Plethora Solutions Holdings Plc Regulatory News (PLE)

PLETHORA SOLUTIONS HOLDINGS PLC

("Plethora" or the "Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014

Plethora is pleased to announce its interim results for the six months ended 30 June 2014.

Highlights

· For the 6 months ended 30 June 2014, the Group made a loss for the year of £1,687k (6 months to 30 June 2013 £704k) and had a cash balance as at 30 June 2014 of £1,061k (30 June 2013 £552k)

· Appointment of Pharmaserve (North West) Limited ("PSNW") as the Company's manufacturing partner.

· Redesign of the canister for a 6 dose application now complete subject to the European Medicines Agency("EMA") variant approval process

· Negotiations with a European Licencing Partner to promote the sale and distribution of PSD502™ in the European Union, Russia (including the Commonwealth of Independent States), Turkey and North Africa have now reached an advanced stage.

· Terms agreed with Shionogi Inc. ("Shionogi"), Paul Royalty Fund Holdings II ("Paul Capital") and Dr. Richard Henry (the "Original Patent Holder") to acquire their royalty rights in PSD502™ for a total consideration of US$25 million (approximately £15.2 million), which would result in the group owning exclusive rights to all future global royalties.

· Announcement today of a conditional fundraise, which if completed would raise £15.9 million to fund the US$25 million (approximately £15.2 million) acquisition of the royalty rights in PSD502™ from Shionogi., Paul Capital and the Original Patent Holder, thus consolidating the Group's intellectual property rights. The remaining proceeds, together with a further intended subscription from Regent Pacific Group Limited will be used to finance the ongoing costs of the processes required to prepare an New Drug Application ("NDA") and file and prosecute this to the FDA, to finance the ongoing costs of the manufacturing and development work with PSNW for the new 6 dose can and provide further funds to meet the working capital needs of the business.

Jamie Gibson, CEO of Plethora said:

"Good progress has been achieved during the first half of 2014 in the regulatory and commercial development of PSD502™. The manufacturing program is progressing to plan with first good manufactured product batches due to be produced before the end of the year. The conditional fundraising, if completed, will give Plethora the chance to repatriate and consolidate 100 per cent of the future revenue streams generated from the 'out licencing' of PSD502™ on a global basis to commercial marketing partners of a potentially life-changing treatment in men's sexual health. I am confident that, upon completion, it will enhance shareholder value by being accretive to earnings and is expected to generate long-term shareholder returns. Furthermore, if completed, the commercialisation agreement with the European Partner to promote and distribute PSD502™ will represent a major milestone in the development of the business and herald further progress in the rest of the world."

- Ends -

A copy of this announcement is available to view on the Company's website at www.plethorasolutions.co.uk 

Enquiries:

PLETHORA SOLUTIONS HOLDINGS PLC

("Plethora" or the "Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014

Introduction

The Company continues to be focussed on the development and commercialisation of its principal pharmaceutical product PSD502™, which is believed to have significant potential value based on the prevalence of premature ejaculation and the lack of a widely available effective treatment. The last twelve months have been a period of significant activity for Plethora. The Group has made progress with the regulatory status of PSD502™, having received EU marketing approval on 15 November 2013 from the EMA and commenced the process for a NDA with the US Food and Drug Administration ("FDA"). PSNW has been appointed as Plethora's manufacturing partner. Further to the Company's announcement on 26 March 2014, work on the development of the new six dose canister has been completed enabling the commencement of the next phase, which is a 5 litre pilot study followed by 3 100 litre GMP batch stability and validation studies that are scheduled to complete by the end of this year.

Plethora is also in the advanced stages of agreeing a European Licensing Agreement with a European Partner, under which the Company would license the rights to commercialise PSD502™ in The European Union, Russia (including the Commonwealth of Independent States), Turkey and North Africa to the European Partner. It is anticipated that the European Licensing Agreement would involve Plethora receiving a payment upon the signing of the agreement, followed by further payments based upon certain milestones, plus tiered royalties on product sales. It is emphasised that the European Licensing Agreement is in the process of being negotiated and that no binding agreement has been entered into, nor can it be guaranteed that such an agreement will be entered into on the terms set out in this report or at all. The EU Licence agreement is conditional on completion of the fundraise and the cessation agreements as detailed below.

It is against this backdrop, and the potential opportunity that PSD502™ consequently represents, that the Directors have negotiated cessation agreements terminating the existing royalty agreements (the "Cessation Agreements") with Shionogi, Paul Capital and the Original Patent Holder and the Patent Transfer Agreement in order to acquire the patents and other intellectual property related to PSD502™. Under the terms of the Cessation Agreements and the Patent Transfer Agreement, Plethora will make cash payments totalling US$25m (approximately £15.2m) to Shionogi, Paul Capital and the Original Patent Holder. This will result in Plethora owning the entire economic benefit of all revenue streams generated from the 'out licencing' of PSD502™ to commercial marketing partners in the future on a global basis.

In order to finance the cash payments that Plethora is required to make pursuant to the Cessation Agreements and the Patent Transfer Agreement, the Company has announced that it has entered into agreements to conditionally raise approximately £15.9 million, before expenses, by way of a placing and subscription for a total of 176,998,486 New Ordinary Shares at 9p per share and 88,499,236 Fundraising Warrants exerciseable at 15p each. The placing and subscription is conditional upon Plethora entering into the European Licensing Agreement, the Cessation Agreements and obtaining shareholder approval. The remaining proceeds of this financing, together with an intended further investment of £2.3 million from Regent Pacific Group Limited, will be also used to fund the ongoing cost of (i) the filing and prosecution of the NDA approval application in the US, (ii) the development of the new six dose can with PSNW, including filing of the variant approval with the EMA, and (iii) to provide additional working capital to the Group.

Regulatory update

On 15 November 2013, Plethora was granted a marketing authorisation for PSD502™ from the EMA. This was a significant event in the development of the business following many years of research, investment in clinical studies and the preparation of regulatory dossiers. This marketing authorisation enabled the Group to commence negotiations with potential partners for the commercial exploitation of PSD502™ in the European Union.

The Group has already commenced preparations for a NDA to the FDA. In the first quarter of 2014, the Group and its consultants had an initial guidance meeting with the FDA to discuss the proposed NDA. The Group is working towards submitting the NDA by the end of 2015, following which the Prescription Fee User Drug Act ("PFUDA") timeline is usually set at a 10-month period for approval of the NDA. Taking this 10-month timeline for NDA approval beginning when Plethora submits the NDA to the FDA, the date for approval (the PDUFA date) would be Q4 2016. The PDUFA date is a target date for the FDA, but the agency can, and many times does, announce a decision prior to the PDUFA date.

Manufacturing partnership

In March 2014, Plethora announced that it had entered into an agreement with PSNW to develop a new six dose canister and establish a production line for the manufacture of PSD502™, allowing the Group to achieve optimal price points per unit sold in accordance with the advice provided by specialist marketing consultants. This manufacturing partnership was a key development in the process of bringing PSD502™ to market in the EU and assisting in the submission of the NDA in the US.

Work on the development of the new six dose canister has been completed enabling the commencement of the next phase, which is a 5 litre pilot study followed by 3 100 litre Good Manufacturing Practice ("GMP") batch stability and validation studies that are scheduled to complete by the end of this year.

Following the completion of the GMP batch stability and validation studies at the end of 2014, an application will be submitted to the EMA for an approval of a variation of the existing Marketing Authorisation for a new 6 six dose can. The Company now expects CHMP approval to be granted during Q3 of 2015 because on 21 March 2014 EMA changed its guidelines for stability testing related to variation applications made after 21 September 2014. The new guidelines require 6 months stability data on GMP batches rather than the previous 3 months under the old guideline. It is this varied marketing authorisation that will pave the way to the commercial launch of the product in Europe via the Licencing Partner immediately thereafter.

Commercialisation of PSD502™

Plethora is in the advanced stages of agreeing a European Licensing Agreement with the European Partner, under which the Company would license the rights to commercialise PSD502 in The European Union, Russia (including the Commonwealth of Independent States), Turkey and North Africa to the European Partner. Plethora would retain full commercialisation rights for the rest of the World, including but not limited to North America, Latin America, the Asia Pacific region, the Middle East and Sub-Sahara Africa.

It is anticipated that the potential European Licensing Agreement, if entered into, would involve Plethora receiving:

· a payment of €5 million upon the signing of the European Licensing Agreement (in limited circumstances, if there are material issues in the final development stages of a six dose can, €4 million may be refundable to the European Partner;

· a payment of €6 million upon grant of variant approval from EMA for a new six dose can;

· a payment of up to €10 million in total upon first commercial sales of PSD502™ in France, Germany, Italy, Spain and Portugal;

· up to €25 million in sales-based milestones; and

· tiered percentage royalties on net sales, ranging from the mid-teens to the mid-twenties for 10 years from first commercial sale, and thereafter at a single digit royalty rate.

It is further anticipated that the potential European Licensing Agreement would involve the European Partner assuming responsibility for commercialisation activities in the licensed territories, with the European Partner also funding all costs associated with the sales and marketing programmes, and all additional regulatory filings that it intends to pursue in the licensed territory.

Whilst there can be no certainty or guarantee, the Board of Plethora anticipates that the European Licensing Agreement will be entered into by 17 September 2014. However, it is not yet possible to determine with accuracy the timing for completion of these discussions and the Company may not be able to finalise the European Licensing Agreement on the terms set out in this announcement or at all.

Terms of the Cessation Agreements and Patent Transfer Agreement

The Cessation Agreements and Patent Transfer Agreement are conditional only upon the passing of resolutions at a General Meeting expected to be held on 17 September 2014 and the successful completion of the Placing and Subscription and the European Licence Agreement.

In exchange for the payment of $25m (approximately £15.2m) in aggregate to Paul Capital, Shionogi and the Original Patent Holder by the Group, the Cessation Agreements and Patent Transfer Agreement provide for the termination of all royalty entitlements for Paul Capital, Shionogi and the Original Patent Holder relating to PSD502™ and the acquisition by the Group of all patents and all other intellectual property rights related to PSD502™. In addition, the Cessation Agreements provide for the termination and release of all other claims that Paul Capital, Shionogi and the Original Patent Holder may have against the Group or PSD502™. As such, the Cessation Agreements constitute a "clean break" between the Group on the one hand and Paul Capital and Shionogi respectively on the other.

Following completion of the Cessation Agreements and Patent Transfer Agreement, the Group will be free to pursue the development, marketing and distribution of PSD502™ without any involvement from Paul Capital or Shionogi and the Group will control the entire economic benefit of all future revenue streams generated from the 'out licencing' of PSD502™ to commercial marketing partnerson a global basis.

 The Placing & Subscription

Details of the proposed Placing and Subscription can be obtained from the Company's web site and its Shareholders Circular.

Rationalisation of the Group Structure

The Company has taken action to simplify the legal structure of the Group. On 10 June 2014 the Company's wholly-owned dormant subsidiary, The Urology Company Holdings Limited, was formally dissolved. Steps are being taken to liquidate the Company's remaining dormant subsidiary, Plethora Therapeutics Limited (PTL). Given the existence of large inter-company balances between PTL and the other Group companies, the liquidation process will involve the creation of new inter-group loan obligations and the payment of a substantial inter-group dividend by PTL to the Company. This will be done to cancel out the relevant inter-Group loans and enable this process to be completed without giving rise to any potential taxation liabilities. For the avoidance of doubt, the consolidated net worth of the Group will not be affected by this process. It is anticipated that the liquidation process will be completed before the end of the current financial year resulting in a simple group structure comprised of the Company and its sole wholly-owned subsidiary, Plethora Solutions Limited.

Trading Update for the Six Months to 30 June 2014

During the six months to 30 June 2014, the Group recorded an operating loss of £1.97m (six months to 30 June 2013 loss: £1.17m, full year to 31 December 2013 loss: £2.90m). The loss after tax from continuing operations for the six months to 30 June 2014 was £1.73m (six months to 30 June 2013 loss: £1.06m, full year to 31 December 2013 loss: £8.76m)

The operating loss for the six months to 30 June 2014 included R&D costs related to the regulatory development of PSD502™ of £1.05m (six months to 30 June 2013: £0.55m, full year to 31 December 2013: £1.31m) and administrative expenses of £0.92m (six months to 30 June 2013: £0.62m, full year to 31 December 2013: £1.59m).

Underlying R&D costs and administrative expenses for the six months to 30 June 2014 were broadly lower than the Board's expectations, before adjustments being made to account for non-cash related share option costs. R&D costs are currently been driven by the project to establish a manufacturing line with the Company's manufacturing partner PSNW. Manufacturing set up costs are expected to fall significantly following the year ended 31 December 2014, but the overall level of expenditure is expected to be maintained as the US FDA approval process begins to gather pace following the issue of the first manufactured batches.

A net finance income of £0.24m (six months to 30 June 2013 cost: £0.19m, full year to 31 December 2013 cost: £6.15m) will be recognised in the interim results for the six months ended 30 June 2014. This credit was generated as a result of fair valuing the Company's warrant instruments as at 30 June 2014 (£0.71m credit) offset by the interest charge and unwind of the discount applied to the Company's borrowings (£0.47m cost).

On the basis that all R&D expenditure is expensed, there were no significant balance sheet movements to comment upon during the six months to 30 June 2014. As at 30 June 2014 the Group had cash resources of £1.06m (30 June 2013: £0.55m, 31 December 2013: £3.12m).

Outlook

The Group is on track in relation to all its key performance measures as it moves along the path to establishing an approved manufacturing facility and bringing PSD502™ to market. The first commercialisation agreement with the European Partner, if signed, will represent a major potential milestone in the development of the business. If secured, this should help to pave the way to new agreements in new territories in parallel with continued progress towards FDA approval to facilitate the launch of the product in the key North American market.

Consolidated Statement of Comprehensive Income

 Consolidated Balance Sheet

Consolidated Interim Cash Flow Statement

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2014

Year ended 31 December 2013

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2013

Notes to the Financial Information

1. Basis of Preparation

The interim financial information is unaudited but has been subjected to review by the Company's auditors in accordance with ISRE 2410. This consolidated financial information for the six months ended 30 June 2014 has been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretations Committee interpretations that had been published by 30 June 2014 and endorsed by the European Union ("EU"). The accounting policies adopted are consistent with those of the financial statements for the year ended 31 December 2013.

The financial information set out in the interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013, prepared under IFRS, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006. The interim report was approved by the Board on 29 August 2014.

A copy of the interim results for the six months ended 30 June 2014 will be available on the Company's website at www.plethorasolutions.co.uk.

2. Going Concern

In considering the appropriate basis of the interim financial information the Directors are required to consider whether the Company can continue in operational existence for the foreseeable future.

 At 30 June 2014 the Company had £1,061,000 of cash and cash equivalents.

Given the current stage in the development of PSD502™, the Group did not generate any revenues during the period and had a cash balance of £1.1 million at 30 June 2014. As indicated earlier, the Group are in advanced stages of agreeing a European Licensing Agreement with a European Partner, which it is anticipated would involve Plethora receiving a payment upon the signing of the agreement, followed by further payments based upon certain milestones, plus tiered royalties on product sales. These cash flows are dependent on the Group successfully completing the development and receiving EMA variant approval for the 6 dose can. The Group has also announced that it expects to secure £15.9 million before expenses through a conditional Placing & Subscription of [176,998,486] New Ordinary Shares (along with [88,499,236] million Fundraising Warrants), the proceeds of which, will be used to fund the US$25 million (c. £15 million) acquisition of the royalty rights in PSD502™ from Shionogi Inc, Paul Capital and the Original Patent Holder, the ongoing costs of the processes required to prepare an NDA and file and prosecute this to the FDA, to finance the ongoing costs of the manufacturing and development work with PSNW for the new six dose can and provide further funds to meet the working capital needs of the business.

The Directors have prepared detailed cash flow forecasts through to the end of 2015 that show that the Group has adequate working capital to meet its immediate needs. Whether further funding from existing investors will be required will be dependent on the successful conclusion of both the European Licensing Agreement with a European Partner and the Placing & Subscription and that completion of the development and receipt of EMA variant approval for the 6 dose can is received. However the board has formed a reasonable expectation of being able to count on the support of its stakeholders and the investment community should any further financing be required to complete the process of commercialising PSD502™.

2. Going Concern (continued)

Nevertheless, there are material uncertainties in relation to the ability of the Group to close the European Licensing Agreement, to raise sufficient funds at the necessary time and to complete the development and receive EMA variant approval for the 6 dose can, which may cast significant doubt on the Group's ability to continue as a going concern. In the event that the above fails to occur as expected, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

3. Segmental Reporting

The Group was organised into two main business segments: the development of new pharmaceutical products known as "Plethora Development" and the sale and marketing of pharmaceutical and healthcare products in the UK and continental Europe known as "The Urology Co". Following the closure of The Urology Company Limited, formerly one of two segments within the Group, the subsidiary has been reclassified as "Discontinued Operations" throughout this report. Unallocated costs represent shared property costs, in addition to background support services, such as finance, IT and marketing, and corporate expenses which cannot be directly attributed to either business segment. Unallocated assets and liabilities represent assets and liabilities of the corporate arm of the Group which cannot be directly allocated to any of the segments.

The Group operates from a single geographical area, namely the United Kingdom.

3. Segmental Reporting (continued)

4. Exceptional Items

Following the debt restructuring in 2013, the Group has reclassified all its borrowings as convertible debt in line with the revised loan agreements. As a result of these changes, in 2013 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.

5. Loss per Share

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.

6. Discontinued Operations

Following the closure of The Urology Company Limited (the "Urology Co"), The liquidator of the Urology Co advised Capital for Enterprise Fund ("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 secured lender. This sum will be accounted for as a partial repayment of the outstanding CFE loan after taking into account a contractual 25% redemption premium and accrued yield that applies to this repayment. The revised amount of principal outstanding under the CFE loan will be £769,595, excluding accrued interest and redemption premium. The assets and liabilities of The Urology Company Limited were presented as discontinued operations following the Group's decision to put the company into administration on 25 February 2013.

6. Discontinued Operations (continued)

Profit and loss of the discontinued operations.

Cash flows from the discontinued operations

7. Trade and other payables

8. Borrowings

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

9. Share Capital

On 15 October 2013, the Company announced it had received notice from a warrant holder to subscribe for 410,000 shares at 10p per share to exercise their warrant.

On 1 November 2013, The Company raised £4.4 million before expenses through the placing of 49,000,000 new Ordinary Shares at a price of 9p per share.

On 29 November 2013, The Company also announced that it has allotted 6,279,407 new ordinary shares of 1p each ("New Shares"), fully paid conditional only upon admission, to trading on AIM in relation to:

· the issuance of 1,355,975 New Shares in connection with awards made in 2010 which have now matured under the Company's LTIP;

· the issuance of 923,432 New Shares in settlement of directors' fees due in relation to Jim Mellon and Mike Collis; and

· the issuance of 4,000,000 New Shares as an award to Ronald Openshaw that would otherwise have accrued under the company's LTIP.

Finally, the Company received notice from Maven Capital Partner (UK) LLP, manager of the Capital for Enterprise Fund LP ("CfE") to convert £200,000 in principal of its £1 million loan note to ordinary shares. The Conversion was completed at the close of business on 3 December 2013. Interest on the loan note was being accrued in accordance with the restructuring announced on 18 March 2013 and the amount of £21,326 had accrued to that date and was converted to new ordinary shares. In addition, the loan carried a redemption premium of 25% of the principal value and consequently a redemption premium of £50,000 arose on conversion. This was paid by the issue of new ordinary shares. In total 13,566,300 new ordinary shares were issued at 2p per share to satisfy the aggregate of £271,326 arising on the conversion.

Independent review report to the directors of Plethora Solutions Holdings Plc

Report on the interim financial information

We have reviewed the interim financial information, defined below, in the Interim Results of Plethora Solutions Holdings Plc for the six months ended 30 June 2014. Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with the basis of preparation and accounting policies in Note 1 to the interim financial information.

Emphasis of matter - going concern

In forming our conclusion on the interim financial information, which is not modified, we have considered the adequacy of the disclosure made in Note 2 to the interim financial information concerning the group's ability to continue as a going concern. The interim financial information has been prepared on a going concern basis and the validity of this depends on the timely completion of the European Licensing Agreement and the Placing & Subscription, in addition to successfully completing the development and receiving EMA variant approval for the six dose can. These conditions, along with the other matters explained in note 2 to the interim financial information, indicate the existence of a material uncertainty which may cast significant doubt about the group's ability to continue as a going concern. The interim financial information does not include the adjustments that would result if the group was unable to continue as a going concern.

This conclusion is to be read in the context of what we say in the remainder of this report.

The interim financial information, which is prepared by Plethora Solutions Holdings plc, comprises:

· the Consolidated Balance Sheet as at 30 June 2014;

· the Consolidated Statement of Comprehensive Income for the period then ended;

· the Condensed Interim Cash Flow Statement for the period then ended;

· the Condensed Consolidated Statement of Changes in Equity for the period then ended; and

· the explanatory notes to the interim financial information.

As disclosed in Note 1, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The interim financial information included in the Interim Results has been prepared in accordance with the basis of preparation and accounting policies in Note 1 to the interim financial information.

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Interim Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.

The Interim Results, including the interim financial information, are the responsibility of, and have been approved by, the directors. The directors are responsible for preparing the interim financial information in accordance with the basis of preparation and accounting policies in Note 1 to the interim financial information.

Our responsibility is to express our conclusion on the interim financial information in the Interim Results based on our review. This report, including the conclusion, has been prepared for and only for the the directors of the Company as a body for management purposes in connection with the directors fulfilling their obligations under the AIM Rules for Companies and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

29 August 2014

Reading

Notes:

(a) The maintenance and integrity of the Plethora Solutions Holdings plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.