11th May 2005 07:01
Phytopharm PLC11 May 2005 Phytopharm plc Interim results for the period to 28 February 2005 Phytopharm plc today announces interim results for the six-month period ended 28February 2005. Key Points - Operational • Completion of a Licence and Joint Development Agreement with Unilever for Hoodia gordonii extract• Successful interim data review for Phase II proof of principle study in Alzheimer's disease (Cogane(TM))• Receipt of £4 million milestone confirmed in February 2005 (£3.6 million net received in March 2005) from Yamanouchi Pharmaceutical Co., Ltd following evaluation of interim Phase II Alzheimer's disease data (Cogane(TM)), confirming that the data had met the criteria in the licensing agreement• Termination of licensing agreement with Yamanouchi Pharmaceutical Co., Ltd (Cogane(TM)) in March 2005, following Yamanouchi's post-merger portfolio review Key Points - Financial • Revenues of £6.3 million (H1 2004: £1.1 million) and milestone receipts enable Phytopharm to record a profit for the period of £734,999 (H1 2004: loss of £1.9 million)• Placing of new shares announced in April raised £9.0 million after expenses Dr Richard Dixey, Chief Executive of Phytopharm, said: "The highlight of the first half was the signing of a worldwide licenceagreement with Unilever, the global leader in weight management products, forour Hoodia gordonii extract. We will be seeking further licensing deals over thenext year, starting with our veterinary portfolio and then with our Alzheimer'sproduct Cogane(TM), following completion of phase II trials at the end of thisyear." Enquiries: Phytopharm plc Today: 07867 782000Dr Richard Dixey, Chief Executive Thereafter: 01480 437697 Mobile: 07867 782000 Dr Wang Chong, Chief Financial Officer Tel: 01480 437697 Mobile: 07876 684223Financial Dynamics Tel: 0207 831 3113David Yates / Ben Atwell A presentation for analysts will be held at Financial Dynamics, Holborn Gate, 26Southampton Buildings, London WC2A 1PB at 9:30am today. www.phytopharm.co.uk Operational Review Phytopharm is a small pharmaceutical company specialising in the discovery anddevelopment of novel pharmaceutical and functional food products forneurodegeneration, obesity and metabolic disease, dermatology and inflammation.The Company's strategy is to develop first-in-class products through Phase IIclinical testing, and then secure pharmaceutical partners for late stagedevelopment, sales and marketing. The progress of our products over the firsthalf of the year, each at different stages of development, is described on thefollowing pages. Neurodegeneration The neurodegeneration programmes include Alzheimer's disease, Parkinson'sdisease and amyotrophic lateral sclerosis, a motor neurone disease. Our lead product, Cogane(TM) (coded PYM50028) is being developed for Alzheimer'sand Parkinson's disease. In pre-clinical studies, PYM50028 is neuroprotectiveand reverses both the decrease of neuronal growth factors and the neuronaldegeneration observed in the ageing brain. Importantly, this product has alsobeen shown to restore levels of proteins that are altered in the ageing brain,returning them to levels observed in the young, causing beneficial outgrowth andbranching of neurites. In January 2005, we announced the successful outcome of a scheduled interim datareview for the ongoing Phase II 'proof of principle' clinical study inAlzheimer's disease of PYM50028. This study is being conducted under a clinicaltrial authorisation (CTA) from the UK Medicines and Healthcare ProductsRegulatory Agency (MHRA). The Phase II study utilises a randomised,double-blind, placebo-controlled design to evaluate the safety, efficacy andpharmacokinetic profile of PYM50028 after once daily oral administration overthree months. The effects of PYM50028 on memory, concentration and executivefunction will be evaluated during the study. In accordance with the protocol,an interim review was conducted after the first 60 subjects completed the study.The objectives of this review were to evaluate the emergent safety profile ofthe study and to re-estimate the total number of subjects required to measurethe efficacy of PYM50028 on cognitive performance. The safety review was conducted by an independent consultant physician, who wasprovided with blinded data for each of the two treatment groups. He concludedthat "the data obtained to date indicate that the study medication is notassociated with any safety concerns." Therefore, the study will continue with nochanges to the safety monitoring. The sample size re-assessment was conducted by an independent statistician, whoreported that the sample size for the study should be increased from 200 to 238subjects. Phytopharm subsequently received regulatory and ethics approval forthis amendment. A total of 237 subjects have now been recruited into this study, and subjectrecruitment is expected to be completed within two weeks. We thereforeanticipate the completion of the phase II trial for Cogane(TM) at the end of 2005 and, following analysis of the results, will be seeking further licensingpartners for this product. In February 2005, we received confirmation of a milestone payment of £4 million(£3.6 million net received in March 2005) from Yamanouchi Pharmaceutical Co. Ltd("Yamanouchi") following receipt by Yamanouchi of the safety data in relation tothe first 60 patients treated with PYM50028 in the ongoing phase II proof ofprinciple study in patients with Alzheimer's disease. The study confirmed thatthe data met the criteria set out in the licensing agreement. In March 2005, Phytopharm also received confirmation from Yamanouchi that as aresult of a portfolio review arising out of the merger of Yamanouchi withFujisawa Pharmaceutical Co, Yamanouchi was terminating the licensing agreement,covering Japan and some other Asian countries, in connection with PYM50028.Phytopharm had previously announced in February 2005 that it had been informedby Yamanouchi that it was likely to terminate this agreement. Our second lead product Myogane(TM) (coded PYM50018) is being developed foramyotrophic lateral sclerosis (ALS; also known as Lou Gehrig's disease). ALS isthe most common motor neurone disease and results from progressive degenerationof both upper and lower motor neurones. In pre-clinical models, PYM50018protects against neuronal damage, increases neurite outgrowth, reversesoxidative damage and reverses neuronal apoptosis in vitro. When administeredorally to a transgenic pre-clinical model of ALS, PYM50018 delays the loss ofmuscle strength and extends survival time. Last year, we successfully completed a Phase Ia clinical study to evaluate thesafety, tolerability and pharmacokinetic profile of PYM50018. This residentialclinical study was conducted under an investigational new drug (IND) applicationfiled with the United States Food and Drug Administration (FDA) and confirmedthat the product was well absorbed with a good safety profile. We also announcedlast year that the FDA had granted Orphan Drug and Fast Track designation toPYM50018 for the treatment of ALS. Building on this success we are nowprogressing the development package to support further clinical studies withPYM50018 for ALS. Obesity and metabolic disease Our obesity programme includes an extract of Hoodia gordonii for the dietarycontrol of obesity, which contains a novel appetite suppressant that reducescaloric intake in overweight subjects, as demonstrated in our double-blind,placebo-controlled clinical study announced in December 2001. In December 2004, we announced that we had granted an exclusive global licencefor our Hoodia gordonii extract to Unilever plc. As part of the agreement,Unilever committed to initial payments totalling approximately £6.5 million($12.5 million) out of a potential total of £21 million ($40 million) inpayments to us. In addition, we will receive a royalty on sales of allproducts, including globally recognised brands, containing the extract. We arecollaborating with Unilever on a five stage research and development programmeof safety and efficacy studies with a view to bringing new products to market.Unilever will manage the agronomy programme and will support the internationalpatent programme for the products. Phytopharm has also developed screens thatare predictive of appetite suppressant activity to evaluate pharmaceuticaldevelopment candidates in our obesity and metabolic disease programme. Dermatology The dermatology programmes include products for canine skin disorders and humaneczema. These products have a dual mode of action that targets both the allergicand inflammatory components of skin disorders. Following the success last year of the three-plant product, coded PYM00217 inour European multi-centre study in canine atopic dermatitis, we launchedPYM00217 with the brand name Phytopica(TM). Following the successful UK launch to registered veterinary practitioners, Phytopharm is now seeking global partners to market Phytopica(TM) in other territories. Inflammation Finally, the inflammation programmes include products for canine joint disordersand human inflammatory disorders, including asthma. These products arecharacterised by their inhibition of a wide range of enzymes central to chronicinflammation. Last year, we announced the launch of Zanthofen(TM) (coded PYM50014) for themaintenance of canine joint mobility. Pre-clinical studies have demonstratedthat the components of Zanthofen(TM) maintain normal white cell function and haveanti-oxidant properties that help maintain joint mobility. Zanthofen(TM) isavailable to veterinary practitioners across the UK and is marketed byPhytopharm's marketing partner, Genitrix Ltd, a UK based veterinary productcompany. Steady progress has been made in developing novel synthetic molecules intendedto result in a pharmaceutical prescription medicine for the treatment of asthmaand other inflammatory disorders. Pre-clinical studies have demonstratedanti-inflammatory and anti-spasmodic activity in several models of asthma andinflammation. We anticipate that further proof of concept studies will beinvestigated during the year using these compounds in pre-clinical models ofasthma. Financial Review Summary The financial performance for the first six months to 28 February 2005 has beeninfluenced by two main events: the income from Unilever for Hoodia gordoniiextract after the agreement was signed in December 2004 and the third milestonepayment due from Yamanouchi for PYM50028 in February 2005. The Company'sinvestment in research and development continues to grow in line principallywith the continuing progress of our programmes for Alzheimer's disease,amyotrophic lateral sclerosis and the dietary control of obesity. Turnover Revenues of £6.34 million for the first six months (H1 2004: £1.05 million, H22004: £0.02 million) comprised principally £2.27 million in payments receivedfrom Unilever, for the exclusive licence to develop, manufacture and marketHoodia gordonii extract for the dietary control of obesity on a global basis,and a £4 million (£3.6 million net of Japanese withholding tax) milestonepayment from Yamanouchi, following acknowledgement by Yamanouchi that the safetydata in relation to 60 patients treated with PYM50028 had fulfilled the criteriain the licensing agreement. The significant increase in revenues for the periodreflects the intermittent timing of milestone payments. Expenses Research and development remained our most significant investment, totalling£4.11 million or 78% of total operating costs, an increase of 58% (H1 2004:£2.60 million, H2 2004: £3.75 million). This is largely due to the successfulprogress of the Alzheimer's disease and amyotrophic lateral sclerosisprogrammes, which are in clinical trials, and also the dietary control ofobesity programme, which is now fully funded by Unilever. The research anddevelopment activity required administrative support of £1.15 million (H1 2004:£0.59 million, H2 2004: £1.12 million), due to the additional one-off costs ofan aborted £23.9 million fund raising, US financial compliance costs and theshare option compensation charge. This period's total operating expenses were£5.26 million, an increase of 65% (H1 2004: £3.18 million, H2 2004: £4.87million). Interest and Tax Interest income of £0.09 million was higher this period (H1 2004: £0.07 million,H2 2004: £0.17 million), due to a combination of changing cash balances andhigher interest rates, and represents an average return of 2.04% on the cashbalances throughout the period. There was a net tax charge of £0.07 millioninstead of net tax recoverable in previous periods (H1 2004: £0.21 million, H22004: £0.33 million), despite a similar research and development corporation taxcredit to the previous period, due to the payment of a 10% Japanese withholdingtax deducted from the Yamanouchi income. Liquidity and Capital Resources At 28 February 2005 the Group had cash and liquid resources of £3.67 million,£1.76 million lower than at the start of the financial year. Cash and liquidresources were strengthened by a placing and open offer of £9.0 million net,post the period end. The fixed asset base remained low at £0.16 million since the start of the sixmonth period as research and development activities are contracted out so thatthe Group does not need to finance its own laboratory facilities. Debtors of£6.33 million are 297% higher than at the start of the period, comprisingprincipally the Yamanouchi milestone payment and to a lesser extent, researchand development tax credits. Creditors of £4.27 million are 89% higher than atthe start of the period, comprising mainly trade creditors and accruals. Working capital at 28 February 2005 was £6.07 million, an increase of £0.96million during the period and is a manifestation of the sporadic nature ofmilestone payments. The underlying utilisation of working capital in FY2005 isanticipated to be similar to previous periods. During the period, Phytopharm reported an operating profit of £0.71 million,compared with a loss of £2.1 million in H1 2004. At a pre-tax level, profitswere £0.81 million, compared with a loss of £2.1m in H1 2004. Phytopharm has raised a net total of £43 million since the IPO in 1996(including the £9.0 million fund raising in April 2005). As at 28 February2005, a net total of £29 million has been invested by shareholders in developingPhytopharm and its product opportunities. Independent review report to Phytopharm plc Introduction We have been instructed by the company to review the financial information whichcomprises the consolidated profit and loss account, the reconciliation ofmovements in Group shareholders' funds, the consolidated balance sheet and theconsolidated cash flow statement and the related notes. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of company management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly we do not expressan audit opinion on the financial information. This report, including theconclusion, has been prepared for and only for the company for the purpose ofthe Listing Rules of the Financial Services Authority and for no other purpose.We do not, in producing this report, accept or assume responsibility for anyother purpose or to any other person to whom this report is shown or into whosehands it may come save where expressly agreed by our prior 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 2005. PricewaterhouseCoopers LLPChartered AccountantsCambridge10 May 2005 (a) The maintenance and integrity of the Phytopharm plc website is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. Unaudited consolidated profit and loss account for six months ended 28 February2005 Notes Unaudited Unaudited Audited Six months Six months Year Ended Ended Ended 28 Feb 2005 29 Feb 2004 31 Aug 2004 £ £ £Turnover 2 6,340,644 1,052,360 1,072,082Cost of sales (371,054) - (10,136) __________ __________ __________Gross profit 5,969,590 1,052,360 1,061,946 __________ __________ __________Net operating expenses 3 (5,255,859) (3,184,923) (8,057,945) __________ __________ __________Operating profit/(loss) 713,731 (2,132,563) (6,995,999) Interest receivable and similar income 93,356 69,693 239,235Interest payable and similar charges (296) - (312) __________ __________ __________Profit/(loss) on ordinary activities 806,791 (2,062,870) (6,757,076)before taxationTax on profit/(loss) on ordinary 4 (71,792) 205,434 530,946activities __________ __________ __________Profit/(loss) for the period 7 734,999 (1,857,436) (6,226,130) __________ __________ __________Basic earnings/(loss) per share (pence) 5 1.7 (4.8) (15.3) Diluted earnings per share 5 1.7 - - Unaudited reconciliation of movements in Group shareholders' funds for the sixmonths ended 28 February 2005 Unaudited Unaudited Audited Six months Six months Year Ended Ended Ended 28 Feb 2005 29 Feb 2004 31 Aug 2004 £ £ £Profit/(loss) for the period 734,999 (1,857,436) (6,226,130)New share capital issued 157,893 6,517,429 6,519,929Expenses of share capital issued - (163,721) (154,035)Share option compensation charge 44,250 27,340 55,400 __________ __________ __________Net increase in shareholders' funds 937,142 4,523,612 195,164Opening shareholders' funds 5,292,048 5,096,884 5,096,884 __________ __________ __________Closing shareholders' funds 6,229,190 9,620,496 5,292,048 __________ __________ __________ Unaudited consolidated balance sheet at 28 February 2005 Notes Unaudited Unaudited Audited At At At 28 Feb 2005 29 Feb 2004 31 Aug 2004 £ £ £Fixed assetsTangible assets 154,628 171,675 177,817 __________ __________ __________ 154,628 171,675 177,817 Current assetsStocks 347,574 195,820 350,534Debtors amounts falling due after one year 6 - - 613,929Debtors amounts falling due within one 6,325,063 1,122,908 977,837yearCash held on deposit as short term 3,524,233 2,541,243 5,237,452investmentsCash at bank and in hand 147,269 6,526,875 193,708 __________ __________ __________ 10,344,139 10,386,846 7,373,460Creditors: amounts falling due within one (4,269,577) (938,025) (2,259,229)year __________ __________ __________Net current assets 6,074,562 9,448,821 5,114,231 __________ __________ __________Total assets less current liabilities 6,229,190 9,620,496 5,292,048 __________ __________ __________Net assets 6,229,190 9,620,496 5,292,048 __________ __________ __________ Capital and reservesCalled up share capital 430,997 427,433 427,488Share premium account 7 38,289,041 38,122,526 38,134,657Merger reserve 7 (204,211) (204,211) (204,211)Profit and loss account 7 (32,286,637) (28,725,252) (33,065,886) __________ __________ __________Equity shareholders' funds 6,229,190 9,620,496 5,292,048 __________ __________ __________ Unaudited consolidated cash flow statement for the six months ended 28 February2005 Notes Unaudited Unaudited Audited six months six months Year ended ended Ended 28 Feb 2005 29 Feb 2004 31 Aug 2004 £ £ £Net cash outflow from continuing operating (2,604,414) (3,095,843) (6,826,047)activities Returns on investment and servicing offinanceInterest received 93,356 69,693 239,235Other interest paid (296) - (312) __________ __________ __________Net cash inflow from returns on investment 93,060 69,693 238,923and servicing of finance TaxationUK corporation tax credit received - 277,600 855,699Foreign taxation paid - (100,000) (100,000) __________ __________ __________Net cash (outflow)/inflow from taxation - 177,600 755,699Capital expenditure and financialinvestmentPurchase of tangible fixed assets (29,126) (59,945) (117,110)Proceeds on sale of tangible fixed assets 9,000 9,750 14,575Reimbursement of advances to/(advances to) 6 613,929 - (613,929)suppliers __________ __________ __________Net cash inflow/(outflow) for capital 593,803 (50,195) (716,464)expenditure and financial investment __________ __________ __________Cash outflow before use of liquid (1,917,551) (2,898,745) (6,547,889)resourcesManagement of liquid resourcesDecrease/(increase) in cash held on short 1,713,219 2,590,309 (105,900)term deposit __________ __________ __________FinancingProceeds from exercise of share options 157,893 33,367 36,625Proceeds from issue of share capital - 6,484,062 6,483,304Expenses of share capital issue - (163,721) (154,035) __________ __________ __________Net cash inflow from financing 157,893 6,353,708 6,365,894 __________ __________ __________ (Decrease)/increase in cash (46,439) 6,045,272 (287,895) __________ __________ __________ Reconciliation of operating loss to net cash outflow from operating activities Unaudited Unaudited Audited six months Six months Year ended ended ended 28 Feb 2005 29 Feb 2004 31 Aug 2004 £ £ £Continuing activitiesOperating profit/(loss) 713,731 (2,132,563) (6,995,999)Depreciation on tangible fixed assets 44,752 45,168 93,114Gain on disposal of fixed assets (1,437) (4,723) (6,471)Decrease/(increase) in stocks 2,960 (153,069) (307,783)(Increase)/decrease in debtors (5,019,018) (525) (108,041)Increase/(decrease) in creditors 1,610,348 (877,471) 443,733Share option compensation charge 44,250 27,340 55,400 __________ __________ __________Net cash outflow from continuing operating (2,604,414) (3,095,843) (6,826,047)activities __________ __________ __________ Notes to the interim report 1. Preparation of Interim Statements The interim results have been prepared in accordance with the accountingpolicies set out in the Group's 2004 annual report and are unaudited. Theinformation set out in this interim report for the six months to 28 February2005 does not comprise statutory accounts within the meaning of the CompaniesAct 1985. The figures for the year ended 31 August 2004 are abridged from the Group'sstatutory accounts for that year, which received an unqualified auditors' reportand have been filed with the Registrar of Companies. 2. Turnover Six months Six months Year ended ended ended 28 Feb 2005 29 Feb 2004 31 Aug 2004 £ £ £ By business activityLicensing and development 6,266,426 1,052,360 1,052,360Product sales 74,218 - 19,722 __________ __________ __________ 6,340,644 1,052,360 1,072,082 __________ __________ __________ 3. Net Operating Expenses Net operating expenses comprise: Six months Six months Year ended ended ended 28 Feb 2005 29 Feb 2004 31 Aug 2004 £ £ £Research and development expenditure 4,109,707 2,597,986 6,347,431Administrative expenditure 1,146,152 586,937 1,710,514 __________ __________ __________ 5,255,859 3,184,923 8,057,945 __________ __________ __________ 4. Tax on Loss on Ordinary Activities Six month Six months Year ended ended ended 28 Feb 2005 29 Feb 2004 31 Aug 2004 £ £ £Current taxUK corporation tax credit on loss for period 328,208 305,434 630,946Foreign tax (400,000) (100,000) (100,000) __________ __________ __________Corporation tax (charge)/credit (71,792) 205,434 530,946 __________ __________ __________ Foreign tax related to 10% Japanese withholding tax. The Group is forecasting tax losses for the full year The Group has takenadvantage of the Research and Development corporation tax credits introduced inthe Finance Act 2000 whereby the Group may surrender corporation tax lossesincurred on research and development expenditure for a corporation tax refund atthe rate of 24 pence in the pound of actual spend. 5. Earnings Per Share The basic earnings per share is based on profits of £734,999 and 42,919,416ordinary shares, being the weighted average number of shares in issue during theperiod. For diluted earnings per share, the weighted average number of ordinary sharesin issue is diluted to assume conversion of all dilutive potential ordinaryshares. The Group has two classes of dilutive potential ordinary shares: theseshare options granted to employees where the exercise price is less than theaverage market price of the company's ordinary shares during the period and thecontingently issuable shares under the group's long term incentive plan. At 28February 2005, the performance criteria for the vesting of the awards under theincentive scheme had not been met and consequently the shares in question areexcluded form the diluted EPS calculation. Reconciliations of the earnings and weighted average number of shares used inthe calculations for the period to 28 February 2005 are set out below. There isno calculation for the comparative period as the group incurred a loss. Earnings Weighted Per-share £ Average Amount Number of (pence) sharesBasic EPSEarnings attributable to ordinary shareholders 734,999 42,919,416 1.7Effect of dilutive share options - 769,570 -Diluted EPS __________ __________ __________Adjusted earnings 734,999 43,688,986 1.7 __________ __________ __________ 6. Debtors The Company was obliged to pay to the Inland Revenue £157,731.41 arising on theexercise by Dr Dixey of 288,889 share options on 3 December 2004, near the endof the exercise period. Dr Dixey is accordingly obliged to reimburse suchamount to the Company including interest charges at a commercial rate. Heintends to sell a sufficient number of his shares in the Company, as soon as heis reasonably and legally able, to raise sufficient funds net of tax and coststo enable him to reimburse the Company. This amount is included in debtors duewithin one year. The Company has been reimbursed by Unilever N.V. as part of the JointDevelopment Agreement, for the advances made to suppliers shown as debtors dueafter one year at 31 August 2004. 7. Share Premium Account and Reserves Share Merger Profit and Premium Reserve Loss Account Account £ £ £At 1 September 2004 38,134,657 (204,211) (33,065,886)Premium on new share issue 154,384 - -Share option compensation charge - - 44,250Loss for the period - - 734,999 __________ __________ __________At 28 February 2005 38,289,041 (204,211) (32,286,637) __________ __________ __________ 8. Performance Share Award On 3 December 2004 the Remuneration Committee made a performance share award of150,000 ordinary shares at par to Dr G W Chong. The Remuneration Committeeconsidered that there was a considerable risk of Dr Chong 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 Chapter 13.13A of the Listing Rules to retain the services if DrChong. The award is subject to performance conditions and the benefits are notpensionable. The performance conditions are based on Total Shareholder Return(TSR) over a three year period (with no retesting opportunities) when comparedto a peer group comprising 21 other listed UK biotech and pharmaceuticalcompanies for 100,000 shares and compared to the FTSE SmallCap index for theremaining 50,000 shares. In each case 25% of the shares awarded will vest formedian performance against the comparator group rising to 100% for upper decileand above performance. None of the shares awarded will vest for below medianperformance. TSR is considered by the Remuneration Committee to be the mostrobust method of measuring company performance over the period. The terms of theaward will not be amended to the benefit of Dr Chong without seeking shareholderapproval. 9. Post Balance Sheet Events Phytopharm announced on 29 March 2005 that it had received confirmation fromYamanouchi Pharmaceutical Co. Ltd ("Yamanouchi) that as a result of a portfolioreview arising out of the merger of Yamanouchi with Fujisawa Pharmaceutical Co,Yamanouchi is to terminate the licensing agreement covering Japan and some otherAsian countries in connection with Cogane(TM) (PYM50028), Phytopharm's candidateproduct for the treatment of Alzheimer's disease. Phytopharm announced on 4 May 2005 the completion of a Placing and Open Offerraising approximately £10.1 million (£9.0 million net of expenses) comprising anaggregate of 8,091,193 New Ordinary Shares at the Issue Price of 125 pence perNew Ordinary Share. 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