---- ------- ------ ---- ------- ------ 8. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS The transition from previous UK GAAP to IFRS has been made in accordance withIFRS 1, First-time Adoption of International Financial Reporting Standards. TheGroup's financial statements for the six months ended 30 June 2007 and thecomparatives presented for the periods ended 30 June 2006 and 31 December 2006comply with all presentation recognition and measurement requirements of IFRSapplicable for accounting periods commencing on or after 1 January 2006. The comparative figures for 31 December 2006 within the consolidated interimfinancial statements for the period ended 30 June 2007 are described asunaudited as the figures have been adjusted for the effect of the transition toInternational Financial Reporting Standards (IFRS). The adjustments for IFRShave been reviewed by the company's auditors as part of the independent reviewof the consolidated interim financial statements but will be subject to a fullstatutory audit in the 31 December 2007 statutory accounts. The following reconciliations and explanatory notes thereto describe the effectsof the transition for the transitional date to IFRS, 1 January 2006, for thefinancial periods ended 30 June 2006 and 31 December 2006. All explanationsshould be read in conjunction with the IFRS accounting policies of PlethoraSolutions Holdings plc. The reconciliation of the Group's equity reported under previous GAAP to itsequity under IFRS as at 1 January 2006, 30 June 2006 and at 31 December 2006 maybe summarised as follows: 1 January 30 June 31 December 2006 2006 2006 £'000 £'000 £'000 UK GAAP equity shareholders' funds 5,755 11,232 7,132Holiday pay provision (5) (12) (11)Reversal of goodwill amortisation - 72 127Reversal of intangible amortisation - 40 189Charge of amortisation on intangible asset - (186) (418)Reversal of foreign exchange onintangibles - - 225Deferred tax credit - 56 125 ------ ------- ------IFRS equity shareholders' funds 5,750 11,202 7,369 ------ ------- ------Total adjustment to equity (5) (30) 237 ------ ------- ------ The re-measurement of balance sheet items as at 1 January 2006, 30 June 2006 andat 31 December 2006 may be summarised as follows: Effect ofReconciliation as at 1 January 2006 UK GAAP transition IFRS £'000 £'000 £'000 Trade and other payables (797) (5) (802)Profit and loss account (8,420) (5) (8,425) -------- ------- -------- Effect ofReconciliation as at 30 June 2006 UK GAAP transition IFRS £'000 £'000 £'000 Goodwill 3,607 (1,337) 2,270Other intangible assets 2,103 2,785 4,888Trade and other payables (1,594) (12) (1,606)Deferred tax provision - (1,466) (1,466)Share based payment reserve 170 - 170Profit and loss account (10,172) (30) (10,202) -------- ------- -------- Effect ofReconciliation as at 31 December 2006 UK GAAP transition IFRS £'000 £'000 £'000 Goodwill 2,786 (1,323) 1,463Other intangible assets 1,689 2,967 4,656Trade and other payable (2,017) (10) (2,027)Deferred tax - (1,397) (1,397)Profit and loss account (14,670) 237 (14,433) -------- ------- -------- Profit and loss reported under UK GAAP for the periods ended 30 June 2006 and 31December 2006 is reconciled to IFRS as follows: Effect ofReconciliation for the period ended 30 June UK GAAP transition IFRS2006 £'000 £'000 £'000 Sales 2,406 - 2,406Cost of sales (562) - (562) -------- ------- -------Gross profit 1,844 - 1,844Administrative expenses (3,867) (7) (3,874)Amortisation of goodwill and intangibles (112) (74) (186) -------- ------- -------Operating result (2,135) (81) (2,216)Finance costs 137 - 137 -------- ------- -------Result for the period before taxation (1,998) (81) (2,079)Tax income - 56 56 -------- ------- -------Net result for the period (1,998) (25) (2,023) -------- ------- ------- Effect ofReconciliation for the year ended 31 December UK GAAP transition IFRS2006 £'000 £'000 £'000 Sales 5,158 - 5,158Cost of sales (1,071) - (1,071) -------- ------- --------Gross profit 4,087 - 4,087Administrative expenses (10,155) (6) (10,161)Amortisation of goodwill and intangibles (316) (102) (418) -------- ------- -------Operating result (6,384) (108) (6,492)Finance costs 253 - 253 -------- ------- -------Result for the period before taxation (6,131) (108) (6,239)Tax income 219 125 344 -------- ------- -------Net result for the year (5,912) 17 (5,895) -------- ------- ------- The Group has modified its former balance sheet and income statement structureon transition to IFRS. The main changes may be summarised as follows: • the elimination of amortisation of goodwill charged under UK GAAP. Goodwill is now subject to an annual impairment test. The effect of this adjustment was to add back amortisation of £72,000 at 30 June 2006 and £127,000 as at 31 December 2006• the elimination of the amortisation charged on intangible assets under UK GAAP• the capitalisation of all separately identifiable intangible assets acquired as part of the acquisition of Timm Medical Technologies Inc. The assets were valued at £5,074,000. The recognised intangibles consist of patents, trademarks and the fair value of a key employee non compete contract• the charging of amortisation on the acquired intangibles. A charge of £186,000 has been made as at 30 June 2006 and £418,000 as at 31 December 2007• the recognition of holiday pay accruals at each reporting date• the full provision for deferred tax arising on acquisitions, specifically in relation to intangible assets acquired. A deferred tax provision of £1,522,000 has been recognised based on the fair value of intangible assets acquired. This provision is released to the profit and loss account over the same period as the intangibles are amortised• the reversal of £225,000 foreign exchange loss on consolidation recorded in the 31 December 2006 statutory accounts which related to the foreign exchange difference on intangibles assets held in Timm Medical Technologies Inc in US Dollars. This foreign exchange difference has now been reversed as the valuation of the intangibles has been completed and recorded in the consolidation in UK Sterling. Explanation of material adjustments to the cash flow statement Application of IFRS has resulted in reclassification of certain items in thecash flow statement as follows: • under UK GAAP, payments to acquire property, plant and equipment were classified as part of 'Capital expenditure and financial investment'. Under IFRS, payments to acquire property, plant and equipment have been classified as part of 'Investing activities'• income taxes paid during 31 December 2006 are classified as operating cash flows under IFRS, but were included in a separate category of tax cash flows under previous GAAP. There are no other material differences between the cash flow statementpresented under IFRS and the cash flow statement presented under UK GAAP. INDEPENDENT REVIEW REPORT TO PLETHORA SOLUTIONS HOLDINGS PLC We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprises the Condensed ConsolidatedInterim Income Statement, the Condensed Interim Statement of Recognised Incomeand Expenditure, the Condensed Consolidated Interim Balance Sheet, the CondensedInterim Cash Flow Statement and the related notes 1 to 8. We have read the otherinformation contained in the interim report which comprises only the Chairmanand Chief Executives Statement and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Ourresponsibilities do not extend to any other information. This report is made solely to the company in accordance with guidance containedin APB Bulletin 1999/4 "Review of Interim Financial Information". Our reviewwork has been undertaken so that we might state to the company those matters weare required to state to them in a review report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the company, for our review work, for this report, or forthe conclusion we have formed. DIRECTORS' RESPONSIBILITIES The interim report including the financial information contained therein is theresponsibility of, and has been approved by, the directors. The directors areresponsible for preparing the interim report in accordance with Listing Rules ofthe Financial Services Authority. As disclosed in note 1, the next annual financial statements of the group willbe prepared in accordance with International Financial Reporting Standards asadopted by the European Union. This interim report has been prepared inaccordance with International Accounting Standard 34 "Interim FinancialReporting" and the requirements of IFRS 1 "First-time Adoption of InternationalFinancial Reporting Standards" relevant to interim reports. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. REVIEW WORK PERFORMED We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof management and applying analytical procedures to the financial informationand underlying financial data and, based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. REVIEW CONCLUSION On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. GRANT THORNTON UK LLPCHARTERED ACCOUNTANTSBIRMINGHAM25 SEPTEMBER 2007 The maintenance and integrity of the Plethora Solutions Holdings plc website isthe responsibility of the directors: the interim review does not involveconsideration of these matters and, accordingly, the company's reportingaccountants accept no responsibility for any changes that may have occurred tothe interim report since it was initially presented on the website. This information is provided by RNS The company news service from the London Stock Exchange