EXPERTS IN
TRANSDERMAL
DELIVERY
Futura Medical plc
Annual Report and Accounts 2017
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About Futura Medical
What we do
Futura’s innovation strategy applies advanced science to
develop products with compelling commercial potential
using our advanced proprietary transdermal technology.
Our key strengths
Technological strengths
We have strong IP on all products under development.
Our expertise is in transdermal delivery.
Commercial strengths
We are focused on products for which there are
substantial market opportunities. We currently have
agreements with a number of key industry players. We
specialise within the growing consumer healthcare sector.
Financial strengths
We maintain a high ratio of research and development
spend relative to administrative costs and a ‘virtual’
organisational structure.
www.futuramedical.com
Contents
About Futura Medical
Our Strategy
Highlights
Our Business Model
Our Expertise
Our Pipeline
Governance
Chairman’s and Chief Executive’s Review
Strategic Report
Board of Directors
Remuneration Report
Corporate Governance
Directors’ Report
Independent Auditor’s Report to the members
of Futura Medical plc
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Parent Company Balance Sheet
Parent Company Statement of Changes in Equity
Notes to the Parent Company Financial Statements
Company Information
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Our Strategy
Futura’s innovation strategy applies advanced science to develop products with
compelling commercial potential and is driven by the following four criteria.
ADVANCED
TRANSDERMAL
TECHNOLOGY
1
Offering innovative delivery
of proven compounds
through the skin to improve
their performance or to
address new indications
CONTROLLED
DEVELOPMENT
RISK
2
3
STRONG
INTELLECTUAL
PROPERTY
Using only approved
compounds to control the
risk profile
Developing products where
the group can secure
strong patent protection
COMMERCIALISATION
4
Out-licensing products
to leading healthcare
companies which offer
the optimum potential
financial return
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INCORPORATING EXISTING
CHEMICAL ENTITIES
Reduces investment
and risk
Reduces
development costs
Increases chances
of regulatory
approval
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SIO
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DIF
DIF
DIF
THE ACTIVE STARTS
THE ACTIVE STARTS
THE ACTIVE STATAT RTS
WORKING RAPIDLYLYL
WORKING RAPIDLY
WORKING RAPIDLY
TARGETED DELIVERY
TARGETED DELIVERY
ETED DELIVERYRYR
TARGTARGT
SEXUAL HEALTH
CSD
500
MED2002
CSD500
PAIN RELIEF
TPR100
TIB200
SPR300
SPR300
Licensing partners
include Ansell, Kabey
Pharmaceuticals, RFSU
and Kwang Dong
Pharmaceutical. Launched in
Holland and Belgium under
brand
the blue diamond
®
and in Saudi Arabia under
the Manex ® brand
TPR100
Licensing agreement with
Thornton & Ross (STADA)
INNOVATIVE DRUG
DELIVERY PLATFORM
Highly efficient and
proprietary transdermal
delivery technology
1
Application
of gel with
active
2
Seconds
later*
3
Minutes
later*
SKIN SURFACE
SKIN SURFACE
SKIN SURFAFAF CE
DERMIS
DERMIS
DERMIS
TARGET AREA
TARGET AREA
ET AREA
TARGTARGT
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TECHNOLOGIES
TECHNOLOGIES
TECHNOLOGIES
WITHIN DERMASYS®
WITHIN DERMASYS
WITHIN DERMASYS
DRIVE THE ACTIVE
DRIVE THE ACTIVE
DRIVE THE ACTIVE
THROUGH THE SKIN
THROUGH THE SKIN
THROUGH THE SKIN
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For more information on
Our Delivery Technology go to page 04
* These are estimates and will vary according to the therapeutic indication
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Highlights
Development and Commercial:
MED2002: Eroxon® - Treatment for erectile dysfunction (“ED”)
● Key meetings held and positive feedback received from US & European regulators on the two phase III trials planned in
our clinical development programme
● Interim pharmacokinetic data indicates that at least two higher strength doses of MED2002 are eligible for the planned
Phase III clinical studies compared with the dose used in the successful Phase II study
● Commercial out-licensing discussions at an advanced stage
CSD500: Erectogenic condom
● Successful product launch in Saudi Arabia with further order placed and in production
● Further launches in 2018 underway
Pain relief products TPR100 (diclofenac) and TIB200 (ibuprofen)
● First out-licensing agreement signed for TPR100
● Commercial out-licensing discussions continuing for other countries
Organisational:
● Appointment of Angela Hildreth as Finance Director and Chief Operating Officer
Financial:
● Net loss of £3.90 million (2016: Net loss of £3.70 million), reflecting planned increase in R&D expenditure in ongoing
MED2002 clinical programme
● Cash resources of £8.36 million at 31 December 2017 (31 December 2016: £12.35 million)
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Stock Code: FUM
03
Our Business Model
Develop
Protect
License
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Commercial potential
Our product development strategy
is focused on creating products
with a predicted high rate of return
on investment and a low cost of
development. We focus exclusively
on topically applied pharmaceutical
drugs and medical devices. We
only incorporate existing well-
characterised chemical entities into
our products.
Robust patent protection
Strong IP underpins all our product
development and commercialisation
strategies. We develop and retain
our intellectual property including
manufacturing rights, patents,
know-how and trademarks to
protect the commercial position and
competitiveness of our products
and our partners.
Strong partners
Our products, once approved by
the relevant regulatory authorities,
will be brought to market through
licensing agreements with partners
that already have significant
distribution networks. In return
we receive upfront payments,
milestones and royalty payments
based on the sales of our products
via these distribution partners.
Licensing partnerships
CSD500 - Futura has seven distribution licensing agreements.
Licensee
Kabey Pharmaceuticals
RFSU
Ansell
Kwang Dong Pharmaceutical
Milsing
TTK Protective Devices Limited
F Lima SA
Licensing Rights
Key countries in the Middle East and North Africa
The Nordic region
China
South Korea
Key countries in Southeast Europe
India
Portugal
TPR100 - Licensing agreement signed with Thornton & Ross Ltd, the UK subsidiary of international healthcare
company STADA Arzneimittel AG, for commercialisation in the UK.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Our Expertise
DermaSys® is Futura’s advanced transdermal
technology platform.
Futura has developed a highly efficient and proprietary transdermal delivery technology, DermaSys®, for
the absorption of active molecules through the skin. DermaSys® is a versatile technology that can be
tailored to suit the specific active compound being used and the therapeutic indication. Such targeted
delivery offers an optimised profile in terms of dose, onset time and duration of effect, as well as an
improved safety profile through lower systemic uptake and the reduced risk of side effects.
MED2002
Topical gel for the
treatment of erectile
dysfunction
TPR100
Topical diclofenac
pain relief gel
TIB200
Topical ibuprofen
pain relief gel
SPR300
Topical methyl salicylate
pain relief gel
1
Application
of gel with
active
2
Seconds
later*
3
Minutes
later*
SKSKIN SURFAFAF CE
SKIN SURFACE
SKIN
DERMIS
DERMIS
DERMIS
TARGET
TARGET AREA
ET AREA
TARGTARGT
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TECHNOLOGIES
TECHNOLOGIES
TECHNOLOGIES
WITHIN DERMASYS®
WITHIN DERMASYS
WITHIN DERMASYS
DRIVE THE ACTIVE
DRIVE THE ACTIVE
DRIVE THE ACTIVE
THROUGH THE SKIN
THROUGH THE SKIN
THROUGH THE SKIN
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SIO
SIO
SIO
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DIF
DIF
DIF
THE ACTIVE STARTS
THE ACTIVE STARTS
THE ACTIVE STATAT RTS
WORKING RAPIDLY
WORKING RAPIDLY
WORKING RAPIDLYLYL
TARGETED DELIVERY
TARGETED DELIVERY
ETED DELIVERYRYR
TARGTARGT
* These are estimates and will vary according to the therapeutic indication
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Stock Code: FUM
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Our Pipeline
Sexual Healthcare
Concept
Development
Commercialisation
CSD500
Description: Condom containing an erectogenic gel
Status: Launched in Saudi Arabia. Further launches due in 2018
MED2002
Description: Topical gel for erectile dysfunction
Status: Final Phase III programme and out-licensing discussions under way
Pain Relief
Concept
TPR100
Development
Commercialisation
Description: Topical diclofenac pain relief gel
Status: First licensing agreement signed. Further discussions under way
TIB200
Description: Topical ibuprofen pain relief gel
Status: Out-licensing discussions under way
SPR300
Description: Topical methyl salicylate pain relief gel
Status: Potential follow on product to TIB200/TPR100
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Chairman’s and Chief Executive’s Review
Following our breakthrough Phase II clinical results
announced in September 2016, our key objective
for 2017 was to progress MED2002 both clinically
and commercially.
Substantial progress was made in 2017 with MED2002,
our topical gel for erectile dysfunction (“ED”), particularly in
advancing the product into its Phase III clinical programme.
MED2002 offers major and disruptive potential in terms of
prescription sales and a subsequent over-the-counter switch.
The rapid onset of action of MED2002 differentiates it from
existing treatments and gives it the potential to be the world’s
fastest-acting treatment for ED. Also during the year, we
continued to advance the commercialisation of CSD500, our
novel erectogenic condom, and to progress our pain relief
franchise.
Following our breakthrough Phase II clinical results
announced in September 2016, our key objective for 2017
was to progress MED2002 both clinically and commercially.
Discussions towards the out-licensing of MED2002 advanced
materially during the year and, as previously stated, we
believe that a commercial out-licensing agreement will be
announced in the first half of this year though, of course, the
timing will also be determined by the detail of negotiations.
The quality of the Phase II results was underlined in January
2018 when the leading, peer-reviewed scientific publication
for sexual health, the Journal of Sexual Medicine, published
its analysis of the data from the study, which had met
its primary endpoint in showing a statistically significant
improvement in erectile function in men compared with
placebo. During the year we finalised the design of our Phase
III programme, comprising a pharmacokinetic (“PK”) study
and two Phase III studies. We were very pleased to report
earlier this week preliminary safety data from the PK study,
which commenced in November last year, show that all
doses were well-tolerated. The PK study included doses up
to four times higher than the dose used in the Phase II study,
which creates the potential for increased efficacy in the Phase
III studies with the objective of being able to treat patients
experiencing more severe ED.
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CSD500 is now actively marketed in the Middle East, where
more than 500,000 condoms have been supplied to date
under the Manex brand; in the test market of Benelux
countries more than 100,000 CSD500 condoms have been
sold under the Blue Diamond brand. Whilst these sales are
encouraging, our commercialisation plans in North America
and certain European countries were impacted by Church &
Dwight’s decision to return licensing rights to the product to
Futura owing to a strategic change at their business. We
continue in commercial discussions for those countries
without a distribution partner for CSD500, including those
that formed part of the Church & Dwight agreement.
As previously announced the commercialisation of our pain
relief products continues, with the UK regulatory dossier
submission of TPR100, our diclofenac gel for topical pain
relief, close to completion with filing expected in Q2 of
this year by Thornton & Ross, a UK subsidiary of STADA
Arzneimittel AG (“STADA”). We are at an advanced stage of
discussions in connection with a further regional licensing
deal for TPR100 with an additional prospective partner.
Our balance sheet remains strong with cash resources of
£8.36 million at 31 December 2017 (31 December 2016:
£12.35 million). We will continue to use these cash resources
prudently through careful consideration of the timing and
design of our clinical trial programmes.
Portfolio updates - Sexual healthcare
MED2002: Eroxon® 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 ED. We hold patents to the product in a market
worth US$5.6 billion1 for currently available treatments and
have registered the brand name Eroxon®, though potential
distributors may choose to use other brand names.
MED2002’s rapid onset of action, with speed of onset within
10 minutes in 70 percent of intercourse attempts in our
Phase II clinical trial, means that it has the potential to be the
world’s fastest-acting treatment for ED.
The breakthrough clinical results announced in September
2016 were discussed with regulators in the UK, Europe and
US during 2017 with a view to confirming the optimal clinical
study pathway to achieve marketing approval throughout
Europe and in the US. As a result of these interactions, we
decided to begin the Phase III programme with an enlarged
pharmacokinetic (“PK”) study, which was designed to assess
the tolerance of 40 healthy subjects to a range of doses of
MED2002, including higher doses than the dose used in the
breakthrough results study.
The PK study, which commenced in November 2017, is
evaluating the dose of 0.2% w/w glyceryl trinitrate (“GTN”)
used in the previously reported successful Phase II clinical
study, and higher doses of 0.4%, 0.6% and 0.8% to assess
their suitability for maximising efficacy in the two planned
Phase III studies.
One of the key goals of the PK study was to demonstrate
that the blood plasma concentrations of GTN of at
least some of the higher doses fall within the plasma
concentrations of a US reference product, Nitrostat®, which is
used to treat angina. Demonstrating this equivalence enables
the Company to use the FDA 505(b)(2) route to regulatory
approval where at least some of the safety information
required for approval comes from studies not conducted by
or for Futura saving both time and money.
We were pleased to report earlier this week that in this phase
of the study in 30 subjects, the 0.2%, 0.4% and 0.6% doses
met this requirement. The 0.8% dose had similar but slightly
higher levels of GTN in the blood plasma than Nitrostat®.
Additionally, as the dose of MED2002 was increased,
the plasma concentrations increased demonstrating that
absorption occurs in a predictable and reliable manner
thereby providing further safety reassurance and underlining
the potency and versatility of Futura’s DermaSys® transdermal
technology.
Note 1 15 Key markets, IMS Health Data (2016) Manufacturers’ Selling Price
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Chairman’s and Chief Executive’s Review (continued)
Adverse events were also monitored during this phase of
the study and all four doses were well tolerated. In particular,
the level of headache (the main side effect normally seen)
between each different MED2002 dose and Nitrostat® was
broadly similar, mostly being mild and self-limiting.
The remaining part of the PK study is analysing the residual
amounts of MED2002 left on the penis five minutes after
application to evaluate the risk of transference of the active
ingredient from the male to the female sexual partner. The
results from this part of the study, along with the full results of
the safety data, are expected within the next month.
We have also recently received written endorsement from
the US Food and Drug Administration of the adaptive design
of our two Phase III trials for MED2002; the design has
already been reviewed by the UK’s Medicines and Healthcare
products Regulatory Agency and the Medicines Evaluation
Board in the Netherlands.
Our current plan is for the first patient in the first Phase III trial
to be dosed early in Q3 this year, though the timing could
be influenced by the signing of a commercial out-licensing
agreement. As previously mentioned, we believe that a
commercial out-licensing agreement will be announced in the
first half of this year.
Awareness of MED2002, and interest in its potential, has
grown considerably in the medical community. Market
research carried out by the leading healthcare strategy firm
Cello Health Consulting, indicated that more than 60 per
cent of physicians in the US consider that MED2002 is
an improvement over current ED therapies. The research
also revealed that at least 10 per cent of ED patients were
contra-indicated to PDE5 inhibitors (such as Viagra® or
Cialis®) because of their existing nitrate medication, a larger
percentage than the 7.5 per cent historically stated by the
Company based on previously conducted research. The
online survey was based on interviews with a total of 200
doctors in the US, Germany and France.
As previously mentioned, the publication of our Phase II
clinical data in the Journal of Sexual Medicine underlines the
scientific and medical interest in MED2002; the article can
be viewed at this link: http://www.jsm.jsexmed.org/article/
S1743-6095(17)31852-0/fulltext. The publication of this
data forms part of our strategy to increase the awareness
of MED2002 in the medical and pharmaceutical community
and attracted significant interest with widespread coverage
in the mainstream press and features in the medical and
pharmaceutical media, highlighting the level of potential
media interest in a future launch of MED2002.
MED2002, as a topically applied gel with a very rapid speed
of onset, has the potential to be a significant product with
combined peak sales of more than US$1 billion in a market
currently dominated by Viagra® and Cialis®, which are taken
orally and do not take effect for at least 30 minutes, and
typically one hour or more2.
MED2002’s patent protection runs until August 2028 in the
USA and August 2025 in Europe. An additional patent filing
announced in 2017 could extend patent protection through
to 2038. As an innovator product filed under Article 8(3)
of 2001/83/EC, MED2002 will also benefit from 10 years
European regulatory data and market exclusivity.
Note 2 US patient information for Viagra® and Cialis®
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We have been pleased with the continued safety data and
positive feedback and are encouraged by the low level of
customer complaints from more than 600,000 CSD500
condoms which have been supplied to date to the MENA
region and Benelux test market. A further order has been
placed and is currently in production.
Our two manufacturing partners - TTK in India and our
European manufacturer - have the required approvals to ship
CSD500 to any country in which the product is approved.
Last year TTK received regulatory approval from the relevant
EU Notified Body to manufacture an extended shelf life
product and we continue to work closely with regulators
to gain approval for an extended shelf life product for our
European manufacturer. We remain hopeful of approval
by the end of H1 2018 from the same EU Notified Body
for an extended shelf life product for our European based
manufacturer, which will be based on two years’, real time
data.
As highlighted in our previous Interim Report, the regulatory
process in Europe has been slowed by the changing
structure of EU regulatory bodies, and we continue to work
closely with regulators to overcome these challenges and
to prioritise certain of our submissions and to enable the
launch of CSD500 in a number of countries during 2018 and
beyond.
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
is CE Marked, represents real innovation in an industry where
there has been limited new product development. Futura’s
unique intellectual property for CSD500 is protected in the
world’s most important markets by the filing and granting of
key core patents.
CSD500 benefits from a total of seven licensing agreements,
covering more than 27 countries worldwide. The most recent
agreement was signed in March last year, when F Lima SA
gained exclusive rights to market CSD500 in Portugal.
The planned commercialisation of the product in North
America and certain European countries was impacted by
the decision by Church & Dwight to return licensing rights
to those countries as announced in August 2017. Whilst
immensely frustrating, it was reassuring that Church & Dwight
had confirmed they had no concerns around clinical and
safety risks and the decision was the result of a change in
strategic direction at its business. We continue in commercial
discussions on out-licensing CSD500 in a number of
countries including those that formed part of the Church &
Dwight agreement. As we have discounted making an online
launch by ourselves, we are exploring a number of potential
commercial approaches, including jointly licensing MED2002
and CSD500 in some countries.
CSD500 was launched in Saudi Arabia in the first half of 2017
by our distributor Kabey and further launches in the MENA
region are planned as soon as the necessary regulatory
approvals on a country by country basis are granted. Kabey
is using the Manex brand name and its promotion is based
on direct retail marketing.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Chairman’s and Chief Executive’s Review (continued)
People
At the year end, Futura had 14 employees, (excluding Non-
Executive Directors), (2016: 12), with the increase reflecting
the strengthening of our in-house regulatory function.
Post the period-end, we were delighted to welcome
Angela Hildreth to the Company as Finance Director, Chief
Operating Officer and Company Secretary as announced on
20 February 2018. Her appointment followed the decision by
Derek Martin, who had served as Finance Director for almost
10 years, to resign from the Company. We would again like
to thank Derek for his contribution to the development of the
Company and wish him well.
Outlook
2018 has started well particularly given the progress of the
Phase III clinical programme of our breakthrough erectile
dysfunction gel, MED2002. The positive interim data
announced on 13 March from the pharmacokinetic study
indicates that we will be able to include at least two higher
strength doses of MED2002 in our Phase III clinical studies
along with the dose used in our earlier Phase II study, thereby
bringing the potential for improved efficacy. Commercial
discussions, especially with MED2002, are advancing well,
further CSD500 launches in 2018 are planned and we
therefore look forward to the year ahead with confidence.
John Clarke
Chairman
James Barder
Chief Executive
Portfolio updates - 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 and increased
skin permeation offers potential benefits in pain management
including: improved onset of action, duration and degree of
pain relief.
Futura has previously demonstrated statistically significant
results over placebo from its two non-steroidal anti-
inflammatory drug (“NSAID”) programmes, TPR100 (2%
diclofenac gel) and TIB200 (10% ibuprofen gel), in a
clinical study.
The UK regulatory submission of TPR100, our diclofenac
gel for topical pain relief, is close to completion with filing
expected in Q2 of this year by Thornton & Ross, a UK
subsidiary of STADA. Under the terms of its licensing
agreement, Thornton & Ross holds rights to manufacture,
market and distribute TPR100 in the UK for the lifetime of the
product’s patents, which run to 2028 in the UK.
We are also in discussions with several potential distribution
partners for further licensing deals for TPR100 in countries
outside of the UK. As previously stated, we do not intend to
conduct any further clinical work, required primarily for the US
market, without a clear indication of interest and commitment
from potential commercial partners.
Our objective is for our pain relief 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 over 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 billion3.
Note 3 2015 IMS Health estimate
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Strategic Report
Our strategy is to develop innovative products with
compelling commercial potential in the pharmaceutical
and consumer healthcare market, leveraging our core
skills in transdermal drug delivery.
The Group’s innovation strategy applies advanced science to
develop products with compelling commercial potential and
is driven by the following four criteria:
• Advanced transdermal technology: offering innovative
delivery of proven compounds through the skin to
improve their performance or to address new indications.
• Controlled development risk: using only generic
compounds to control the risk profile.
• Strong intellectual property: developing products for
which the Group can secure strong patent protection.
• Commercialisation: out-licensing products to leading
healthcare companies which offer the optimum potential
financial returns.
Our focus is on sexual healthcare and pain relief. Our
expertise is in transdermal delivery with our unique proprietary
delivery technology DermaSys®.
Long lead times for product development characterise the
pharmaceutical industry. However, the Board seeks to drive
the business through to recurring revenue generation as soon
as is practicable with due regard to regulatory standards
and an appropriate commercial approach. This is achieved
through swift decision-making, highly capable staff, the
involvement of external expertise and a focus on compounds
with a known safety profile.
The Board is committed to driving product development
allowing greater control of their assets to provide greater
certainty around efficacy and safety to minimise risk for
commercial partners and maximise value and certainty in our
product portfolio.
The Strategic Report should be read in conjunction with
the Chairman’s and Chief Executive’s Review on pages 6 to
10, the consolidated financial statements and the Notes to
the Consolidated Financial Statements set out on pages
33 to 56.
Group strategy
The Group strategy is to focus on developing innovative
products primarily for the pharmaceutical and consumer
healthcare market. This strategy is aligned with the well-
publicised demographic changes of ageing populations,
increasing prosperity, government initiatives to increase self-
medication, pressures on payers and healthcare systems, the
rapid growth of OTC opportunities in developing countries,
the natural desire for an improved quality of life and the
Directors’ expectations that consumer healthcare spending
will increase as a result. The objective is to develop products
such that each on its own has the potential to generate
significant annual revenues.
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Annual Report and Accounts for the year ended 31 December 2017
Strategic Report (continued)
At the same time, the Board remains committed to
keeping regular or fixed costs restricted to an appropriate
level through the continued and judicious use of external
consultants and professional advisers. Clearly, the lower the
Group’s regular and fixed costs, the earlier that on-going
revenue generation would lead to a key future financial
milestone of monthly break-even and profitability.
The consumer healthcare market and competitive
environment
The Group develops products that address the needs of
the pharmaceutical and consumer healthcare market. The
Group considers there to be two distinct categories in which
it operates.
The first category is the global transdermal delivery market.
The Group develops transdermal products for prescription
(Rx) and over-the-counter (OTC) use. These comprise the
sexual healthcare product MED2002 and the pain relief
products: TPR100 and TIB200. The global topical OTC
analgesics market was estimated at US$2.9 billion1 in 2015
and the market leader for topical OTC analgesics has annual
sales of US$632 million2. The prescription market for existing
approved erectile dysfunction treatments was estimated at
US$5.6 billion3 in 2016. External market assessment based
on market research conducted by Cello Health Consulting
in 2017 and on the modelling work carried out by Decision
Resources Group, forecast peak Rx sales in excess of
$550m in key countries worldwide with no price premium.
With an OTC switch later in its product life cycle, MED2002
would form part of a new category within the OTC market.
Market research conducted by Ipsos into the potential
of MED2002 as an OTC product, using their validated
healthcare forecasting model, forecast peak OTC annual
sales for MED2002 in key countries worldwide in excess of
US$650 million4.
The second category is the global consumer medical devices
market. The consumer medical device being developed
by the Group is the condom product CSD500 which
addresses the global condom market, estimated to be worth
US$3.5 billion5.
These consumer healthcare markets are dominated by
global pharmaceutical and consumer healthcare groups with
established distribution networks. Smaller companies, such
as Futura, engaging in research and product development,
seek to out-license their innovative products to these larger
entities.
Futura offers its licensing partners its ability to identify
commercially attractive consumer healthcare product
opportunities coupled with a lower cost, expert and fast
development model, backed by strong patent protection.
In return for this, Futura seeks significant royalties from
future sales of these products through its partners and their
established distribution networks.
Financial Review
The Group ended the year with a strong balance sheet and
with a more definitive clinical and regulatory pathway to
commercialisation of our products.
Revenue
Group revenue for the year ended 31 December 2017 was
£363k (2016: £170k), comprising of milestone and royalty
payments in relation to TPR100 and CSD500.
Notes
1 2015 IMS Health estimate
2 Get Report 2014 Global Sales
3 15 Key markets, IMS Health Data (2016) Manufacturers’ Selling Price
4 2017 Ipsos,Top 10 markets Retailers’ Selling Price
5 Source: “Condoms: A Global Strategic Business Report”, Oct. 2012, Global Industry Analysts, Inc.
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Losses
The Group continues to maintain a focus on tight control of all expenditure. The Group’s operating loss for the year ended
31 December 2017 was £4.86 million (2016: £4.55 million), reflecting the increase in planned R&D expenses during the
period. The Group’s loss after taxation for the year ended 31 December 2017 was £3.90 million (2016: £3.70 million). Loss per
share for the year ended 31 December 2017 was 3.23 pence (2016: 3.65 pence).
No dividends were paid and none are proposed by the Board (2016: £nil).
Group research and development costs
Group R&D costs each year reflect the number of products being developed, the stage of development reached for each and
the impact on their progress of external factors.
R&D costs of £4,100,453 (2016: £3,509,680) were higher in the year as we prepared for the commencement of the MED2002
clinical trial programme which began in Q4 2017.
The table shows the trend in R&D costs and other administrative costs over the past five years ended 31 December:
2017
£
2016
£
2015
£
2014
£
2013
£
R&D costs
4,100,453
3,509,680
4,778,039
2,365,678
1,976,322
Other administrative costs
1,118,218
1,214,755
1,368,240
1,205,078
926,123
Total operating costs
5,218,671
4,724,435
6,146,279
3,570,756
2,902,445
R&D ratio
79%
74%
78%
66%
68%
The R&D ratio is the percentage of R&D costs relative to total operating costs. The Board monitors this ratio closely. R&D
spend since the formation of the business totalled £30.4 million (65% of total cumulative operating costs). A subsidiary, Futura
Medical Developments Limited, continues to incur all of the Group’s R&D expenditure which has been written off as incurred
for all reporting periods prior to and including the year ended 31 December 2017.
The Board considers that this overall total R&D spend relative to its pipeline of later stage products and emerging new
products distinguishes the Group’s lower funding requirements and risk profile from more typical businesses in the wider
pharmaceutical industry. The Group’s strategy is to focus on pharmaceutical drugs and medical devices that offer the potential
for a significant return on the costs of development. As well as progressing its existing R&D programmes, the Group continues
to seek new opportunities for potential products to add to its portfolio.
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Annual Report and Accounts for the year ended 31 December 2017
Strategic Report (continued)
Other administrative costs
Other administrative costs for the year ended 31 December 2017 were £1,118,218 (2016: £1,214,755), reflecting continued
vigilence in managing costs. These comprised all other operating costs excluding those relating to product development and
associated intellectual property.
The main constituents of other administrative costs and their relative proportions were:
Wages and salaries
Legal and professional advisers
Office costs and staff expenses
Commercial and marketing support
Year ended
31 December
2017
Year ended
31 December
2016
53%
18%
11%
18%
54%
13%
9%
24%
100%
100%
Taxation
A tax credit of £936,344 (2016: £842,246) in respect of R&D expenditure incurred has been recognised in the consolidated
financial statements. The tax credit relating to R&D expenditure will be surrendered and cash is expected to be received
in Q2 2018.
Capital structure and funding
The Group remains funded primarily by equity share capital. Equity funding (net of expenses) received since the formation of
the business until 31 December 2017 totalled £46.06 million.
Cash held by the Group at 31 December 2017 totalled £8.36 million comprising cash and cash equivalents (31 December
2016 £12.35 million).
The Group had no bank borrowings as at 31 December 2017 (2016: £nil). Other significant sources of funding received
for the Group since formation of the business until 31 December 2017 comprised: R&D tax credits £4.90 million, interest
£1.05 million and grants £0.28 million.
On 12 January 2017 the Group raised £155,100 following the issue of 382,962 shares at 40.50 pence per share pursuant to
the exercise of share options by employees (including Directors).
On 13 January 2017 the Group raised £28,669 following the deferred issue of 100,770 shares at 28.45 pence per share in
respect of the 2016 Non-Executive Directors’ remuneration.
On 17 May 2017 the Group raised £15,525 following the issue of 30,000 shares at 51.75 pence per share pursuant to the
exercise of share options by an employee.
On 31 December 2017 the Group raised £21,459 following the deferred issue of 37,320 shares at 57.50 pence per share in
respect of the 2017 Non-Executive Directors’ remuneration.
In January 2018 the Group raised £48,000 following the issue of 160,000 shares at 30.00 pence per share pursuant to the
exercise of share options by employees.
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As a result of the above, the Directors have a reasonable
expectation that the consolidated Group and the Company
have adequate resources to continue in operational existence
for the foreseeable future. For these reasons the Directors
continue to adopt the going concern basis in preparing the
financial statements.
Key performance indicators
The Directors consider the successful achievement of
development, licensing and commercialisation milestones
and the number of products under development (beyond
the evaluation stage) to be the major drivers of value
creation for the Group. These are measures of the progress
of the business towards its revenue generation goal and
are considered by the Directors to be the key non-financial
performance indicators used to determine achievement of
Group strategy. The Group’s performance with regard to
such milestones is discussed in the Chairman’s and Chief
Executive’s Review.
The Directors consider Group cash and the absolute values
of, and the ratio between, R&D costs and other administrative
overhead costs as being the Group’s key financial
performance indicators. The cost related indicators assist in
monitoring financial control to reduce the hurdle to achieving
a key future financial milestone of monthly break-even and
profitability. The monitoring of cash gives due consideration
to anticipated future spend required to prioritise development
opportunities and to plan the resources required to achieve
the goals of the business.
Principal risks and uncertainties
The development of pharmaceutical drugs and medical
devices requires the necessary safety, stability and efficacy
to be demonstrated in clinical programmes in order to meet
the requirements of the appropriate regulatory bodies. These
clinical programmes may not achieve their endpoints.
The Board considers that the key risks of the Group are:
Clinical development and regulatory risk
There can be no guarantee that any of the Group’s products
will be able to obtain or maintain the necessary regulatory
approvals in any or all of the countries in respect of which
applications for such approvals are made. Where regulatory
approvals are obtained, there can be no guarantee that the
conditions attached to such approvals will not be considered
too onerous by the Group or its distribution partners in order
to be able to market its products effectively. The Group
has reduced this risk by developing products using safe,
well-characterised active compounds, has sought and will
continue to seek, where appropriate, advice from regulatory
advisers, consultations with regulatory approval bodies and
by working with experienced distribution partners.
In 2017, the Board created a Risk Oversight Committee to
provide additional oversight of its operational compliance in
respect of its assets. This committee uses as its framework
the Medical Device Quality Management System (QMS)
as defined in the Medical Device Quality Manual and the
equivalent for Pharmaceutical products. They meet every
six months and agenda items are driven by a management
review which assesses compliance against the QMS on an
ongoing basis.
Commercial risk
There can be no guarantee that the Group will succeed
in establishing and maintaining the necessary contractual
relationships with licensing partners for the Group’s products
under development. Even if the Group’s products are
successfully developed and approved by the appropriate
regulatory bodies, they may not be launched by the Group’s
licensing partners, be successfully promoted or enjoy
commercial acceptance. The Group is reliant on commercial
partners to carry out their contractual obligations and the
degree to which these can be enforced by the Group is
limited. The Group seeks to reduce this risk by selecting
experienced licensing partners, maintaining and developing
these relationships and seeking to develop new products of
commercial interest to these and other partners.
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Annual Report and Accounts for the year ended 31 December 2017
Strategic Report (continued)
Competition risk
The Group’s current and future potential competitors include,
amongst others, major multinational pharmaceutical and
healthcare companies with substantially greater resources
than those of the Group. There can be no assurance that
competitors will not succeed in developing systems and
products that are more effective or economic than any of
those developed by the Group, with its distribution partners,
or which would render the Group’s products obsolete or
otherwise non-competitive.
The Group seeks to reduce this risk by securing patent
registration protection for its products and European
regulatory data and market exclusivity protection where
applicable pertaining to data accumulated through the
development process, maintaining confidentiality agreements
regarding Group know-how and technology, monitoring
technological developments and by selecting leading
businesses in their respective fields as licensing partners
capable of addressing significant competition, should it arise.
Intellectual property risk
The commercial success of the Group and its ability to
compete effectively with other companies depend, amongst
other things, on its ability to obtain and maintain patents
sufficiently broad in scope to provide protection for the
Group’s intellectual property rights against third parties and to
exploit its pharmaceutical products. The absence of any such
patents may have a material adverse effect on the Group’s
ability to develop its business. The Group seeks to reduce
this risk by only developing products where legal advice
indicates patent protection would be available, seeking
patent protection for the Group’s products, maintaining
confidentiality agreements regarding Group know-how and
technology and monitoring technological developments and
the registration of patents by other parties.
The commercial success of the Group also depends
upon not infringing patents granted, now or in the future,
to third parties who may have filed applications or who
have obtained, or may obtain, patents relating to business
processes which might inhibit the Group’s ability to develop
and exploit its own products.
Impact of Brexit
Following the outcome of the EU referendum, the Medicines
and Healthcare products Regulatory Agency is working
closely with the UK Government to analyse the best options
and opportunities available for the safe and effective
regulation of medicines and medical devices in the UK. The
impact of the decision to leave the EU is not yet known and
the future relationship with bodies such as the European
Medicines Agency and the European Patent Office will be
closely monitored.
The Strategic Report was approved by order of the Board on
13 March 2018.
Angela Hildreth
Secretary
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Board of Directors
The Board of Directors has overall responsibility
for the Group.
The Board of Directors (“the Board”) currently comprises the Non-Executive Chairman, the Chief Executive, the Finance
Director and Chief Operating Officer, the Head of R&D and one independent Non-Executive Director. The Board retains full
control of the Group with day-to-day operational control delegated to the Executive Directors. The full Board meets bi-monthly
and on any other occasions it considers necessary. The Board is responsible for approving interim and annual financial
statements, formulating and monitoring Group strategy, approving financial plans and reviewing performance, as well as
complying with legal, regulatory and corporate governance matters.
The Chairman provides strategic and operational guidance bringing to bear his extensive experience of the healthcare sector.
He also oversees the duties performed by the Chief Executive and ensures that they are in line with Board expectations with a
particular emphasis on monitoring product development. The Chief Executive manages the day-to-day running and strategic
direction of the Group in line with policy decisions taken by the Board with particular emphasis on the commercial direction of
the Group.
John Clarke
Non-Executive Chairman
and Chairman of
Nominations Committee
James Barder
Chief Executive
Current roles:
John Clarke became Chairman of Futura Medical plc in 2012. He is a
member of the Nominations Committee and the Remuneration Committee.
He is also the Non–Executive Chairman of Science in Sport plc, Kind
Consumer Holdings Limited and is a senior adviser to Helios Investment
Partners LLP.
Past roles:
President of GSK Consumer Healthcare. Non–Executive Chairman of
Quantum Pharma Plc, which was subsequently acquired by Clinigen plc.
Brings to the Board:
Extensive experience of the healthcare sector, having worked at a senior
level at GSK for more than 35 years.
Current roles:
James Barder joined the Group as Chief Executive in 2001. He assists the
Remuneration Committee and the Nominations Committee (but is not a
member of and does not vote on either). He has overall responsibility for all
activities of the Group, is a principal contact for shareholder and investor
relations and leads commercial negotiations. He first became involved with
the Group in 1997.
Past roles:
Managing Director of Aon Capital Markets Limited and Non-Executive
Director of Lorega Limited. He has predominantly worked in the field of
insurance and finance including firms he founded.
Brings to the Board:
Over 25 years of experience in setting up, managing and running
companies.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Board of Directors (continued)
Angela Hildreth
Finance Director, Chief
Operating Officer and
Company Secretary
Jonathan Freeman,
BA (Hons), MBA
Senior Independent Non-
Executive Director
and Chairman of
Remuneration Committee
and Audit Committee
Current roles:
Angela joined the company in February 2018. She leads the Group’s
finance, HR and IT functions, inputs into commercial and financial
strategy, ensures its compliance procedures and is a principal contact for
shareholder and investor relations matters.
Current roles:
Jonathan Freeman joined the Board in 2003. He chairs the Audit
Committee and the Remuneration Committee and is also a member of the
Nominations Committee. He is also a Director of PhotonStar LED Group
plc and Braveheart Investment Group plc.
Past roles:
Senior financial roles in a diverse range of industries, including the past
7 years as UK Finance Director at Shield Therapeutics Plc (quoted on AIM).
Past roles:
Director of Beeson Gregory, Chief Executive Officer of Syndicate Asset
Management plc and a Director of Hume Capital Securities plc.
Brings to the Board:
Strategic and operational financial experience of developing and
commercialising pharmaceutical products.
Brings to the Board:
Over 25 years of experience in the financial services sector, guidance on
City regulatory matters, corporate finance and investor relations.
Ken James
Executive Director and
Head of R&D
Directors who served in the year
Derek Martin, BSc (Hons), ACA
Finance Director and Company Secretary
Derek Martin resigned from his position on 19 February 2018.
Current roles:
Ken James joined the Board in April 2016. In November 2016 he was
appointed Head of R&D. He oversees the development, regulatory
and manufacturing strategies for the Group’s existing pipeline and the
evaluation of early stage pipeline opportunities. He is a member of the
Audit Committee.
Past roles:
Senior Vice President of Research and Development for GlaxoSmithKline
Worldwide Consumer Healthcare, having worked in the UK and the United
States.
Brings to the Board:
Over 40 years’ experience in the research, development and
commercialisation of consumer healthcare products.
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Remuneration Report
Remuneration Committee: composition and
terms of reference
During the period under review the Remuneration Committee
comprised the independent Non-Executive Directors and was
chaired by Jonathan Freeman.
The purpose of the Remuneration Committee is to ensure
that the Executive Directors and other employees are fairly
rewarded for their individual contribution to the overall
performance of the Group. The Committee considers and
recommends to the Board the remuneration of the Executive
Directors and is kept informed of the remuneration packages
of senior staff and invited to comment on these. There were
two Remuneration Committee meetings during 2017.
The Board retains responsibility for overall remuneration
policy. The terms of reference of the Remuneration
Committee are set out in the Investor Centre/Corporate
Governance section on the Group’s website at
www.futuramedical.com.
Policy on Executive Directors’ remuneration
Executive remuneration packages are designed to attract
and retain executives of the necessary skill and calibre
to run the Group. Direct benchmarking of remuneration
is difficult given the specialised nature and size of the
Group. The Remuneration Committee recommends to the
Board remuneration packages by reference to individual
performance and uses the knowledge and experience of
the Committee members, published surveys relating to AIM
companies, the pharmaceutical industry and market changes
generally. The Remuneration Committee has responsibility for
recommending any long-term incentive plans.
The Board determines whether or not Executive Directors
are permitted to serve in roles with other companies. Such
permission is only granted where a role is on a strictly limited
basis, where there are no conflicts of interest or competing
activities and providing there is not an adverse impact on
the commitments required to the Group. Earnings from such
roles are not disclosed to the Group.
There are four main elements of the remuneration package
for Executive Directors and staff:
Basic salaries and benefits in kind
Basic salaries are recommended to the Board by the
Remuneration Committee, taking into account the
performance of the individual and the rates for similar
positions in comparable companies. Benefits in kind
comprising death in service cover and private medical
insurance are available to all staff and Executive Directors.
Benefits in kind are non-pensionable.
Share options and other share-based incentives
The Group operates approved and unapproved share option
schemes for the Executive Directors and other employees
to motivate those individuals through equity participation.
Unapproved share options are also sometimes granted to key
consultants. Exercise of share options under the schemes is
subject to specified exercise periods and compliance with the
AIM Rules.
The schemes are overseen by the Remuneration Committee
which recommends to the Board all grants of share options
based on the Remuneration Committee’s assessment of
personal performance and specifying the terms under which
eligible individuals may be invited to participate.
The Remuneration Committee considers that the best
alignment of employee interests with those of its shareholders
is through the continued use of incentives for performance
through the award of share options or other share-based
arrangements.
The Group operates a long-term incentive plan (“LTIP”).
The quantum of any awards receivable by the staff and
Directors will depend on achieving set Group performance
milestones and the share price at the time relative to targets
set in advance. As a guide, if all of the approved milestones
are achieved at the share price targets over the next 48
months and if the Group exercised its discretion to settle the
awards in equity then the additional shares issued would
be equivalent to approximately 2.69% of the issued share
capital.
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Annual Report and Accounts for the year ended 31 December 2017
Remuneration Report (continued)
Bonus scheme
The Group has a discretionary bonus scheme for staff and
Executive Directors.
Pension contributions
The Group pays a defined contribution to the pension
scheme of Executive Directors and other employees. The
individual pension schemes are private and their assets are
held separately from those of the Group.
Salaries and benefits are reviewed in December to cover the
following calendar year. The timing of the review enables the
Group’s performance over the preceding financial year and
the strategy for the forthcoming year to be considered.
Service contracts
The Executive Directors are employed under service
contracts requiring six months’ notice by either party. Non-
Executive Directors and the Chairman receive payments
under appointment letters which are terminable by three
months’ notice by either party. The service contracts of the
Non-Executive Directors are made available for inspection at
the AGM.
Policy on Non-Executive Directors’ remuneration
The Non-Executive Directors and the Chairman each receive
a fee for their services as a director, which is approved by the
Board, mindful of the time commitment and responsibilities
of their roles and of current market rates for comparable
organisations and appointments. Non-Executive Directors
and the Chairman are reimbursed for travelling and other
incidental expenses incurred on Group business in line with
the Group Expenses Policy. The Non-Executive Directors and
the Chairman are also included under the long-term
incentive plan.
The Board encourages the ownership of Futura shares by
Executive and Non-Executive Directors alike and in normal
circumstances does not expect Directors to undertake
dealings of a short-term nature.
The Non-Executive Directors receive a proportion of their
remuneration in the form of shares. The quantum of shares is
determined at the start of each calendar year based on the
average closing mid-price of the last ten trading days prior to
the year end. The award for 2017 was settled on 2 January
2018 by the issue of 37,320 shares at 57.50 pence per
share. The 2018 award has been determined at 25.10 pence
per share and the Non-Executive Directors will accrue these
shares over 2018 and receive them, or such lower number as
have accrued if they leave the Group earlier, in January 2019.
The Board considers ownership of Futura shares by Non-
Executive Directors as a positive alignment of their interest
with shareholders. The Board periodically reviews the
shareholdings of the Non-Executive Directors and will seek
guidance from its advisers if, at any time, it is concerned that
a shareholding may, or could appear to, conflict with their
duties as an independent Non-Executive Director of
the Group.
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Stock Code: FUM
21
Directors’ emoluments
The emoluments of the Directors, who represent the key management personnel, in 2017 were as follows:
Year ended 31 December 2017
Salary &
Directors’
Fees
£
Bonus
£
Share
Awards
£
Benefits
In Kind
£
Pension
£
Total
£
Year ended
31 December
2016
£
Executive Directors
James Barder*
229,748
–
Derek Martin
Ken James
127,400
17,231
166,500
19,687
–
–
–
Non-Executive Directors
John Clarke
Jonathan Freeman
Lisa Arnold
Totals
61,600
35,070
–
–
–
–
25,195
8,394
–
5,254
2,758
–
–
–
–
–
235,002
306,566
21,875
169,264
183,774
–
186,187
51,184
–
–
–
86,795
43,464
–
83,085
41,524
15,741
620,318
36,918
33,589
8,012
21,875
720,712
681,874
* James Barder waived his right to a cash bonus of £23,495 in 2017 and the Board agreed that the bonus could be earned in 2018 subject to revised
performance criteria being met and in addition to the 2018 scheme in place.
The above fees and emoluments exclude reimbursed expenditure incurred in the conduct of Group business.
There were no cash bonuses or settlements under the LTIP in 2017 (2016: £nil).
Directors’ interests in shares
John Clarke
James Barder
Derek Martin
Jonathan Freeman
Ken James
Totals
31 December 2017
31 December 2016
Beneficial
Interests
Non-beneficial
Interests
Beneficial
Interests
Non-beneficial
Interests
198,976
–
119,551
–
611,330
867,500
621,330
867,500
280,000
63,565
13,787
–
–
–
280,000
35,803
–
–
–
–
1,167,658
867,500
1,056,684
867,500
Other than as shown in the table no Director had any interest in the shares of the Company at 31 December 2017 or at
31 December 2016.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Remuneration Report (continued)
Directors’ interests in share options
The Board uses share options to align Executive Directors’ and employees’ interests with those of shareholders in order
to provide incentives and reward them based on improvements in Group performance. Options granted to the Executive
Directors were as follows:
James Barder
Derek Martin*
Ken James
Totals
31 December 2017
31 December 2016
Options
Held
Share-based
Payment
Expense
Options
Held
Share-based
Payment
Expense
1,750,000
40,608
1,500,000
1,060,000
400,000
30,963
26,396
760,000
–
11,864
6,969
–
3,210,000
97,967
2,260,000
18,833
* Following Derek Martin’s resignation on 19 February 2018, those options will lapse if not exercised prior to 14 May 2018.
All share options were granted with an exercise price at or above market value on the date of grant. The main vesting
condition of the share options is that the Director remain employed with the Group as at the date of exercise or continues
to provide consultancy services as at the date of exercise. The share options of the Directors under the Futura Medical plc
Enterprise Management Incentive Scheme are set out below:
Grant Date
Number
Awarded
Exercise
Price/Share
Earliest
Exercise Date
Expiry Date
James Barder
14 September 2012
250,000
61.50 pence
1 October 2014 30 September 2019
James Barder
23 September 2013
34,615
71.50 pence
1 October 2015 30 September 2020
James Barder
13 January 2017
124,348
57.50 pence
1 October 2018 30 September 2023
Derek Martin*
28 September 2011
73,894
56.50 pence
1 October 2013 30 September 2018
Derek Martin*
14 September 2012
100,000
61.50 pence
1 October 2014 30 September 2019
Derek Martin*
23 September 2013
130,000
71.50 pence
1 October 2015 30 September 2020
Derek Martin*
11 September 2014
103,961
51.75 pence
1 October 2016 30 September 2021
Derek Martin**
13 January 2017
200,000
57.50 pence
1 October 2018 30 September 2023
Ken James
Ken James
Totals
13 January 2017
200,000
57.50 pence
1 October 2018 30 September 2023
12 September 2017
200,000
30.50 pence
1 October 2019 30 September 2024
2,266,818
* Following Derek Martin’s resignation on 19 February 2018, his options will lapse if not exercised prior to 14 May 2018.
** Following Derek Martin’s resignation on 19 February 2018 these options lapsed immediately.
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23
Directors’ interests in long-term incentive plan
Assuming that each remaining Group performance milestone is met, at the target share price and before the next target
date ends, and if the awards were to be equity-settled then the number of shares that could be awarded, before tax, to the
participants are:
James Barder
Derek Martin*
Ken James
John Clarke
Jonathan Freeman
Other employees
2018
85,708
85,708
40,000
40,000
40,000
2019
85,708
85,708
40,000
40,000
40,000
2020
85,708
85,708
40,000
40,000
40,000
2021
85,708
85,708
40,000
40,000
40,000
356,124
356,124
356,124
356,124
At discretion of Remuneration Committee
163,664
163,664
163,664
163,664
Totals
811,204
811,204
811,204
811,204
* Following Derek’s Martin’s resignation on 19 February 2018, it is not anticipated that the shares above will be awarded.
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The Directors consider that until a milestone has been met it is not appropriate to recognise a share-based remuneration
charge in the Consolidated Statement of Comprehensive Income in respect of the LTIP.
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Jonathan Freeman
Chairman of the Remuneration Committee
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Corporate Governance
Directors’ statement on corporate governance
The Board of Directors is accountable to shareholders for
the good corporate governance of the Group. Under the AIM
rules compliance with the UK Corporate Governance Code
(‘the Code’) is voluntary. Although the Board has not formally
adopted the Code, the Board is aware of the best practice
defined by the Code and will seek to adopt procedures
to institute good governance insofar as is practical and
appropriate for a group of its size while retaining its primary
focus on the success of the business. This statement sets
out how certain principles of the Code are met through the
Group’s application of best practice.
Board of Directors
The Board comprises a Non-Executive Chairman
(“Chairman”), the Chief Executive, the Finance Director
and Chief Operating officer, the Head of R&D and an
independent Non-Executive Director. The Chairman and the
Non-Executive Director receive part of their remuneration
in the form of shares but this does not constitute a material
business relationship with the Group and is not considered to
impair the independence of the Non-Executive Directors. The
roles of Chairman and Chief Executive are intended to remain
separate.
The Board retains full control of the Group with day-to-day
operational control delegated to the Executive Directors. The
full Board meets bi-monthly and on any other occasions it
considers necessary. During 2017, there were nine meetings
of the full Board, two of the Remuneration Committee, two of
the Audit Committee and two of the Nominations Committee.
All meetings were fully attended by their constituent Directors.
Board responsibility
The Board is responsible for approving interim and
annual financial statements, formulating and monitoring
Group strategy, approving financial plans and reviewing
performance, as well as complying with legal, regulatory
and corporate governance matters. There is a schedule of
matters reserved for the Board.
There have been no material changes to our corporate
governance processes following our annual review.
The Board considers that the remuneration of Executive
Directors should include a performance related element.
Audit Committee
During the period under review the Audit Committee was
chaired by Jonathan Freeman as Senior Independent Non-
Executive Director. It met to review the Interim Report, the
Annual Report and to consider the suitability and monitor
the effectiveness of the internal control processes. There
were two Audit Committee meetings during 2017. The Audit
Committee reviews the findings of the external auditors
and reviews accounting policies and material accounting
judgements.
The independence and effectiveness of the external auditor
is reviewed annually and audit partners are rotated every
five years. The Audit Committee meets at least once per
calendar year with the auditors to discuss their independence
and objectivity, the Annual Report, any audit issues arising,
internal control processes, auditor appointment and fee levels
and any other appropriate matters. The fees in respect of
audit and tax services are disclosed in Note 4 of the Notes
to the Consolidated Financial Statements. Fees for non-audit
services paid to the auditors are not deemed to be of such
significance to them as to impair their independence and
therefore the Audit Committee considers that the objectivity
and independence of the auditors is safeguarded.
The terms of reference of the Audit Committee are set out
in the Investor Centre/Corporate Governance section on the
Group’s website at www.futuramedical.com.
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Internal control
The Board is responsible for establishing and maintaining
the Group’s system of internal control and for reviewing its
effectiveness. The system of internal control is designed
to manage, rather than eliminate, the risk of failure of the
achievement of business objectives and can only provide
reasonable but not absolute assurance against material
misstatement or loss.
The Audit Committee continues to monitor and review the
effectiveness of the system of internal control and report to
the Board when appropriate with recommendations.
The annual review of internal control and financial reporting
procedures did not highlight any issues warranting the
introduction of an internal audit function. It was concluded,
given the current size and transparency of the operations of
the Group, that an internal audit function is not required.
The main features of the internal control system are outlined
below:
• A control environment exists through the close
management of the business by the Executive Directors.
The Group has a defined organisational structure with
delineated approval limits. Controls are implemented and
monitored by the Executive Directors.
• The Board has a schedule of matters expressly
reserved for its consideration and this schedule includes
acquisitions and disposals, major capital projects,
treasury and risk management policies and approval of
budgets.
• The Group utilises a detailed budgeting and forecasting
system. Detailed budgets are prepared annually by the
Executive Directors before submission to the Board for
approval. Forecasts are updated at least quarterly to
reflect changes in the business and are monitored by
the Board including future cash flow projections. Actual
results are monitored against annual budgets in detail on
a monthly basis, with variances highlighted to the Board.
• Financial risks are identified and evaluated for each major
transaction for consideration by the Board.
• Standard financial control procedures are operated
throughout the Group to ensure that the assets of the
Group are safeguarded and that proper accounting
records are maintained.
Going concern
As disclosed in the Strategic Report the consolidated
financial statements have been prepared on the going
concern basis as the Directors have a reasonable expectation
that the Group has adequate resources to continue in
operational existence for the foreseeable future.
Nominations Committee
The Nominations Committee monitors the requirements of
the Group in respect of Board composition as the Group
evolves and with regard to succession planning. There were
two meetings during 2017. The terms of reference of the
Nominations Committee are set out in the Investor Centre/
Corporate Governance section on the Group’s website at
www.futuramedical.com.
Employees
At 31 December 2017, the Group’s employees (excluding
Non-Executive Directors) comprised: three Executive
Directors and ten full-time and one part-time member of staff,
all of whom are employed by Futura Medical Developments
Limited.
The Executive Directors regularly keep staff informed of the
progress and development of the Group through formal and
informal meetings and employee feedback is encouraged.
The Group has a policy of offering share options and other
share-based incentives to all eligible employees with due
consideration to the level of dilution to shareholders.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Corporate Governance (continued)
Employees (continued)
The Group does not discriminate between employees
and prospective employees on the grounds of age, race,
disability, religion or gender.
The Board recognises its obligation towards its employees
to provide a safe and healthy working environment. The
Group complies with health and safety legislation including
conducting regular inspections and risk assessments.
Environmental, social and community matters
As a consequence of the size and nature of our operations,
the impact of the Group’s operations on the local community
and the environment is not considered to be significant.
Recycling of office supplies is undertaken where possible.
The Group operates in a highly regulated industry and
clinical trials are conducted in compliance with regulatory
requirements. The Group undertakes periodic reviews of
corporate social responsibility matters with policy updates
and implements improvements to its operations where
identified.
Relationship with shareholders
The Directors seek to build a mutual understanding of
objectives between the Group and its shareholders. The
Group reports formally to shareholders in its Interim Report
and Annual Report setting out details of its activities. In
addition, the Group keeps shareholders informed of events
and progress through the issue of regulatory news in
accordance with the AIM Rules. The Chief Executive and
Finance Director and Chief Operating Officer meet with
institutional shareholders following interim and final results.
The Group also maintains investor relations pages and other
information regarding the business, its products and activities
on its website at www.futuramedical.com.
The Annual Report is made available to shareholders at least
20 working days before the Annual General Meeting (“AGM”)
along with the Notice of the AGM. Directors are required
to attend the AGM, unless unable to do so for personal
reasons or due to pressing commercial commitments, and
shareholders are given the opportunity to vote on each
separate resolution proposed at the AGM. The Group counts
all proxy votes and will report at the AGM the level of proxies
lodged for each resolution, after it has first been dealt with by
a show of hands.
Angela Hildreth
Secretary
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27
Directors’ Report
Directors
The Directors during the year were:
John Clarke
James Barder
Derek Martin (resigned 19 February 2018)
Jonathan Freeman
Ken James
Dividends
No dividends were paid and none are proposed (2016: £nil).
Group research and development costs
The main area of R&D continues to be in the field of
innovative pharmaceutical drugs and medical devices for the
consumer healthcare market with the focus being on sexual
healthcare and pain relief management.
Financial Instruments
Information about the Group’s management of financial risk
can be found in note 2 to the financial statements.
Future developments
The Group aims to achieve cost-effective research and
development (“R&D”) and to bring products to market
through licensing partners as soon as is practicable.
Directors’ qualifying third party indemnity provisions
The Group has made qualifying third party indemnity
provisions in favour of the Directors against liability in respect
of proceedings brought by third parties and these remain in
force at the date of this Directors’ Report.
Statement of Directors’ responsibilities in respect of the
Annual Report and the financial statements
The directors are responsible for preparing the Annual
Report and Account and the Group and parent Company
financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare Group and
parent Company financial statements for each financial year.
As required by the AIM Rules of the London Stock Exchange
they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs as adopted by
the EU) and applicable law and have elected to prepare the
parent Company financial statements in accordance with
UK accounting standards and applicable law (UK Generally
Accepted Accounting Practice), including FRS 101 Reduced
Disclosure Framework.
Under company law the directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
parent Company and of their profit or loss for that period. In
preparing each of the Group and Parent company financial
statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable,
relevant, reliable and prudent;
Adequacy of information supplied to auditor
Each Director has taken all reasonable steps to make himself
aware of any information needed by the Group’s auditor for
the purpose of the audit and to establish that the auditor is
aware of that information. The Directors are not aware of any
relevant audit information of which the auditor is unaware.
•
•
for the Group financial statements, state whether they
have been prepared in accordance with IFRSs as
adopted by the EU;
for the parent Company financial statements, state
whether applicable UK accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements;
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Directors’ Report (continued)
• assess the Group and parent Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report and a Directors’
Report that complies with that law and those regulations.
• use the going concern basis of accounting unless
they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the parent Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
parent Company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking
such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and
other irregularities.
Website publication
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
By order of the Board
Angela Hildreth
Secretary
13 March 2018
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Independent Auditor’s Report to the members of
Futura Medical plc
Our opinion is unmodified
We have audited the financial statements of Futura Medical Plc (“the Company”) for the year ended 31 December 2017 which
comprise the Consolidated Statement of Comprehensive Loss, Consolidated Statement of Financial Position, Consolidated
Statement of Changes in Equity, Consolidated Statement of Cash Flows, Parent Company Balance Sheet, Parent Company
Statement of Changes in Equity, and the related notes, including the accounting policies in note 1.
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at
31 December 2017 and of the Group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with International Financial Reporting
Standards as adopted by the European Union;
the parent Company financial statements have been properly prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the
audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Independent Auditor’s Report to the members of
Futura Medical plc (continued)
The risk
Our response
Expenses recognition
(Research and
Development expenses
and Administrative
expense)
(£5,218,671; 2016:
£4,724,435)
Refer to page 46 (financial
disclosures).
Although we do not consider
recognition of expenses to
be an area with a high risk of
significant misstatement, or
requiring a significant level of
judgement, it is considered to
be the key drivers of results
and as such had the greatest
effect on our audit and
allocation of resources in
the planning and completing
of our audit.
Our procedures included:
Tests of details: In order to challenge whether the
expensed had been accurately recorded in the correct
period, we:
• selected a sample of external expenses and
inspected related invoices;
•
for payroll related expenses, agreed the total net pay
per the payroll reports to the bank statements.
• selected a sample of post year end invoices and post
year end bank payments and agreed to supporting
documentation.
Recoverability of parent
company’s investment
and debt due from group
entities
(Investment - £1,321,798;
2016: £1,120,537)
(Loan - £36,475,173;
2016: £32,332,884)
Refer to page 61 (financial
disclosures).
Forecast-based valuation
Our procedures included:
The carrying amount of the
parent company’s investment
in its subsidiary and group
debtor balance are significant
and at risk of irrecoverability
due to uncertainties related to
successful commercialisation
of pipeline products. The
estimated recoverable amount
of these balances is subjective
due to the inherent uncertainty
in forecasting and discounting
cash flows.
Benchmarking assumptions: Challenging the
assumptions used in the discounted cash flow model
based on our knowledge of the Group including
products pipeline, results from latest clinical trials, the
markets in which the subsidiaries operate and our sector
experience.
Comparing valuations: Comparing the carrying amount
of the investment and debtor balance to the market
capitalisation of the Group as at and since year end, to
assess the reasonableness of the cash flow forecasts
and discount rates used.
Assessing transparency: Assessing the adequacy
of the parent company’s disclosures in respect of the
investment in subsidiaries and group debtor balance.
Our application of materiality and an overview of the scope of our audit
Materiality for the group financial statements as a whole was set at £217,000 (2016: £162,000), determined with reference to
a benchmark of group loss before tax of £4,773,053 (2016: £4,730,058), of which it represents 4.5% (2016: 3.5%).
Materiality for the parent company financial statements as a whole was set at £95,000 (2016: £133,000), by reference to the
component materiality. This is lower than the materiality we would have otherwise have determined by reference to company
total assets.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £10,850, in
addition to other identified misstatements that warranted reporting on qualitative grounds.
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Of the group’s 3 reporting components (2016: 3); Futura Medical Developments Limited, Futura Consumer Health Limited and
Futura Medical plc, we subjected 2, (2016: 2) to full scope audits.
The components within the scope of our work accounted for the percentages illustrated below:
The components within the scope of our work accounted for the following percentages of the group’s results:
Number of components
Group revenue
Group loss before tax
Group total assets
2017
2016
2017
2016
2017
2016
2017
2016
Audits for group
reporting purposes
2
2
100%
100%
100%
97%
100%
98%
The Group team approved the following component materialities, having regard to the mix of size and risk profile of the Group
across the components:
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• Futura Medical Developments Limited £215,000 (2016: £162,000)
• Futura Medical plc, £95,000 (2016: £133,000)
All work on a component and group level was performed by the Group team at the company’s head office in Guildford, United
Kingdom.
We have nothing to report on going concern
We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate
or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least
twelve months from the date of approval of the financial statements. We have nothing to report in these respects.
We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based
solely on that work we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic report and the directors’ report;
•
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
•
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Independent Auditor’s Report to the members of
Futura Medical plc (continued)
We have nothing to report on the other matters on which
we are required to report by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions
of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a
body, for our audit work, for this report, or for the opinions we
have formed.
Derek McAllan (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Arlington Business Park
Theale
Berkshire
RG7 4SD
14 March 2018
• adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
•
the parent Company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on pages
27-28, the directors are responsible for: the preparation
of the financial statements including being satisfied that
they give a true and fair view; such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error; assessing the Group and parent
Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and using
the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
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33
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
Revenue
Research and development costs
Administrative costs
Operating loss
Finance income
Loss before tax
Taxation
Year ended
31 December
2017
£
Year ended
31 December
2016
£
Notes
1.5
362,727
170,362
(4,100,453)
(3,509,680)
(1,118,218)
(1,214,755)
(4,855,944)
(4,554,073)
19,316
14,714
(4,836,628)
(4,539,359)
936,344
842,246
4
7
8
Loss for the year being total comprehensive loss attributable to owners of the
parent company
(3,900,284)
(3,697,113)
Basic and diluted loss per share (pence)
9
(3.23 pence)
(3.65 pence)
All amounts relate to continuing activities.
The notes on pages 37 to 56 form part of these consolidated financial statements.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Share
Capital
£
Share
Premium
£
Merger
Reserve
£
Retained
Losses
£
Total
Equity
£
Notes
At 1 January 2016
198,185
33,053,345
1,152,165 (29,617,464)
4,786,231
Total comprehensive loss for the year
Share-based payment
Shares issued during the year
Cost of share issue
At 31 December 2016
Total comprehensive loss for the year
Share-based payment
Shares issued during the year
17
16
17
16
–
–
–
–
42,105
11,957,895
–
(559,495)
–
(3,697,113)
(3,697,113)
–
–
–
54,405
54,405
–
–
12,000,000
(559,495)
240,290
44,451,745
1,152,165 (33,260,172)
12,584,028
–
–
–
–
1,102
219,651
–
(3,900,284)
(3,900,284)
–
–
201,261
201,261
–
220,753
At 31 December 2017
241,392
44,671,396
1,152,165 (36,959,195)
9,105,758
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 all other net gains and losses not recognised elsewhere.
The notes on pages 37 to 56 form part of these consolidated financial statements.
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35
Consolidated Statement of Financial Position
As at 31 December 2017
Assets
Non-current assets
Plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Taxation
Cash and cash equivalents
Total current assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total net assets
Capital and reserves attributable to owners of the parent company
Share capital
Share premium
Merger reserve
Retained losses
Total equity
As at
31 December
2017
£
As at
31 December
2016
£
Notes
10
11
13
8
14
63,517
63,517
21,351
21,351
70,413
83,641
181,076
138,989
927,247
842,246
8,362,646
12,352,978
9,541,382
13,417,854
15
(499,141)
(855,177)
(499,141)
(855,177)
9,105,758
12,584,028
16
241,392
240,290
44,671,396
44,451,745
1,152,165
1,152,165
(36,959,195)
(33,260,172)
9,105,758
12,584,028
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The consolidated financial statements were approved and authorised for issue by the Board on 13 March 2018.
The notes on pages 37 to 56 form part of these consolidated financial statements.
By order of the Board
James Barder
Chief Executive
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Consolidated Statement of Cash Flows
For the year ended 31 December 2017
Cash flows from operating activities
Loss before tax
Adjustments for:
Depreciation
Finance income
Share-based payment charge
Year ended
31 December
2017
£
Year ended
31 December
2016
£
Notes
(4,836,628)
(4,539,359)
10
7
17
13,428
6,247
(19,316)
(14,714)
201,261
54,405
Cash flows from operating activities before changes in working capital
(4,641,255)
(4,493,421)
Decrease in inventories
(Increase) / decrease in trade and other receivables
11
13,228
80,126
(42,087)
16,981
(Decrease) / increase in trade and other payables
15
(356,036)
101,284
Cash used in operations
Income tax received
Net cash used in operating activities
Cash flows from investing activities
Purchase of plant and equipment
Interest received
Cash (used in) / generated by investing activities
Cash flows from financing activities
Issue of ordinary shares
Expenses paid in connection with share issue
Cash generated by financing activities
(Decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
(5,026,150)
(4,295,030)
851,343
997,036
(4,174,807)
(3,297,994)
10
(55,594)
(7,483)
19,316
29,656
(36,278)
22,173
16
220,753
12,000,000
–
(559,495)
220,753
11,440,505
(3,990,332)
8,164,684
12,352,978
4,188,294
Cash and cash equivalents at end of year
14
8,362,646
12,352,978
The notes on pages 37 to 56 form part of these consolidated financial statements.
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37
Notes to the Consolidated Financial Statements
For the year ended 31 December 2017
1.
Accounting policies
1.1 Basis of preparation
The consolidated financial statements have 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 these consolidated financial
statements 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 2017.
1.2 Going concern
The Group had an operating loss of £4.86 million for the 2017 financial year (2016: £4.55 million), but had a positive
net asset value of £9.11 million at 31 December 2017 (31 December 2016: £12.58 million). The cash component
of this at 31 December 2017 was £8.36m (31 December 2016: £12.35 million) and the Directors consider this to
represent sufficient funds for the foreseeable future, taking into account the Group’s current development plans.
In assessing the Group’s going concern ability the Directors have considered all relevant available information about
the future trading and commercial activities of the Group, including profit forecasts, cash forecasts, sensitivity analysis
scenario planning and funding requirements. The Directors continue to manage the working capital of the Group
to ensure it is well positioned to fund its future development programme and also to take advantage of appropriate
commercial opportunities as and when they arise in the near and medium term.
Based on this assessment, the consolidated financial statements have been prepared on a going concern basis and
the Directors have no reason to believe that the Group will not operate as a going concern for the foreseeable future.
1.3 Accounting developments
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s
financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they
become effective.
IFRS 15
Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that
will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that
reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a
customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The
new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under
IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January
2018 with early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the
new standard on the required effective date.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
1.
Accounting policies (continued)
IFRS 16
IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a
single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term
is twelve months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or
finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. IFRS 16
was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019. The Group
is currently assessing the impact of IFRS 16 and plans to adopt the new standard on the required effective date.
Other standards
The following standards and interpretations, applicable for annual periods beginning on or after 1 January 2017, are
not expected to have any impact on the results of the Group or the presentation of the financial statements:
•
IFRS 9 Financial Instruments
•
•
•
IFRS 10 Consolidated Financial Statements – Amendments regarding the sale or contribution of assets between an
investor and its associate or joint venture and amendments regarding the application of the consolidation exception
IFRS 11 Joint Arrangements – Amendments regarding the accounting for acquisitions of an interest in a joint
operation
IFRS 12 Disclosure of Interests in Other Entities – Amendments regarding the application of the consolidation
exception
•
IFRS 14 Regulatory Deferral Accounts
•
IAS 1 Presentation of Financial Statements – Amendments resulting from the disclosure initiative
•
IAS 7 Statement of Cash Flows – Amendments resulting from the disclosure initiative
•
IAS 12 Income Taxes – Amendments to recognition of deferred tax assets for unrealised losses
•
•
IAS 16 Property, Plant and Equipment – Amendments regarding the clarification of acceptable methods of
depreciation and amortisation and amendments bringing bearer plants into the scope of IAS 16
IAS 27 Separate Financial Statements (as amended in 2011) – Amendments reinstating the equity method as an
accounting option for investments in subsidiaries, joint ventures and associates in an entity’s separate financial
statements
•
IAS 28 Investments in Associates and Joint Ventures – Amendments regarding the application of the consolidation
exception
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1.
Accounting policies (continued)
•
IAS 38 Intangible Assets – Amendments regarding the clarification of acceptable methods of depreciation and
amortisation
•
IAS 41 Agriculture – Amendments bringing bearer plants into the scope of IAS 16
• Amendments resulting from September 2014 Annual Improvements to IFRSs:
— IFRS 2 Classification and Measurement of Share-based Payment Transactions
— IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
— IFRS 7 Financial Instruments: Disclosures
— IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration
— IAS 19 Employee Benefits
— IAS 34 Interim Financial Reporting
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
statements present 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 statements.
1.5 Revenue
Revenue comprises the fair value received or receivable for milestone income and royalties, net of value added tax.
The accounting policies for the principal revenue streams of the Group are as follows:
(i) 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.
(ii) 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.
(iii) Revenue is recognised in the consolidated statement of profit and loss and other comprehensive income when the
risks and rewards associated with the ownership of goods are transferred to the customer. This is deemed to occur
when the customer collects and loads the product, resulting in the legal transfer of title.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
1.
Accounting policies (continued)
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, including patents and trademarks, 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 yet met for CSD500 prior to
the extended shelf life product being commercially launched in at least one major market and further testing and
development is required before the capitalisation criteria are met.
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.
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1.
Accounting policies (continued)
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 consumable materials to be used in development and 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
or defective items, where appropriate.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
1.
Accounting policies (continued)
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.
Cash and cash equivalents are financial assets and comprise cash in hand and sterling short-term money market
funds 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.
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1.
Accounting policies (continued)
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.
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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.
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(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.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
1.
Accounting policies (continued)
(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 all staff and 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, assumptions 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.
Estimates and assumptions
Share-based payments
The Group operates an equity-settled share-based compensation plan as detailed in note 17 for employee (and
consultant) services to be received and the corresponding increases in equity are measured by reference to the fair
value of the equity instruments as at the date of grant. The fair value determination is based on the principles of the
Black-Scholes Model, the inputs of which require the use of estimation.
Judgements
Deferred tax recognition
The determination of probable future profits, against which the Group’s deferred tax profits can be offset, requires
judgement.
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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 market rates of
interest on Group cash deposits using money market funds. Cash balances used to settle the liabilities from operating
activities are maintained in current accounts.
(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 2017 the
Group had trade payables denominated in a foreign currency totalling £11,582 (31 December 2016: £nil).
Cash flow interest rate risk and fair value interest rate risk
The Group’s interest rate risk arises from short-term money market deposits.
(ii) Credit risk
Credit risk arises from cash and cash equivalents and money market deposits as well as credit exposure in relation to
outstanding receivables.
(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 £499,141 (2016: £855,177) 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.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
3.
Segment reporting
The Group is organised and operates as one segment. The Group’s revenue analysed by geographical location of the
Group’s customers is:
Middle East / ROW
United States of America
Europe
4. Operating loss
Operating loss is stated after charging:
Depreciation of plant and equipment (note 10)
Inventories consumed in R&D
Wages and salaries (note 5)
Operating lease costs: property
Loss on foreign exchange
The fees of the Group’s auditor KPMG LLP for services provided are analysed below:
Audit services
Parent company
Subsidiaries
Tax services
Parent company
Subsidiaries
Total fees
Year ended
31 December
2017
£
Year ended
31 December
2016
£
12,727
118,192
–
350,000
35,473
16,697
362,727
170,362
Year ended
31 December
2017
£
Year ended
31 December
2016
£
13,428
6,247
22,978
122,565
2,154,137
1,662,299
116,076
76,394
9,701
4,823
Year ended
31 December
2017
£
Year ended
31 December
2016
£
26,000
7,500
2,500
1,000
37,000
26,000
7,500
1,000
10,000
44,500
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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 9, administration 5), (2016:12, by category: R&D 6, administration 6) and their aggregate emoluments
were:
Wages and salaries
Social security costs
Other pension and insurance benefits costs
Total cash-settled emoluments
Accrued holiday pay
Share-based payment remuneration charge
Total emoluments
All employees of the Group are employed by Futura Medical Developments Limited.
6.
Directors’ emoluments
Aggregate emoluments
Employer pension contributions
Subtotal per remuneration report
Share-based payment remuneration charge
Employer’s national insurance charge
Total emoluments
Year ended
31 December
2017
£
Year ended
31 December
2016
£
1,582,108
1,288,330
200,623
161,481
168,131
156,656
1,950,862
1,606,467
2,014
6,224
201,261
49,608
2,154,137
1,662,299
Year ended
31 December
2017
£
Year ended
31 December
2016
£
698,837
628,609
21,875
53,265
720,712
681,874
97,967
96,038
18,833
86,284
914,717
786,991
In 2017 two Directors exercised share options under the Group share option schemes and realised a combined gain of
£28,768 (2016: nil). In respect of the highest paid Director the realised gain was £14,263 (2016: £nil).
In 2017 one Director (2016: one Director) participated in a private money purchase defined contribution pension
scheme. Emoluments for individual Directors are disclosed within the Remuneration Report.
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48
Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
6.
Directors’ emoluments (continued)
Emoluments on the previous page include the following amounts in respect of the highest paid Director:
Aggregate emoluments
Employer pension contributions
Subtotal per remuneration report
Share-based payment remuneration charge
Employer’s national insurance charge
Total emoluments
7.
Finance income
Interest receivable in 2017 on treasury funds was £19,316 (2016: £14,714).
8.
Taxation
Current tax
UK corporation tax credit reported in the
Consolidated Statement of Comprehensive Income
Year ended
31 December
2017
£
Year ended
31 December
2016
£
235,002
306,566
–
–
235,002
306,566
40,608
32,176
11,864
41,998
307,786
360,428
Year ended
31 December
2017
£
Year ended
31 December
2016
£
936,344
842,246
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8.
Taxation (continued)
The tax assessed for the year is different from the standard rate of corporation tax in the UK.
The differences are explained below:
Loss on ordinary activities before tax
Loss on ordinary activities at an average standard rate of corporation tax
in the UK of 19.25% (2016: 20%)
Expenses not deductible for tax purposes
Unrecognised deferred tax
Unutilised tax losses
Share scheme deduction
Additional relief attaching to R&D tax credit claims
UK corporation tax credit
R&D expenditure credit re 2016
R&D expenditure credit re 2017
UK corporation tax credit reported in the
Consolidated Statement of Comprehensive Income
Year ended
31 December
2017
£
Year ended
31 December
2016
£
4,836,628
4,539,359
931,051
907,872
(249)
(125)
(30,523)
(12,154)
(381,446)
(396,701)
11,235
–
381,880
343,354
911,948
842,246
9,098
15,298
–
–
936,344
842,246
The Group has tax losses of £24,300,530 (2016: £22,332,102) available for offset against future taxable profits.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
8.
Taxation (continued)
Deferred tax
Deferred tax assets amounting to £4,133,675 (2016: £3,859,456) have not been recognised due to it not being
probable that taxable profits will be available, against which these deductible temporary differences can be utilised.
Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective from
1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective from
1 April 2020) was substantively enacted on 6 September 2016. The unrecognised deferred tax asset at 31 December
2017 has been calculated assuming a prevailing tax rate when the timing differences reverse of 17% (2016: 17%) and
comprises:
Depreciation differential versus capital allowances
Tax relief on unexercised share options
Other short-term timing differences
Unutilised tax losses
Year ended
31 December
2017
£
Year ended
31 December
2016
£
(348)
6,820
–
53,156
2,932
3,022
4,131,091
3,796,458
4,133,675
3,859,456
9.
Loss per share (pence)
The calculation of the loss per share is based on a loss of £3,900,284 (2016: loss of £3,697,113) and on a weighted
average number of shares in issue of 120,631,242 (2016: 101,350,836).
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’.
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Computer
Equipment
£
Furniture
and Fittings
£
Total
£
49,694
51,345
60,787
110,481
4,249
55,594
(9,796)
(1,751)
(11,547)
91,243
63,285
154,528
35,970
53,160
89,130
(9,796)
(1,751)
(11,547)
11,741
37,915
53,328
13,724
1,687
53,096
10,189
7,627
Computer
Equipment
£
Furniture
and Fittings
£
13,428
91,011
63,517
21,351
Total
£
44,754
58,244
102,998
4,940
2,543
7,483
49,694
60,787
110,481
30,844
52,039
82,883
5,126
1,121
6,247
35,970
53,160
89,130
13,724
13,910
7,627
6,205
21,351
20,115
10.
Plant and equipment
Cost
At 1 January 2017
Additions
Disposals
At 31 December 2017
Depreciation
At 1 January 2017
Eliminated on disposals
Charge for year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Cost
At 1 January 2016
Additions
At 31 December 2016
Depreciation
At 1 January 2016
Charge for year
At 31 December 2016
Net book value
At 31 December 2016
At 31 December 2015
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All fixed assets of the Group are held in Futura Medical Developments Limited.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
11.
Inventories
Consumable materials used for development
31 December
2017
£
31 December
2016
£
70,413
83,641
12.
Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
Assets as per Consolidated Statement of Financial Position
Loans and receivables
Trade and other receivables (note 13)
Cash and cash equivalents (note 14)
Total loans and receivables
Liabilities as per Consolidated Statement of Financial Position
Trade and other payables (note 15)
Total financial liabilities
13.
Trade and other receivables
Amounts receivable within one year:
Trade receivables
Other receivables
Financial assets (note 12)
Prepayments and accrued income
31 December
2017
£
31 December
2016
£
39,520
34,986
8,362,646
12,352,978
8,402,166
12,387,964
31 December
2017
£
31 December
2016
£
131,430
286,135
131,430
286,135
31 December
2017
£
31 December
2016
£
6,299
33,221
39,520
20,364
14,622
34,986
141,556
104,003
181,076
138,989
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.
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31 December
2017
£
31 December
2016
£
168,825
147,200
8,193,821
12,205,778
8,362,646
12,352,978
31 December
2017
£
31 December
2016
£
131,430
286,135
131,430
286,135
131,771
42,923
235,940
526,119
499,141
855,177
14. Cash and cash equivalents
Cash at bank and in hand
Sterling short-term money market funds
15.
Trade and other payables
Trade payables
Financial liabilities (note 12)
Social security and other taxes
Accrued expenses and deferred income
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16.
Share capital
Authorised
31 December
2017
Number
31 December
2016
Number
31 December
2017
£
31 December
2016
£
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
2017
Number
31 December
2016
Number
31 December
2017
£
31 December
2016
£
Ordinary shares of 0.2 pence each
120,696,002
120,144,950
241,392
240,290
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
16.
Share capital (continued)
The number of issued ordinary shares as at 1 January 2016 was 99,092,318. During the year ended 31 December
2016, the Company issued shares of 0.2 pence each as follows:
Month
Reason for issue
Gross
Consideration
£
Shares
Issued
Number
November 2016
Share placing at 57.00 pence per share
12,000,000
21,052,632
The number of issued ordinary shares as at 1 January 2017 was 120,144,950. During the year ended 31 December
2017, the Company issued shares of 0.2 pence each as follows:
Month
Reason for issue
Gross
Consideration
£
Shares
Issued
Number
January 2017
Non-Executive Director award at 28.45 pence per share
28,669
100,770
January 2017
Option exercise at 40.50 pence per share
May 2017
Option exercise at 51.75 pence per share
December 2017
Non-Executive Director award at 57.50 pence per share
155,100
382,962
15,525
21,459
30,000
37,320
17.
Share options
At 31 December 2017, 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 Period
Exercise
Price per
Share
Pence
At
1 January
2017
Number
Options
Exercised
Number
Options
Lapsed
Number
Options
Granted
Number
At
31 December
2017
Number
1 August 2012 - 31 July 2017
40.50
482,962 (382,962)
(100,000)
1 October 2013 - 30 September 2018
56.50
627,500
1 October 2014 - 30 September 2019
61.50
660,000
1 October 2015 - 30 September 2020
71.50
750,000
–
–
–
1 October 2016 - 30 September 2021
51.75
740,000
(30,000)
1 October 2017 - 30 September 2022
30.00
1,060,000
1 October 2018 - 30 September 2023
57.50
1 October 2019 - 30 September 2024
30.50
–
–
–
–
–
–
–
–
–
–
–
–
627,500
660,000
750,000
710,000
1,060,000
1,260,000
1,260,000
–
–
–
–
–
–
– 1,440,000
1,440,000
4,320,462 (412,962)
(100,000) 2,700,000
6,507,500
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Stock Code: FUM
55
17.
Share options (continued)
On 13 January 2017 share options over 1,260,000 new ordinary shares were granted to employees in respect of
2016 (including Executive Directors) at a price of 57.50p. The exercise period for these options is 1 October 2018 to
30 September 2023.
On 12 September 2017 share options over 1,440,000 new ordinary shares were granted to employees (including
Executive Directors) at a price of 30.50p. The exercise period for these options is 1 October 2019 to 30 September 2024.
The share options outstanding at 31 December 2017 represented 5.39% of the issued share capital as at that date
(2016: 3.60%) and would generate additional funds of £3,145,813 (2016: £2,193,237) if fully exercised. The weighted
average remaining life of the share options outstanding at 31 December 2017 was 52 months (2016: 56 months) with
a weighted average remaining exercise price of 48.34 pence (2016: 50.76 pence).
The share options exercisable at 31 December 2017 totalled 3,707,500 (2016: 3,260,462) with an average exercise
price of 51.53 pence (2016: 57.51 pence) and would have generated additional funds of £1,910,613 (2016:
£1,875,237) if fully exercised.
The Group’s share option scheme rules apply to 6,027,500 of the share options outstanding at 31 December 2017
(31 December 2016: 3,740,462) and include a rule regarding forfeiture of unexercised share options upon the
cessation of employment (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.
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Inputs to share option pricing model
Grant date
Number of shares under option
Share price as at date of grant
Option exercise price
31 December
2017
31 December
2017
31 December
2016
12 September
13 January
1,440,000
1,260,000
30.50 pence
57.50 pence
30.50 pence
57.50 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
Dividend yield: no dividends assumed
67.82%
65.74%
0%
0%
Risk-free rate: yield on 3 year treasury stock as at date of grant
0.31% p.a.
0.30% p.a.
–
–
–
–
–
–
–
–
Futura Medical AR2017.indd 55
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56
Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2017
17.
Share options (continued)
Outputs generated from share option pricing model
Fair value per share under option
Total expected charge over the vesting period
Recognised in Consolidated Statement
of Comprehensive Income
The share-based remuneration charge comprises:
Share-based payments - employees
Share-based payments - consultants
Share-based payments
31 December
2017
31 December
2017
31 December
2016
11.55 p
20.37p
£166,320
£256,662
–
–
31 December
2017
£
31 December
2017
£
31 December
2016
£
24,648
144,731
49,608
–
–
4,797
24,648
144,731
54,405
18. Pension costs
The pension charge represents contributions payable by the Group to independently administered funds which during
the year ended 31 December 2017 amounted to £141,992 (2016: £131,181). Pension contributions payable in arrears
at 31 December 2017, included in accrued expenses at the relevant Consolidated Statement of Financial Position
date, totalled £4,300 (2016: £6,846).
19. Commitments
At 31 December 2017 the Group had operating lease commitments in respect of property leases cancellable on one
month’s notice of £9,767 (2016: £9,575).
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.
Key management compensation
The Directors represent the key management personnel. Details of their compensation and share options are given in
note 6 and within the Remuneration Report.
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Parent Company Balance Sheet
For the year ended 31 December 2017
Company No. 04206001
Fixed assets
Investment
Current assets
Debtors – due within one year
Debtors – due after more than one year
Total debtors
Cash at bank and in hand
www.futuramedical.com
Stock Code: FUM
57
As at
31 December
2017
£
As at
31 December
2016
£
Notes
2
1,321,798
1,120,537
3
3
3,103
3,107
36,475,173
32,332,884
36,478,276
32,335,991
8,202,788
12,210,946
44,681,064
44,546,937
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Creditors: amounts falling due within one year
4
(41,160)
(64,211)
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Shareholders’ funds
44,639,904
44,482,726
45,961,702
45,603,263
5
241,392
240,290
44,671,396
44,451,745
1,048,914
911,228
45,961,702
45,603,263
The parent company financial statements were approved and authorised for issue by the Board on 13 March 2018.
The notes on pages 59 to 61 form part of these parent company financial statements.
By order of the Board
James Barder
Chief Executive
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58
Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Parent Company Statement of Changes in Equity
For the year ended 31 December 2017
At 1 January 2016
198,185
33,053,345
906,864
34,158,394
Share
Capital
£
Share
Premium
£
Profit and
Loss Account
£
Total
Equity
£
Note
Total comprehensive loss for the year
Share-based payment
Issue of shares
Cost of share issue
At 31 December 2016
Total comprehensive loss for the year
Share-based payment
Issue of shares
At 31 December 2017
–
–
–
–
(50,041)
(50,041)
54,405
54,405
5
42,105
11,957,895
–
(559,495)
–
–
12,000,000
(559,495)
240,290
44,451,745
911,228
45,603,263
–
–
–
–
(63,575)
(63,575)
201,261
201,261
5
1,102
219,651
–
220,753
241,392
44,671,396
1,048,914
45,961,702
Share premium represents amounts subscribed for share capital in excess of nominal value, less the related costs of share
issues.
Profit and loss account represents the cumulative net profit recognised. The total comprehensive loss for the year represents
the total recognised income and expense for the year.
The notes on pages 59 to 61 form part of these parent company financial statements.
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Stock Code: FUM
59
Notes to the Parent Company Financial Statements
For the year ended 31 December 2017
1.
Accounting policies
The parent company financial statements have been prepared in accordance with FRS 100 ‘Application of Financial
Reporting Requirements’ and FRS 101 ‘Reduced Disclosure Framework’.
The principal accounting policies adopted in the preparation of the financial statements are set out below and have
been consistently applied to all the years presented. The financial statements have been prepared on a historical cost
basis.
The accounts are prepared on a going concern basis. In assessing whether a 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 a going concern basis of
accounting in the preparation of the annual financial statements.
As a consolidated statement of comprehensive income is published, no separate statement of comprehensive
income for the parent company has been included in these financial statements, as permitted by section 408 of the
Companies Act 2006. The loss in respect of the Company for the year was £63,575 (2016: £50,041).The remuneration
of the Directors of the Company is disclosed in note 6 to the consolidated financial statements. Auditor’s remuneration
is disclosed in note 4 to the consolidated financial statements.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by
FRS 101. Therefore these financial statements do not include:
• certain comparative information as otherwise required by EU endorsed IFRS;
• financial instrument disclosures;
• certain disclosures regarding the Company’s capital;
• a statement of cash flows;
•
the effect of future accounting standards not yet adopted;
•
the disclosure of the remuneration of key management personnel; and
• disclosure of related party transactions with other wholly owned members of the Group.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity, trade and other debtors, cash and cash
equivalents and trade and other creditors.
Trade and other debtors
Trade and other debtors are recognised initially at fair value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method, less any impairment losses.
Trade and other creditors
Trade and other creditors are recognised initially at fair value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method.
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60
Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Notes to the Parent Company Financial Statements (continued)
For the year ended 31 December 2017
1.
Accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and treasury fund units.
Share-based employee remuneration
The Company has no employees but does issue shares to satisfy share option awards made by its subsidiary
company Futura Medical Developments Limited.
The grant date fair value of share-based payments awards granted to employees is recognised as an increase in the
investment, with a corresponding increase in equity, over the period in which the employees become unconditionally
entitled to the awards. The fair value of the awards granted is measured using the Black-Scholes model, taking into
account the terms and conditions upon which the awards are granted.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss
account except to the extent that it relates to items recognised directly in equity or other comprehensive income, in
which case it is recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted
or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the temporary difference can be utilised.
2.
Investment in subsidiary
The investment represents 100% of the issued ordinary £1 shares in the subsidiary undertaking Futura Medical
Developments Limited whose registered address is: 40 Occam Road, Guildford, Surrey GU2 7YG. The principal activity
of the company is the research and development of pharmaceutical drugs and medical devices and their commercial
exploitation. The investment is stated at cost plus capital contribution by the subsidiary in respect of share-based
payment charge. The results of the subsidiary are included in the consolidated financial statements.
Cost
31 December
2017
£
31 December
2016
£
1,321,798
1,120,537
Futura Medical Developments Limited owns 100% of the issued ordinary £1 shares of Futura Consumer Healthcare
Limited whose registered address is: 40 Occam Road, Guildford, Surrey GU2 7YG. The principal activity of Futura
Consumer Healthcare Limited is the commercial exploitation and branding of pharmaceutical drugs and medical
devices developed by Futura Medical Developments Limited. The results of Futura Consumer Healthcare Limited are
included in the consolidated financial statements.
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Stock Code: FUM
61
3.
Debtors
Amounts receivable within one year: prepayments
Amounts receivable after more than one year:
31 December
2017
£
31 December
2016
£
3,103
3,107
Amounts owed by subsidiary
36,475,173
32,332,884
The intercompany balance between Futura Medical Developments Limited and Futura Medical plc, which at 31
December 2017 was £36,475,173 (including accumulated interest), will become repayable between 2 and 5 years.
4.
Creditors: amounts falling due within one year
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Trade creditors
Accruals and deferred income
5.
Called up share capital
Authorised
31 December
2017
£
31 December
2016
£
16,060
25,100
41,160
10,797
53,414
64,211
31 December
2017
Number
31 December
2016
Number
31 December
2017
£
31 December
2016
£
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
2017
Number
31 December
2016
Number
31 December
2017
£
31 December
2016
£
Ordinary shares of 0.2 pence each
120,696,002
120,144,950
241,392
240,290
Details of shares issued by the Company in the year and details of share options outstanding are given in notes 16 and
17 to the consolidated financial statements.
6.
Related party transactions
Details are given in note 20 to the consolidated financial statements.
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Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2017
Company Information
Company number
04206001
Directors
John Clarke
James Barder
Angela Hildreth
Ken James
Jonathan Freeman
Audit committee
Jonathan Freeman
Non-Executive Chairman
Chief Executive
Finance Director and Chief Operating Officer
Executive Director
Non-Executive Director
Remuneration committee
Jonathan Freeman
John Clarke
Nominations committee
John Clarke
Jonathan Freeman
Secretary and registered office
Angela Hildreth
Futura Medical plc
Surrey Technology Centre
40 Occam Road
Guildford
Surrey
GU2 7YG
Nominated adviser and broker
N+1 Singer
1 Bartholomew Lane
London
EC2N 2AX
Auditor
KPMG LLP
Arlington Business Park
Theale
Reading
Berkshire
RG7 4SD
Patent attorney
Withers & Rogers LLP
4 More London Riverside
London
SE1 2AU
Principal solicitor
Memery Crystal LLP
44 Southampton Buildings
London
WC2A 1AP
Principal banker
HSBC Bank
12A North Street
Guildford
GU1 4AF
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Public relations adviser
Buchanan Communications Limited
107 Cheapside
London
EC2V 6DN
Investment manager
Royal London Asset Management
Limited
PO Box 9035
Chelmsford
CM99 2XB
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Surrey Technology Centre
40 Occam Road, Guildford,
Surrey, GU2 7YG
Telephone: +44 (0) 1483 685 670
Fax: +44 (0) 1483 685 671
Email: info@futuramedical.com
Website: www.futuramedical.com
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