Half Yearly Report

14 September 2015

Midatech Pharma PLC

("Midatech" or the "Company")

Interim results for the six months ended 30 June 2015

Midatech Pharma (AIM: MTPH), the international specialty pharmaceutical company with a diversified portfolio of high-value products in development, today announces its interim results for the six months ended 30 June 2015.

Operational Highlights

· Offer, negotiation and agreement to acquire DARA Biosciences Inc. in the US

· Positive results in a proof-of-concept in vivo study for our OpsiSporin sustained release treatment for uveitis

· Approval and site initiation of our Phase IIa transbuccal Insulin (MidaFormTM) clinical trial

· Commissioning of new laboratories and offices at our Head Office site in Abingdon

· Three new collaborations signed

· Commencement of product candidate testing in vivo for glioblastoma

Financial Highlights

· Revenue grew from £36k in the six months to June 2014 to £324k (up 800%)

· Administrative expenses increased from £1,862k in the six months to June 2014 to £3,768k (up 102%)

· Research and development costs increased from £1,260k in the six months to June 2014 to £1,822k (up 45%)

· Net cash outflow from operating activities (before changes in working capital) was £4,983k, up 70% from £2,923k in the six months to June 2014. The cash balance at 30 June 2015 stood at £24.34m.

· Loss per share decreased by 54% from 39p in the six months to June 2014 to 18p

Commenting on the interim results, Dr. Jim Philips, CEO of Midatech Pharma, said: "2015 has shown a strong start to Midatech's next stage of corporate development. With the proposed acquisition of DARA BioSciences, three new collaborations and further progress with our own pipeline, we continue to build upon our strategy with the aim of creating a world-class specialty pharmaceutical company."

Conference call today

Dr Jim Phillips, Chief Executive Officer and Nick Robbins-Cherry, Finance Director, will host a conference call for analysts at 1300 BST today. The conference call ID is: 24926910.

UK: +44 1452 555 566

USA: +1 631 510 7498

A replay of the call will be available for 30 days after the event, using the same conference ID: 24926910.

UK: +44 1452 550 000

USA: +1 866 247 4222

- Ends -

For more information, please contact:

Midatech Pharma PLC

Jim Phillips, CEO

Tel: +44 (0)1235 841575

www.midatechpharma.com

Panmure Gordon (UK) Limited (Nominated Adviser and Broker)

Corporate Finance

Freddy Crossley / Adam James / Atholl Tweedie / Duncan Monteith

Broking

Tom Salvesen

Tel: +44 (0)20 7886 2500

Consilium Strategic Communications (Financial PR)

Mary Jane Elliott / Ivar Milligan / Matthew Neal / Hendrik Thys

Tel: +44 (0)20 3709 5700

Email: [email protected]

About Midatech Pharma PLC

Midatech is a nanomedicine company focused on the development and commercialisation of multiple, high-value, targeted therapies for major diseases with unmet medical need. These diseases include diabetes, rare cancers including brain (glioblastoma), ovarian, liver and pancreatic cancer and neurological/ophthalmologic conditions.

Midatech's strategy is to develop its products in-house in rare cancers and with partners in other indications, and to accelerate growth of its business through strategic acquisition of complementary products and technologies.

All of Midatech's product candidates derive from its two multi-applicable platform technologies that can be used alone or in combination to enable the targeted delivery ('right place') and controlled release ('right time') of existing drugs. These technologies are provided through its wholly-owned subsidiaries, Midatech and Q Chip (acquired in 2014).

Midatech's core platform is a drug conjugate delivery system based on a patented form of gold nanoparticles (GNP) combined with existing drugs for the safe and targeted release of therapeutic payloads at specific organs, cells or sites of disease.

The Group's second platform is a sustained release technology acquired with Q Chip that involves the consistent and precise encapsulation of active drug compounds within polymer microspheres enabling their release into the body in a highly controlled manner over a prolonged period of time.

Midatech announced the proposed acquisition of DARA BioSciences Inc., (NASDAQ: DARA), an oncology supportive care pharmaceutical company, in June 2015. The acquisition will add an oncology-focused commercial platform and products in the US.

The Group is headquartered near Oxford, UK, with a nanoparticle manufacturing operation in Bilbao, Spain and an R&D facility in Cardiff, UK.

For further company information see: www.midatechgroup.com.

CHAIRMAN'S STATEMENT

Introduction

After the great strides made during 2014 that culminated in the successful IPO and acquisition of Q Chip Limited (since renamed Midatech Pharma (Wales) Limited), 2015 has seen the Group continue to deliver on its strategy with significant developments made in each of the Group's three business model components: partnering, development of its wholly-owned pipeline and acquisitions. Midatech has also successfully advanced its pipeline across its three areas of therapeutic focus; oncology, ophthalmology/neuroscience and diabetes.

February 2015 saw the announcement of positive results in a proof-of-concept in vivo study for our OpsiSporin sustained release treatment for uveitis, a serious eye condition. This was closely followed in March with the announcement of a research collaboration agreement between our MidaSolTM Therapeutics LP diabetes joint venture and a major international pharmaceutical company, exploring needle-free delivery of an existing, marketed diabetes drug. A further research collaboration was announced in April with the Dana-Farber Cancer Institute, a principal teaching affiliate of Harvard Medical School, one of the US's premier cancer centres, in the area of targeted nano-medicines for the treatment of glioblastoma brain cancer. The Group's continued activity in forming research collaborations demonstrates the growing interest in companies and institutions working with our technology platforms to develop innovative therapies.

In June we were delighted to announce the proposed acquisition of DARA BioSciences, Inc. ("DARA") a US based, oncology supportive care business that we believe will accelerate Midatech's transition towards becoming a leading specialty pharmaceutical company. DARA provides an excellent strategic fit and strengthens Midatech's franchise in oncology giving immediate access to a revenue generating product portfolio in cancer supportive care. The proposed acquisition will provide Midatech with an established commercial platform in the US, which, assuming its self-developed oncology products, including Q-Octreotide, are approved, will enable the Group to distribute, market and sell directly in the world's largest and most profitable pharmaceutical market.

The DARA acquisition is expected to complete in Q4 2015 and will reaffirm Midatech's commitment to build on its diverse and balanced product pipeline by acquiring later stage assets within the chosen therapeutic areas. The acquisition is also expected to reduce the loss per share.

Overview of results and guidance

Results for the six month period have been good and are in-line with expectations. Top-line revenue of £324k is significantly up on the corresponding period in 2014 and we are working towards the Group meeting market forecasts for the full year. Expenses and cash spend before the impact of the DARA acquisition have also been consistent with market expectations.

Board and employees

During the first six months of 2015 Midatech has made a number of important new hires, recruiting highly experienced individuals in key areas including Head of Regulatory, Head of Chemistry and Head of Pre-Clinical Development. These new employees significantly enhance Midatech's executive capabilities particularly in bringing our pipeline products to market.

Jeff Brown stepped down from the Board in April. I would like to thank him again for his contribution over the years.

Outlook

The outlook for the remainder of 2015 and beyond is encouraging. We believe that our recently announced agreement with Ophthotech will underpin a significant amount of market forecasts for full year revenue. There are also a number of pre-clinical studies in other disease areas that will read out over the remainder of the financial year thereby building value across the Midatech pipeline. Our Phase IIa insulin study commenced in July and is expected to complete around the end of the year. By continuing to leverage our platform technologies and significant value-creating expertise as a management team, we look forward to continued delivery on our strategy to create a world-class specialty pharmaceutical business.

Rolf Stahel

Chairman

CHIEF EXECUTIVE OFFICER'S REVIEW

The first half of 2015 has seen a great deal of activity in the different areas of Midatech Pharma's business, and the key achievements are highlighted below:

· Completion of Q Chip integration process within three months of the acquisition.

· Fast-track investment in Q-Octreo and Opsisporin, the lead programmes derived from the technology acquired with Q Chip, with encouraging results.

· Approval and first patient treated in our Phase IIa transbuccal Insulin (MidaFormTM) clinical trial.

· Offer, negotiation and agreement in principle to acquire DARA Biosciences, Inc. in the US, bringing two growth products alongside commercial infrastructure in the world's largest pharmaceutical market.

· Three new collaborations signed in the six months, of which two are revenue earning and the third is a collaboration with Dana-Farber Cancer Institute in Boston.

· Commencement of product candidate testing in vivo for glioblastoma with Dana-Farber.

· Commissioning of new laboratories and offices at our Head Office site in Abingdon - reducing the number of sites from four to three, and improving internal communication.

· Commencement of the nanoparticle manufacturing scale-up work by the European consortium led by Midatech Pharma España, as funded by Horizon 2020.

· Revenue of £324k which has been building from Q1 to Q2 and we expect considerably higher revenues to be achieved in H2 2015, based on contracts already signed.

We have continued to invest in high quality people across the business and have attracted two senior executives from Shire.

The outlook for the second half of the year is buoyed by the recent signature of a fourth collaboration in 2015 with Ophthotech - a large US based biotech developing a number of products for the treatment of severe age related eye diseases. This agreement may extend over a number of reporting periods.

We also expect to close the DARA Acquisition in Q4 2015, subject to customary closing conditions, including the receipt of DARA shareholder approval and the commencement of trading of American Depositary Receipts on NASDAQ in the same period.

The Group is advancing well on the execution path of our three elements of strategy. The first strand, partnerships, continues to expand and attract new parties, the second, own products, continues to be developed with promising results to date, and the third, acquisitions, is on track as we look to deliver a second acquisition with DARA following on from the Q Chip deal which completed at the end of 2014.

Midatech Pharma will continue to build around these core strategic elements and will be looking to grow revenue swiftly over the next few years to reach break-even. We firmly believe that we are on the path to creating a world-class specialty pharmaceutical business.

Dr Jim Phillips

Chief Executive Officer

FINANCIAL REVIEW

We report a positive set of results for the 6 months to June 2015 as Midatech Pharma plc reports its first interim financial information as a listed group.

Revenue

Revenue for the six months to 30 June 2015 was £0.32m, up significantly (800%) on the £0.04m generated in the corresponding period in 2014. This included revenue from two of the Group's significant grant funded programmes and milestone payments from collaborations in both of the Group's two platform technologies, gold nanoparticle drug conjugates and sustained release. The pro forma revenue for the six months to 30 June 2014, including revenue from the Midatech Pharma (Wales) Limited business prior to its acquisition, was £0.23m.

Research and development expenditure

Investment in research and development increased 45% from £1.26m in the six months to 30 June 2014 to £1.82m in the first six months of 2015 which saw a number of critical developments, including:

· Preparatory work on the MidaFormTM transbuccal insulin programme, being developed via our MidaSolTM joint venture, was completed prior to the commencement of its Phase IIa clinical trial in the second half of 2015.

· Oncology projects intended to develop targeted therapies for the treatment of glioblastoma and hepatocellular carcinoma were progressed.

· Completion of a successful pre-clinical study for our sustained release Opsisporin treatment for uveitis.

· Further development of our Q-Octreotide programme.

Administrative expenses

Administrative expenses increased 102% between the six month periods to 30 June 2014 and 2015 from £1.86m to £3.77m. This increase is a result of a number of movements including: £0.67m of expenses incurred with respect to the proposed acquisition of DARA BioSciences; significant changes to headcount between the periods following the restructuring of the business in 2014; and further recruitment in 2015. Also, during the first half of 2015, the Group moved into its new premises in Abingdon near Oxford, UK bringing together the Head Office function and nanoparticle research operations for the first time.

Administrative expenses during 2015 also included a charge of £0.09m in respect of share options granted at the time of the IPO in December 2014.

Intangible assets

The provisional values of the Midatech Pharma (Wales) Limited acquisition made on 8 December 2014, as presented in the 31 December 2014 statutory financial statements, were revised as they had originally been determined on a provisional basis at the date of the approval of the financial statements. The result of the revision was a reduction of goodwill by £0.66m, the reduction of acquired in-process research and development by £1.50m and the reduction of the acquired deferred tax liability of £2.11m. See note 8 for more details.

Subsequent to the approval and filing of the 2014 annual accounts, the Board and management of the Company became aware of circumstances that indicated that one of the intangible assets acquired with Midatech Pharma (Wales) Limited had become impaired as a result of a condition that existed at 31 December 2014. This condition resulted in a £1.80m non-cash impairment charge to research and development expenses and a deferred tax credit to income taxes of £0.36m which has been restated in the 31 December 2014 income statement and statement of financial position included herein.

Cash flows

Cash outflows from operating activities (before changes in working capital) in H1 2015 were £4.98m compared to £2.92m in H1 2014, reflecting the general increase in operating costs noted above. However the 2015 expenditure included £0.98m incurred in respect of the proposed DARA BioSciences acquisition and associated NASDAQ listing. £0.67m of spend relating to the acquisition has been charged to the income statement and a further £0.31m relating to the listing has been recorded against prepayments pending completion of the deal at which point it will be reported against share premium. Significant additional costs in respect of both the DARA acquisition and NASDAQ listing are expected to be incurred in the second half of the year.

These cash movements resulted in a period end cash balance as at 30 June 2015 of £24.34m compared to £1.87m at 30 June 2014 and £30.33m at 31 December 3014.

Capital expenditure

CAPEX between H1 2014 and H1 2015 increased substantially to £0.75m reflecting planned investment in facilities across all three of the Group's sites: Abingdon, Cardiff and Bilbao. The most significant areas of investment were in the new combined Head Office and laboratory facilities at Abingdon, UK and in the Group's manufacturing facility in Bilbao, Spain. This investment is now substantially complete and the expenditure was in line with expectations.

Since the successful IPO we have delivered on our strategy and continue to look to the future with confidence.

Nick Robbins-Cherry

Finance Director

Condensed consolidated unaudited statement of comprehensive income

for the six month period ended 30 June 2015

Condensed consolidated unaudited statement of financial position

at 30 June 2015

Condensed consolidated unaudited statement of cash flows

for the six month period ended 30 June 2015

Condensed consolidated unaudited statement of changes in equity

for the six month period ended 30 June 2015

Notes forming part of the condensed consolidated unaudited interim financial information

for the six month period ended 30 June 2015

1 Basis of preparation

The unaudited interim consolidated financial information for the six months ended 30 June 2015 has been prepared following the recognition and measurement principles of the International Financial Reporting Standards as adopted by the EU and in accordance with International Accounting Standard 34 Interim Financial Reporting ('IAS34'). The interim consolidated financial information does not include all the information and disclosures required in the annual financial information, and should be read in conjunction with the audited statutory financial statements for the year ended 31 December 2014.

The condensed interim financial information contained in this interim statement does not constitute financial statements as defined by section 434(3) of the Companies Act 2006. The condensed interim financial information has not been audited. The financial information for the year ended 31 December 2014 is derived from the audited statutory financial statements for the year ended 31 December 2014 which have been restated as set out in note 8. The independent auditor's report was unqualified and did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006.

There are no new standards or interpretations applicable to the Group for the accounting period commencing 1 January 2015 for adoption.

In preparing the condensed interim financial information the Directors have considered the Group's financial projections, borrowing facilities and other relevant financial matters, and the Board is satisfied that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing the financial information, the condensed financial information for the six month period were approved by the board on 11 September 2015.

2 Accounting policies

The accounting policies adopted are consistent with those followed in the preparation of the audited statutory financial statements for the year ended 31 December 2014.

None of the newly applicable IFRS standards adopted by the EU and amendments had an impact on the Group's interim consolidated financial information.

Some of the significant accounting policies require management to make difficult, subjective or complex judgments or estimates. The policies which management consider critical because of the level of complexity, judgment or estimation involved in their application and their impact on the financial Information are:

· Business combinations

· Impairment of goodwill and intangible assets not yet ready for use

· Share-based payments

· Income Taxes

· Intangible asset recognition

3 Taxation credit

Income tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively enacted at the Group Statement of Financial Position date. Research and development tax credits are recognised on an accruals basis and are included as an income tax credit under current assets. The research and development tax credit recognised is based on management's best estimate of the expected tax claim for the period.

4 Segment information

The Group contains two operating segments following the acquisition of Midatech Pharma (Wales) Limited. These entities meet the aggregation criteria because the operations are closely related in terms of the field of research, the commercial partners they are working with and overall operations. Consequently, they been presented as a single reportable segment. The research and development activities involve the discovery and development of pharmaceutical products in the field of nanomedicine and sustained release technology.

Information about major customers

To date, modest sales have meant that no meaningful analysis can be drawn from the customer profile of the revenues achieved during each period under review.

Non-current assets by location of assets

Non-current assets of £1.12m (30 June 2014: £0.95m and 31 December 2014: £1.15m) reside in Spain. The remainder of the Group's non-current assets reside in the United Kingdom.

5 Loss per share

Basic loss per share amounts are calculated by dividing the net loss for the period/year attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the year. As the Group made a loss for the period/year the diluted earnings per share is equal to the basic earnings per share.

The loss per share presented for 30 June 2014 is based on the Midatech Limited weighted average number of shares in issue which has been adjusted to take account of the share division that took place on 28 November 2014 whereby each 0.01p Ordinary Share was sub divided into two 0.005p Ordinary Shares.

6 Property, plant and equipment

7 Intangible assets