Preliminary Results for the year ended 31 December 2009
Futura Medical plc (AIM: FUM), the pharmaceutical group that develops innovative products for consumer healthcare, is pleased to announce its preliminary results for the year ended 31 December 2009.
Highlights
Chairman's and Chief Executive's Joint Review
Group Statement of Comprehensive Income
Group Statement of Changes in Equity
Group Statement of Financial Position
Group Statement of Cash Flows
Notes
Highlights
- Significant progress across our product pipeline putting the Company on track to have two revenue generating products on the market in the foreseeable future
- CSD500 – Dossier submission expected later this month for CE mark approval, clearing the way for commercial launch
- PET500 – Successfully reformulated to be marketed on an OTC basis in the USA without further clinical or regulatory work subject to a commercial agreement being concluded
- TPR100 – Evaluation agreement signed in July 2009 with major pharmaceutical company, and agreement subsequently extended to end of June 2010 whilst commercial terms are being negotiated
- Reduced net loss of £1.39 million (2008: Net loss of £1.93 million)
- Increased cash resources of £1.79 million at 31 December 2009 (31 December 2008: £0.78 million), following successful equity fundraisings
James Barder, Futura’s Chief Executive, said: “We continue to make excellent progress across our product pipeline. CSD500 is moving ever closer to launch, and we share our commercial partner’s belief that it is destined to become a highly successful product. With an appropriate commercial agreement, PET500 could be launched in the USA in the foreseeable future giving Futura the potential to have two products in the market generating revenue. “
Chairman's and Chief Executive’s Joint Review
The year to 31 December 2009 marked another important stage in the development of the Company. During the year we made significant progress in completing the data package for the European Union (“EU”) marketing authorisation of CSD500, our innovative condom designed to help healthy men maintain a firmer erection. We also made good progress with our pipeline of other product opportunities such that the Company has the potential to have two revenue generating products on the market – CSD500 and our enhanced sexual control product PET500 – in the foreseeable future. In addition, we are currently negotiating a commercial agreement for TPR100, our topical pain relief product, with a major pharmaceutical company.
We were successful in raising further equity during the year and benefit from a well-resourced Group Statement of Financial Position. However, we continue to manage our financial resources carefully. Our cash burn remains modest and we are moving close to our goal of becoming a revenue generating company in receipt of recurring royalties from our products. We own the intellectual property rights to all our products, hence protecting and maximising the potential shareholder return.
We work only on projects where the commercial and clinical opportunities are compelling and where, from an early stage, we have active interest from one or more potential commercial partners.
Our commercial partner for CSD500 is SSL International plc (“SSL”), which is committed to launching CSD500 as part of the Durex® range as soon as is practicable. Our focus during 2009 was on generating additional manufacturing data on CSD500, which was a regulatory requirement following SSL’s decision to relocate condom manufacture to Asia. SSL and Futura also took the opportunity to investigate improvements to the manufacturing process. The data in connection with the improved manufacturing process has been completed and the regulatory dossier is currently being updated as necessary ahead of its expected submission this month for CE mark approval.
The award of the CE mark will represent a major milestone in the development and commercialisation of CSD500. It will also mark the culmination of Futura’s work on the product and CSD500’s transition to SSL for the final preparations for commercial launch. These preparations are well advanced but the timetable and strategy for launch, and the product’s name within the Durex® range, will all be managed by SSL.
We have five products in our development pipeline, comprising both medical devices and pharmaceutical drugs, focused predominantly on the OTC market. Our development pipeline comprises products using four different active compounds which, in line with our strategy, are all safe and well-characterised. Four of the products use our novel drug delivery platform, DermaSys®. All five products have the potential to return a high royalty income once launched, compared with the related development cost incurred by the Company.
We were particularly pleased with progress on PET500, which we have repositioned as an enhanced sexual control product for men with premature ejaculation. In addition, we received independent regulatory advice that confirmed that the product can be marketed in the United States of America (“USA”) on an OTC basis without any further clinical data being required. We are currently in discussions with potential commercial partners and, subject to a commercial agreement being concluded, the product could be launched in the USA in the foreseeable future.
Portfolio updates - Sexual healthcare
CSD500: Condom safety device
CSD500 gained a positive regulatory opinion from the Competent Authority in the EU with respect to the pharmaceutical aspects of the product in November 2008. The Competent Authority confirmed that CSD500 is a Class III medical device with an ancillary medicinal substance.
We believe the remaining regulatory data required for the submission has now been generated and we expect SSL to submit this to the Notified Body to complete the dossier during March 2010 with CE mark approval expected before the end of June 2010. Preparations within SSL are now underway regarding the launch of CSD500, however it is important for our shareholders to understand that Futura’s work relating to the development and regulatory approval of CSD500 is now largely complete. Under the terms of the commercial agreement signed between SSL and Futura, the launch and marketing of CSD500 within the Durex® range is the responsibility of SSL. Both Futura and SSL recognise the unique selling points of CSD500 and the significant commercial potential this presents especially when supported by Durex®, the largest condom brand globally. However it is important for our shareholders to understand that it is not the practice of our commercial partner, SSL, to comment publicly about new products ahead of launch due to commercial sensitivities.
We have previously highlighted the successful outcome of a user study involving 108 couples in which CSD500 successfully met its endpoints of demonstrating the maintenance of a firmer erection in healthy men during intercourse whilst wearing a condom, increased penile size and a longer lasting sexual experience for women.
In addition to positive clinical data, the results of our previously commissioned market research reinforce the commercial potential of CSD500. The market research, conducted by an internationally recognised research company, showed that 88% of existing condom users would be interested in purchasing CSD500 and that 49% of non-condom users would be interested in purchasing the product. The research also showed that 46% of men had experienced some loss of sensitivity when using a condom during sexual intercourse, which can lead to loss of erection. This is one reason why some men avoid condoms, thereby increasing the risks of unwanted pregnancies and contracting or spreading sexually transmitted infections (“STIs”).
As supported by our market research we believe that CSD500 will have a strong appeal to men and women who already use condoms as well as men and women who do not currently use them.
STIs are a serious and growing problem. In the UK, a Government report from the Health Protection Agency¹, published in 2007, indicated that in the previous 10 years new cases of syphilis had increased by 1130%, HIV by over 300%, gonorrhea by 45% and chlamydia by 166%.
We have protected CSD500’s unique intellectual property position throughout the world including the principal consumer markets within Europe, the USA and Canada through patents now granted or proceeding to grant in 34 countries and applications pending in a further two.
MED2002: Treatment for erectile dysfunction
MED2002, our topical gel for the treatment of men with erectile dysfunction, is also licensed to SSL and has the potential to become the world’s first non-prescription pharmaceutical treatment for men with erectile dysfunction, a condition that affects, to some degree, as many as 52% of men aged 40 or over².
A simplified development plan has been outlined for MED2002, which shares the same active compound as CSD500, and it is expected that this product will be progressed as soon as CSD500 receives CE mark approval. We expect to be able to provide an update on the status of this programme to shareholders later this year.
PET500: Enhanced sexual control
Significant progress was made during the year with PET500, our enhanced sexual control product which combines our DermaSys® AquaFree delivery system with a well-known mild topical anaesthetic compound. We have previously announced positive results from a Phase I clinical study of 20 healthy volunteers in which PET500 was shown to give a rapid and controlled reduction in penile sensitivity, thereby having the potential to prolong the sexual experience.
Following market research conducted by Futura the product has been designed to meet the requirements of men who suffer from occasional early ejaculation as well as men suffering from clinically diagnosed premature ejaculation. PET500 is designed to take effect rapidly once applied and to delay ejaculation for a period of approximately eight minutes. The marketing positioning of the product will depend upon local regulatory requirements including the status of existing regulatory approvals for the active ingredients. A home use clinical study will be required for some markets including those in the EU.
In considering how to market the product and subject to local regulatory requirements, we believe that 'enhanced sexual control' is a more attractive marketing positioning for the product. Many men that, if medically assessed, would be diagnosed as suffering from premature ejaculation would never consider themselves as suffering from this condition or seek medical treatment due to the stigma associated with the indication of premature ejaculation. We believe that a clinically proven product to treat premature ejaculation but which is marketed as a product to ‘enhance sexual control’ will provide a much wider potential market for the product and have greater acceptability from sufferers of premature ejaculation.
The PET500 formulation has been successfully modified to comply with the current USA Food and Drug Administration (“FDA”) monograph for male genital desensitisers. The product can therefore be marketed immediately in the USA without any further regulatory approval or clinical data, a position confirmed by independent regulatory consultants based in the USA.
Discussions with potential partners are currently progressing. A priority for Futura in these discussions is that PET500 is launched in the USA as soon as possible, giving the Company the potential to have two revenue generating products on the market, CSD500 and PET500, in the foreseeable future.
Portfolio updates - Pain relief management
TPR100: Topical pain relief
TPR100 leverages one of our key proprietary assets, DermaSys®, a highly efficient transdermal delivery system which facilitates rapid absorption of pharmacologically active compounds through the skin. In TPR100 we are using DermaSys® for the topical delivery of a non-steroidal anti-inflammatory drug (“NSAID”) for pain relief. Clinical tests carried out by Futura have shown that TPR100 achieves between 30 to 40 times higher bioavailability than those achieved by the market-leading product. TPR100's speed of permeation brings potential benefits including rapid onset of action of pain relief.
In July 2009, Futura announced an evaluation agreement with a major pharmaceutical company, which paid an upfront fee to gain exclusive rights to carry out in vitro studies on TPR100. These studies were completed and, in December 2009, the major pharmaceutical company agreed to pay a further fee of £50,000 to extend the exclusivity period to the end of June 2010 whilst the commercial terms of a licensing agreement are being negotiated. The negotiations may, or may not, result in a commercialisation agreement for rights to TPR100 in certain territories.
We have previously consulted with relevant regulatory authorities and believe the regulatory pathway for TPR100 in a number of key commercial territories is relatively straightforward as the active compound is well-characterised and has already been approved in both oral and topical form for the indication of pain relief. The minimum requirements to satisfy EU regulators are likely to comprise a Phase I trial of around 24 healthy volunteers to demonstrate a lack of skin irritation or sensitisation and a pivotal Phase III trial of around 250 subjects to demonstrate non-inferiority to the market-leading product in topical pain relief. Based on our research and development programme so far we remain confident of obtaining positive outcomes to these studies, which we expect will be funded by commercial partners.
RAD100: Rapid anaesthetic delivery
The impressive results seen in our Phase I study of PET500, which used a low dose of a topical anaesthetic compound, prompted us to explore the potential of using the same concept to provide rapid topical anaesthesia prior to injection, vaccination or cannulation. Demand in this market is already well developed but poorly served with treatments taking at least 30 to 45 minutes to take effect. We believe that there is clear commercial potential for a product in which the speed of onset of skin desensitisation is significantly faster.
In early in vitro work, already completed, we have shown a 250% increase in the rate of permeation of a topical anaesthetic across the skin using RAD100 and the DermaSys® AquaFree delivery system when compared with an established product. This substantial increase in skin permeation is expected to equate to a more rapid onset of skin desensitisation compared to existing products.
RAD100 has attracted interest from commercial partners and we intend to progress development of the product during the coming year.
Operations and people
Development of medicinal products is highly regulated to ensure that the rights, safety and wellbeing of clinical trial subjects are protected and that the results of clinical trials are credible and accurate. Futura conducts all research and development activities in strict compliance with the applicable regulatory and quality standards for clinical trials.
The United Kingdom (“UK”) regulatory authority, the Medicines and Healthcare products Regulatory Agency (“MHRA”), monitor compliance with these standards through a programme of inspections. In October 2009 Futura had a routine three day inspection by the MHRA during which all aspects of our research and development operations were reviewed. There were no critical findings and all non-critical findings were addressed to the satisfaction of the MHRA.
We continue to run a highly efficient business and benefit from considerable stability in our workforce. Staff numbers (including non-executive directors) were ten at the year end, unchanged since 31 December 2008. We would like to offer our sincere thanks to all of our staff and scientific advisers for their dedication and commitment throughout the year.
Outlook
We continue to make excellent progress across our product pipeline. CSD500 is moving ever closer to launch, and we share our commercial partner’s belief that it is destined to become a highly successful product. With an appropriate commercial agreement, PET500 could be launched in the USA in the foreseeable future giving Futura the potential to have two products in the market generating revenue.
Dr W D Potter J H Barder
Executive Chairman Chief Executive
Note
¹The UK Collaborative Group for HIV and STI Surveillance. Testing Times. HIV and other Sexually Transmitted Infections in the United Kingdom: 2007. London: Health Protection Agency, Centre for Infections. November 2007.
² Massachusetts Male Aging Study (MMAS), J Urol. 1994 Jan; I5I (1): 54-61
Financial Review
The Group ended the year with costs firmly under control, a more advanced development portfolio and the prospect of recurring royalty revenues.
Revenue
Group revenue for the year ended 31 December 2009 was £50,000 (2008: £150,000). Grant income for the year ended 31 December 2009 was £30,000 (2008: £73,828).
Losses
The Group continues to maintain a focus on tight control of all expenditure.
The Group’s operating loss for the year ended 31 December 2009 was £1.53 million (2008: £2.17 million).
The Group’s loss after taxation for the year ended 31 December 2009 was £1.39 million (2008: £1.93 million).
Loss per share for the year ended 31 December 2009 was 2.24 pence (2008: 3.36 pence).
No dividends were paid and none are proposed by the Directors (2008: £nil).
Financial instruments
The financial instruments held by the Group are disclosed in note 13 of the Notes to the Preliminary Announcement. The Group policy on exposure to financial risk is disclosed in note 2 of the Notes to the Preliminary Announcement.
Group research and development costs
The Group aims to achieve cost effective research and development (“R&D”) and to bring products to market through licensing partners as soon as is practicable.
Group R&D costs each year reflect the number of products being developed, the stage of development reached for each and the impact on their progress of external factors.
R&D costs of £810,188 were considerably lower compared to 2008, due to the scale down of activity pending receipt of regulatory approval for CSD500.
The table below shows the trend in our R&D costs and other administrative costs over the past five years ended 31 December:
| 2009 | 2008 | 2007 | 2006 | 2005 | |
| IFRS £ | IFRS £ | IFRS £ | IFRS £ | UK GAAP £ | |
| R&D costs | 810,188 | 1,390,616 | 1,508,269 | 1,079,986 | 1,553,056 |
| Other administrative costs | 796,186 | 1,007,964 | 1,227,320 | 1,029,075 | 805,161 |
| Total operating costs | 1,606,374 | 2,398,580 | 2,735,589 | 2,109,061 | 2,358,217 |
| R&D ratio | 50% | 58% | 55% | 51% | 66% |
The figures for 2005, prepared under UK GAAP, were not restated for the holiday pay accrual under IAS 19 as the figures were not materially different.
The R&D ratio is the percentage of R&D costs relative to total operating costs. The Board is mindful to keep a sensible balance as reflected in this ratio. Total R&D spend since formation of the business in 1997 totals £10 million (which represents 54.9% of total cumulative operating costs). During the year, the sole subsidiary, Futura Medical Developments Limited continued to incur this R&D expenditure which has been accounted for as explained in accounting policy note 1.7 of the Notes to the Preliminary Announcement and has been written off as incurred for all reporting periods prior to and including the year ended 31 December 2009.
The Board considers that this overall total R&D spend relative to its pipeline of later stage products and emerging new products distinguishes the Group’s lower funding requirements and risk profile from more typical businesses in the wider pharmaceutical industry. The Group’s strategy is to focus on medical devices and pharmaceutical drugs that offer the potential for a significant return on the costs of development. As well as progressing its existing R&D programme, the Group continues to seek new opportunities for potential products to add to its portfolio.
Other administrative costs
Other administrative costs for the year ended 31 December 2009 were £796,186 (2008: £1,007,964). These comprised all other operating costs excluding those relating to product development and associated intellectual property. The main constituents and their relative proportions were:
| Year ended 31 December 2009 |
Year ended 31 December 2008 |
|
| Wages and salaries | 69% | 63% |
| Legal and professional advisers | 18% | 24% |
| Office costs and staff expenses | 12% | 12% |
| Licensing negotiations | 1% | 1% |
| 100% | 100% |
During 2009 the Board reacted to the economic conditions by reducing operating costs and also achieved additional cost savings as a result of the scale down of research activity pending receipt of regulatory approval for CSD500.
Supplier payment policy
The Group’s policy concerning the payment of its trade creditors is to pay on the basis of the agreed terms of payment established with each supplier, providing that all terms and conditions have been complied with and are in accordance with the Group’s financial control procedures.
The average credit period for the Group (expressed as creditor days) during the year ended 31 December 2009 was 33 days (2008: 19 days). At the year end the Company had trade creditors totalling £29,542 (2008: £2,211) giving rise to an average credit period for the year ended 31 December 2009 of 34 days (2008: 7 days).
Charitable and political contributions
No political donations were made during either year. Charitable donations of £190 were made during the year (2008: £200).
Taxation
A tax credit of £119,289 (2008: £143,443) in respect of R&D expenditure incurred has been recognised in the Group financial statements. The decrease compared to 2008 reflects the reduced level of R&D expenditure undertaken in the year.
Capital structure and funding
The Group remains funded primarily by equity capital. This reflects the development status of its products.
Cash held by the Group at 31 December 2009 totalled £1.79 million. This comprised cash and cash equivalents and medium-term deposits with original maturities of more than three months, shown below at each year ended 31 December:
| 2009 | 2008 | 2007 | 2006 | 2005 | |
| £m | £m | £m | £m | £m | |
| Medium-term deposits | - | - | - | 1.04 | - |
| Cash and cash equivalents | 1.79 | 0.78 | 2.64 | 2.74 | 1.81 |
| Total cash | 1.79 | 0.78 | 2.64 | 3.78 | 1.81 |
The Group had no bank borrowings at 31 December 2009 (2008: £nil).
On 12 March 2009, the Group raised £1.00 million (£0.90 million net) following a placing of 5,000,000 shares at 20 pence per share. On 18 November 2009, the Group raised £1.46 million (£1.40 million net) following a placing of 4,864,471 shares at 30 pence per share. The funds raised are for general corporate and R&D purposes. Total funds raised by the Group from formation of the business in 1997 until 31 December 2009 were £16.84 million, net of costs.
Other significant sources of funding received for the Group from formation of the business until 31 December 2009 comprised R&D tax credits of £1.39 million, bank interest of £0.86 million and R&D grants of £0.25 million.
D A Martin
Secretary
The financial information set out below does not constitute the Company’s full statutory accounts for the year ended 31 December 2009 (or year ended 31 December 2008) but it is derived from those accounts that have been audited. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered after the forthcoming Annual General Meeting. The independent auditors have reported on those accounts; their report was unqualified, did not include an emphasis of matter statement and did not contain any statements under section 498 of the Companies Act 2006.
Group Statement of Comprehensive Income
For the year ended 31 December 2009
| Year ended 31 December 2009 |
Year ended 31 December 2008 |
||
| Notes | £ | £ | |
| Revenue | 1.5 | 50,000 | 150,000 |
| Grant income | 4 | 30,000 | 73,828 |
| Research and development costs | (810,188) | (1,390,616) | |
| Administrative costs | (796,186) | (1,007,964) | |
| Operating loss | 5 | (1,526,374) | (2,174,752) |
| Finance income | 8 | 14,398 | 96,550 |
| Loss before tax | (1,511,976) | (2,078,202) | |
| Taxation | 9 | 119,289 | 143,443 |
| Total comprehensive loss for the year attributable to owners of the parent company |
(1,392,687) | (1,934,759) | |
| Basic and diluted loss per share (pence) | 10 | (2.24p) | (3.36p) |
All amounts relate to continuing activities.
Group Statement of Changes in Equity
For the year ended 31 December 2009
| Share capital |
Share premium |
Merger reserve |
Retained losses |
Total equity |
||
| Note | £ | £ | £ | £ | £ | |
| At 1 January 2008 | 115,238 | 13,261,376 | 1,152,165 | (11,755,289) | 2,773,490 | |
| Total comprehensive loss for the year | - | - | - | (1,934,759) | (1,934,759) | |
| Share-based payment | - | - | - | 47,621 | 47,621 | |
| At 1 January 2009 | 115,238 | 13,261,376 | 1,152,165 | (13,642,427) | 886,352 | |
| Total comprehensive loss for the year | - | - | - | (1,392,687) | (1,392,687) | |
| Share-based payment | - | - | - | 44,144 | 44,144 | |
| Shares issued during the year | 17 | 19,729 | 2,439,612 | - | - | 2,459,341 |
| Costs of share issues | - | (144,341) | - | - | (144,341) | |
| At 31 December 2009 | 134,967 | 15,556,647 | 1,152,165 | (14,990,970) | 1,852,809 |
Share premium represents amounts subscribed for share capital in excess of nominal value, less the related costs of share issues.
Merger reserve represents the reserve arising on the acquisition of Futura Medical Developments Limited on 6 June 2001 via a share for share exchange accounted for as a group reconstruction using merger accounting under UK GAAP.
Retained losses represent cumulative net losses recognised in the Group Statement of Comprehensive Income. The total comprehensive loss for the year represents the total recognised income and expense for the year.
Group Statement of Financial Position
As at 31 December 2009
| As at 31 December 2009 |
As at 31 December 2008 |
||
| Notes | £ | £ | |
| Assets | |||
| Non-current assets | |||
| Plant and equipment | 11 | 10,293 | 20,493 |
| Total non-current assets | 10,293 | 20,493 | |
| Current assets | |||
| Inventories | 12 | 10,825 | 10,435 |
| Trade and other receivables | 14 | 147,761 | 60,020 |
| Income tax asset | 9 | 119,289 | 165,526 |
| Cash and cash equivalents | 15 | 1,789,173 | 782,253 |
| Total current assets | 2,067,048 | 1,018,234 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 16 | (224,532) | (152,375) |
| Total liabilities | (224,532) | (152,375) | |
| Total net assets | 1,852,809 | 886,352 | |
| Capital and reserves attributable to owners of the parent company |
|||
| Share capital | 17 | 134,967 | 115,238 |
| Share premium | 15,556,647 | 13,261,376 | |
| Merger reserve | 1,152,165 | 1,152,165 | |
| Retained losses | (14,990,970) | (13,642,427) | |
| Total equity | 1,852,809 | 886,352 |
The Group financial statements from which this preliminary results announcement is derived were approved and authorised for issue by the Board on 1 March 2010 and were signed on its behalf by J H Barder, Director.
Group Statement of Cash Flows
For the year ended 31 December 2009
| Notes | Year ended 31 December 2009 |
Year ended 31 December 2008 |
|
| £ | £ | ||
| Cash flows from operating activities | |||
| Loss before tax | (1,511,976) | (2,078,202) | |
| Adjustments for: | |||
| Depreciation | 11 | 11,178 | 16,427 |
| Finance income | 8 | (14,398) | (96,550) |
| Share-based payment charge | 18 | 44,144 | 47,621 |
| Cash flows from operating activities before changes in working capital | (1,471,052) | (2,110,704) | |
| (Increase)/decrease in inventories | 12 | (390) | 12,909 |
| (Increase)/decrease in trade and other receivables | 14 | (84,904) | 103,150 |
| Increase/(decrease) in trade and other payables | 16 | 72,157 | (162,786) |
| Cash used in operations | (1,484,189) | (2,157,431) | |
| Income tax received | 165,526 | 186,634 | |
| Net cash used in operating activities | (1,318,663) | (1,970,797) | |
| Cash flows from investing activities | |||
| Purchase of plant and equipment | 11 | (978) | (1,505) |
| Interest received | 11,561 | 116,663 | |
| Cash generated by investing activities | 10,583 | 115,158 | |
| Cash flows from financing activities | |||
| Issue of ordinary shares | 17 | 2,459,341 | - |
| Expenses paid in connection with share issues | (144,341) | - | |
| Cash generated by financing activities | 2,315,000 | - | |
| Increase/(decrease) in cash and cash equivalents | 1,006,920 | (1,855,639) | |
| Cash and cash equivalents at beginning of year | 782,253 | 2,637,892 | |
| Cash and cash equivalents at end of year | 15 | 1,789,173 | 782,253 |
Notes to the Financial Statements
The Notes to the Financial Statements are contained in the full results which is available to download in PDF format.
Page last up-dated: 2 March 2010
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