1st May 2007 07:02
Phytopharm PLC01 May 2007 Company Contact: U.K. Investor Relations Contact:Phytopharm plc FDDr Daryl Rees CEO David YatesMr Piers Morgan CFO Ben Atwell+44 1480 437 697 +44 207 831 3113www.phytopharm.com 1 May 2007 Phytopharm plc Interim Results Phytopharm plc (PYM: London Stock Exchange) ("Phytopharm" or the "Company", orthe "Group") announces today its interim results for the six months ended 28February 2007. Portfolio Highlights Hoodia extract • Successfully advancing through the second stage of Joint Development Agreement with Unilever for our weight management product, Hoodia extract • Good progress in clinical trials with healthy overweight subjects Phytopica(R) • UK sales of canine skin health product, Phytopica(R), by our partner Schering-Plough exceed expectations • Schering-Plough launch Phytopica(R) in Italy in March 2007 • Schering-Plough launch Phytopica(R) in France in April 2007 Myogane(TM) • Significant progress towards initiation of a Phase Ib healthy volunteer clinical trial for amyotrophic lateral sclerosis (ALS) in H2 2007 Cogane(TM) • Data on pre-clinical models of Parkinson's disease presented at 'The Movement Disorder Society's 10th international congress' in Kyoto, Japan, November 2006 Key Financials • Revenue of £1.59 million (H1 2006 £0.88 million) • Loss after tax of £2.86 million (H1 2006 £3.64 million) • Cash balance of £3.38 million (H1 2006 £8.07 million) with an additional £1.68 million (£1.53 million net of expenses) raised through placing of 4,425,416 new Ordinary Shares after the period end Board changes • Appointment of Dr Daryl Rees as Chief Executive Officer (formerly Chief Operating Officer) • Appointment of Mr Piers Morgan as Chief Financial Officer Dr Daryl Rees, Chief Executive, commented: "Phytopharm has made significant progress on its strategic objectives for theyear. With the new management team in place, we have rationalised ourdevelopment pipeline while improving our ability to partner our products. Ourpartner Schering-Plough has launched Phytopharm's canine skin health product,Phytopica(R), in two more major European territories while our partner Unilever,has continued to make good progress in the clinic with our weight managementproduct, Hoodia extract. Throughout the remainder of 2007, we look forward tocontinuing to execute our strategic plan, including progressing Hoodia throughthe third stage of the development agreement with Unilever and completing anout-licensing agreement for one of our pharmaceutical products." Chief Executive's statement I am pleased to report that Phytopharm is making good progress in developing abroad, balanced portfolio of products with diversified risk and substantialpotential value. Upon my promotion to Chief Executive in January 2007, Iimplemented a series of strategic objectives that included rationalising ourdevelopment pipeline while improving our ability to partner our products. Withthe appointment of Piers Morgan as Chief Financial Officer in January 2007, themanagement team is strengthened, bringing significant benefits to the Board andthe Company. Over the period we have continued to make good progress in clinical trials withour weight management product, Hoodia extract, with our partner Unilever, andcontinue to advance successfully through all other aspects of the second stageof our Joint Development Agreement. We look forward to progressing into thethird stage of the Agreement in calendar H2 2007. It is encouraging that UKsales of our canine skin health product, Phytopica(R), by our partnerSchering-Plough have exceeded expectations and that their European rollout hasbegun with launches in Italy in March 2007 and France in April 2007. One of our strategic objectives is to partner one of our pharmaceutical productsin calendar H2 2007. The out-licence of our pharmaceutical products to partnerswill enable us to share the cost and risk of product development while alsoproviding near term cash in-flows on achievement of development milestones. Wehave continued to advance the development of our pharmaceutical products andhave made significant progress towards initiation of a Phase Ib healthyvolunteer clinical trial with Myogane(TM) for amyotrophic lateral sclerosis (ALS)in H2 2007 and anticipate requesting EU orphan drug status for Myogane(TM) duringthe same period. We have also made significant progress in pre-clinical modelsof Parkinson's disease demonstrating that Cogane(TM) reverses the changes in thearea of the brain involved in Parkinson's disease, providing encouragingevidence that Cogane(TM) has a disease modifying effect. This data was presentedat 'The Movement Disorder Society's 10th international congress of Parkinson'sdisease and movement disorders' in Kyoto Japan, November 2006 and has receivedconsiderable interest from potential partners. We also intend to pursuein-licensing opportunities to supplement the existing product portfolio, whilelimiting any significant increase in development costs from these activities. In March 2007, we raised approximately £1.68 million before expenses (£1.53million after expenses) by way of a placing of new Ordinary Shares in theCompany, the proceeds of which will be used to strengthen the Company's balancesheet and continue the development of its products effectively. By delivering on our strategic objectives, we believe we will be able to createvalue for our shareholders and we look forward with confidence to building onthe achievements of the first six months and reporting on the development of ourpipeline and the progress of out-licensing one of our pharmaceutical productsduring calendar H2 2007. Business Review Phytopharm is a pharmaceutical development and functional food company whoseproduct leads are generated from medicinal plants. The Company's strategy is todevelop these products through 'proof of principle' clinical testing, and thensecure partners for late stage development, sales and marketing. Laboratory,manufacturing and clinical work is outsourced to selected specialists, operatingunder expert in-house management. This operational structure allows access tothe best external research facilities whilst maintaining low fixed overheads anda lower development cost structure. Pharmaceutical Products The progress of our pharmaceutical products over the period is described below. Parkinson's and Alzheimer's disease and niche neurodegenerative diseases Cogane(TM) (PYM50028), a novel synthetic chemical, is an orally active,neurotrophic factor inducer being developed as a potential disease modifyingagent for neurodegenerative diseases including Parkinson's and Alzheimer'sdisease. A consistent feature of Parkinson's disease is the loss ofdopamine-containing neurones in the substantia nigra area of the brain. Currentdrugs can mitigate many of the symptoms for a while but do not alter theprognosis of steady decline. Phytopharm has made significant progressdemonstrating that in pre-clinical models of Parkinson disease, Cogane(TM)reverses the damage to dopamine containing neurones and reverses the decrease ofneuronal growth factors and dopamine receptors in the brain and as such is apromising novel treatment for Parkinson's disease. This data was presented at 'The Movement Disorder Society's 10th international congress of Parkinson'sdisease and movement disorders' in Kyoto Japan, November 2006 and has receivedconsiderable interest from potential partners. The neuroprotective and neurotrophic actions of Cogane(TM) suggest potentialbeneficial effects in other neurodegenerative diseases including diabeticneuropathy. In pre-clinical models, Cogane(TM) protects against sensory and motorneuronal damage, increases neurite outgrowth, reverses oxidative damage andreverses neuronal apoptosis in vitro. Cogane(TM) restores the learning and memory ability in Alzheimer's diseasepre-clinical models and thereby offers the potential to arrest or reverse theprogression of Alzheimer's disease. In late November 2005, we announced thepreliminary results obtained from the Phase IIa clinical study of Cogane(TM) inmild and moderate Alzheimer's disease patients. Two hundred and fifty-sixsubjects with Alzheimer's disease ranging in severity from mild to moderate wererandomly allocated to receive either 120 mg Cogane(TM) (n = 127) or a placebo (n =129), orally once daily for 12 weeks. The majority of patients enrolled had milddisease. Although the disease progression over the short study period wasinsufficient to detect a beneficial effect of Cogane(TM) in the mild patientsthere was an encouraging trend for slower disease progression in more moderateAlzheimer's patients with Cogane(TM). This, coupled with its excellent safetyprofile and tolerability, provides positive data for longer term studies forefficacy determination. Initial discussions with potentially suitable licenseeshave now led to detailed assessments and due diligence evaluations of the fulldata set. Motor neurone disease Myogane(TM) (PYM50018) is being developed for ALS (also known as Lou Gehrig'sdisease). ALS is the most common motor neurone disease and results fromprogressive degeneration of both upper and lower motor neurones. This conditionhas a high unmet medical need. Although the precise molecular pathways thatcause the death of motor neurones in ALS remain unknown, possible mechanismsinclude oxidative and glutamate mediated damage. In pre-clinical studies, thesingle chemical Myogane(TM) protects against neuronal damage, reverses thedecrease of neuronal growth factors and reverses neuronal degeneration observedin motor neurones. Myogane(TM) also increases neurite outgrowth, reversesoxidative damage and reverses neuronal apoptosis in vitro. When administeredorally to a transgenic pre-clinical model of ALS, Myogane(TM) delays the loss ofmuscle strength and extends survival time. Phytopharm has successfully completed a Phase Ia clinical study that evaluatedthe safety, tolerability and pharmacokinetic profile of Myogane(TM). Thisresidential clinical study was conducted under an investigational new drug (IND)filed with the United States Food and Drug Administration (FDA) and confirmedthat the product was well absorbed with an excellent safety profile. We alsoannounced that the FDA had granted Orphan Drug and Fast Track designation toMyogane(TM) for the treatment of ALS. Building on this success we have furtherdeveloped a new liquid formulation suitable for ALS patients and have madesignificant progress towards initiation of a Phase Ib healthy volunteer clinicaltrial for H2 2007. Initial discussions with potentially suitable licensees havenow led to detailed assessments and due diligence evaluations of the full dataset. The neuroprotective and neurotrophic actions of Myogane(TM) suggest potentialbeneficial effects in other orphan neurodegenerative diseases includingFriedrich's ataxia, progressive supranuclear palsy, Huntington's disease andmultiple system atrophy as well as niche market diseases. Asthma and other inflammatory disorders Asthma is a chronic inflammatory disorder of the airways that causes recurrentepisodes of wheezing, breathlessness, chest tightness and coughing. Inaddition, asthma is usually associated with widespread but variable airflowobstruction. Inhibition of inflammation and opening of the airways aretherefore key components of asthma treatment. Steady progress has been made inidentifying novel synthetic molecules from the PYM60001 series that can bedeveloped as a pharmaceutical medicine for the treatment of asthma and otherinflammatory disorders. Pre-clinical comparative, 'proof of concept', studieswith marketed products have demonstrated encouraging results showing improvedbeneficial effects in several models of asthma including opening of the airwaysand reduction in airway inflammation. Metabolic syndrome Obesity leads to a cluster of metabolic alterations and as a result is a majorrisk factor for insulin resistance, type 2 diabetes, coronary artery disease,hypertension, stroke, osteoarthritis and certain forms of cancer. Weight isgained when energy intake exceeds energy expenditure. The excess energy isstored as fat, and if there is an extended period of positive energy balance,obesity will result. The mechanism of action of the chemical series based onthe active components of our Hoodia extract (see below) is under investigation.Proteomic research is helping to define novel targets and the design of newmolecules from the PYM60004 series as pharmaceutical candidates for metabolicsyndrome and Prader-Willi syndrome which is an orphan disease characterised byclearly definable features including obesity due to hyperphagia and a decreasedcalorific requirement owing to low energy expenditure. Functional Foods Our functional food products continue to make strong progress. Dietary weight management Our weight management functional food product is based on an extract of thesucculent plant, Hoodia, which contains a novel satiety stimulator that reducescalorie intake in overweight subjects, as demonstrated in our double-blind,placebo-controlled clinical study. Extracts of Hoodia and the active moleculestherein are the subject of a global patenting programme, with major patentsgranted in the US, UK, Europe and Japan and pending in all other majorterritories. In December 2004, we announced that we had granted an exclusive global licencefor the Hoodia extract to Unilever plc. Under the terms of the agreement,Phytopharm and Unilever are collaborating on a five-stage research anddevelopment programme of safety and efficacy studies with a view to bringing newweight management products to market. In April 2006, we announced that we hadsuccessfully completed the first stage of our Joint Development Agreement. Wealso announced the progression into the second stage which included clinicalstudies. Over the period we have continued to advance successfully throughclinical trials in healthy overweight subjects as well as all other aspects ofthe second stage of our Joint Development Agreement. As part of the agreement, Unilever committed to initial payments ofapproximately £6.5 million for the first stage and in April 2006 committed up to£3.5 million for the second stage in payments to Phytopharm. In addition,Phytopharm will receive an undisclosed royalty on sales of all productscontaining the extract. Unilever is also managing a separate agronomy programmeand supporting the international patent programme for the products. Phytopharm and Unilever have also become aware of many companies that areselling products over the Internet and in some stores claiming to contain Hoodiaand causing weight loss. Analysis of these products has demonstrated that thegreat majority of them contain little or no Hoodia. Phytopharm and Unileverhave made contact with the relevant authorities concerning this development andare satisfied with the progress being made in these key discussions. Canine skin health Phytopica(R) is a natural, three plant product for canine skin health thatprovides a novel 3 in 1 approach to help maintain a normal healthy immunesystem, support normal white cell function and provide anti-oxidant benefits.The beneficial effects and excellent safety profile of Phytopica(R) have beenproven extensively in clinical trials and the product has been found to besuitable for all dogs whatever size or breed. Canine dermatological disordersare well recognised by veterinarians to be a major problem in small animalpractice, with an estimated 15% of the UK dog population (around 900,000 dogs)affected by skin conditions (source: Animal Pharm). Maintenance of a healthyskin and coat and alleviation of itching are of major importance to caninegeneral health and quality of life. In January 2006, Phytopharm entered into an exclusive global agreement withSchering-Plough Animal Health ("Schering-Plough") for Phytopica(R). Under theterms of the agreement, Phytopharm is responsible for manufacturing Phytopica(R)whilst Schering-Plough is responsible for the global sales, marketing anddistribution. In April 2006, Schering-Plough launched Phytopica(R) in the UKand the product has enjoyed firm support from veterinary dermatologists, withsales exceeding expectations. Schering-Plough launched Phytopica(R) in Italy and France in March and April2007, respectively. With more than 8.5 million dogs, France is one of thelargest companion animal markets in Europe and of these, some 15% referred toveterinarians may be affected by skin conditions. Following the French launch,Schering-Plough will seek to market and distribute Phytopica(R) in furthercountries worldwide. With Schering-Plough's global presence we look forward tostrong growth from this product. Financial review The financial performance for the six months ended 28 February 2007 reflects theGroup's ongoing pharmaceutical development and functional foods activities. Income statement The increased revenue of £1.59 million for the period was generated from our twocollaboration agreements: firstly with Unilever for the development of Hoodiaextract for dietary weight management; and secondly with Schering-Plough for theglobal sales, marketing and distribution of Phytopica(R) for canine skin health.Revenue for the comparable period to 28 February 2006 amounted to £0.88million. Revenue from Unilever represents reimbursement to the Group ofdevelopment expenditure relating to the Hoodia extract programme, together withfunding of certain Phytopharm staff, and therefore the level of revenue in eachperiod depends on the nature of the ongoing activities and level of relatedexpenditure at that particular time. Revenue from Schering-Plough comprises thesale of Phytopica(R) by Phytopharm to Schering-Plough for onward distributionand eventual sale to end users. Of the revenue in the period to 28 February2007, £1.58 million represents stage payments from Unilever, and £0.01 millionrepresents product sales to Schering-Plough; for the corresponding period to 28February 2006 stage payments amounted to £0.84 million and product salesamounted to £0.04 million. Expenditure on research and development has continued as planned for the sixmonths ended 28 February 2007. A total of £3.84 million was spent during theperiod, compared to £3.79 million for the six months ended 28 February 2006.54% of this expenditure related to the Hoodia extract functional food programme,and 41% on the pharmaceutical development of Cogane(TM) and Myogane(TM). Thebalance of development expenditure relates to Phytopharm's other pharmaceuticaldevelopment programmes, particularly for asthma, and a small amount of ongoingwork in relation to Phytopica(R). The Hoodia extract programme for dietaryweight management continues to make encouraging progress through Stage 2 of the5-Stage Unilever Development and Launch Agreement, and Unilever continues tomake substantial further investment in this programme, in addition to thefunding it pays to Phytopharm. Expenditure on selling, general and administrative expenses for the six monthsended 28 February 2007 reduced slightly to £0.94 million from £1.08 million inthe six months ended 28 February 2006. Interest receivable for the six months ended 28 February 2007 amounted to £0.11million, compared to £0.22 million for the comparable period to 28 February2006. The reduced overall net loss for the period to 28 February 2007 was £2.86million compared to £3.64 million for the period ended 28 February 2006. Balance sheet Non-current assets comprise property, plant and equipment. At 28 February 2007these amounted to £0.21 million compared to £0.24 million at 28 February 2006. Current assets amounted to £5.47 million at 28 February 2007 and comprisedinventories of £0.86 million, amounts receivable of £1.23 million (of which£0.85 million related to R&D tax credits), and cash resources of £3.38 million.Inventories rose slightly in the six months ended 28 February 2007 as the Groupmanufactured further finished stocks of Phytopica(R) to support the launches inItaly and France in March and April 2007 respectively as well to meet UK demand.These finished goods were supplied and invoiced to Schering Plough after theperiod end. Amounts receivable excluding R&D tax credits have reduced to £0.38million at 28 February 2007 from £0.65 million at 28 February 2006; amounts at28 February 2006 included £0.25 million receivable from Unilever under thedevelopment and launch agreement (£nil at 28 February 2007). The level of R&Dtax credit receivable by the Group, at £0.85 million, is in line with previousperiods. Cash resources, described as cash and cash equivalents, are investedfor periods of 90 days or less. The decrease in cash resources during theperiod of £2.62 million reflects the cash utilised in the business and excludesthe proceeds of the fundraising by the Group in March 2007. Current liabilities at 28 February 2007 have reduced to £1.73 million from £2.17million at 28 February 2006, reflecting a reduction in accruals for clinicaltrial expenditure relating to the Group's development activities. The increase on the Share Premium account for the period ended 28 February 2007reflects the recovery and capitalisation of VAT previously written off againstthat reserve, following a change in HMRC policy with respect to the Group's May2005 fundraising. Cash flow The net cash used in operating activities for the six months ended 28 February2007 was £2.73 million, a reduction from £3.64 million in the period ended 28February 2006. Outlook Throughout the remainder of 2007 we look forward to continuing to implement ourstrategic plan, which includes progressing Hoodia through the third stage of thedevelopment agreement with Unilever and completing an out-licensing agreementfor one of our pharmaceutical products. We also look forward to continuedgrowth in sales of our canine skin health product, Phytopica(R) with ourpartner, Schering-Plough. Dr Daryl ReesChief Executive Piers MorganChief Financial Officer Independent review report to Phytopharm plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 28 February 2007 which comprises the unaudited consolidatedinterim balance sheet as at 28 February 2007 and the related unauditedconsolidated interim statements of income, cash flows and changes inshareholders' equity for the six months then ended and related notes. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The ListingRules of the Financial Services Authority require that accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. The Interim Report has been prepared in accordance with the basis set out innote 1. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for theCompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. 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 28 February 2007. PricewaterhouseCoopers LLPChartered AccountantsCambridge1 May 2007 Notes: a. The maintenance and integrity of the Phytopharm 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 interim report since it was initially presented on the website. b. Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. Unaudited consolidated income statementFor the six months ended 28 February 2007 Notes Unaudited Unaudited Audited Six months ended Six months ended Year ended 28 Feb 2007 28 Feb 2006 31 Aug 2006 £ £ £Revenue 1,588,182 879,420 1,882,501 Cost of sales (30,168) (239,434) (341,067) _____ _____ _____Gross profit 1,558,014 639,986 1,541,434Research and development expenses (3,840,704) (3,790,941) (6,540,173)Selling, general and administrative (941,101) (1,076,732) (1,624,779)expenses _____ _____ _____Operating loss (3,223,791) (4,227,687) (6,623,518) Interest receivable and similar income 109,917 223,087 380,484Interest payable and similar charges (30) - - _____ _____ _____Loss on ordinary activities before (3,113,904) (4,004,600) (6,243,034)taxationUK tax credit on loss on ordinary 2 250,221 367,544 604,421activities _____ _____ _____Loss for the period (2,863,683) (3,637,056) (5,638,613) _____ _____ _____Basic and diluted loss per share (pence) 3 (5.6) (7.1) (11.0) All revenues and expenses shown above were generated from continuing operations. Unaudited consolidated statement of changes in shareholders' equityFor the six months ended 28 February 2007 Share capital Share premium Other Profit and loss Total reserves account (deficit) (deficit) £ £ £ £ £Balance at 1 September 2005 511,809 47,156,708 (204,211) (35,650,581) 11,813,725Loss for the six month period - - - (3,637,056) (3,637,056)Equity share options charge - - - 228,018 228,018 _____ _____ _____ _____ _____Balance at 28 February 2006 511,809 47,156,708 (204,211) (39,059,619) 8,404,687 _____ _____ _____ _____ _____ Loss for the six month period - - - (2,001,557) (2,001,557)Equity share options charge - - - 74,474 74,474 _____ _____ _____ _____ _____ Balance at 31 August 2006 511,809 47,156,708 (204,211) (40,986,702) 6,477,604 _____ _____ _____ _____ _____ Loss for the six month period - - - (2,863,683) (2,863,683)Share issue costs recovered - 39,564 - - 39,564Equity share options charge - - - 287,194 287,194 _____ _____ _____ _____ _____ Balance at 28 February 2007 511,809 47,196,272 (204,211) (43,563,191) 3,940,679 _____ _____ _____ _____ _____ Unaudited consolidated balance sheetAs at 28 February 2007 Notes Unaudited Unaudited Audited At At At 28 Feb 2007 28 Feb 2006 31 Aug 2006 £ £ £Non-current assetsProperty, plant & equipment 205,347 242,474 201,521 _____ _____ _____ Non-current assets 205,347 242,474 201,521 _____ _____ _____ Current assetsInventories 4 861,889 722,258 842,899Trade and other receivables 5 377,504 646,827 568,882Current tax receivable 854,642 891,885 604,421Cash and cash equivalents 3,374,478 8,070,426 5,997,428 _____ _____ _____ Current assets 5,468,513 10,331,396 8,013,630 _____ _____ _____ Current liabilitiesTrade and other payables 6 (1,733,181) (2,169,183) (1,737,547) _____ _____ _____ Net current assets 3,735,332 8,162,213 6,276,083 _____ _____ _____ Net assets 3,940,679 8,404,687 6,477,604 _____ _____ _____ EquityShare capital 511,809 511,809 511,809Share premium 47,196,272 47,156,708 47,156,708Other reserves (deficit) (204,211) (204,211) (204,211)Profit and loss account (deficit) (43,563,191) (39,059,619) (40,986,702) _____ _____ _____ Shareholders' funds 3,940,679 8,404,687 6,477,604 _____ _____ _____ Unaudited consolidated cash flow statementFor the six months ended 28 February 2007 Unaudited Unaudited Audited Six months Six months Year Ended Ended Ended 28 Feb 2007 28 Feb 2006 31 Aug 2006 £ £ £Cash flow from operating activities Operating loss (3,223,791) (4,227,687) (6,623,518)Depreciation 43,377 54,327 108,259(Gain)/loss on disposal of property, plant and (4,725) 1,304 10,068equipment Equity share options charge 287,194 228,018 302,492 _____ _____ _____ (2,897,945) (3,944,038) (6,202,699) Changes in working capitalDecrease in trade and other receivables 191,378 18,262 96,207Decrease in trade and other payables (4,366) (89,085) (520,725)(Increase)/decrease in inventories (18,990) 224,963 104,325 _____ _____ _____ Cash used in operations (2,729,923) (3,789,898) (6,522,892) Taxation received - 150,000 674,341Interest paid (30) - - _____ _____ _____ Net cash used in operating activities (2,729,953) (3,639,898) (5,848,551) Cash flows from investing activitiesPurchase of property, plant & equipment (79,339) (178,854) (234,596)Sale of property, plant & equipment 36,861 26,750 60,750 Interest received 109,917 223,087 380,484 _____ _____ _____ Net cash generated from investing activities 67,439 70,983 206,638 Cash flows from financing activities Share issue costs recovered 39,564 - - Capital element of finance leases - (1,398) (1,398) _____ _____ _____ Net cash generated from/(used in) financing activities 39,564 (1,398) (1,398) _____ _____ _____ Movements in cash and cash equivalents in the period (2,622,950) (3,570,313) (5,643,311)Cash and cash equivalents at the beginning of the 5,997,428 11,640,739 11,640,739period _____ _____ _____ Cash and cash equivalents at the end of the period 3,374,478 8,070,426 5,997,428 _____ _____ _____ Notes to the unaudited financial statementsFor the six months ended 28 February 2007 1 Accounting policies and basis of preparation This financial information comprises the consolidated interim balance sheets asat 28 February 2007 and 28 February 2006 and the year end balance sheet at 31August 2006 together with the related consolidated interim statements of income,cash flows and changes in shareholders' equity for the 6 and 12 month periodsthen ended of Phytopharm plc. In preparing this financial information in accordance with the Listing Rules ofthe Financial Services Authority, management has used the principal accountingpolicies as set out in the Group's annual financial statements for the yearended 31 August 2006. The Group has chosen not to adopt IAS34, "Interim financial statements", inpreparing its 2007 interim statements and therefore, this interim financialinformation is not in compliance with IFRS. The interim financial information has not been audited and does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985but has been reviewed by the auditors in accordance with Bulletin 1999/4 issuedby the Auditing Practices Board. The Company's statutory accounts for the yearended 31 August 2006 have been delivered to the Registrar of Companies; thereport of the auditors on these accounts was unqualified and did not contain astatement under section 237 (2) or (3) of the Companies Act 1985. 2 Tax on loss on ordinary activities There is no corporation tax charge because of the incidence of tax losses. TheCompany has taken advantage of the Research and Development corporation taxcredits introduced in the Finance Act 2000 whereby a company may surrendercorporation tax losses incurred on research and development expenditure for acorporation tax refund at the rate of 24 pence on the pound of actualexpenditure. 3 Loss per ordinary share Basic loss per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the period. For diluted loss per share, the weighted average number of ordinary shares inissue is adjusted to assume conversion of all dilutive potential ordinaryshares. Since the Group is loss making there is no such dilutive impact. Six months ended Six months ended Year ended 28 Feb 2007 28 Feb 2006 31 Aug 2006 Attributable loss (£) (2,863,683) (3,637,056) (5,638,613) Weighted average number of shares in issue 51,180,893 51,180,893 51,180,893 _____ _____ _____ Basic and diluted loss per ordinary share (pence) (5.6) (7.1) (11.0) _____ _____ _____ 4 Inventories Six months ended Six months ended Year ended 28 Feb 2007 28 Feb 2006 31 Aug 2006 £ £ £ Raw materials and consumables 483,558 303,335 482,056 Work in progress 256,837 418,923 360,843 Finished goods and goods for resale 121,494 - - _____ _____ _____ 861,889 722,258 842,899 _____ _____ _____ 5 Trade and other receivables Six months ended Six months ended Year ended 28 Feb 2007 29 Feb 2006 31 Aug 2006 £ £ £ Trade receivables 5,929 264,795 324,396 Other receivables 161,438 85,495 34,740 Prepayments and accrued income 210,137 296,537 209,746 _____ _____ _____ 377,504 646,827 568,882 _____ _____ _____ 6 Trade and other payables Six months ended Six months ended Year ended 28 Feb 2007 28 Feb 2006 31 Aug 2006 £ £ £ Trade payables 790,720 342,487 522,222 Other payables - 102,333 73 Other taxation and social security 61,140 50,889 61,598 Accruals and deferred income 881,321 1,673,474 1,153,654 _____ _____ _____ 1,733,181 2,169,183 1,737,547 _____ _____ _____ 7 Related party transactions On 9 January 2007 Dr Richard Dixey stepped down as Chief Executive Officer andBoard Director and his employment with the Company terminated on 31 January2007. By way of compensation for loss of office and the early termination ofemployment the Company made a contractual payment of £32,109 and a payment of£5,000 in respect of post termination restrictions (in each case before thededuction by the Company of PAYE and National Insurance Contributions, which arethe responsibility of Dr Dixey) together with a final pension contribution of£180,000. 8 Performance share award On 9 January 2007 the Remuneration Committee made a performance share award of350,000 ordinary shares to Dr D Rees, and 250,000 ordinary shares to Mr P Morganat an exercise price of 45 pence per share. The Remuneration Committeeconsidered that there was a considerable risk of Dr Rees leaving the Company ashis existing share option awards were at option prices significantly in excessof the current share price and this performance share award was granted, aspermitted by Listing Rule 9.4.2 (2) to retain the services of Dr Rees. TheRemuneration Committee considered that the award to Mr Morgan was necessary, aspermitted by Listing Rule 9.4.2 (2), to secure the services of Mr Morgan. Theawards are subject to performance conditions and the benefits are notpensionable. The market - based performance condition is based on TotalShareholder Return (TSR) over a three year period (with no retestingopportunities) when compared to the FTSE Small Cap Index. 100% of the sharesawarded will vest for performance above the comparator group. None of the sharesawarded will vest for performance below the comparator group. TSR is consideredby the Remuneration Committee to be the most robust method of measuring companyperformance over the period. The terms of the award will not be amended to thebenefit of Dr Rees or Mr Morgan without seeking shareholder approval. 9 Post balance sheet events Phytopharm announced on 1 March 2007 that it had raised approximately £1.7million before expenses (£1.6 million after expenses) by way of a placing of4,425,416 new Ordinary Shares of 1 pence each in the Company, representing 8.65per cent. of the Company's issued share capital prior to the placing. Theproceeds will be used to strengthen the Company's balance sheet and continue thedevelopment of its products. The shares were admitted to trading on 7 March2007. The new ordinary shares rank pari passu in all respects with the Company'sexisting ordinary shares. Following the placing the Company has 55,606,309Ordinary Shares in issue. Phytopharm announced the launch by its partner, Schering-Plough Animal Health ("Schering-Plough"), of Phytopica(R) in Italy on 26 March 2007, and in France on16 April 2007. Following these launches, Schering-Plough will seek to market anddistribute Phytopica(R) in further countries. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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