REG - Futura Medical PLC - Preliminary Results <Origin Href="QuoteRef">FUM.L</Origin> - Part 1

Futura MedicalAnnouncement

15/03/2016 07:07

RNS Number : 0561S
Futura Medical PLC
15 March 2016
For immediate release
15 March 2016
Futura Medical plc
("Futura" or "the Company")
Preliminary Results for the year ended 31 December 2015
Futura Medical plc (AIM: FUM), the innovative healthcare company focused on advanced transdermal technology, is pleased to announce its preliminary results for the year ended 31 December 2015.
Highlights
CSD500 (erectogenic condom)
 Modified manufacturing process achieves extended shelf life with continuing positive real-time data and regulatory submission made
 Commercial order received from a licensee partner signalling an H2 2016 launch
 Progress with own brand Blue Diamond product via online and retail channels in the Netherlands and Belgium, providing customer insight and safety data to Futura and its licensee partners
Pain relief products TPR100 (diclofenac) and TIB200 (ibuprofen)
 Achieved primary endpoints in clinical study showing potential to be best-in-class based on improved drug delivery
 Received confirmation from relevant EU regulator that in principle no further clinical efficacy studies are expected to be required for TPR100 or TIB200 prior to the submission of regulatory dossiers in Europe, expected by the end of 2016
 Considerable interest in the two products from potential commercial partners and, subsequent to the year end, appointed advisers to manage the out-licensing process
MED2002 (treatment for erectile dysfunction)
 Pivotal efficacy study under way expected to report headline results by the end of H1 2016
 Made available as a 'special' or unlicensed medicine in the UK until it gains marketing authorisation
Organisational
 Strengthened the R&D department by establishing two separate teams, one focusing on clinical development and the other on chemistry, manufacturing and controls
Financial
 Net loss of 5.08 million (2014: net loss of 3.00 million), reflecting two clinical studies undertaken in 2015 (2014: Nil)
 Cash resources of 4.19 million at 31 December 2015 (31 December 2014: 9.49 million);
plus tax credit receivable of 1.00 million at 31 December 2015 (31 December 2014: 0.48 million)
James Barder, Futura's Chief Executive, commented: "2015 was a period of intense clinical activity for Futura, following which we expect our R&D expenditure to be significantly lower in the current year when there will be more of a focus on commercial development. We have made important progress with the shelf life extension of our novel condom CSD500 and we look forward to the start of licensee launches in 2016 and beyond. Futura has also made significant advances in its clinical programmes in erectile dysfunction and pain relief. In 2016 we expect to build on that progress and look forward to providing further updates during the course of the year across the wider portfolio."
Analyst meeting and webcast
A meeting for analysts will be held at 10.00am this morning, 15 March 2016, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. There will be a live webcast of the analyst presentation. If you would like to listen to the webcast, please log on to the following web address approximately 5 minutes before 10.00am:
http://vm.buchanan.uk.com/2016/futuramedical150316/registration.htm
A recording of the webcast will also be made available at www.futuramedical.com and www.buchanan.uk.com following the results meeting.
For further information please contact:
Futura Medical plc
James Barder, Chief Executive
Tel: +44 (0) 1483 685 670
Email to: james.barder@futuramedical.com
www.futuramedical.com
N+1 Singer (Nominated Adviser and Broker)
Aubrey Powell / Liz Yong /Tom Smale - Corporate Finance
Tel:+44 (0) 20 7496 3000
For media enquiries please contact:
Buchanan 
Mark Court / Sophie Cowles / Stephanie Watson
Tel: +44 (0) 20 7466 5000
Notes to Editors
Futura Medical plc
Futura Medical is a pharmaceutical group that develops innovative products for consumer healthcare. The Company is developing a portfolio of products and its strategy is to license their manufacture and distribution to major pharmaceutical and healthcare groups.
Futura is based in Guildford, Surrey, and its shares trade on the AIM market of the London Stock Exchange.
www.futuramedical.com
Chairman's and Chief Executive's Review
2015 saw significant progress across our portfolio of product opportunities, particularly in the advancement of our clinical programmes and in the extension of the shelf life of the novel condom CSD500 ahead of its licensee launch and international roll-out.
The extended shelf life of CSD500 which has been achieved using a modified manufacturing process continues to show substantial improvement over the previously approved shelf life and it is expected to meet the launch requirements of our commercial partners. Regulatory submissions have been made in Europe for approval of the modified manufacturing process, which are expected to be granted mid-2016.
Our existing licensee partners cover a total of 31 countries worldwide and we recently received a commercial order from one of them indicating an H2 2016 launch. We believe the regained momentum behind CSD500 will continue to grow during 2016 and we anticipate further commercial orders in the months ahead. In addition, as the challenge of shelf life diminishes, we have turned our attention to signing further territorial agreements and expect to announce at least one new licensee agreement during the current year.
Blue Diamond, our own brand of the CSD500 condom and exclusively available in the Netherlands and Belgium, continues to provide customer feedback and pharmaco-vigilance (drug safety) data, which we are able to share with our licensee partners. We now have two stock keeping units (SKUs) in the Netherlands: a six condom pack and a three condom pack which have replaced the initial four condom pack, giving choice to customers and greater presence on retail shelves. We are currently working on further SKUs, including different condom types, to further expand this range and provide our distributors and licensees alike with the potential of more facings and therefore retail shelf presence.
Our two non-steroidal, anti-inflammatory (NSAID) pain relief products both showed statistically significant pain relief in a pivotal clinical study completed in 2015. We have since been advised by the relevant European regulator that no further clinical efficacy work is expected to be required for either of the products ahead of submission of regulatory dossiers, which we aim to submit by the end of 2016. There is considerable interest in the two products from potential commercial partners and we have recently appointed advisers to manage the out-licensing process.
In June 2015, we started a pivotal efficacy study of MED2002, our topical gel for the treatment of erectile dysfunction. Recruitment of patients for the study is proceeding well and headline data from the study is expected by the end of H1 2016. In October 2015, we signed an agreement with Quantum Pharma Plc under which it has made MED2002 available as an unlicensed medicine, or special, in the UK. MED2002 meets the UK regulatory criteria for a special owing to the estimated 7.5% of erectile dysfunction sufferers who cannot be prescribed PDE5 inhibitors because of contraindications with other medications taken by them.
The R&D team within the Company was strengthened during the year by establishing two separate teams, one focusing on clinical development and the other on chemistry, manufacturing and controls. This structure is working well and is providing additional resource for progressing our current pipeline and for the development of new product opportunities.
Our balance sheet remains strong, with cash resources of 4.2 million as at 31 December 2015. We expect our costs to be significantly lower in the current year compared with 2015, which was a year of intense clinical activity. R&D expenditure in 2015 was 4.8 million (2014: 2.4 million) but 2.4 million of the 2015 spend was in respect of the MED2002 and pain relief studies which will not be repeated in 2016.
Portfolio updates - Sexual healthcare
CSD500: Condom containing the erectogenic Zanifil gel
CSD500 benefits from three clinically proven claims: the maintenance of a firmer erection, maximised penile size and a longer lasting sexual experience for women. CSD500, which gained CE marking in 2013, represents real innovation in an industry where there has been limited new product development. Futura's unique intellectual property position for CSD500 has been protected throughout the world. We are continuing to progress a further patent application worldwide based on our extended shelf life manufacturing process, which we anticipate will extend patent protection for CSD500 through to 2033.
Our out-licensing strategy for CSD500 is on a territorial basis and in addition to Bizzy Diamond BV, our Futura distributor for Holland and Belgium, to date we have licensed exclusive rights to CSD500 as follows:
Company / CSD500 Licensee
Territorial Licensing Rights
Church & Dwight 
North America and certain European countries
Kabey Pharmaceuticals
Key countries in the Middle East and North Africa
RFSU
The Nordic region
Ansell
Kwang Dong Pharmaceutical
China
South Korea
Discussions in connection with further geographic regions are ongoing and, as stated above, we expect to sign at least one further licensee agreement during 2016.
Regulatory approval has been granted for all 28 EU countries and we have now started to receive regulatory approvals from non-EU countries, such as Saudi Arabia.
CSD500 will be launched either under commercial partners' own brand names or under Futura's brand name, Blue Diamond. Bizzy Diamond BV launched Blue Diamond in the Netherlands and Belgium in 2014 and continues to market the product in those countries. Our licensees however have been waiting for the extended shelf life product, which we are now close to achieving.
Much of the focus during 2015 was on optimising the manufacturing of CSD500 to achieve a longer shelf life to meet the requirements of the condom supply chain. Following a study of all aspects of CSD500's manufacture and a modification to the manufacturing process, we announced in December 2015 that we had achieved a significantly extended shelf life beyond the currently approved shelf life of one year. A regulatory submission has been made in Europe, and it is the role of the regulator to specify the duration of the new shelf life. The Company is currently awaiting the decision of the regulator for the approval of the changes in manufacture to extend the shelf life of CSD500 in Europe. In addition we are also awaiting approval of an alternative manufacturing facility in Asia. These approvals are expected during the coming months.
MED2002: Treatment for erectile dysfunction
MED2002, which uses our DermaSys drug delivery system, is the development name for our topical gel for the treatment of men with erectile dysfunction (ED). We hold worldwide rights to the product, which shares the same active ingredient as CSD500. We anticipate that MED2002 is likely to be a prescription-only product. In Europe, MED2002 has patent protection until 2025 and in the USA it has patent protection until 2028.
In June 2015, we began a pivotal study of MED2002 with the primary endpoint being the product's efficacy in male subjects self-diagnosed with ED using the erectile function domain of the International Index of Erectile Function (IIEF). The IIEF is a well validated measure of erectile function and was used for the approval of PDE5 inhibitors, such as Viagra. Secondary endpoints in the trial include the speed of onset, which we believe is an important claim for the product and a substantial differentiator to products, such as Viagra, that require planning by sexual partners owing to the delay of onset after the treatment is taken.
A total of 192 patients are expected to complete the study, which remains on track to deliver headline results by the end of H1 2016. Recruitment of patients for the study is proceeding well, with 250 patients having been consented into the study to date. Based on current estimates, we have a requirement for 310 consented patients to ensure that 192 patients complete the study as all studies over recruit to compensate for patient drop out.
No serious adverse events have been recorded to date among the patients who have participated in the study, which is of a randomised, placebo-controlled, double blind, home use, crossover design. As the study is blinded, efficacy data will not be available until the end of the study. The current MED2002 study is expected to be one of two pivotal studies required for the regulatory filing of the product. The final commercialisation strategy, including design of the second efficacy study, will be decided following the results of the current study.
Whilst the clinical work is underway, we have advanced MED2002 as an unlicensed medicine, or "special". Specials are medicines that have not yet been authorised and which are requested and prescribed for treatment on a named patient basis only by appropriately qualified doctors under their own authority. Such requests can only be made subject to a number of conditions being met including the absence of licensed alternatives.
In October 2015, we signed an agreement with Quantum Pharma Plc under the terms of which it has made MED2002 available for prescription as a special. MED2002 meets the criteria required within the UK for an unlicensed medicine because of the estimated 7.5% of ED sufferers who cannot be prescribed PDE5 inhibitors due to contraindications with other medications taken by them. It is intended that MED2002 will remain available as a special until it gains marketing authorisation.
Portfolio updates - Pain relief management
Topical pain relief
The rapid skin permeation rates offered by Futura's transdermal delivery system, DermaSys, have created a major opportunity in topical pain relief. Rapid skin permeation offers potential benefits in pain management including: improved onset of action, duration and degree of pain relief.
Futura made major progress in its pain relief portfolio during 2015, specifically in achieving statistically significant results from its two NSAID programmes, TPR100 (2% diclofenac gel) and TIB200 (10% ibuprofen gel), in a pivotal clinical study. A third product, the methyl salicylate and menthol product SPR300, failed to achieve its primary endpoint and no further work on the compound is currently being carried out.
The clinical study of a total of 60 subjects compared Futura's products against a placebo. It also compared them against currently marketed products to show equivalence, which is a strategy frequently used in the consumer healthcare industry as it gives the potential for strong marketing claims, such as superior delivery of drug (through the skin) whilst reducing the clinical requirements for regulatory approval. No comparator product, topical or oral outperformed our two NSAID products.
Our objective is for our products to be best in class. The rationale for this is that the National Institute for Health and Care Excellence (NICE) gives clear guidance to physicians to prescribe topical NSAIDs in the first instance for joint pain associated with osteoarthritis, in preference to oral NSAIDs, owing to concerns on the long term use of oral NSAIDs. This means that the best-in-class topical treatment should be the first choice for doctors in the initial treatment of pain and therefore represents a substantial opportunity in a market with global sales estimated at US$2.9 billion.
As announced in November 2015, we have been advised by the relevant European regulator that in principle no further clinical efficacy studies are expected to be required for either of these products prior to the submission of regulatory dossiers in Europe. Filing of these dossiers in Europe is expected by the end of 2016.
The US also represents a very significant opportunity for TPR100 and we are preparing for a meeting with the US Food and Drug Administration in the near future to clarify the remaining requirements for US regulatory approval.
We have appointed advisers to manage the out-licensing of the two products, which have already attracted considerable interest from potential commercial partners.
People
At year end Futura had 14 employees compared with 12 a year earlier. It is not anticipated that staff numbers will grow significantly during the current year.
We were delighted to announce on 7 March that Ken James will join our Board as a Non-Executive Director. Ken, the former head of consumer healthcare R&D at GlaxoSmithKline plc, has a proven track record of bringing innovative consumer healthcare products to market across multiple geographies. We look forward to his input to the Board.
Lisa Arnold, who has served as a Non-Executive Director since 2008, has decided to step down from the end of March. We are immensely grateful to Lisa for her wise counsel during the past eight years and we wish her all the best in her career.
We offer our sincere thanks to all our staff, external consultants, scientific advisers and commercial partners for their contribution to the development of the Company throughout the year. We also extend our sincere thanks to our shareholders for their patience and support.
Outlook
2015 was a period of intense clinical activity for Futura, following which we expect our R&D expenditure to be significantly lower in the current year when there will be more of a focus on commercial development. We have made important progress with the shelf life extension of our novel condom CSD500 and we look forward to the start of licensee launches in 2016 and beyond. Futura has also made significant advances in its clinical programmes in erectile dysfunction and pain relief. In 2016 we expect to build on that progress and look forward to providing further updates during the course of the year across the wider portfolio.
John Clarke  James Barder
Chairman Chief Executive
The financial information set out below does not constitute the Company's full statutory accounts for the year ended 31 December 2015 (or year ended 31 December 2014) but it is derived from those accounts that have been audited. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 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 2015
Year ended
31 December
 2015
Year ended
31 December
 2014
 
 
Revenue
Notes
1.5
 29,476
 43,929
Research and development costs
(4,778,039)
(2,365,678)
Administrative costs
(1,368,240)
(1,205,078)
Operating loss
4
(6,116,803)
(3,526,827)
Finance income
7
 38,325
 48,257
Loss before tax
(6,078,478)
(3,478,570)
Taxation 
8
 997,036
 480,689
Total comprehensive loss for the year attributable to
owners of the parent company
(5,081,442)
(2,997,881)
Basic and diluted loss per share (pence)
9
(5.13 pence)
(3.35 pence)
Group Statement of Changes in Equity
For the year ended 31 December 2015
Share
Capital
Share
Premium
Merger
Reserve
 Retained
Losses
Total
 Equity
Notes
 
 
 
 
 
At 1 January 2014
 155,619
 21,516,284
 1,152,165
 (21,836,296)
 987,772
Total comprehensive loss for the year 
 
 -
 
 -
 
 -
 (2,997,881)
 
 (2,997,881)
Share-based payment
17
 -
 -
 -
 177,043
 177,043
Shares issued during the year
16
 42,426
 12,050,622
 -
 -
 12,093,048
Cost of share issues
 -
 (538,171)
 -
 -
 (538,171)
At 31 December 2014
 198,045
 33,028,735
 1,152,165
 (24,657,134)
 9,721,811
Total comprehensive loss for the year 
 
 -
 
 -
 
 -
 (5,081,442)
 
 (5,081,442)
Share-based payment
17
 -
 -
 -
 121,112
 121,112
Shares issued during the year
16
 140
 24,610
 -
 -
 24,750
At 31 December 2015
 198,185
 33,053,345
 1,152,165
 (29,617,464)
 4,786,231
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 in 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 2015
As at 
31 December
 2015
As at 
31 December
 2014
Notes
 
 
Assets
Non-current assets
Plant and equipment
10
20,115
11,115
Total non-current assets
20,115
11,115
Current assets
Inventories 
11
163,767
141,517
Trade and other receivables
13
146,137
204,600
Taxation
8
997,036
480,689
Cash and cash equivalents
14
4,188,294
9,491,776
Total current assets
5,495,234
10,318,582
Liabilities
Current liabilities
Trade and other payables
15
(729,118)
(607,886)
Total liabilities
(729,118)
(607,886)
Total net assets
4,786,231
9,721,811
Capital and reservesattributable to 
owners of the parent company
Share capital
16
198,185
198,045
Share premium
33,053,345
33,028,735
Merger reserve
1,152,165
1,152,165
Retained losses
(29,617,464)
(24,657,134)
Total equity 
4,786,231
9,721,811
Group Statement of Cash Flows
For the year ended 31 December 2015
Notes
Year ended
 31 December
 2015
Year ended
 31 December
 2014
Cash flows from operating activities
Loss before tax
 (6,078,478)
 (3,478,570)
Adjustments for:
Depreciation
 10
 6,958
 4,527
Finance income
 7
 (38,325)
 (48,257)
Share-based payment charge
 17
 121,112
 177,043
Cash flows from operating activities before changes in working capital
 
 (5,988,733)
 (3,345,257)
 
Increase in inventories
 11
 (22,250) 
 (106,510)
Decrease / (increase) in trade and other receivables
 
 45,212
 (58,524)
Increase in trade and other payables
 15
 121,232
 129,888
Cash used in operations
 
 (5,844,539)
 (3,380,403)
 
Income tax received
 
 480,689
 313,677
Net cash used in operating activities
 
 (5,363,850)
 (3,066,726)
 
Cash flows from investing activities
 
Purchase of plant and equipment
10
 (15,958)
 (7,793)
Interest received
 
 51,576
 20,851
Cash generated by investing activities
 
 35,618
 13,058
 
Cash flows from financing activities
 
Issue of ordinary shares
 16
 24,750
 12,093,048
Expenses paid in connection with share issues
 -
(538,171)
Cash generated by financing activities
 
 24,750
 11,554,877
 
(Decrease)/increase in cash and cash equivalents
 (5,303,482)
 8,501,209
Cash and cash equivalents at beginning of year
 9,491,776
 990,567
Cash and cash equivalents at end of year
14
 4,188,294 
 9,491,776 
Notes to the Group Financial Information
For the year ended 31 December 2015
1. Accounting policies
1.1 Basis of preparation
This Group financial information has been prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.
The accounting policies set out below have been applied to all periods presented in this Group financial information and are in accordance with IFRSs as adopted by the European Union and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that were applicable for the year ended 31 December 2015.
1.2 Going concern
The Group had cash balances of 4.19 million at 31 December 2015, with a net cash outflow of 5.30 million in the year.
The Group financial information has been prepared on the going concern basis which assumes that the Group will continue in operational existence for the foreseeable future. The rate of expenditure in 2015 reflected the two clinical studies undertaken in the year and that rate of expenditure will not be sustained in 2016. In assessing whether the going concern assumption is appropriate the Directors have taken into account all relevant available information about the future trading including profit forecasts, cash forecasts and funding. It is therefore considered appropriate to adopt the going concern basis of accounting in the preparation of the Group financial information.
1.3 Accounting developments
 
The following amendments have been adopted in the year however the Directors do not expect them to have a material effect on the Group financial information:
 Defined Benefit Plans: Employee Contributions: Amendments to IAS 19
The following new standards, amendments and interpretations, which are not yet effective and have not been adopted early in this financial information, will or may have an effect on the Group's future financial information:
 Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation (effective 1 January 2016)
 IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)
 IFRS 9 Financial Instruments (effective 1 January 2018)
 IFRS 16 Leases (effective 1 January 2019)
 Disclosure Initiative: Amendments to IAS 1 Presentation of Financial Statements (effective 1 January 2016)
1.4 Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business, so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial information presents the results of the Company and its subsidiaries Futura Medical Developments Limited and Futura Consumer Healthcare Limited as if they formed a single entity (the "Group"). Intra-group transactions and balances are eliminated in preparing the consolidated financial information.
1.5 Revenue
Revenue comprises the fair value received or receivable for: exclusivity arrangements, consultancy fees, milestone income or royalties, net of value added tax.
The accounting policies for the principal revenue streams of the Group are as follows:
(i) Exclusivity arrangements and similar agreements are recognised as revenue in the accounting period in which the related services, or required activities, are performed or specified conditions are fulfilled in accordance with the terms of completion of the specific transaction.
(ii) Consultancy fees are recognised as revenue in the accounting period in which the revenue becomes receivable.
(iii) Non-refundable milestone income is recognised as revenue in the accounting period in which the milestones are achieved. If any milestone income is creditable against royalty payments then it is deferred and released to the Consolidated Statement of Comprehensive Income over the accounting periods in which the royalties would otherwise be receivable.
(iv) Royalty income relating to the sale by a licensee of licensed product is recognised on an accruals basis in accordance with the substance of the relevant agreement and based on the receipt from the licensee of the relevant information to enable calculation of the royalty due.
1.6 Leased assets
Leases, which contain terms whereby the Group does not assume substantially all the risks and rewards incidental to ownership of the leased item are classified as operating leases. Operating lease rentals are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term. The Group does not hold any assets under finance leases.
1.7 Intangible assets
Research and development ("R&D")
Expenditure incurred on the development of internally generated products is capitalised if it can be demonstrated that:
 it is technically feasible to develop the product for it to be sold;
 adequate resources are available to complete the development;
 there is an intention to complete and sell the product;
 the Group is able to out-license or sell the product;
 sale of the product will generate future economic benefits; and
 expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the periods in which the Group expects to benefit from selling the products developed but not exceeding five years. The amortisation expense is included in R&D costs recognised in the Consolidated Statement of Comprehensive Income. The useful life and the value of the capitalised development cost are assessed for impairment at least annually. The value is written down immediately if impairment has occurred and the unimpaired cost amortised over the reduced useful life. The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to that product being commercially launched in at least one country.
Development expenditure, not satisfying the above criteria, and expenditure on the research phase of internal projects are included in R&D costs recognised in the Consolidated Statement of Comprehensive Income as incurred.
Patents and trademarks
The costs incurred in establishing patents and trademarks are either expensed or capitalised in accordance with the corresponding treatment of the development expenditure for the product to which they relate.
1.8 Plant and equipment
Plant and equipment is initially recognised at cost, and subsequently at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is charged to the Consolidated Statement of Comprehensive Income at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over their estimated useful lives.
The assets' residual values and useful lives are determined by the Directors and reviewed and adjusted if appropriate at each Consolidated Statement of Financial Position date.
1.9 Impairment of non-financial assets
Assets that are subject to depreciation are reviewed for impairment on a half-yearly basis and when events or circumstances suggest that the carrying amount may not be recoverable. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). An impairment loss is recognised immediately in the Consolidated Statement of Comprehensive Income for the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value, less disposal costs, and value in use. 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.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in the Consolidated Statement of Comprehensive Income.
1.10 Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost includes materials, related contract manufacturing costs and other direct costs. Cost is calculated using the first in, first out method. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and disposal.
A provision is recognised immediately in the Consolidated Statement of Comprehensive Income in respect of obsolete, slow-moving or defective items, where appropriate.
1.11 Financial instruments
Financial assets
The Group classifies its financial assets in the category of loans and receivables, comprising 'trade and other receivables' and 'cash and cash equivalents'. They are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.
Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest rate method, less an estimate made for impairment based on a review of all past due amounts at the year end. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due. If an impairment loss is required the carrying amount of the trade or other receivable is reduced through the use of an allowance account and the amount of the loss recognised immediately in the Consolidated Statement of Comprehensive Income in administrative costs.
Medium-term deposits, comprising sterling fixed rate deposits, with original maturities of more than twelve months are included in trade and other receivables.
Cash and cash equivalents are financial assets and comprise cash in hand and sterling fixed rate short-term deposits with original maturities of twelve months or less which are held by the Group so as to be available to meet short-term cash commitments.
The Group assesses at each Consolidated Statement of Financial Position date whether there is objective evidence that a financial asset is impaired.
Financial liabilities
The Group's financial liabilities comprise 'trade and other payables' recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.
1.12 Taxation
Income tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively enacted at the Consolidated Statement of Financial Position date. R&D tax credits are recognised on an accruals basis and are included as an income tax credit under current assets.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability on the Consolidated Statement of Financial Position date differs from its tax base, except for differences arising on:
 the initial recognition of an asset or liability in a transaction which is not a business combination and which at the time of the transaction affects neither accounting profit nor taxable profit; and
 investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profits will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the Consolidated Statement of Financial Position date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
 the same taxable group company; or
 different group entities which intend to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, on each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
1.13 Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income in the period in which they arise.
 
1.14 Employee benefits
(i) Defined contribution plans
The Group provides retirement benefits to all employees who wish to participate in defined contribution pension schemes. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to the Consolidated Statement of Comprehensive Income in the period in which they become payable.
(ii) Accrued holiday pay
Provision is made at each Consolidated Statement of Financial Position date for holidays accrued but not taken, at applicable rates of salary. The expected cost of compensated short-term absence (holidays) is charged to the Consolidated Statement of Comprehensive Income on an accruals basis.
 
(iii) Share-based payment transactions
The Group operates an equity-settled share-based compensation plan. For all share options awarded to employees, and others providing similar services, the fair value of the share options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Consolidated Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of share options that eventually vest. There are no market vesting conditions. If the terms and conditions of share options are modified before they vest, the change in the fair value of the share options, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period. The proceeds received when share options are exercised, net of any directly attributable transaction costs, are credited to share capital (nominal value) and the remaining balance to share premium. All employee share option holders enter into an HM Revenue & Customs joint election to transfer the employers' national insurance contribution potential liability to the employee, therefore no Group asset or liability arises.
(iv) Long-term incentive plan
The Group operates a long-term incentive plan for staff and Executive Directors. The quantum of any awards receivable will depend on the Group achieving set milestones and the share price at the time relative to targets set in advance. The Group can exercise discretion in settling any award in equity or in cash.
1.15 Finance income
Interest income is recognised on a time-proportion basis using the effective interest rate method.
 1.16 Critical accounting estimates and judgements
Critical accounting estimates, assumptions and judgements are continually evaluated by the Directors based on available information and experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates.
Judgements
(i) Revenue recognition
Fees invoiced in respect of non-refundable milestones have been recognised as revenue in the Consolidated Statement of Comprehensive Income in the period when all criteria for revenue recognition have been met.
(ii) Intangible asset recognition
The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to that product being commercially launched in at least one country.
(iii) Deferred tax recognition
The Directors consider that, given the current stage of development of the business, deferred tax assets should not be recognised before the Group is generating sufficient recurring royalty revenue.
Estimates and assumptions
(iv) Fair value of financial instruments
The Group determines the fair value of financial instruments using valuation techniques which can be significantly affected by the assumptions used, including interest and discount rates and estimates of future cash flows.
(v) Inventories
The Group reviews the net realisable value of its inventories on a half-yearly basis to provide assurance that recorded inventories are stated at the lower of cost or net realisable value. Factors that could impact realisable value include: the timing and success of future technological innovations in relation to product R&D, competitor and Government actions, supplier prices and economic trends.
(vi) Share-based payments
The Group operates an equity-settled share-based compensation plan as detailed in note 17. Employee (and similar) services received and the corresponding increase in equity are measured by reference to the fair value of the equity instruments as at the date of grant.
2. Financial risk management
2.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange rate risk, cash flow interest rate risk and fair value interest rate risk); credit risk and liquidity risk.
It is Group policy not to enter into speculative positions using complex financial instruments. The Group's primary treasury objective is to minimise exposure to potential capital losses whilst at the same time securing favourable market rates of interest on Group cash deposits using money market deposits with banks. Cash balances used to settle the liabilities from operating activities are also maintained in current accounts which earn interest at variable rates.
(i) Market risk
Foreign exchange rate risk
The Group primarily enters into supplier contracts which are to be settled in sterling. However, some contracts involve other currencies including the US dollar and the euro. Where supplier contracts of more than 100,000 total value are to be settled in foreign currencies consideration is given to settling the sums to be paid through conversion of sterling deposits to the appropriate foreign currency holdings at the outset of the contract to minimise the risk of adverse currency fluctuations.
 
For contracts with smaller values the foreign exchange rate risk is not considered sufficient to require the establishment of foreign currency accounts unless specific circumstances are identified which warrant this.
At 31 December 2015 the Group had trade payables of 27,014 denominated in a foreign currency
(31 December 2014: 55,809).
 
Cash flow interest rate risk and fair value interest rate risk
The Group's interest rate risk arises from short-term money market deposits. Deposits which earn variable rates of interest are exposed to cash flow interest rate risk. Deposits at fixed rates expose the Group to fair value interest rate risk. The Group analyses its interest rate exposure on a dynamic basis.
The impact in the year ended 2015, of a defined interest rate shift of a 1% higher rate of interest earned per annum applied to the term deposits over the period of the deposit, on the post-tax loss for the year and net assets would have been 124,350 reduction/increase (2014: 110,629 reduction/increase).
The impact in the year ended 2015, of a defined interest rate shift of a 1% lower (or to zero) rate of interest earned per annum applied to the term deposits over the period of the deposit, on the post-tax loss for the year and net assets would have been 51,545 increase/reduction (2014: 20,775 increase/reduction).
(ii) Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions as well as credit exposure in relation to outstanding receivables. The Group policy is to spread deposits over at least two institutions with investment grade A1 or better (Standard & Poor's credit rating) and deposits are made in sterling only. The Group does not expect any losses from non-performance by these institutions.
(iii) Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Prudent liquidity risk management involves maintaining sufficient cash and cash equivalents and the monitoring of rolling forecasts of the Group's liquidity reserve on the basis of expected cash flow.
The Group had trade and other payables at the Consolidated Statement of Financial Position date of 729,118 (2014: 607,886) which fall due within one year.
2.2 Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for equity holders of the Company and benefits for other stakeholders and to maintain an optimal capital structure to minimise the cost of capital.
2.3 Fair value estimation
The Group uses amortised cost, using the effective interest rate method, to determine subsequent fair value, after initial recognition, for its financial instruments.
3. Segment reporting
The Group is organised and operates as one business segment. The main area of R&D continues to be in the field of innovative products for consumer healthcare using the Group's advanced proprietary transdermal technology.
The Group manages any overseas R&D from the UK, the primary business segment. Segment revenue is based on the geographical location of the Group's customers. Since there is currently only one business segment and one geographical segment, no separate segment reporting has been prepared.
4. Operating loss
 Year ended
 31 December
 2015
 Year ended
 31 December
 2014
Operating loss is stated after charging
Depreciation of plant and equipment (note 10)
 6,958
 4,527
Inventories consumed in R&D
 60,647
 41,317
Wages and salaries (note 5)
 1,653,345
 1,339,981
Operating lease costs: property
 70,992
 69,603
 Loss on foreign exchange  4,066 1,314
The fees of the Group's auditor, BDO LLP, for services provided are analysed below:
 Year ended
 31 December
 2015
 Year ended
 31 December
 2014
Audit services
Parent company
27,500
27,500
Subsidiaries
7,500
7,500
Tax compliance services
Parent company
1,000
1,000
Subsidiaries
5,000
5,000
Total fees
41,000
41,000
5. Wages and salaries
The average monthly number of persons (including all Directors) employed by the Group during the year was 14 (by category: R&D 8, administration 6), (2014:10, by category: R&D 4, administration 6) and their aggregate emoluments were:
 Year ended
 31 December
 2015
 Year ended
 31 December
 2014
 
 
Wages and salaries
 1,273,543
 953,830
Social security costs
 159,715
 120,064
Other pension and insurance benefits costs
 108,784
 115,050
Total cash-settled emoluments
 1,542,042
 1,188,944
Accrued/(prepaid) holiday pay
 650
 (5,544)
Share-based payment remuneration charge 
 110,653
 156,581
Total emoluments
 1,653,345 
 1,339,981
All employees of the Group are employed by Futura Medical Developments Limited.
6. Directors' emoluments
Year ended
 31 December
 2015
Year ended
 31 December
 2014
Aggregate emoluments
559,495
710,384
Employer pension contributions
13,099
45,497
Subtotal 
572,594
755,881
Share-based payment remuneration charge
50,534
110,866
Employer's national insurance charge
76,746
97,265
Total emoluments
699,874
964,012
There were no share options exercised by the Directors during the current or preceding year. In 2015 one Director (2014: three Directors) participated in a private money purchase defined contribution pension scheme.
Emoluments above include the following amounts in respect of the highest paid Director:
Year ended
 31 December
 2015
Year ended
 31 December
 2014
Aggregate emoluments
257,010
243,161
Employer pension contributions
-
9,409
Subtotal 
257,010
252,570
Share-based payment remuneration charge
33,018
48,384
Employer's national insurance charge
35,155
30,418
Total emoluments
325,183
331,372
7. Finance income
Interest receivable in 2015 on fixed rate short-term deposits was 38,325 (2014: 48,257)
 
8. Taxation
 Current tax
 Year ended
 31 December
 2015
 Year ended
 31 December
 2014
 
 
UK corporation tax credit reported in the 
Consolidated Statement of Comprehensive Income
 997,036
 480,689
The tax assessed for the year is different from the standard rate of corporation tax in the UK.
The differences are explained below:
 Year ended
 31 December
 2015
 Year ended
 31 December
 2014
 
 
Loss on ordinary activities before tax
 6,078,478
 3,478,570
Loss on ordinary activities at an average standard rate of corporation tax in the UK of 20% (2014: 20%)
 1,215,696
 695,714
Expenses not deductible for tax purposes
 (674)
 (481)
Difference between depreciation and capital allowances
 1,800
 653
Other short-term timing differences
 (24,321)
 (36,795)
Unutilised tax losses
 (615,640)
 (354,615)
Tax relief on share options exercised
 -
 2,100
Additional relief attaching to R&D tax credit claims
 420,175
 174,113
UK corporation tax credit reported in the 
Consolidated Statement of Comprehensive Income
 
 997,036
 
 480,689
The Group has tax losses of 20,360,259 (2014: 17,272,460) available for offset against future taxable profits.
Deferred tax
Deferred tax assets amounting to 3,676,244 (2014: 3,475,177) have not been recognised on the basis that their future economic benefit is not certain. Assuming a prevailing tax rate of 18% (2014: 20%) when the timing differences reverse, the unrecognised deferred tax asset comprises:
 Year ended
 31 December
 2015
 Year ended
 31 December
 2014
 
 
Depreciation in excess of capital allowances
 7,444
 10,071
Tax relief on unexercised share options
 2,121
 6,757
Other short-term timing differences
 1,832
 3,857
Unutilised tax losses
 3,664,847
 3,454,492
 3,676,244
 3,475,177

9. Loss per share (pence)
The calculation of the loss per share is based on a loss of 5,081,442 (2014: loss of 2,997,881) and on a weighted average number of shares in issue of 99,022,600 (2014: 89,452,302).
The loss attributable to equity holders of the Company for the purpose of calculating the fully diluted loss per share is identical to that used for calculating the basic loss per share. The exercise of share options, disclosed in note 17, or the issue of shares under the long-term incentive plan, would have the effect of reducing the loss per share and is therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'.
10. Plant and equipment
Computer Equipment
Furniture
and Fittings
Total
Cost
At 1 January 2015
33,939
 53,101
 87,040
Additions
 10,815
 5,143
 15,958 
At 31 December 2015
 44,754
 58,244
 102,998
Depreciation
At 1 January 2015
 24,995
 50,930
 75,925
Charge for year
 5,849
 1,109
 6,958
At 31 December 2015
 30,844
 52,039
 82,883
Net book value
At 31 December 2015
 13,910
 6,205
 20,115
At 31 December 2014
 8,944
 2,171
 11,115
Computer Equipment 
Furniture
and Fittings
Total
Cost
At 1 January 2014
 59,958
 52,146
112,104
Additions
 5,719
 2,074
 7,793
Disposals
 (31,738)
 (1,119)
 (32,857)
At 31 December 2014
33,939  
 53,101
 87,040
Depreciation
At 1 January 2014
 52,500
 51,755
104,255
Charge for year
 4,233
 294
 4,527
Disposals
 (31,738)
 (1,119)
 (32,857)
At 31 December 2014
 24,995
 50,930
 75,925
Net book value
At 31 December 2014
 8,944
 2,171
 11,115
At 31 December 2013
 7,458
 391
 7,849
All fixed assets of the Group are held in Futura Medical Developments Limited.
11. Inventories
31 December
 2015
31 December
 2014
 
 
Raw materials and consumables
163,767
141,517
12. Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
Assets as per Consolidated Statementof Financial Position
31 December
 2015
31 December
 2014
Loans and receivables
 
 
Trade and other receivables (note 13)
146,137
204,600
Cash and cash equivalents (note 14)
4,188,294
9,491,776
Total loans and receivables
4,334,431
9,696,376
 
31December
 2015
 31 December
 2014
Liabilities as per Consolidated Statementof Financial Position
 
 
Trade and other payables (note 15)
529,355
435,832
Accrued expenses (note 15)
199,763
172,054
Total financial liabilities
 729,118
 607,886
13. Trade and other receivables
31 December
 2015
31 December
 2014
Amounts receivable within one year:
 
 
Other receivables
49,578
111,350
Prepayments and accrued income
96,559
93,250
146,137
204,600
Trade and other receivables do not contain any impaired assets. The Group does not hold any collateral as security and the maximum exposure to credit risk at the Consolidated Statement of Financial Position date is the fair value of each class of receivable.
14. Cash and cash equivalents
31 December
 2015
31 December
 2014
 
 
Cash at bank and in hand
44,110
176,914
Sterling fixed rate short-term deposits 
4,144,184
9,314,862
4,188,294
9,491,776
15. Trade and other payables
31 December
 2015
31 December
 2014
 
 
Trade payables
461,451
395,645
Social security and other taxes
67,904
40,187
Accrued expenses and deferred income
199,763
172,054
729,118
607,886
16. Share capital
Authorised
31 December
 2015
31 December
2014
31 December
 2015
31 December
2014
Number
Number
 
Ordinary shares of 0.2 pence each
500,000,000
500,000,000
1,000,000
1,000,000
Allotted, called up and fully paid
31 December
 2015
31 December
 2014
31 December
 2015
31 December
 2014
Number
Number
 
 
Ordinary shares of 0.2 pence each
99,092,318
99,022,600
198,185
198,045
The number of issued ordinary shares as at 1 January 2014 was 77,809,576. During the year ended 31 December 2014, the Company issued shares of 0.2 pence each as follows:
Month
Reason for issue
Gross Consideration
 Shares Issued
Number
January 2014
Share option exercise at 56.25 pence per share
67,500
120,000
March 2014
Share placing at 57.00 pence per share
12,000,000
21,052,632
December 2014
Non-Executive Director award at 63.25 pence per share
 25,548
 40,392
12,093,048
21,213,024
The number of issued ordinary shares as at 1 January 2015 was 99,022,600. During the year ended 31 December 2015, the Company issued shares of 0.2 pence each as follows:
Month
Reason for issue
Gross Consideration
 Shares Issued
Number
December 2015
Non-Executive Director award at 35.50 pence per share
 24,750
 69,718
17. Share options
At 31 December 2015, the number of ordinary shares of 0.2 pence each subject to share options granted under the Company's Approved and Unapproved Share Option Schemes were:
Exercise Price per Share
At 1
January 2015
Grants
 During
 Year
Options Lapsed
At 31 December2015
Exercise Period 
 Pence
Number
 Number
 Number
 Number
1 August 2011 - 31 July 2016
 24.25
314,279
 -
 -
314,279
1 August 2012 - 31 July 2017
 40.50
662,962
 -
 (180,000)
482,962
1 October 2013 - 30 September 2018
 56.50
827,500
 -
 (200,000)
627,500
1 October 2014 - 30 September 2019
 61.50
860,000
 -
 (200,000)
660,000
1 October 2015 - 30 September 2020
 71.50
950,000
 -
 (200,000)
750,000
1 October 2016 - 30 September 2021
 51.75
1,240,000
 -
 (200,000)
1,040,000
1 October 2017 - 30 September 2022
 30.00
-
 1,110,000
 -
1,110,000
4,854,741
 1,110,000
(980,000)
4,984,741
On 9 September 2015 share options over 1,110,000 new ordinary shares were granted to employees (including Executive Directors) and a consultant.
The share options outstanding at 31 December 2015 represented 5.03% of the issued share capital as at that date (2014: 4.9%) and would generate additional funds of 2,439,700 (2014: 2,662,100) if fully exercised. The weighted average remaining life of the share options was 62 months (2014: 57 months), with a weighted average remaining exercise price of 48.94 pence (2014: 54.84 pence).
The share options exercisable at 31 December 2015 totalled 2,834,741 (2014: 2,664,741) with an average exercise price of 55.33 pence (2014: 50.33 pence) and would have generated additional funds of 1,568,500 (2014: 1,341,150) if fully exercised.
The Group's share option scheme rules apply to 4,229,741 of the share options outstanding at 31 December 2015 (31 December 2014: 4,199,741) and include a rule regarding forfeiture of unexercised share options upon the cessation of employment/provision of consultancy services (except in specific circumstances).
There were no market vesting conditions within the terms of the grant of the share options.
The Black-Scholes formula is the option pricing model applied to the grants of all share options made in respect of calculating the fair value of the share options.
Inputs to share option pricing model
31 December
 2015
31 December
 2014
Grant date
9 September
12 September
Number of shares under option
 1,110,000
 1,240,000
Share price as at date of grant
 30.00 pence
 51.75 pence
Option exercise price
 30.00 pence
 51.75 pence
Expected life of options: based on previous exercise history
 3 years
 3 years
Expected volatility: based on 50 day median fluctuations over 3 years
 42.68%
 42.96%
Dividend yield: no dividends assumed
 0%
 0%
Risk-free rate: yield on 3 year treasury stock as at date of grant
 0.82% p.a.
 1.24% p.a.
Outputs generated from share option pricing model
31 December
 2015
31 December
 2014
Fair value per share under option
 8.27 pence
 15.71 pence
Total expected charge over the vesting period
 91,750
 194,804
Recognised in Consolidated Statement
of Comprehensive Income 
31 December
 2015
31 December
 2014
 
 
The share-based remuneration charge comprises:
Share-based payments - employees
 110,653
 156,581
Share-based payments - consultants
 10,459
 20,462
Share-based payments 
 121,112
 177,043
18. Pension costs
The pension charge represents contributions payable by the Group to independently administered funds which during the year ended 31 December 2015 amounted to 80,923 (2014: 93,993). Pension contributions payable in arrears at 31 December 2015 included in accrued expenses at the relevant Consolidated Statement of Financial Position date totalled 5,470 (2014: 4,139).
19. Commitments
At 31 December 2015 the Group had operating lease commitments in respect of property leases cancellable on one month's notice of 5,945 (2014: 5,829).
20. Related party transactions
Related parties, as defined by IAS 24 'Related Party Disclosures', are the wholly owned subsidiary companies, Futura Medical Developments Limited, Futura Consumer Healthcare Limited and the Board. Transactions between the Company and the wholly owned subsidiary companies have been eliminated on consolidation and are not disclosed.
In October 2015 the Company signed an agreement with Quantum Pharma Plc, for whom John Clarke is Non-Executive Chairman, for the manufacture and supply of MED2002 as an unlicensed medicine. At the year end the sum due from Quantum Pharma Plc in respect of shared development costs was 10,923 (2014: Nil).
Key management compensation
The Directors represent the key management personnel. Details of their compensation and share options are given in note 6.

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