RNS Number:7050E
Phoqus Pharmaceuticals PLC
28 September 2007
28 September 2007
Phoqus Pharmaceuticals plc
(formerly Phoqus Group plc)
Interim results for the six months ended 30 June 2007
Phoqus Pharmaceuticals plc (PQS: London Stock Exchange) ("Phoqus
Pharmaceuticals" or "Company") today announces its interim results for the six
months ended 30 June 2007.
Operational Highlights
* New Chief Executive Officer appointed in May 2007
* Execution of new strategy to transform Phoqus Pharmaceuticals into a
specialty pharmaceutical company
* Signed collaboration with US Government's National Institutes of Health (NIH)
for clinical development of ChronocortTM for endocrine disorders, with the
NIH conducting and partially funding the US components of the ChronocortTM
clinical trials
* ChronocortTM received second Orphan Drug Designation from EMEA
* EMEA positive opinion on pivotal development plan for ChronocortTM in
congenital adrenal hyperplasia
Financial Highlights
* Revenue #0.1 million (2006: #0.1 million) representing residual service
business income
* Operating loss #3.1 million (2006: #2.4 million)
* Cash and cash equivalents #2.3 million (31 December 2006: #4.4 million)
After the Period End
* Successful Placing raising #5.2m to fund new strategy and the development of
ChronocortTM
* Successful completion of ChronocortTM Phase I clinical trials programme in
healthy volunteers
* IND granted by US FDA for ChronocortTM in the CAH indication
* Phase II clinical trial of ChronocortTM in patients with congenital
adrenal hyperplasia initiated at NIH
* Manufacturing operations streamlined and appointment of Patheon as contract
manufacturing partner for ChronocortTM Phase III clinical trial supply
* Change of Company name to reflect new strategy as a specialty pharmaceutical
company
* Drawn down #1.25m loan and warrants
Dr Richard Mason, Chief Executive Officer of Phoqus Pharmaceuticals, said:
"The last period has been one of tremendous change for Phoqus Pharmaceuticals,
with the implementation of a new vision and strategy to be a specialty
pharmaceutical company and the excellent progress of our lead product
Chronocort, which holds great promise for the treatment of patients with
congenital adrenal hyperplasia and adrenal insufficiency due to conditions such
as Addison's Disease."
Enquiries:
Phoqus Pharmaceuticals plc
Dr Richard Mason, Chief Executive Officer Tel: 01732 870227
Dr Peter Johnson, Chief Financial Officer Tel: 01732 870227
Financial Dynamics
David Yates / John Gilbert Tel: 0207 831 3113
Nomura Code Securities
Phil Walker Tel: 0207 776 1200
www.phoqus.com
Chairman and Chief Executive Officer's Statement
The period under review has been a period of significant change and real
progress for Phoqus Pharmaceuticals. We ended the period with the appointment
of a new CEO who led the Company through a thorough strategic review leading to
an exciting new strategy and vision for the Company. As a result Phoqus
Pharmaceuticals is now an emerging speciality pharmaceutical company developing
novel therapeutic products for patients with significant unmet medical needs.
We are delighted with the continued support of both our existing and new
shareholders, who invested over #5m in the Company at the recent Placing,
completed in July, to fund our new strategy and the further development of our
valuable lead product ChronocortTM.
Phoqus Pharmaceuticals' strategy
Phoqus Pharmaceuticals' strategy is to focus on the development of new products
from existing licensed drugs or known chemical entities (KCEs) using our
re-formulation and drug delivery technologies to either improve the way a drug
works in its existing licensed indication, or developing a drug for use in an
entirely new indication ("indication switch"). By basing new product development
on such "re-profiling" of KCEs, the Company believes it can reduce the very high
risk of drug development, where many new molecular entities fail due to
unpredictable toxicity and efficacy profiles. The Company's drug delivery
platform QtrolTM has the potential to produce a wide range of drug release
profiles and the Directors believe it will be a powerful product development
tool to create novel therapeutic products. The Company plans to identify product
opportunities from KCEs by searching for fundamental biological and clinical
insights into existing drugs made by academic and government research
institutions. This was the case for the biology behind the Company's lead
product ChronocortTM which is based on work conducted at the University of
Sheffield.
The Company's plan is to continue the development of ChronocortTM into Phase III
clinical trials whilst identifying new product opportunities to bring into the
pipeline. The Company has several commercialisation options for ChronocortTM
which are currently under review. We also intend to exploit the broader
potential of Phoqus Pharmaceuticals' technology platforms through a programme of
out-licensing in order to generate revenue. The platforms potentially have a
wide range of uses in the areas of pharmaceutical tablet manufacture, coating,
branding and anti-counterfeiting and we intend to seek partners to help us
exploit these.
ChronocortTM
The continued successful development of our lead product ChronocortTM , now in a
Phase II clinical trial in patients in the US, has helped to validate the
Company's underlying technology platform and has also exemplified the future
strategy of the Company as a drug developer. The Director's believe that
ChronocortTM shows tremendous promise in treating patients with cortisol hormone
deficiency, an area of significant unmet medical need despite existing
therapies.
ChronocortTM's potential for patients
Cortisol deficiency results from diseases such as Addison's Disease, an
autoimmune condition that damages the adrenal glands where cortisol is made, and
congenital adrenal hyperplasia (CAH), a genetic deficiency of the enzyme
responsible for the synthesis of cortisol. As a result of their cortisol
deficiency these patients are required to take daily steroid hormone replacement
therapy for life. Such existing replacement therapy is often sub-optimal as it
does not replicate the normal daily cortisol cycle ("circadian rhythm") and very
often uses non physiological long-acting steroids. As a result existing therapy
leaves patients with a number of significant clinical problems and can also
cause the side effects of excess steroid therapy. ChronocortTM has the potential
to address these problems by providing the physiological hormone in a manner
that means that patients are receiving it at the right time and in the right
way.
ChronocortTM's market potential
There are approximately 135,000 patients with cortisol hormone deficiency in
North America alone (and approximately 375,000 in the EU, North America and
Japan in total). The Directors believe that ChronocortTM has the potential to
gain "orphan drug" protection upon approval in the EU and the US, providing a
period of marketing exclusivity. Due to the unmet medical need that
ChronocortTM has the potential to address, the lifelong requirement for
treatment and the very significant pricing potential of orphan drug products,
the Directors believe that ChronocortTM has the potential to generate attractive
revenues, with peak sales potential in excess of $200m per annum.
ChronocortTM's development programme
As a result of successful clinical studies in healthy human volunteers
undertaken during the last reporting period, ChronocortTM has now proceeded into
Phase II clinical testing in the US in patients with cortisol deficiency due to
CAH. We are delighted to have entered into collaboration with the US
Government's National Institutes of Health (NIH) who are conducting and
partially funding our clinical trials programme in the US. We have also put in
place an excellent advisory board of experts and key opinion leaders to help
guide the Company and our clinical investigators in the design of the optimal
development programme for ChronocortTM. We are particularly indebted to
continued support and expert guidance of Professor Richard Ross of the
University of Sheffield, who is the inventor of the ChronocortTM product
concept.
We now look forward to the results of our Phase II clinical study at the end of
the year, which if successful, should allow ChronocortTM to proceed into its
pivotal Phase III clinical trial programme in CAH during the first quarter of
2008. CAH is the lead indication for ChronocortTM and with filing for
regulatory approval expected in the first quarter of 2009 and launch as early as
the fourth quarter of 2009, assuming an accelerated regulatory review period of
six months. The Company is currently in discussions with the European Agency
for the Evaluation of Medicinal Products (EMEA) and the Food and Drug
Administration (FDA) in order to develop and refine our plans to test
ChronocortTM in patients with the other causes of cortisol deficiency (which we
term "acquired adrenal insufficiency") such as Addison's Disease.
Alongside the clinical testing of ChronocortTM the Company has made real
progress in manufacturing process development during the period, a crucial
aspect of bringing a new therapeutic product to market. Whilst the manufacture
of supplies for the clinical trials is successfully undertaken at Phoqus
Pharmaceuticals' own GMP manufacturing plant in West Malling, the plan is
ultimately to transfer the manufacturing process to a contract manufacturing
organisation for supply of commercial product to the market place.
Future developments
Strengthening the Company's senior management team is a high priority for the
Company and we plan to make key appointments in the areas of manufacturing and
product development in the near future. Building our team with top quality
individuals is key to our future success, not only in bringing ChronocortTM
through later stage development but also in identifying and developing
additional products to create a product pipeline.
We are committed to providing our shareholders with regular updates on the
Company's progress and we look forward to communicating the results of our
ChronocortTM development programme in due course, in particular the Phase II
results at the end of this year and the commencement of a pivotal Phase III
trial in the US in the first quarter of 2008.
Dr Edwin Moses Dr Richard Mason
Chairman Chief Executive Officer
28 September 2007
Financial Review
International Financial Reporting Standards ("IFRS")
To date, Phoqus Pharmaceuticals plc has prepared its financial statements under
UK Generally Accepted Accounting Practice ("UK GAAP"). The financial results
presented here are, for the first time, presented in accordance with the Group's
accounting policies based on IFRS. The unaudited interim results for the six
months ended 30 June 2007 are prepared in accordance with the IFRS accounting
policies that are expected to apply in the year ended 31 December 2007. The
comparative numbers for the six months ended 30 June 2006 and the 12 months
ended 31 December 2006 have been restated under IFRS. In the Appendix to the
interim report, we describe our new IFRS accounting policies and reconcile
previously reported UK GAAP results to IFRS results.
Operating performance
The Consolidated Income Statement year to date revenue of #51k represents the
residue of the service business model before the Company re-focussed on a drug
development business model. Administrative expenses of #3,105k include costs
that are believed to qualify under the Inland Revenue definition as Research and
Development expenditure. The related income tax credit has been accrued in the
period.
The Consolidated Balance Sheet is in line with expectations. The cash and cash
equivalents figure includes a #1.25m loan but excludes receipts from the #5.2m
placing in July, and the anticipated receipts of the second #1.25m loan (see
below), and the #0.4m Research and Development tax credit.
The Consolidated Cash Flow Statement is in line with expectations and shows the
receipt of #1.25m in respect of a loan. The loan has associated warrants. For
accounting purposes the fair value of the warrants issued with the loan has been
calculated and an appropriate portion of the loan proceeds of #1.25m has been
allocated to the warrants as consideration for their issue. The remainder of
the funds received from the loan draw down is treated as a loan. This is
disclosed in the Consolidated Cash Flow Statement
Dr Peter Johnson
Chief Financial Officer
28 September 2007
PHOQUS PHARMACEUTICALS PLC
Consolidated Income Statement
for the six months ended 30 June 2007
Six months ended Six months ended
30 June 2007 30 June 2006 Year ended 31 Dec
2006
(unaudited) (unaudited) (audited)
(restated) (restated)
#'000 #'000 #'000
Note
Revenue 2 51 117 167
Cost of sales - - -__________
__________ __________
Gross profit 51 117 167
Administrative expenses (3,105) (2,547) (5,293)
__________ __________ __________
Operating loss (3,054) (2,430) (5,126)
Finance revenue 92 101 192
Finance charges (95) (116) (209)
__________ __________ __________
Loss on ordinary activities before taxation (3,057) (2,445) (5,143)
Income tax credit 264 163 396
_________ _________ _________
Loss attributable to equity holders (2,793) (2,282) (4,747)
======== ======== ========
Basic and diluted loss per ordinary share (pence) 3 7.9 7.0 14.3
All operations are continuing activities.
PHOQUS PHARMACEUTICALS PLC
Consolidated Balance Sheet
at 30 June 2007
At 30 June 2006 At 31 Dec
2006
At 30 June 2007 (unaudited) (audited)
Note (unaudited) (restated) (restated)
#'000 #'000 #'000
Assets
Non current assets
Property, plant and equipment 2,092 2,317 2,119
__________ _________ ________
2,092 2,317 2,119
__________ _________ ________
Current assets
Trade and other receivables 637 835 605
Current tax asset 668 168 402
Cash and cash equivalents 2,334 3,814 4,395
__________ __________ ________
3,639 4,817 5,402
__________ __________ ________
__________ __________ ________
Total Assets 5,731 7,134 7,521
========= ======== =======
Equity and Liabilities
Capital and reserves
Called up share capital 3,596 3,560 3,596
Share premium account 21,839 19,048 21,839
Merger reserve 18,295 18,295 18,295
Other reserve: warrants 249 206 206
Retained earnings (40,637) (35,460) (37,877)
__________ __________ ________
Total Equity 3,342 5,649 6,059
__________ __________ ________
Non-current liabilities
Interest-bearing loans and borrowings 971 664 344
__________ __________ ________
971 664 344
__________ __________ ________
Current liabilities
Trade and other payables 531 352 551
Interest-bearing loans and borrowings 887 469 567
__________ __________ ________
1,418 821 1,118
__________ __________ ________
Total Liabilities 2,389 1,485 1,462
__________ __________ ________
Total Equity and Liabilities 5,731 7,134 7,521
========= ======== =======
PHOQUS PHARMACEUTICALS PLC
Consolidated Cash Flow Statement
for the six months ended 30 June 2007
Six months Six months Year ended
ended ended 31 Dec 2006
30 June 2007 30 June 2006
(unaudited) (audited)
(unaudited) (restated) (restated)
Note #'000 #'000 #'000
Net cash flows from operating activities 4 (2,891) (2,635) (4,585)
________ ________ ________
Cash flows from investing activities
Interest received 92 101 192
Purchase of fixed assets (144) (116) (164)
________ ________ ________
Net cash flows from investing activities (52) (15) 28
________ ________ _________
Cash flows from financing activities
Proceeds from issue of ordinary shares - 300 3,300
Share issue costs - - (140)
Warrants granted to lender 43 - -
New long-term loans 1,207 - -
Interest paid (29) (2) (36)
Interest element of payments under finance leases (68) (116) (173)
Repayment of capital element of finance leases and hire (271) (248) (529)
purchase contracts
________ ________ ________
Net cash flows from/(used in) financing activities 882 (66) 2,422
________ ________ ________
Net (decrease)/increase in cash and cash equivalents (2,061) (2,716) (2,135)
Cash and cash equivalents at beginning of period 4,395 6,530 6,530
________ ________ ________
Cash and cash equivalents at end of period 2,334 3,814 4,395
======= ======= =======
PHOQUS PHARMACEUTICALS PLC
Consolidated Statement of Changes in Equity
for the six months ended 30 June 2007
Share Share Merger Warrant Retained Total equity
capital premium reserve reserve earnings
#'000 #'000 #'000 #'000 #'000 #'000
At 31 December 2005 3,260 19,048 18,295 206 (33,176) 7,633
Loss for the period - - - - (2,282) (2,282)
_______ _______ ________ _______ _______ _______
Total recognised income and - - - - (2,282) (2,282)
expense for period
Exchange difference - - - - (2) (2)
New share issue 300 - - - - 300
_______ _______ ________ _______ _______ _______
At 30 June 2006 3,560 19,048 18,295 206 (35,460) 5,649
Loss for the period - - - - (2,465) (2,465)
_______ _______ ________ _______ _______ _______
Total recognised income and - - - - (2,465) (2,465)
expense for the period
Exchange difference - - - - 3 3
New share issue 36 2,964 - - 3,000
Share issue costs - (173) - - (173)
Share based payment - - - - 45 45
_______ _______ ________ _______ _______ _______
At 31 December 2006 3,596 21,839 18,295 206 (37,877) 6,059
Loss for the period - - - - (2,793) (2,793)
_______ _______ ________ _______ _______ _______
Total recognised income and - - - - (2,793) (2,793)
expense for the period
Exchange difference - - - - (2) (2)
Grant of warrants - - - 43 - 43
Share based payment - - - - 35 35
_______ _______ ________ _______ _______ _______
At 30 June 2007 3,596 21,839 18,295 249 (40,637) 3,342
====== ====== ====== ====== ====== ======
Notes to the Interim Financial Information
1. Basis of preparation of interim financial information
The Group will prepare consolidated financial statements in accordance with
International Financial Reporting Standards ('IFRS') and applicable
interpretations, as adopted for use in the EU, and with those parts of the
Companies Act 1985 applicable to companies reporting under IFRS, for the first
time for the year ended 31 December 2007. The interim financial information for
the six months ended 30 June 2007 has been prepared for the first time in
accordance with the accounting principles that are expected to be applied in the
annual financial statements.
The Group has established IFRS accounting principals which it expects to apply
in its financial statements for the year ending 31 December 2007 and applied
these principles to its results for the six months ended 30 June 2007. The
comparative financial information previously reported in accordance with UK
General Accepted Accounting Practice for the year ended 31 December 2006 and for
the six months ended 30 June 2006 has also been restated to conform to the same
basis of presentation, as detailed in the Appendix to this report. Subject to
EU endorsement of outstanding standards and no further changes from the IASB,
the information presented is expected to form the basis for comparatives when
reporting financial results for the year ending 31 December 2007 and subsequent
reporting periods. The date of the Group's transition to IFRS is 1 January 2006.
In preparing the statements, the Directors have applied certain first-time
adoption provisions allowed by IFRS 1; these are set out below.
As provided by IAS 32 "Financial Instruments Disclosure and Presentation" and
IAS 39 "Financial Instruments: Recognition and Measurement", IAS 32 and IAS 39
have been applied with effect from 1 January 2006. The restatement of the
financial instruments in place at 31 December 2005 to IFRS as at 1 January 2006
has no impact.
The financial information has not been reviewed or audited by the group's
auditors and has been approved by the Directors. The financial information does
not constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985.
The statutory accounts for the year ended 31 December 2006 have been filed with
the Registrar of Companies and contained an unqualified but modified audit
opinion. The audit opinion contained an emphasis of matter relating to the
fundamental uncertainty as to the Group's medium-term viability until its
technology is capable of adequate revenue generation.
Fundamental accounting concept
The financial statements have been prepared on a going concern basis.
The Company's strategy is to commercialise the technology it has developed for
the manufacture of tablets, the appearance and medical properties of which are
tailored to the requirements of customers in the pharmaceutical industry. The
level of retained losses as at the date of these financial statements represents
the Company's costs incurred to pursue this strategy. In order to finance the
next phase of the strategy, the Company raised #8.8m of funds (net of costs)
through a Placing on the Company's admission to AIM in November 2005 and #2.8m
of funds (net of costs) through a Secondary Placing in October 2006. In
addition the Company has entered into a #2.5m loan agreement which was completed
on 2 April 2007. The terms of the loan were an immediate drawdown of #1.25m,
with the drawdown of the balance being subject to certain conditions. The loan
is repayable over 36 monthly instalments, with an initial interest only period
of 6 months, at an interest rate of 13.3%. The Company has granted the lender a
warrant to subscribe for shares equal to 6% of the drawn down loan with an
exercise price equal to the average closing price per share in the 30 days
preceding the closing of documentation. Furthermore in July 2007 the Company was
successful in raising a further #5m net of expenses in a placing of shares.
There are risk factors inherent in the business and its potential to generate
future revenues. As at the date of these financial statements, there is a
fundamental uncertainty as to the viability of the Company on a medium term
basis and hence the validity of the going concern basis adopted in the
preparation of these financial statements.
The Directors have prepared and approved cash flow projections that indicate
that the Company will be able to meet its liabilities as the fall due for the
foreseeable future. These projections include the planned receipt in the short
term of significant fees and licensing revenues from current projects, and
planned revenues from the commercial application of the technology in the medium
term. If the fees and licensing revenues are not forthcoming, the Company will
need to raise additional funds to continue the development of the Company's
products. If the technology being developed by the Company is not developed
through to successful commercial launch, through lack of funding or clinical
failure, the going concern basis of the preparation would not be appropriate.
The financial statements do not include any adjustments that would result from a
failure to develop a commercial product and generate future revenues. The
Directors are of the opinion that it is not practical to quantify the
adjustments that might be required, but should any adjustments be required they
may be significant.
Key accounting policy changes required as a result of the adoption of IFRS are
included in the Appendix to this report, as are the accounting policies.
2. Turnover and segmental analysis
The Directors have assessed that substantially all of the Group's operations
relate to the principal activity of the development for the manufacture of
pharmaceutical tablets with tailored appearance and medical properties using
inter alia its own proprietary electrostatic deposition technology. The
Directors believe that all turnover, losses and net assets relate to continuing
activities performed in the Group's principal activity as stated above.
3. Loss per share
Six months ended Six months ended Year ended
30 June 2007 30 June 2006 31 Dec 2006
(restated) (restated)
(unaudited) (unaudited)
#'000 #'000 #'000
Loss (#'000) 2,793 2,282 4,747
Weighted average number of shares (No.) 35,501,394 32,573,521 33,144,349
Loss per ordinary share (pence) 7.9 7.0 14.3
Basic and diluted earnings per ordinary 10p share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period.
The Share Options and Warrants are not dilutive since if they were exercised
they would reduce the loss per share as the Group is loss making.
4. Reconciliation of operating loss to net cash outflow from operating activities
Six months ended Six months ended Year ended
30 June 2007 30 June 2006 31 Dec 2006
(unaudited) (unaudited) (audited)
(restated) (restated)
#'000 #'000 #'000
Operating loss (3,054) (2,430) (5,126)
Depreciation of fixed assets 183 183 356
Loss on disposal of fixed assets - - 98
(Increase)/decrease in debtors (33) (65) 164
Increase/(decrease) in creditors (20) (918) (717)
Share based compensation 35 - 45
________ ________ ________
Net cash inflow/(outflow) from operations (2,889) (3,230) (5,180)
Overseas tax paid (2) (6) (6)
Research and development tax credit received - 601 601
________ ________ ________
Net cash outflows from operating activities (2,891) (2,635) (4,585)
======= ======= =======
APPENDIX
Reporting under International Financial Reporting Standards (IFRS)
From 1 January 2007 Phoqus Pharmaceuticals plc will produce its consolidated
report and accounts in accordance with International Financial Reporting
Standards and applicable interpretations as adopted by the European Union. The
first full financial statements to be prepared on this basis will be the annual
report and accounts in respect of the year ended 31 December 2007. This
financial information has been prepared on the basis of IFRS expected to be
applicable at 31 December 2007. These standards are subject to ongoing review
and endorsement by the EU or possible amendment by interpretive guidance from
the IASB and are therefore still subject to change. We will update our restated
information for any such changes when they are made.
The commentary below highlights the key changes that have arisen due to the
transition from reporting under UK GAAP to reporting under IFRS. The Group's
date of transition is 1 January 2006, which is the beginning of the comparative
period for the 2007 financial year. Therefore, the opening balance sheet for
IFRS purposes is that reported at 1 January 2006, as amended for changes due to
IFRS.
This interim financial report is the first to be prepared under IFRS. The
comparative figures have been prepared on the same basis and are therefore
restated from those previously reported under UK GAAP. To help understand the
impact of the transition, reconciliations have been prepared to show the changes
made to the statements, previously reported under UK GAAP, in arriving at the
equivalent statements under IFRS. The following are the unaudited
reconciliations which are included in this Appendix:
1. Consolidated balance sheet at 1 January 2006
2. Consolidated income statement for the year ended 31 December 2006
3. Consolidated balance sheet at 31 December 2006
4. Consolidated income statement for the six months ended 30 June 2006
5. Consolidated balance sheet at 30 June 2006
A full set of accounting policies and changes are included within this report.
The net effect of presenting the financial statements for the year ended 31
December 2006 under IFRS rather than UK GAAP is to increase the net loss after
tax for the year from #4.743 million to #4.747 million and reduce net assets at
that date from #6.080 million to #6.059 million. The changes have no impact on
the cash flows previously reported. The key areas of change are outlined below.
First-time adoption
IFRS 1 "First-time Adoption of International Financial Reporting Standards" sets
out the approach to be followed when IFRSs are applied for the first time. As a
general principle, IFRS 1 requires that the accounting policies are to be
applied retrospectively, although IFRS 1 provides a number of optional
exemptions where the cost of compliance is deemed to exceed the benefits to
users of the financial statements. Where applicable, the options selected by
management under IFRS 1 are set out in the explanatory notes below.
Holiday pay
Under IAS 19 "Employee Benefits" a provision for holiday to which employees are
entitled, but have not yet taken, is required. This charge was not required
under UK GAAP.
Financial instruments
As provided by IAS 32 "Financial Instruments Disclosure and Presentation" and
IAS 39 "Financial Instruments: Recognition and Measurement", IAS 32 and IAS 39
have been applied with effect from 1 January 2006. The restatement of the
financial instruments in place at 31 December 2005 to IFRS as at 1 January 2006
has no impact.
Basis of consolidation
In preparing the statements, the Directors have applied the provisions set out
under IFRS1 and IFRS3.
The creation of the Phoqus Pharmaceuticals Group in 2002 was accounted for using
the merger method of accounting. The Group has taken advantage of the
transitional provisions of IFRS 3 in relation to business combinations. The
Income Statements, Balance Sheets, Cash Flow Statements, Statement of Changes in
Equity and the related notes have been prepared as if the Group had always been
in existence in its current form.
Share based payment
The Group has taken advantage of the exemption available in IFRS 1 not to apply
IFRS 2 to those equity-settled awards granted before 7 November 2002 that had
vested before 1 January 2006.
Cash flow statement
There have been no changes to the cash flow statement other than the
presentation of items in a different format under the different headings
provided by IAS 7.
PHOQUS PHARMACEUTICALS PLC
Reconciliation of consolidated balance sheet
at 1 January 2006
(Unaudited)
As previously
reported under UK IAS19 Restated
GAAP
Holiday pay Under IFRS
#'000 #'000 #'000
Assets
Non current assets
Property, plant and equipment 2,322 - 2,322
________ _________ ________
2,322 - 2,322
________ _________ ________
Current assets
Trade and other receivables 769 - 769
Current tax asset 601 - 601
Cash and cash equivalents 6,530 - 6,530
________ _________ ________
7,900 - 7,900
________ _________ ________
________ _________ ________
Total Assets 10,222 - 10,222
======= ======== =======
Equity and Liabilities
Capital and reserves
Called up share capital 3,260 - 3,260
Share premium account 19,048 - 19,048
Merger reserve 18,295 - 18,295
Other reserve: warrants 206 - 206
Retained earnings (33,159) (17) (33,176)
________ _________ ________
Total Equity 7,650 (17) 7,633
________ _________ ________
Non-current liabilities
Interest-bearing loans and borrowings 845 - 845
________ _________ _________
845 - 845
________ _________ _________
Current liabilities
Trade and other payables 1,252 17 1,269
Interest-bearing loans and borrowings 475 - 475
________ _________ ________
1,727 17 1,744
________ _________ ________
Total Liabilities 2,572 17 2,589
________ _________ ________
Total Equity and Liabilities 10,222 - 10,222
======= ======== =======
PHOQUS PHARMACEUTICALS PLC
Reconciliation of consolidated income statement
for the year ended 31 December 2006
(Unaudited)
Previously
reported under UK
GAAP
IAS19 Restated
Holiday pay under IFRS
#'000 #'000 #'000
Revenue 167 - 167
Cost of sales - - -
__________ ________ _________
Gross profit 167 - 167
Administrative expenses (5,289) (4) (5,293)
__________ ________ _________
Operating loss (5,122) (4) (5,126)
Finance revenue 192 - 192
Finance charges (209) - (209)
__________ ________ _________
Loss on ordinary activities before taxation (5,139) (4) (5,143)
Income tax credit 396 - 396
_________ ________ _________
Loss attributable to equity holders (4,743) (4) (4,747)
======== ======= ========
Basic and diluted loss per ordinary share (pence) 14.3 - 14.3
All operations are continuing activities.
PHOQUS PHARMACEUTICALS PLC
Reconciliation of consolidated balance sheet
at 31 December 2006
(Unaudited)
As previously
reported under UK IAS19 Restated
GAAP
Holiday pay under IFRS
#'000 #'000 #'000
Assets
Non current assets
Property, plant and equipment 2,119 - 2,119
_________ _________ ________
2,119 - 2,119
_________ _________ ________
Current assets
Trade and other receivables 605 - 605
Current tax asset 402 - 402
Cash and cash equivalents 4,395 - 4,395
_________ _________ ________
5,402 - 5,402
_________ _________ ________
_________ _________ ________
Total Assets 7,521 - 7,521
======== ======== =======
Equity and Liabilities
Capital and reserves
Called up share capital 3,596 - 3,596
Share premium account 21,839 - 21,839
Merger reserve 18,295 - 18,295
Other reserve: warrants 206 - 206
Retained earnings (37,856) (21) (37,877)
_________ _________ ________
Total Equity 6,080 (21) 6,059
_________ _________ ________
Non-current liabilities
Interest-bearing loans and borrowings 344 - 344
_________ _________ ________
344 - 344
_________ _________ ________
Current liabilities
Trade and other payables 530 21 551
Interest-bearing loans and borrowings 567 - 567
_________ _________ ________
1,097 21 1,118
_________ _________ ________
Total Liabilities 1,441 21 1,462
_________ _________ ________
Total Equity and Liabilities 7,521 - 7,521
======== ======== =======
PHOQUS PHARMACEUTICALS PLC
Reconciliation of consolidated income statement
for the six months ended 30 June 2006
(Unaudited)
Previously
reported under UK
GAAP
IAS19 Restated
Holiday pay Under IFRS
#'000 #'000 #'000
Revenue 117 - 117
Cost of sales - - -
__________ ________ _________
Gross profit 117 - 117
Administrative expenses (2,523) (24) (2,547)
__________ ________ _________
Operating loss (2,406) (24) (2,430)
Finance revenue 101 - 101
Finance charges (116) - (116)
__________ ________ _________
Loss on ordinary activities before taxation (2,421) (24) (2,445)
Income tax credit 163 - 163
_________ ________ _________
Loss attributable to equity holders (2,258) (24) (2,282)
======== ======= ========
Basic and diluted loss per ordinary share (pence) 6.9 0.1 7.0
All operations are continuing activities.
PHOQUS PHARMACEUTICALS PLC
Reconciliation of consolidated balance sheet
at 30 June 2006
(Unaudited)
As previously
reported under UK Restated
GAAP
IAS19 Under IFRS
Holiday pay
#'000 #'000 #'000
Assets
Non current assets
Property, plant and equipment 2,317 - 2,317
_________ _________ ________
2,317 - 2,317
_________ _________ ________
Current assets
Trade and other receivables 835 - 835
Current tax asset 168 - 168
Cash and cash equivalents 3,814 - 3,814
_________ _________ ________
4,817 - 4,817
_________ _________ ________
Total Assets 7,134 - 7,134
======== ======== =======
Equity and Liabilities
Capital and reserves
Called up share capital 3,560 - 3,560
Share premium account 19,048 - 19,048
Merger reserve 18,295 - 18,295
Other reserve: warrants 206 - 206
Retained earnings (35,419) (41) (35,460)
_________ _________ ________
Total Equity 5,690 (41) 5,649
_________ _________ ________
Non-current liabilities
Interest-bearing loans and borrowings 664 - 664
_________ _________ ________
664 - 664
_________ _________ ________
Current liabilities
Trade and other payables 311 41 352
Interest-bearing loans and borrowings 469 - 469
_________ _________ ________
780 41 821
_________ _________ ________
Total Liabilities 1,444 41 1,485
_________ _________ ________
Total Equity and Liabilities 7,134 - 7,134
======== ======== =======
Accounting policies
The accounting policies adopted in the preparation of the Group's IFRS
statements are set out below:
Basis of preparation
The financial statements have been prepared in accordance with the Companies Act
1985 and International Financial Reporting Standards (IFRS) and related
interpretations as adopted by the European Union. The Group financial statements
are also consistent with International Financial Reporting Standards as issued
by International Accounting Standards Board.
The financial statements have been prepared on the historical cost basis,
revised for use of fair values where required by applicable IFRS. The
consolidated financial statements are presented in sterling and all values are
rounded to the nearest thousand (#000), except where otherwise indicated. The
principal accounting policies adopted are set out below.
Fundamental accounting concept
The financial statements have been prepared on a going concern basis.
The Company's strategy is to commercialise the technology it has developed for
the manufacture of tablets, the appearance and medical properties of which are
tailored to the requirements of customers in the pharmaceutical industry. The
level of retained losses as at the date of these financial statements represents
the Company's costs incurred to pursue this strategy. In order to finance the
next phase of the strategy, the Company raised #8.8m of funds (net of costs)
through a Placing on the Company's admission to AIM in November 2005 and #2.8m
of funds (net of costs) through a Secondary Placing in October 2006. In
addition the Company has entered into a #2.5m loan agreement which was completed
on 2 April 2007. The terms of the loan were an immediate drawdown of #1.25m,
with the drawdown of the balance being subject to certain conditions. The loan
is repayable over 36 monthly instalments, with an initial interest only period
of 6 months, at an interest rate of 13.3%. The Company has granted the lender a
warrant to subscribe for shares equal to 6% of the drawn down loan with an
exercise price equal to the average closing price per share in the 30 days
preceding the closing of documentation. Furthermore in July 2007 the Company was
successful in raising a further #5m net of expenses in a placing of shares.
There are risk factors inherent in the business and its potential to generate
future revenues. As at the date of these financial statements, there is a
fundamental uncertainty as to the viability of the Company on a medium term
basis and hence the validity of the going concern basis adopted in the
preparation of these financial statements.
The Directors have prepared and approved cash flow projections that indicate
that the Company will be able to meet its liabilities as the fall due for the
foreseeable future. These projections include the planned receipt in the short
term of significant fees and licensing revenues from current projects, and
planned revenues from the commercial application of the technology in the medium
term. If the fees and licensing revenues are not forthcoming, the Company will
need to raise additional funds to continue the development of the Company's
products. If the technology being developed by the Company is not developed
through to successful commercial launch, through lack of funding or clinical
failure, the going concern basis of the preparation would not be appropriate.
The financial statements do not include any adjustments that would result from a
failure to develop a commercial product and generate future revenues. The
Directors are of the opinion that it is not practical to quantify the
adjustments that might be required, but should any adjustments be required they
may be significant.
Basis of consolidation
The consolidated financial statements includes the financial information of the
Company and its subsidiary undertakings, Phoqus Pharmaceuticals (UK) Limited, a
company incorporated in England and Phoqus Pharmaceuticals Inc, a company
incorporated in the USA.
In preparing the statements, the Directors have applied the provisions set out
under IFRS1 and IFRS3.
The creation of the Phoqus Pharmaceuticals Group in 2002 was accounted for using
the merger method of accounting. The Group has taken advantage of the
transitional provisions of IFRS 3 in relation to business combinations. The
Income Statements, Balance Sheets, Cash Flow Statements, Statement of Changes in
Equity and the related notes have been prepared as if the Group had always been
in existence in its current form.
Revenue Recognition
Revenue represents the amount receivable for goods and services provided and
royalties earned, net of trade discounts, VAT and other sales related taxes.
All revenue arises from continuing activities.
Pharmaceutical development services
Revenue is recognised by reference to the terms and conditions of the contract.
Revenue related to the achievement of objectives is recognised when those
objectives are met, whilst revenue related to time is recognised in proportion
to the work completed in the period. Revenue is only recognised when the Group
has an unconditional right to the consideration and all performance obligations
have been met.
Intangible assets
Intellectual property
Intellectual property comprises acquired patents, trade marks, know-how and
other similarly identified rights. These are capitalised when it is probable
that they will generate economic benefit. When they are capitalised they are
recorded at their cost and amortised on a straight line over their useful
economic lives from the time they are available for use. The period over which
the Group expects to derive economic benefits does not exceed 20 years.
Research and development
Research expenditure is charged to the income statement in the period in which
it is incurred. Development expenditure is capitalised when the criteria for
recognition as an asset are met: when it is probable that the project will be a
technical and commercial success and costs can be measured reliably.
Regulatory and other uncertainties generally mean that such criteria are not
met. When development costs are capitalised they are amortised over their
useful economic lives from product launch. Prior to product launch, the
capitalised expenditure is tested for impairment annually.
Property, plant and equipment
Property, plant and equipment is recorded at cost less depreciation.
Depreciation is calculated so as to write off the cost of such assets, less
their estimated residual values, on a straight-line basis over their expected
useful economic lives, as follows:
Leasehold improvements - over the shorter of the useful life or
the period of the lease
Plant and machinery - 2 -15 years
Office furniture and fittings - 2 -10 years
Assets in the course of construction are not depreciated until they are brought
into use.
The assets' residual values, lives and methods of depreciation are reviewed, and
adjusted if appropriate at each financial year end.
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an
asset may be impaired. If any such indication exists, or when annual impairment
testing for an asset is required, the Group makes an estimate of the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's or
cash-generating unit's fair value less costs to sell and its value-in-use and is
determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of
assets. Where the carrying amount of an asset exceeds its recoverable amount,
the asset is considered impaired and is written down to its recoverable amount.
In assessing value-in-use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
Impairment losses on continuing operations are recognised in the income
statement in those categories consistent with the function of the impaired
asset.
Borrowing costs
Borrowing costs are recognised as an expense when incurred.
Leases
Finance lease agreements
Where the Group enters into a lease which entails taking substantially all the
risks and rewards of ownership of an asset, the lease is treated as a finance
lease. The fair value of the asset, or if lower the present value of the minimum
lease payments, is recorded in the balance sheet as a tangible fixed asset and
is depreciated in accordance with the above depreciation policies, or if shorter
the life of the lease. Future instalments under such leases, net of finance
charges, are included with liabilities. Rentals payable are apportioned between
the finance element, which is charged to the income statement at a constant rate
applied to a reducing balance, and the capital element which reduces the
outstanding obligation for future instalments.
Operating lease agreements
Rentals payable under operating leases are charged to the income statement on a
straight line basis over the lease term. Lease incentives are recognised over
the shorter of the lease term and the date of the next rent review.
Sale and leaseback arrangements
Sale and leaseback arrangements using finance leases have been accounted for
such that the assets remain in the Group's balance sheet at their previous book
value and the sales proceeds are shown as a liability, representing the Group's
finance lease liability under the leaseback. The finance lease payments are
treated as outlined in the finance lease agreements accounting policy above. If
a sale and leaseback transaction results in a finance lease, any excess of sales
proceeds over the carrying amount are not recognised immediately as income by
the Group. Instead, the excess if also deferred and amortised over the lease
term.
All of the Group's sale and leaseback transactions have been in the form of
finance leases.
The determination of whether an arrangement is, or contains a lease is based on
the substance of the arrangement at inception date of whether the fulfilment of
the arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys a right to use the asset. A reassessment is made after
inception of the lease only if the following applies:
a) There is a change in contractual terms other than a renewal or extension of
the arrangement;
b) A renewal option is exercised or extension granted, unless the term of the
renewal or extension was initially included in the lease term;
c) There is a change in the determination of whether fulfilment is dependent on
a specific asset; or
d) There is substantial change to the asset.
Where a reassessment is made lease accounting shall commence or cease from the
date when the change in circumstances gave rise to the reassessment for
scenarios a), c) and d) and at the date of renewal or extension period for
scenario b).
For arrangements entered into prior to 1 January 2006, the date of inception is
deemed to be 1 January 2006 in accordance with transitional requirements of
IFRIC 4.
Foreign currencies
The functional and presentational currency is pounds Sterling.
Transactions in foreign currencies are recorded at the functional currency rate
of exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the functional
currency rate of exchange ruling at the balance sheet date. All differences are
included in the income statement.
Taxation
UK corporation tax, including research and development tax credits is provided
on taxable profits or in the case of research and development tax credits on
eligible tax losses at amounts to be paid, or recovered, applying the tax rates
and laws that have been enacted, or substantively enacted, by the balance sheet
date.
Deferred taxation
Deferred tax is accounted for using the balance sheet liability method in
respect of temporary differences arising from the differences between the
carrying amount of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of the taxable profit or loss.
Deferred tax assets are recognised to the extent that it is probable that future
taxable profits will be available against which the temporary differences can be
utilised. Their carrying amount is reviewed at each balance sheet date on the
same basis. Deferred tax is measured on an undiscounted basis at the tax rates
that are expected to apply in the periods in which the asset or liability is
settled. It is recognised in the income statement except when it relates to
items credited or charged directly to equity, in which case the deferred tax is
also dealt with in equity.
Pension costs
Phoqus Pharmaceuticals (UK) Limited, a 100% owned subsidiary undertaking,
operates a stakeholder personal defined contribution pension scheme. Employees
contribute at various rates, which are partially matched by Phoqus
Pharmaceuticals (UK) Limited and charged to the income statement as
administrative expenses as they become payable in accordance with the rules of
the scheme.
Share-based payments
The Group operates a number of executive and employee share option schemes. In
accordance with IFRS 2, for all grants of share options and awards, the cost of
equity-settled transactions is measured by reference to their fair value at the
date at which they are granted, and is recognised as an expense over the vesting
period, which ends on the date on which the relevant employees become fully
entitled to the award. Fair value is determined by using an appropriate pricing
model. In valuing equity-settled transactions, no account is taken of any
vesting conditions, other than conditions linked to the price of the shares of
the Company (market conditions).
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon the a market condition, which are
treated as vesting irrespective of whether or not the market condition is
satisfied, provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non-market conditions number of
equity instruments that will ultimately vest or in the case of an instrument
subject to a market condition, be treated as vesting as described above. The
movement in cumulative expense since the previous balance sheet date is
recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on the
difference between the fair value of the original award and the fair value of
the modified award, both as measured on the date of the modification. No
reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on
the date of cancellation, and any cost not yet recognised in the income
statement for the award is expensed immediately. Any compensation paid up to
the fair value of the award at the cancellation or settlement date is deducted
from equity, with any excess over fair value being treated as an expense in the
income statement.
The Group has taken advantage of the exemption available in IFRS 1 not to apply
IFRS 2 to those equity-settled awards granted before 7 November 2002 that had
vested before 1 January 2006.
For awards granted before 7 November 2002, the Group recognises only the
intrinsic value or cost of these potential awards as an expense. This is
accrued over the performance period of each plan based on the intrinsic value of
the equity settled awards.
Finance and warrants
Finance secured with the issue of warrants is accounted for by allocating the
proceeds between liabilities and warrants; the value of warrants is accounted
for in equity and the resultant discount on issue of the debt is treated as a
finance cost and allocated to accounting periods so that the total finance cost
on the debt will have a constant relationship to the outstanding obligation.
The fair value of the warrants is determined using a Black Scholes pricing
model. The remainder of the proceeds is allocated to the liability. Ordinarily
under IAS 39 the fair value of the liability would be determined first and the
remainder of the proceeds allocated to the equity instrument.
However, the Directors are of the view that the Group's current stage of
development, risks associated with its business, and the lack of similar
liabilities traded on a market make determining the fair value of the liability
first difficult and subject to uncertainty. Given the listed nature of the
Group's ordinary shares, the application of a pricing model to determine the
fair value of the warrants is deemed to be a more reliable method of
ascertaining the fair value of the respective instruments rather than attempting
to value the liability using a discounted cash flow or other technique.
Provisions for liabilities and charges
A provision is recognised when the Group has a legal or constructive obligation
as a result of a past event and it is probable that an outflow of economic
benefits will be required to settle the obligation.
Cash and cash equivalents
Cash and short term deposits in the balance sheet comprise cash at banks and at
hand and short term deposits with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement cash and cash
equivalents consist of cash and cash equivalents as defined above net of
outstanding bank overdrafts.
Employee Benefit Trust
Assets and liabilities held by the EBT are consolidated within the assets of the
Group. Contribution payments made to the Trust are treated as a Group cash
asset until the Trust makes an unconditional agreement to transfer funds for the
benefit of specific individuals or incurs administration expenses charged by the
Trustees. At this point a charge is made to the income statement. The
Company's access to the assets held by the EBT is subject to the agreement of
the Trustees of the Trust.
Derecognition of financial assets and liabilities
Financial assets
A financial asset is derecognised when the rights to receive cash flows from the
asset have expired; or those cash flows that are received are immediately
transferred to a third party; or rights to receive the cash flows have been
transferred together with either the risks or rewards of the asset or control of
the asset.
Financial liabilities
A financial liability is derecognised when the liability is discharged,
cancelled or expires.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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