Phytopharm plc
Report and accounts  
2007
The pharmaceutical 
development and  
functional food company
Developing & Delivering
Phytopharm Report & accounts 2007
Phytopharm plc
Corpus Christi House
9 West Street
Godmanchester
Cambs PE29 2HY
United Kingdom
Tel +44 (0) 1480 437697
Fax +44 (0) 1480 417090
Company number 3131723
www.phytopharm.com Contents Shareholder information
01 Business highlights
02 Chairman ’s statement
03  Chief Executive’s review
04 Our strategic objectives
08 Our business strategy
09 Our pipeline
10 Business review: Pharmaceutical products
14 Business review: Functional foods
18 Financial review
20  Corporate social responsibility review
23 Board of Directors
24 Directors’ report
29  Remuneration report of the Board of Directors
37 Corporate governance
42  Independent auditors’ report to the members of Phytopharm plc
44  Consolidated income statement
45  Consolidated and Company balance sheets
46  Statement of changes in shareholders’ equity
47  Consolidated and Company cash ﬂ ow statements
48 Notes to the ﬁ nancial statements
We develop novel products in areas of high unmet health needs, 
to deliver cures and relieve suffering for healthier lives, for longer.
Inspired by nature…
Registered ofﬁ ce
Corpus Christi House
9 West Street
Godmanchester
Cambridgeshire PE29 2HY
Phytopharm plc is a company registered in 
England & Wales, which is listed on the 
London Stock Exchange (symbol: PYM).
Company number
3131723
Registrars
Equiniti Registrars Limited
The Causeway
Worthing
West Sussex BN99 6DA
Brokers
KBC Peel Hunt Limited
111 Old Broad Street
London EC2N 1PH
Auditors
PricewaterhouseCoopers LLP
Abacus House
Castle Park
Cambridge CB3 0AN
Solicitors
White & Case LLP
5 Old Broad Street
London EC2N 1DW
Financial Public Relations
Financial Dynamics
Holborn Gate
26 Southampton Buildings
London WC2A 1PB
Financial Advisers
NM Rothschilds & Sons Ltd
New Court
St Swithins Lane
London EC4P 4DU
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FSC and NAPM approved. 01 Phytopharm plc Report and accounts 2007
Business highlights
Business highlights
Phytopharm is a pharmaceutical development and functional food company.  Our products are developed from medicinal 
plants thereby reducing the development risk, cost and time to market. As a virtual company, Phytopharm ’s model 
is centred on a lean cash burn with all laboratory, manufacturing and clinical work out-sourced to specialists, while 
core competencies such as strategy and management are maintained in-house. Close collaboration with charitable 
organisations enhances our interaction with Key Opinion Leaders and accelerates our development programmes 
increasing their value.
Our strategy
Pharmaceutical products
Functional foods
Myogane
™
Successful completion in July 2007 
of a Phase Ib healthy volunteer 
clinical trial for Myogane
™
, 
our amyotrophic lateral 
sclerosis (ALS) product
Cogane
™
Data on preclinical models of 
Parkinson ’s disease presented at 
‘The Movement Disorder Society’s 
11th international congress’ in 
Istanbul, Turkey, June 2007, 
supporting a novel mode of action 
for Cogane
™
 in treating the 
underlying disease
Data presented at ‘Neuroscience 
2007, the 37th annual meeting 
of the Society for Neuroscience’, 
in San Diego USA, November, 
demonstrating that in a preclinical 
model, Cogane
™
 elevates glial-
derived neurotrophic factor (GDNF) 
in the area of the brain involved 
in Parkinson ’s disease
Hoodia extract
Hoodia extract, our weight 
management product partnered with 
Unilever, enters final development 
stage prior to registration and 
commercial launch
 
Good progress in clinical trials with 
healthy overweight subjects
Phytopica
®
Sales of our canine skin health 
product, Phytopica
®
, partnered 
with Schering-Plough exceed 
expectations (103% growth on 
an annualised basis)
Schering-Plough launches 
Phytopica
®
 in Italy in March 
and in France in April 2007
PYM60086
In-licence of a novel functional 
food for memory and concentration 
from the Beijing Institute, China in 
June 2007 02 Phytopharm plc Report and accounts 2007
Chairman ’s statement and Chief Executive’s review
Chairman ’s  
statement
Phytopharm ’s business strategy of developing 
pharmaceutical products and functional foods 
from medicinal plants is appealing and the 
Company has an impressive portfolio of 
innovative products in areas of high unmet 
health needs. With the new management 
team in place, the business has a clear vision 
and strong growth potential. 
Non-Executive Directors are closely involved 
with the governance of the Company and we 
form the Audit and Remuneration Committees. 
Of particular satisfaction is the high quality of 
internal operational and financial controls the 
Group maintains.
My Non-Executive Director colleagues and 
I continue to be impressed by the quality of 
people in the business and their energy and 
commitment. The Board and management team 
have a keen focus on the creation of shareholder 
value and a series of strategic objectives have 
been put in place to achieve this goal. We look 
forward to developing our products further 
and delivering on our objectives in 2008.
Alistair Taylor
Non-Executive Chairman
I was delighted to be invited to 
join the Board of Directors as 
Non-Executive Chairman in 
July 2007.
I am pleased to report that 
Phytopharm is making good 
progress in developing a broad, 
balanced portfolio of products 
with diversified risk and 
substantial potential value.
Chief Executive’s 
review 03 Phytopharm plc Report and accounts 2007
Chief Executive’s review
Developing
Measuring our success against 
our key strategic objectives:
Delivering
Upon my appointment to Chief Executive 
in January 2007, I implemented a series of 
strategic objectives that included rationalising 
our pipeline while improving our ability to 
develop our products. 
With the appointment of Piers Morgan as 
Chief Financial Officer in January 2007, 
the management team is strengthened, 
bringing significant benefits to the Board 
and the Company.
Over the period we have continued to make 
good progress in clinical trials with our weight 
management product, Hoodia extract, and 
advanced successfully into the final development 
stage prior to registration and launch with our 
partner Unilever, in September 2007. This final 
development stage includes supply chain 
expansion and consumer studies that will 
evaluate reductions in calorie intake as part 
of a weight management programme in the 
general population. 
It is encouraging that sales of our canine skin 
health product, Phytopica
®
, by our partner 
Schering-Plough have exceeded expectations 
(103% growth on an annualised basis) and 
A broad, balanced portfolio of 
products with diversified risk 
and substantial potential value
On our strategy to create value 
for our shareholders
that their European rollout has begun with 
launches in Italy in March 2007 and France 
in April 2007.
Over the period we have made steady progress 
with our pharmaceutical products in clinical 
development. We have successfully advanced 
Myogane
™
 for amyotrophic lateral sclerosis 
(ALS) through a Phase Ib healthy volunteer 
clinical trial in July 2007 and we requested EU 
orphan medicinal product status for Myogane
™
 
in December 2007. We have also demonstrated 
that in preclinical models of Parkinson ’s 
disease, Cogane
™
 reverses the neuronal 
damage and elevates glial-derived neurotrophic 
factor (GDNF) in the area of the brain involved 
in Parkinson ’s disease. Elevation of GDNF 
has been shown to improve symptoms in 
Parkinson ’s disease patients. 
One of our strategic objectives is to share the 
cost and risk of product development while 
increasing long term shareholder value. The 
data from our pharmaceutical products has 
generated considerable interest from charitable 
organisations and we are finalising strategic 
financial support from these organisations for 
further development activities.
Our key strategic objectives:
Phytopharm has developed a broad portfolio of 
products with diversified risk and substantial 
value. Our functional food products are now 
generating revenue. Our partner Schering-
Plough continues its European rollout of 
Phytopica
®
 with revenues exceeding expectations 
and with their global presence we look forward 
to continued growth. Meanwhile, Unilever is 
fully funding our programme for Hoodia extract, 
and we look forward to generating royalty 
income in the near future on product launch.
We operate with a low cash burn and with 
strategic financial support being finalised 
from charitable organisations to develop 
further our pharmaceutical products Cogane
™
 
and Myogane
™
, we will continue to reduce our 
net development costs while increasing long 
term shareholder value. By delivering on our 
strategic objectives, we look forward with 
confidence to building on our achievements 
and reporting on the continued development 
of our pipeline over the coming year.
Dr Daryl Rees
Chief Executive Officer 04 Phytopharm plc
Developing
…a broad, balanced portfolio of 
products with diversifi ed risk 
and substantial potential value
Report and accounts 2007
Our strategic objectives
Strategic objective 1
How we are achieving this
Cogane
™
 is being developed for Parkinson ’s 
and Alzheimer’s disease and has potential as 
a treatment for neuro psychiatric disorders. 
A consistent feature of Parkinson ’s disease is 
the loss of dopamine-containing neurones in 
the substantia nigra area of the brain. In 2007, 
we presented data showing that in preclinical 
models of Parkinson ’s disease, Cogane
™
 reverses 
the neuronal damage and elevates glial-derived 
neurotrophic factor (GDNF) in this area 
of the brain. Elevation of GDNF has been 
shown to improve symptoms in Parkinson ’s 
disease patients.
Myogane
™
 is being developed for ALS (also 
known as Lou Gehrig’s disease). ALS is the 
most common motor neurone disease and 
results from progressive degeneration of 
motor neurones. Myogane
™
 protects against 
neuronal damage when administered orally 
to preclinical models of ALS, delays the loss 
of muscle strength and extends survival time. 
In July 2007 we successfully advanced our 
oral liquid formulation of Myogane
™
 through 
a Phase Ib healthy volunteer clinical trial.
PYM60086 is a functional food that we 
licensed from the Beijing Institute, China in 
July 2007. This in-licence fulfi ls one of our 
strategic objectives of expanding our product 
portfolio with a functional food candidate for 
memory and concentration, an area in which 
we have established expertise.
Cogane
™
an orally active, neurotrophic 
factor inducer for Parkinson ’s & 
Alzheimer’s disease
Myogane
™
an orally active, neurotrophic 
factor inducer for ALS
PYM60086
a novel functional food for 
memory and concentration 05 Phytopharm plc Report and accounts 2007
Our strategic objectives
Elevates glial-derived 
neurotrophic factor 
(GDNF) in the area 
of the brain involved 
in Parkinson ’s disease
Cogane
™ 06 Phytopharm plc Report and accounts 2007
Our strategic objectives
Strategic objective 2
Delivering
…on our strategy to create 
value for our stakeholders
How we are achieving this
Hoodia extract contains a novel satiety 
stimulator that reduces calorie intake in 
overweight subjects. We have continued 
to make good progress in clinical trials and 
in September 2007 advanced successfully 
into the fi nal development stage prior to 
registration and launch with our partner 
Unilever. This fi nal development stage includes 
supply chain expansion and consumer studies 
that will evaluate reductions in calorie intake 
as part of a weight management programme 
in the general population.
Phytopica
®
 is a novel three in one approach 
to help maintain a normal healthy immune 
system, support normal white cell function 
and provide antioxidant benefi ts. Sales of 
Phytopica
®
 by our partner Schering-Plough 
have exceeded expectations (103% growth on 
an annualised basis) and their European 
rollout has begun with launches in Italy 
in March 2007 and France in April 2007. 
Schering-Plough will continue to explore 
the marketing and distribution of Phytopica
®
 
in further countries worldwide.
Our Cogane data has generated considerable 
interest from charitable organisations and 
we are now fi nalising the strategic fi nancial 
support from these organisations for further 
development activities.
Hoodia extract
weight management 
functional food product
Phytopica
®
natural, three plant product 
for canine skin health
Cogane
™
an orally active, neurotrophic 
factor inducer for Parkinson ’s & 
Alzheimer’s disease 07 Phytopharm plc Report and accounts 2007
Our strategic objectives
Hoodia extract enters 
fi nal development stage 
prior to registration and 
commercial launch
Hoodia extract 08 Phytopharm plc
Our business strategy
Report and accounts 2007
Our business strategy
Virtual operation 
Balanced portfolio
Partner with charitable organisations
Medicinal plants – history of use 
Reduces development cost and time •	
Reduces risk •	
 Pharmaceuticals and  •	
functional foods
 Internal expertise with outsourced •	
development activities
Reduces costs/maximises efficiency •	
 Enhances collaboration with KOLs •	
and specialist contractors worldwide
Enhances innovative partnering •	
Reduces development cost •	
 Enhances collaboration with KOLs •	
 Validates novel treatments for •	
diseases with high unmet medical 
need and enhances value
 High value products (major CNS •	
and asthma)
 Low cost, rapid development •	
products (orphan pharmaceuticals, 
functional foods)
 Human and veterinary markets •	
We develop novel  
products in areas  
of high unmet  
health needs,  
to deliver cures  
and relieve suffering  
for healthier lives,  
for longer.
KOL = Key Opinion Leader 09 Phytopharm plc
Our pipeline
Report and accounts 2007
Our pipeline
Company pipeline
Development Status
Programme Product Preclinical studies Phase I Phase II Phase III Marketed
Consumer Studies
Canine skin health Phytopica
®
Global licence: Schering-Plough
Weight management Hoodia extract Global licence: Unilever
Clinical
Parkinson’s disease Cogane
™
Alzheimer’s disease Cogane
™
 
ALS and orphan diseases Myogane
™
Orphan
Asthma & COPD PYM60001 series
Preclinical
Memory & concentration PYM60086 US & EU
Vascular dementia PYM60086 China
Prader-Willi syndrome PYM60004 series Orphan
Pharmaceutical products
Single chemicals greater  
than 98 % purity
Functional foods
Standardised plant extracts where the 
chemical composition is not fully specified. 10 Phytopharm plc
Parkinson ’s and 
Alzheimer’s disease
Parkinson ’s disease is a movement disorder 
characterised by muscle rigidity, tremor, a slowing 
of physical movement (bradykinesia) and, in 
extreme cases, a loss of physical movement 
(akinesia). The primary symptoms are the result 
of altered signaling of an area of the brain, 
the striatum, responsible for the control of 
movement. This is caused by degeneration of 
dopaminergic neurones between the striatum 
and the substantia nigra part of the brain leading 
to insufficient formation and action of dopamine.
The prevalence of the disease is estimated to be 
100 to 200 per 100,000 population (Source: 
Datamonitor). In the US alone, there are 
estimated to be one million patients with 
diagnosed Parkinson ’s disease with associated 
healthcare costs of $25 billion (Source: Northwest 
Parkinson ’s Foundation submission to US 
Congress). Parkinson ’s disease can affect people 
of any age, though the incidence is higher in 
older people. The cause of Parkinson ’s disease 
in the majority of cases is unknown. Possible 
Report and accounts 2007
Business review
Pharmaceutical products
Overview
Cogane
™
 (PYM50028) is an orally active, neurotrophic factor inducer being 
developed as a disease modifying agent for Parkinson ’s and Alzheimer’s disease 
and has the potential as a treatment for neuropsychiatric disorders. Myogane
™
 
(PYM50018) is an orally active, neurotrophic factor inducer being developed 
as a disease modifying agent for ALS (also known as Lou Gehrig’s disease). 
Myogane
™
 has been granted Orphan Drug and Fast T rack status by the US FDA. 
The Orphan Drug Act was created by the United States Congress to provide 
assistance and incentives for sponsors to develop drugs judged to be of potential 
benefit for a qualifying disease. Orphan drug designation qualifies a product 
for possible financial incentives, including seven years of marketing exclusivity 
upon FDA approval, and the potential of an expedited approval. The Fast Track 
programme is designed to expedite the review of drug candidates for the 
treatment of patients with serious or life-threatening diseases where there is 
an unmet medical need for new therapeutic approaches. Having a Fast Track 
designation allows a company to file a New Drug Application (NDA) on a 
rolling basis as data becomes available. This enables the FDA to review the 
filing as it is received, rather than waiting for the entire document prior to 
commencing the review process. With a Fast Track designation, there is often 
the opportunity for more frequent interactions with the FDA and the option 
of requesting evaluation of studies using surrogate endpoints. In addition, 
there may be the possibility of a priority review, which could decrease the 
typical review period.
The Cure Parkinson ’s Trust, supported by 
Movers and Shakers has funded some of 
our preclinical studies and was co-founded 
by four individuals with Parkinson ’s who 
are determined to help find a cure for this 
debilitating disease
$25 billion
In the US there are one million 
patients diagnosed with Parkinson ’s 
disease with associated healthcare 
costs estimated at up to $25 billion 11 Phytopharm plc
mechanisms include oxidative damage of nerve 
cells coupled with loss of neurotrophic factors. 
Neurotrophic factors are essential for the survival 
and maintenance of nerve cells and provide 
protection against toxic insults, however as 
proteins, their utility as pharmacological 
treatments are limited (Source: The Cure 
Parkinson ’s Trust).
At present, there is no cure for Parkinson ’s 
disease, but a variety of medications provide 
temporary relief from the symptoms, usually 
by dopamine replacement therapy.
Alzheimer’s disease is a neurodegenerative 
disorder that mainly affects the elderly and is 
characterised by a progressive loss of learning 
ability and memory. Alzheimer’s disease is 
thought to affect 4.5 million people in the US, 
and it is believed that this number will continue 
to grow to approximately 16 million by 2050 
(Source: Alzheimer’s Association).
There is an urgent need for the development 
of new approaches to both Parkinson ’s and 
Alzheimer’s disease and non-peptide orally 
bioavailable neurotrophic factor inducers that 
readily cross the blood brain barrier represent 
an important therapeutic approach.
The estimated market size in 2010 is 
approximately $5bn for Parkinson ’s disease, 
$8bn for Alzheimer’s disease and $13bn for 
the neuropsychiatric disorders schizophrenia, 
depression and anxiety.
Mode of action
Cogane
™
 (PYM50028) is a novel non-peptide, 
orally bioavailable neurotrophic factor inducer 
that readily crosses the blood brain barrier. 
In preclinical studies, Cogane
™
 stimulates the 
release of neuronal growth factors and increases 
neurite outgrowth. Importantly, Cogane
™
 
also reverses the decrease of neuronal growth 
factors and reverses dopaminergic neuronal 
degeneration observed in vitro. When 
administered orally to preclinical models of 
Parkinson ’s disease, Cogane
™
 reverses the loss 
of dopaminergic neurones and elevates glial 
derived neurotrophic factor (GDNF).
Cogane
™
 restores the learning and memory 
ability in Alzheimer’s disease preclinical models 
and thereby offers the potential to arrest or 
reverse the progression of Alzheimer’s disease.
The neuroprotective, neurorestorative and 
neurotrophic actions of Cogane
™
 suggest 
potential benefi cial effects in other neuro-
degenerative diseases including diabetic 
neuropathy and neuropsychiatric disorders 
such as schizophrenia, depression and anxiety.
Progress to date
In our Phase IIa clinical study of Cogane
™
 in 
mild and moderate Alzheimer’s disease patients. 
The more moderate Alzheimer’s patients 
showed a decline in cognition in the placebo 
group with an encouraging trend for slower 
disease progression in the Cogane
™
 treated 
group. This, coupled with its excellent safety 
profi le and tolerability, provides positive data for 
longer term studies for effi cacy determination 
in both Parkinson ’s and Alzheimer’s disease.
Report and accounts 2007
Business review
Direct infusions of GDNF in the brain of 
Parkinson ’s disease patients has been shown 
to restore the control of movement
1 to 2 in 1,000
100 to 200 per 100,000 population 
have Parkinson ’s disease 12 Phytopharm plc
Pharmaceutical products continued
Over the period we have made significant 
progress demonstrating that in preclinical 
models of Parkinson ’s disease, Cogane
™
 reverses 
the damage to dopamine-containing neurones 
and elevates GDNF in the area of the brain 
involved in Parkinson ’s disease. These studies 
were partly funded by The Cure Parkinson ’s 
Trust. Elevation of GDNF has been shown 
to improve symptoms in Parkinson ’s disease 
patients and our data has generated considerable 
interest from charitable organisations. We are 
now finalising strategic financial support from 
these organisations for further development 
activities for Parkinson ’s disease.
Motor neurone disease
Amyotrophic lateral sclerosis (ALS, also 
known as Lou Gehrig’s disease) is the most 
prevalent form of motor neurone disease 
which generally strikes people between 40 
and 60 years of age. It is characterised by 
progressive loss of both lower (spinal cord 
and brain stem) and upper (cerebral cortex) 
motor neurones, which leads to severe 
muscle weakness and wasting, followed by 
paralysis and death, generally caused by 
respiratory failure.
ALS is considered an orphan disease (i.e. the 
condition is rare) as it affects fewer than 
200,000 in the US (US definition) and affects 
no more than 5 in 10,000 people (EU definition). 
Approximately 350,000 patients suffer from 
ALS world wide, of which 50% die within 18 
months of diagnosis. The financial cost to 
families of patients is exceedingly high, and 
it is estimated that care can cost an average 
of $200,000 per patient per year (Source: 
International Alliance of ALS Associations).
The precise causes of motor neurone 
degeneration in ALS patients remain unknown. 
Approximately five to 10% of cases appear to 
be of familial origin and possible mechanisms 
include loss of neurotrophic factors coupled 
with oxidative and glutamate mediated damage 
of nerve cells. Neurotrophic factors are essential 
for the survival and maintenance of nerve cells 
and provide protection against toxic insults, 
however as proteins, their utility as pharma-
cological treatments are limited. Riluzole 
(Rilutek
™
), a glutamate modulator, is the only 
agent indicated for the treatment of this condition 
and increases average survival by only a few 
months (source Datamonitor). There is an 
urgent need for the development of new 
approaches to this devastating condition and non-
peptide orally bioavailable neurotrophic factor 
inducers that readily cross the blood brain barrier 
represent an important therapeutic approach.
Mode of action
Myogane
™
 is a novel non-peptide, orally 
bioavailable neurotrophic factor inducer that 
readily crosses the blood brain barrier. In 
preclinical studies, Myogane
™
 stimulates the 
release of neuronal growth factors and increases 
neurite outgrowth. Myogane
™
 also reverses the 
decrease of neuronal growth factors, reverses 
oxidative and glutamate damage and reverses 
neuronal degeneration observed in motor 
neurones in vitro. When administered orally to 
preclinical models of ALS, Myogane
™
 delays the 
loss of muscle strength and extends survival time.
Report and accounts 2007
Business review
ALS is characterised by the progressive 
degeneration of motor neurones leading 
to severe paralysis, muscle wasting and 
eventually death.
$200,000
In the advanced stage of ALS, 
supportive care can cost an average 
of $200,000 per patient per year 13 Phytopharm plc
Progress to date
Phytopharm has successfully completed 
a Phase Ia clinical study conducted under an 
investigational new drug (IND) filed with the 
United States Food and Drug Administration 
(FDA) and confirmed that Myogane
™
 was well 
absorbed with an excellent safety profile. The 
FDA has also granted Orphan Drug and Fast 
T rack designation to Myogane
™
 for the treatment 
of ALS. In July 2007, we successfully progressed 
through a Phase Ib healthy volunteer clinical 
trial with a new liquid formulation suitable for 
ALS patients conducted under a clinical trial 
authorisation (CTA) filed with the Medicines 
and Healthcare products Regulatory Agency 
(MHRA). Our data has generated considerable 
interest from charitable organisations and 
we are progressing discussions for further 
development activities with these organisations.
The neuroprotective, neurorestorative and neuro-
trophic actions of Myogane
™
 suggest potential 
beneficial effects in other orphan motor neuro-
degenerative diseases including Huntington ’s 
disease, Friedrich ’s ataxia, progressive 
supranuclear palsy and multiple system atrophy. 
The aggregate market size for these orphan 
diseases is estimated to be in excess of $1bn.
Asthma and COPD
Asthma is a chronic inflammatory disorder 
of the airways that causes recurrent episodes 
of wheezing, breathlessness, chest tightness 
and coughing. In addition, asthma is usually 
associated with widespread but variable airflow 
obstruction. Inhibition of inflammation and 
opening of the airways are therefore key 
components of asthma treatment.
Mode of action
Our lead candidates have novel anti-
inflammatory and airway relaxant activity 
in several models of asthma.
Progress to date
Steady progress has been made in identifying 
novel synthetic molecules from the PYM60001 
series that can be developed as a pharmaceutical 
medicine for the treatment of asthma and 
chronic obstructive pulmonary disease (COPD). 
Preclinical comparative ‘proof of concept’ studies 
with marketed products have demonstrated 
encouraging results showing improved 
beneficial effects in several models of asthma. 
Prader-Willi syndrome
Prader-Willi syndrome is an orphan disease 
(i.e. the condition is rare) as it affects fewer 
than 200,000 in the US (US definition) and 
affects no more than 5 in 10,000 people 
(EU definition). It is characterised by clearly 
definable features including obesity due 
to hyperphagia and a decreased calorific 
requirement owing to low energy expenditure. 
Mode of action
The mechanism of action of the chemical series 
based on the active components of our Hoodia 
extract (see below) is under investigation.
Progress to date
Proteomic research is helping to define novel 
targets and the design of new molecules from 
the PYM60004 series as pharmaceutical 
candidates for Prader-Willi syndrome.
Report and accounts 2007
Business review
1 in 15,000
Prader-Willi syndrome (PWS) 
is a genetic disorder that 
occurs in approximately one 
out of every 15,000 births
£850 million
Approximately eight million people 
in the UK have been diagnosed with 
asthma and the condition costs the 
NHS on average £850 million per year
Asthma is a chronic inflammatory condition 
of the airways with widespread variable 
airflow obstruction 14 Phytopharm plc
Dietary weight management
Obesity is a major health problem and growing 
rapidly in numbers and severity. In the US 66% 
of adults are overweight or obese (Source: US 
National Centre for Statistics) and healthcare 
costs are thought to amount to $100 billion 
(Source: American Obesity Association). 
The problem is growing in Europe, and in 
the UK about 43% of men and 34% of women 
are overweight, and a further 22% of men 
and 23% of women are obese (Source: British 
Heart Foundation). There is a rising level of 
premature obesity in children and obesity is 
increasing in the developing world. 
In 2002, the market for the dietary control of 
obesity was $2.3 billion in the US alone, and 
this has continued to grow (Source: Market 
Research Report, Weight control-US).
Mode of action
Our weight management functional food 
product is based on an extract of the succulent 
plant, Hoodia, which contains a novel satiety 
stimulator that reduces calorie intake in 
Functional foods
Report and accounts 2007
Business review
Hoodia extract
Enters final  
development stage
66%
In the US 66% of adults 
are overweight or obese
Overview
Our patented functional food, Hoodia extract for incorporation into weight 
loss products is making continued good progress. In September 2007, we 
advanced into the final development stage with our licensing partner, Unilever. 
Our marketed veterinary functional food for canine skin health, Phytopica
®
, 
has shown an increase in sales (103% growth on an annualised basis) following 
launch in the UK, Italy and France by our partner, Schering-Plough.
Functional foods are foodstuffs that provide health or physiological benefits 
above their nutritional value and have a health claim on the packaging. 
Currently gut and heart health products dominate with new interest in areas 
of weight control, memory and concentration, anti-fatigue, immune system 
function and skin health. The global value of functional foods is estimated 
to be up to $65bn. The growth potential is predicted to be 50% from 2005 
to 2010 with an accelerating trend for new products.
Unilever have a range of functional foods 
on the market 15 Phytopharm plc
overweight subjects, as demonstrated in our 
double-blind, placebo-controlled clinical study. 
In this study, overweight but otherwise healthy 
male volunteers were randomly allocated to 
receive either Hoodia extract or placebo twice 
daily for 15 days. The Hoodia extract group 
showed a statistically significant reduction 
in the average daily calorie intake compared 
with placebo (p= 0.014) with a statistically 
significant reduction in body fat content 
compared with the placebo (p=0.035). 
No serious adverse effects were experienced 
by any of the subjects, and the safety data are 
consistent with a satisfactory overall safety 
profile. The kinetic data confirm that the 
systemic exposure to biologically active 
constituents of Hoodia was consistent with 
the observed clinical effects.
Progress to date
In December 2004, we announced that we 
had granted an exclusive global licence for 
the Hoodia extract to Unilever plc. Under the 
terms of the agreement, Phytopharm and 
Unilever are collaborating on a five-stage 
research, development and launch programme 
of safety and efficacy studies with a view to 
bringing new weight management products to 
market. Over the period we have continued to 
advance successfully through clinical trials in 
healthy overweight subjects as well as all other 
aspects of our Joint Development Agreement.
In September 2007, we announced that 
we had successfully progressed into stage 3 
of our Joint Development Agreement. Stage 3 
activities include supply chain expansion and 
consumer studies that will evaluate reductions 
in calorie intake as part of a weight management 
programme in the general population, and 
is the final stage prior to submission for 
regulatory approval. Stage 4 and 5 activities 
comprise registration and launch respectively.
As part of the agreement, Unilever is committed 
to fully funding the development programme. 
In addition, Phytopharm will receive an 
undisclosed royalty on sales of all products 
containing the extract. 
Separately, Unilever is also managing the 
agronomy programme, including scale up 
for launch, undertaking manufacturing and 
market research activities, and supporting 
the international patent programme for 
the products.
Extracts of Hoodia and the active molecules 
therein are the subject of a global patenting 
programme, with major patents granted in the 
US, UK, Europe and Japan and pending in all 
other major territories. 
Phytopharm and Unilever have become aware 
of many companies that are selling products 
over the Internet and in some stores claiming 
to contain Hoodia and causing weight loss. 
Analysis of these products has demonstrated 
that the great majority of them contain little or 
no Hoodia. 
Phytopharm and Unilever have made contact 
with the relevant authorities concerning this 
development and are satisfied with the 
progress being made to limit this activity.
Report and accounts 2007
Business review
$2.3 billion
US market for weight management 
products in 2002 16 Phytopharm plc
Functional foods continued
Canine skin health
Canine dermatological disorders are well 
recognised by veterinarians to be a major 
problem, with an estimated 15% of the UK 
dog population (around 900,000 dogs) 
affected by skin conditions (Source: Animal 
Pharm). Maintenance of a healthy skin and 
coat and alleviation of itching are of major 
importance to canine general health and 
quality of life.
Mode of action
Phytopica
®
 is a natural, three plant product 
for canine skin health that provides a novel 
three in one approach to help maintain 
a normal healthy immune system, support 
normal white cell function and provide 
antioxidant benefits. The beneficial effects 
and excellent safety profile of Phytopica
®
 
have been proven extensively in clinical trials 
and the product has been found to be suitable 
for all dogs whatever size or breed.
Progress to date
In January 2006, Phytopharm entered into 
an exclusive global agreement with Schering-
Plough Animal Health (‘Schering-Plough ’) 
for Phytopica
®
. Under the terms of the 
agreement, Phytopharm is responsible for 
manufacturing Phytopica
®
 whilst Schering-
Plough is responsible for the global sales, 
marketing and distribution. In April 2006, 
Schering-Plough launched Phytopica
®
 in the 
UK and the product has enjoyed firm support 
from veterinary dermatologists, with sales 
exceeding expectations. 
Schering-Plough launched Phytopica
®
 in 
Italy and France in March and April 2007, 
respectively. France is one of the largest 
companion animal markets in Europe with 
more than 8.5 million dogs and, of these, 
some 15% referred to veterinarians may be 
affected by skin conditions.
Schering-Plough will continue to seek to 
market and distribute Phytopica
®
 in further 
countries worldwide. With Schering-Plough ’s 
global presence we look forward to strong 
growth from this product.
Memory and concentration
There is growing interest in functional foods 
for memory and concentration. PYM60086 
has been selected from a library of compounds 
derived from Traditional Chinese Medicine 
(TCM) licensed from the Beijing Institute 
(Institute of Radiation Medicine, the Academy 
of Military Medical Sciences, Beijing). 
Preclinical studies suggest that PYM60086 
may help to reverse normal age related memory 
loss and improve concentration. 
Mode of action
PYM60086 is an extract of a TCM used as 
tonic for the elderly with memory enhancing 
properties. Research at the Beijing Institute 
has shown that in preclinical studies 
PYM60086 increases blood flow to the brain, 
has antioxidant and anti-inflammatory 
Report and accounts 2007
Business review
Phytopica
Launched in UK, Italy and France 
with 103% growth in sales
900,000
An estimated 15% of the UK dog 
population (around 900,000 dogs) 
affected by skin conditions 17 Phytopharm plc
properties and is a neuro trophic factor 
inducer. When administered orally to several 
preclinical models, PYM60086 improves 
memory and learning.
Progress to date
In July 2007, we licensed a novel functional 
food candidate for memory and concentration 
from The Beijing Institute. Under the terms 
of the Collaboration and Licence Agreement, 
Phytopharm and The Beijing Institute 
will collaborate to progress The Beijing 
Institute’s lead product for memory and 
concentration (PYM60086).
Phytopharm will develop this lead product 
through further preclinical testing and 
progress into clinical trials. The collaboration 
and Licence Agreement also extends to certain 
other patented compounds that may have 
utility in other disease areas including vascular 
disorders and stroke. Phytopharm has been 
granted an exclusive licence from The Beijing 
Institute to develop and commercialise these 
products globally in return for royalty and 
milestone payments to The Beijing Institute 
upon the achievement of certain pre-defined 
goals. The Beijing Institute’s scientists bring 
significant knowledge on TCM and we look 
forward to working with them to advance the 
lead product through clinical development.
Report and accounts 2007
Business review
PYM60086
Novel functional food in-licensed 
from the Beijing Institute
The global value of functional foods 
is estimated to be up to $65bn.  
The growth potential is predicted to  
be 50% from 2005 to 2010 with an 
accelerating trend for new products 18 Phytopharm plc
The financial performance for the 13 month 
period ended 30 September 2007 reflects the 
Group’s ongoing pharmaceutical development 
and functional food activities.
Period end
During the period the Group changed its 
financial year end to 30 September 2007 for 
administrative reasons. The financial results 
for the period therefore comprise 13 months 
of trading for the period ended 30 September 
2007; results for the comparative period 
comprise trading for the 12 months ended 
31 August 2006. 
Income statement
The increased revenue of £3.12 million for 
the 13 month period (12 months 2006: 
£1.88 million) was generated from our two 
collaboration agreements: firstly with Unilever 
for the development of Hoodia extract for 
dietary weight management; and secondly 
with Schering-Plough for the global sales, 
marketing and distribution of Phytopica
®
 for 
canine skin health. Revenue from Unilever 
represents reimbursement to the Group of 
development expenditure relating to the 
Hoodia extract programme, together with 
funding of certain Phytopharm staff, and 
therefore the level of revenue in each period 
depends on the nature of the ongoing activities 
and level of related expenditure at that 
particular time. Revenue from Schering-Plough 
comprises the sale of Phytopica
®
 by Phytopharm 
to Schering-Plough for onward distribution and 
eventual sale to end users. Of the revenue in the 
period to 30 September 2007, £2.64 million 
represents revenue from Unilever, and 
£0.48 million represents product sales to 
Schering-Plough (103% growth on an annualised 
basis); for the corresponding 12 month period 
to 31 August 2006 revenue amounted to 
£1.66 million and product sales amounted 
to £0.22 million.
Expenditure on development has continued as 
planned for the 13 months ended 30 September 
2007. A total of £7.50 million was spent during 
the 13 month period, compared to £6.54 million 
for the 12 months ended 31 August 2006. 
The Hoodia extract programme for dietary 
weight management continues to make 
encouraging progress, with the initiation of 
Stage 3 activities of the five Stage Unilever 
Development and Launch Agreement. Stage 3 
is the final stage prior to registration and 
commercial launch of the product. Unilever 
continues to make substantial further 
investment in this project, independently 
of the funding it pays to Phytopharm.
Expenditure on selling, general and 
administrative expenses for the 13 months 
ended 30 September 2007 rose slightly to 
£1.92 million from £1.63 million for the 12 
months ended 31 August 2006. 
Interest receivable for the 13 months ended 
30 September 2007 amounted to £0.22 million, 
compared to £0.38 million for the year to 
31 August 2006, reflecting the lower average 
cash balance during the period.
The reduced overall operating loss for the 
13 month period to 30 September 2007 was 
£6.55 million compared to £6.62 million for 
the 12 month period to 31 August 2006. 
The loss after tax for the 13 month period to 
30 September 2007 was slightly higher at 
£5.81 million from £5.64 million for the 12 
months ended 31 August 2006, although on 
a pro rata basis, the overall loss ran at a lower 
level than in the previous financial period.
Report and accounts 2007
Financial review
Financial review 19 Phytopharm plc
Balance sheet
Non-current assets comprise property, plant 
and equipment. At 30 September 2007 these 
amounted to £0.20 million compared to 
£0.20 million at 31 August 2006.
Current assets amounted to £3.95 million at 
30 September 2007 and comprised inventories 
of £0.68 million, amounts receivable of 
£1.03 million (of which £0.52 million related 
to R&D tax credits), and cash resources of 
£2.24 million. Inventories fell slightly in the 
13 months ended 30 September 2007 as the 
Group manufactured and sold through further 
finished stocks of Phytopica
®
 to support the 
launches in Italy and France in March and 
April 2007 respectively. Amounts receivable 
excluding R&D tax credits at £0.52 million at 
30 September 2007 are broadly in line with 
previous levels of £0.57 million at 31 August 
2006. The level of R&D tax credit receivable 
by the Group, at £0.52 million, is slightly lower 
than the previous period of £0.60 million at 
31 August 2006, reflecting the fact that during 
the period a higher proportion of the Group’s 
R&D activities have been related to the Hoodia 
extract programme which, because it is fully 
reimbursed by Unilever, does not qualify for 
R&D tax credits. Cash resources, described 
as cash and cash equivalents, are invested for 
periods of 90 days or less. The decrease in cash 
resources during the period to £2.24 million 
reflects the cash utilised in the business during 
the period.
Current liabilities at 30 September 2007 have 
reduced to £1.35 million from £1.74 million 
at 31 August 2006 reflecting a reduction in 
trade payables and accruals for clinical trial 
expenditure relating to the Group’s 
development activities.
The increase on Share Capital and Share 
Premium accounts for the period ended 
30 September 2007 reflects the issue of new 
shares for cash on 1 March 2007, to raise 
£1.68 million (£1.53 million net of expenses) 
and the recovery of VAT of £0.04 million 
previously written off against that reserve 
following a change in HMRC policy with 
respect to the Group’s May 2005 fund raising.
Cash flow
The net cash used in operating activities for 
the 13 months ended 30 September 2007 was 
£5.46 million, a reduction from £5.85 million 
in the 12 month period ended 31 August 
2006. Our goal is to increase shareholder 
value by progressing our products through 
development, subject to available resources. 
Taking into account the future revenues from 
Phytopica
®
 and the funding by Unilever of the 
Hoodia programme, Phytopharm expects its 
2008 net cash outflow, funded from available 
resources, to be lower than in previous years. 
Cash outflows in respect of Cogane
™
, and the 
rate of its development, may be favourably 
impacted through the funding by charitable 
organisations, as discussed above, and likewise 
any future partnering arrangements in respect 
of Myogane
™
 would bring similar benefits. 
By delivering on our strategic objectives, 
we look forward with confidence to building 
on our achievements and reporting on the 
continued development of our pipeline over 
the coming year.
Report and accounts 2007
Financial review 20 Phytopharm plc
To our employees
Phytopharm places considerable value on the 
involvement of its employees and seeks to keep 
them informed on the Group ’s business strategy 
and objectives to assist them in working towards 
these goals. This is achieved through formal 
and informal meetings where employees have 
the opportunity to ask questions as well as 
receive information. 
Employee training and development 
requirements are assessed as part of the 
performance appraisal process. Additional 
training maybe undertaken as required 
to provide staff with continuous 
professional development. 
The Group operates an equal opportunities 
policy. Full consideration is given to all job 
applicants, irrespective of gender, age, marital 
status, disability, sexuality, race, colour, religion, 
political belief, ethnic or national origin or any 
other conditions not relevant to the performance 
of the job, who can demonstrate that they have 
the necessary skills and abilities.
Phytopharm is committed to health and safety, 
has well-developed health and safety policies and 
procedures to safeguard all of its employees, 
partners, contractors and visitors. The Board 
is aware of its legal and moral obligations for 
health and safety at work and is committed 
to preventing accidents and minimising 
occupational ill health.
To ethical business practices
As a semi-virtual company, Phytopharm has 
adopted the key principles of SA8000, Social 
Accountability International’s standard that 
provides a comprehensive and flexible system 
for managing ethical workplace conditions 
throughout global supply chains. In adopting 
these principles Phytopharm addresses the 
issue of fair treatment to all its employees who 
are required to follow a code of conduct that 
includes social awareness. Phytopharm also 
promotes SA8000 standards amongst its 
partners, suppliers and contractors worldwide. 
Assessment of compliance to these principles 
and other applicable regulatory or legal 
requirements, is through audit and improvement; 
plans are agreed and implemented to raise the 
level of compliance where appropriate.
By starting with a plant extract that has a history 
of clinical use Phytopharm ’s unique approach 
reduces the need for lengthy preclinical testing. 
Nevertheless, regulatory authorities worldwide 
require that all new medicines must be 
subjected to rigorous safety testing in preclinical 
models and in human clinical studies before 
they are approved for use to protect people from 
potentially toxic effects. The use of preclinical 
tests to develop medicines is the subject of 
enormous ethical sensitivity that rightly 
commands a high level of public interest. 
Phytopharm is committed to implementing the 
three R’s – Reducing the number of preclinical 
tests used for research, Replacement by 
alternative methods whenever possible and 
Refinement of the techniques used to eliminate 
or reduce suffering. Phytopharm has no 
testing facilities itself but uses regulated and 
licensed Contract Research Organisations 
and other licensed institutions that comply 
with government requirements. Phytopharm 
implements robust review processes to ensure 
the highest quality standards are maintained. 
To the environment
Phytopharm recognises that protecting the 
environment is a primary corporate responsibility 
and that environmental matters are not just 
the responsibility of the Board of Directors, 
but also an area in which each employee, 
corporate partner and third party contractor 
has a contribution to make. Phytopharm 
therefore encourages all employees, partners 
and contractors to operate in an environmentally 
responsible manner. Where appropriate these 
requirements have been incorporated into the 
Company’s standard operating procedures and 
the environmental performance of contractors 
is reviewed as part of the audit process. It is 
Phytopharm ’s policy to undertake reasonable 
measures to assess the environmental impact 
of its operations, processes and products and 
the Company aims to continuously improve 
environmental performance and compliance 
within these areas.
Biodiversity Treaty
Phytopharm ’s policy is to embrace the principles 
of the International Convention on Biodiversity 
and address the challenging issues it presents. 
The Group endeavours to enter into commercial 
arrangements with organisations and 
companies in third world countries that bring 
financial and technology transfer rewards to the 
originating country or inventor. These financial 
rewards may take the form of milestone 
payments or royalty shares in successful 
products. Examples of technology transfer 
include training of farmers to cultivate botanical 
raw materials in accordance with the principles 
of Good Agricultural Practice (GAP) and the 
installation of Good Manufacturing Practice 
(GMP) compliant facilities and training of 
staff responsible for its correct operation 
and maintenance.
Quality Assurance
As a responsible company, Phytopharm ’s 
products are developed in accordance with 
recognised quality guidelines and appropriate 
national and international legislation to ensure 
the efficacy of the product and the safety of the 
consumer. In order to achieve this, the Company 
has adopted the following guidelines:
Good Agricultural Practice (GAP)
The principles of GAP are applied to the 
cultivation and post-harvest processing of 
botanical raw materials. The Group’s GAP 
manual and associated technical documentation 
Report and accounts 2007
Corporate social responsibility
Corporate social responsibility
Delivering responsibly 21 Phytopharm plc Report and accounts 2007
Corporate social responsibility
Wild populations of Hoodia are vulnerable. We only use 
cultivated plants and have developed methods which avoid 
the use of pesticides and minimise water use in the fragile 
conditions of the Kalahari desert
Environmental responsibility and sustainability 22 Phytopharm plc
have been developed with reference to 
recognised codes of practice. The manual 
provides a framework for cultivation protocols 
that are implemented by working with local 
farmers, agronomists and horticulturalists 
in the countries where crops are grown. 
The cultivation protocols are developed to 
combine local practice with the principles of 
GAP to ensure a synergy between developing 
agricultural systems and western agricultural 
practices. Compliance to the protocols is 
assessed by the review of crop record sheets 
and monitoring visits to the growing sites. 
Good Laboratory Practice (GLP)
The Group requires that contractors involved in 
the conduct of key non-clinical studies and the 
analysis of such studies apply the appropriate 
level of GLP to their facilities and the conduct 
of studies therein. These requirements are 
detailed in the GLP regulations Statutory 
Instrument 199 No. 3106 and they have been 
incorporated into the Company’s quality system. 
Compliance is reviewed by routine monitoring 
visits and/or audit; training may be provided 
to ensure the level of compliance is acceptable.
Good Manufacturing Practice (GMP)
The Group requires that all contractors directly 
managed by Phytopharm and involved in the 
operational aspects of manufacture, analysis, 
packing, labelling, release, storage, distribution of 
its materials and products apply the appropriate 
level of GMP to their facilities, as defined in 
GMP regulation and guideline documents.
These practices are mandatory requirements 
for products designated for use in clinical trials 
conducted in accordance with competent 
authorities’ regulatory requirements. Guidelines 
are detailed in UK, European, US and ICH 
publications and have been incorporated into 
the Company’s quality system. Compliance is 
routinely monitored by audit and training may 
be provided to ensure the level of compliance 
is acceptable.
Good Clinical Practice (GCP)
GCP is an international ethical and scientific 
quality standard for designing, conducting, 
recording and reporting studies that involve 
the participation of human subjects. Studies 
conducted in Europe and North America 
must have ethical and regulatory approval 
prior to initiation and compliance with the 
stated protocol is independently monitored 
and further assessed by audit. These actions 
help to provide assurance that the rights, safety 
and wellbeing of study subjects are protected, 
consistent with the principles that have their 
origin in the Declaration of Helsinki, and 
that the clinical trial data are credible. These 
requirements have been incorporated into the 
Group’s standard operating procedures and 
working documentation.
Report and accounts 2007
Corporate social responsibility review
Corporate social responsibility continued
All seed for the expansion of the 
Hoodia agronomy programme is 
collected from existing cultivations 
to ensure we do not put pressure 
on wild Hoodia populations. 23 Phytopharm plc
1 Mr Alistair Taylor
Non-Executive Chairman
Mr Taylor is formerly Executive Chairman of UK 
listed Lombard Medical Technologies plc and has 45 
years experience in the healthcare industry, ten years 
in pharmaceuticals and 35 years in medical devices. 
He was Chief Executive Offi cer of Biocompatibles 
International plc from 1994 to 1998 and during this 
period the company progressed from a technology-
based start up company, through fl otation to a 
FTSE 250 company. Prior to this, Mr Taylor was 
Chief Executive Offi cer of Schneider Inc, a Swiss 
interventional cardiology/radiology device company 
and during this time the company’s turnover grew 
to $100 million. Schneider was subsequently sold by 
Pfi zer Inc., its parent, for over $2 billion. Mr Taylor’s 
early career included the Chief Accountant role at 
Beecham Pharmaceuticals. He is also Chairman of 
Starbridge Systems Limited.
2 Dr Daryl Rees
Chief Executive Ofﬁ cer
Dr Rees has an MSc in Pharmacology and a PhD 
in Clinical Pharmacology. He joined Phytopharm in 
June 1999 from University College London where 
he was a senior lecturer in Clinical Pharmacology. 
Prior to this Dr Rees gained ten years’ experience in 
the discovery and clinical development of medicines 
as a senior scientist at Wellcome and was part of 
a multidisciplinary team involved in the discovery of 
the L-arginine- NO pathway. He is a former editor of 
the British Journal of Pharmacology and is Chairman 
of an accredited Research Ethics Committee.
3 Mr Piers Morgan
Chief Financial Ofﬁ cer
Mr Morgan has an MA in Law and Management 
Studies from Cambridge University and is a Chartered 
Accountant. He worked at Close Brothers Corporate 
Finance on a wide variety of equity capital market 
and mergers and acquisitions transactions and was 
a founding director of the Life Sciences Mergers & 
Acquisitions team at Ernst & Young. In 2000, he 
joined Arrow Therapeutics Limited (acquired by 
AstraZeneca for $150m) as Finance Director, raising 
signifi cant fi nance through private equity, debt and 
grants. In 2005, he moved to Paris to become Chief 
Financial Offi cer of BioAlliance Pharma SA, where 
he led the successful fl otation of the company on 
Euronext Paris.
4 Mr Alexander Morrison
Non-Executive Director
Mr Morrison has a BSc (Hons) in applied chemistry 
(Strathclyde) and has over 20 years experience in 
general and international management, global supply 
chain and R&D. He was Chief Executive Offi cer of 
Lipton Ltd, the global tea sourcing organization for 
Unilever with operations in six countries from 2000 
to 2006. During Mr Morrison ’s period as CEO, 
substantial operational and fi nancial improvements 
were made to the Unilever global tea supply chain and 
he also played a signifi cant part in addressing issues 
in the international tea trade. In the immediate years 
prior to 2000, Mr Morrison had senior international 
food and beverage roles for Unilever outside the UK, 
in the supply chain and in R&D, both at the Rotterdam 
head offi ce and in the Unilever food and beverage 
subsidiary in Australia.
5 Dr Peter Blower
Non-Executive Director
Dr Blower has over 30 years experience in medicinal 
research and development with a strong background 
in the fi eld of neuroscience. He joined Beecham 
Research Laboratories in 1969 and rose to the position 
of Director of New Neuroscience products in 1996 
before leaving in 2000 to form his own consultancy 
company. He has been elected to Fellowship of the 
Royal Society of Medicine and the Institute of Biology 
and has authored over 50 scientifi c publications. 
He has a M.I.Biol from the Institute of Biology 
(1972), a PhD in Pharmacology from the University 
of Aston (1977) and a DSc from the University of 
East London (1997).
Board of directors
Report and accounts 2007
Board of directors
Leading strategically
Top row from left:
Mr Alistair Taylor
Dr Daryl Rees
Mr Piers Morgan
Bottom row from left:
Mr Alexander Morrison
Dr Peter Blower 24 Phytopharm plc Report and accounts 2007
Directors’ report
The Dir ectors pr esent their r eport together with the financial statements and auditors ’ r eport for the thirteen month period ended 30 September 2007.
Principal activities
Phytopharm is a pharmaceutical devel opment and functional food company whose pr oducts ar e generated fr om medicinal plants.
Review of the business and futur e devel opments
The Gr oup is r equir ed to set out in this Dir ectors ’ r eport a fair r eview of the business of the Gr oup and a description of the principal risks and uncertainties 
f acing the Gr oup (known as a “Business Review”). The Business Review is r equir ed to set out a balanced and compr ehensive anal ysis of the devel opment 
and performance of the Gr oup’ s business during the thirteen month period ended 30 September 2007 and of the position of the Gr oup at the end of that 
financial period. The information that fulfils the r equir ements of the Business Review can, in addition to that set out bel ow, be found on pages 10 to 19.
The Dir ectors ar e satisfied with the pr ogr ess made acr oss the pr oduct portfolio and with the period end position.
Principal risks and unc ertainties
Industry risk
In common with other r esear ch and devel opment stage businesses, Phytopharm’ s business risks r elate principall y to the success of its devel opment 
pr ogrammes and to the need to fund its operations thr ough these. The pr ogr ess of the devel opment pr ogrammes ther ef or e r epr esents the best indicator 
of the Gr oup’ s performance and a full r eview of the pr ogrammes is given in the Business Review on pages 10 to 19. 
Financial risk
The Gr oup has one pr oduct, Phytopica
®
, on the mark et. However the r evenues curr entl y being generated by this pr ogramme ar e not yet sufficient to 
offset the Company’ s r esear ch and devel opment expenditur e, and the Gr oup expects to continue to mak e l osses until it is abl e to incr ease its r evenues 
sufficientl y . This may r equir e commer cialisation of additional pr oducts. Until this can be achieved the Gr oup may r emain dependant on the continuing 
support of its investors.
Clinical and r egulatory risk
Successful commer cialisation of the Gr oup’ s pr oducts is lik el y to depend on continuing successful pr ogr ess thr ough clinical and consumer studies, 
and r egistration as applicabl e. Devel opment of pr oduct candidates invol ves a l engthy and compl ex pr ocess, and pr oducts may not meet the necessary 
r equir ements in terms of to xicity, efficacy or safety, or the r el evant r egulators may not agr ee with the r esults of the Gr oup’ s r esear ch and may r equir e 
further testing or withhold appr oval altogether .
Competition risk
The Gr oup’ s success depends on acceptance of the Gr oup’ s pr oducts by the mark ets, including physicians and thir d party payers, and consequentl y the 
Gr oup’ s pr ogr ess may be adversel y affected if it is unabl e to achieve mark et acceptance of its pr oducts. F actors which may affect the rate and l evel of 
mark et acceptance of any of the Gr oup’ s pr oducts will include the existence or entry on to the mark et of superior competing pr oducts or therapies and 
the price of the Gr oups pr oducts compar ed to competing pr oducts.
Intell ectual pr operty risk
The Gr oup’ s suc c es s depends in part on its ability to obtain and maintain pr otection f or its intell ectual and pr oprietary inf ormation, so that it can stop others 
fr om making, using or selling its inventions or pr oprietary rights. The Gr oup’ s patent applications may not be granted and its existing patent rights may 
be successfull y chall enged and r evok ed.
Ec onomic risk
As a consequence of the international natur e of its business, the Gr oup is exposed to risks associated with changes in for eign curr ency rates. The Gr oup 
is headquarter ed in the United Kingdom, and substantiall y all its cash r esour ces ar e in pounds sterling. An adverse change in ex change rates may l ead 
to either an incr ease in certain of the Gr oup’ s costs or a decr ease in the pounds sterling value of its r evenues, and hence a significant impact on the 
Gr oup’ s r eposted r esults of operations, financial position and cash fl ow .
Directors’ report
for the thirteen month period ended 30 September 2007 25 Phytopharm plc Report and accounts 2007
Directors’ report
Counterparty risk
The Gr oup r elies on thir d party or ganisations to conduct its clinical trials and to manufactur e its pr oducts. If the r elationship with or performance of any 
of these partners is adversel y affected the Gr oup’ s r esults of operations may be adversel y impacted.
The Gr oup also derives r evenue or financial support fr om its c ollaborators and e xpects to derive additional support fr om partnering with c ertain charitabl e 
or ganisations. If these r elationships ar e adversel y affected, or if the pr oducts invol ved fail to continue to mak e satisfactory pr ogr ess, the Gr oup’ s r esults of 
operations may be adversel y impacted.
Post balanc e sheet events
Ther e ar e no post balance sheet events of significance.
Results and Dividends
The Gr oup’ s r esults f or the period ended 30 Sept ember 2007 ar e pr esent ed on page 44. The Gr oup’ s net l os s aft er t axation was £5,813,249 (2006: £5,638,613). 
The Gr oup is not yet in a position to pay a dividend and the l oss for both periods has been added to the accumulated deficit on r eserves.
Gr oup r esear ch and devel opment activities
The Gr oup continues to devel op pharmaceutical pr oducts and functional foods fr om pr oduct l eads generated fr om medicinal plants
Dir ectors
The Dir ectors of the Company, all of whom have been Dir ectors for the whol e of the period ex cept as noted bel ow, ar e as foll ows:
Ex ecutive Dir ectors
Dr D D Rees – Chief Ex ecutive
Mr P J Mor gan – Chief Financial Officer (appointed 9 January 2007)
Dr R P Dix ey (r esigned 31 January 2007)
Non-Ex ecutive Dir ectors
Mr A H T ayl or – Non-Ex ecutive Chairman (appointed 18 Jul y 2007) 
Mr A D Morrison – Senior Independent Director 
Dr P R Blower 
Dr P M Whitney (r esigned 18 Jul y 2007)
Mr G K G Stevens (r esigned 5 September 2006)
Dr T H Flanagan (r esigned 5 September 2006)
Company Secr etary
Mrs Z K McGowan
Biographical details of the curr ent Dir ectors ar e shown on page 23.
Ther e wer e no contracts of significance with the Company or any of its subsidiaries subsisting during or at the end of the financial period in which 
a Dir ector of the Company was materiall y inter ested.
The inter ests of Dir ectors in the shar es and shar e options of the Company at 30 September 2007 ar e discl osed in the r eport of the Boar d on r emuneration 
on pages 30 to 36. 26 Phytopharm plc Report and accounts 2007
Directors’ report
Directors’ report
for the thirteen month period ended 30 September 2007
Substantial shar eholdings
The Dir ectors have been advised of the foll owing substantial holdings as at 19 December 2007 in the Company’ s issued shar e capital:
Name of shareholder % holding
Material inter est
Invesco Perpetual Investment Series 14.77
Chakra Ltd 14.26
AXA S.A. 6.00
Henderson Global Investors 5.64
Non-material inter est
Amvescap plc 26.94
The material holding by Invesco Perpetual Investment Series is included within the non-material holding by Amvescap pl c.
Save f or the above, the Company has not been notified, as at 19 Dec ember 2007 of any material inter est of 3% or mor e or any Non-material inter est 
e x c eeding 10% of the issued shar e capital of the Company .
Authority to pur chase shar es
At the Company’ s Annual General Meeting held on 27 Mar ch 2007, shar eholders appr oved authority, for the purposes of Section 166 of the Companies 
Act 1985 (the ‘ Act’), to make market purchases (within the meaning of Section 163(3) of the Act) of any of its ordinary shares of 1p each in the capital 
of the Company on such terms and in such manner as the Dir ectors may fr om time to time determine, and wher e such shar es ar e held as tr easury 
shar es, the Company may use them for the purposes of its empl oyee shar e scheme pr ovided that:
the maximum number of or dinary shar es which may be pur chased is 5,560,631, r epr esenting appr o ximatel y 10% of the or dinary shar e capital issued (a) 
at the date of the meeting;
the minimum price which may be paid for each or dinary shar e is 1p which shall be ex clusive of all expenses, if any; (b) 
the maximum price which may be paid for each or dinary shar e is an amount equal to 105% of the average middl e mark et quotations for the or dinary (c) 
shar es of the Company as derived fr om the Official List of the London Stock Ex change pl c for the five business days immediatel y pr eceding the day 
on which such shar e is contracted to be pur chased;
unl ess pr eviousl y r enewed, r evok ed or varied this authority shall expir e at the conclusion of the annual general meeting in 2008; and (d) 
under this authority the Company may mak e a contract to pur chase or dinary shar es which would or might be ex ecuted wholl y or partl y after the (e) 
expiry of this authority, and may mak e pur chases of or dinary shar es pursuant to it as if this authority had not expir ed.
As at 30 September 2007 this authority had not been utilised. 27 Phytopharm plc Report and accounts 2007
Directors’ report
Cr editor payment policy
The Gr oup’ s curr ent policy concerning the payment of the majority of its trade cr editors is to foll ow the CBI’ s Pr ompt Payers Code (copies ar e availabl e 
fr om the CBI, Centr e Point, 103 New Oxfor d Str eet, London WC1A 1DU). F or other suppliers, the Gr oup’ s policy is to:
agr ee the terms of payment with those suppliers when negotiating the terms of each transaction; (a) 
ensur e that those suppliers ar e made awar e of the terms of payment by inclusion of the r el evant terms in contracts; and (b) 
pay in accor dance with its contractual and other l egal obligations. (c) 
The payment policy applies to all payments to cr editors f or r evenue and capital supplies of goods and servic es without e x c eption. The average cr edit period 
(expr essed as cr editor days) tak en during the period was 21 days (2006: 38 days) for the Gr oup and nil days for the Company in both periods. The average 
cr edit period is cal culated using pur chases for the period and the cl osing trade cr editors figur e.
Empl oyees
The Boar d of Dir ectors is committed to continuing communication and invol vement with all the Gr oup’ s empl oyees. F urther details of the Gr oup’ s policies 
towar ds its empl oyees ar e given in the corporate social r esponsibility r eview on pages 20 to 22.
Health and Saf ety
The Dir ectors ar e committed to ensuring the highest standar ds of health and safety . F urther details of the Gr oup’ s policies towar ds its empl oyees ar e 
given in the Corporate Social Responsibility r eview on pages 20 to 22.
Charitabl e donations
Phytopharm has established a Charity Committee to facilitate charitabl e donations to community pr ogrammes and l ocal charities. During the period the 
Gr oup made charitabl e donations of £nil (2006: £50).
Financial risk management policies
The Gr oup’ s policies in r elation t o financial risk management ar e described in the financial r e vie w on pages 18 t o 19 and in not e 19 t o the financial s t at ements.
Statement of Dir ectors ’ r esponsibilities
The Dir ectors ar e r esponsibl e for pr eparing the Annual Report, the Dir ectors ’ Remuneration Report and the financial statements in accor dance with the 
applicabl e law and r egulations.
Company law r equir es the Dir ectors to pr epar e financial statements for each financial period. Under that law the Dir ectors have pr epar ed the Gr oup 
and par ent company financial statements in accor dance with International Financial Reporting Standar ds (IFRSs) as adopted by the Eur opean Union. 
The financial statements ar e r equir ed by law to give a true and fair view of the state of affairs of the Company and the Gr oup and of the pr ofit or l oss of 
the Gr oup for that period.
In pr eparing those financial statements, the Dir ectors ar e r equir ed to:
sel ect suitabl e accounting policies and then appl y them consistentl y; • 
mak e judgements and estimates that ar e r easonabl e and prudent; • 
state whether the financial statements compl y with IFRSs as adopted by the Eur opean Union ; and • 
pr epar e the financial statements on the going concern basis unl ess it is inappr opriate to pr esume that the Gr oup will continue in business, in which • 
case these should be supporting assumptions or qualifications as necessary .  28 Phytopharm plc
Directors’ report
for the thirteen month period ended 30 September 2007
Report and accounts 2007
Directors’ report
The Dir ectors confirm that they have complied with the above r equir ements in pr eparing the financial statements.
The Dir ectors ar e r esponsibl e for k eeping pr oper accounting r ecor ds that discl ose with r easonabl e accuracy at any time the financial position of the 
Company and the Gr oup and enabl e them to ensur e that the financial statements and the Dir ectors ’ Remuneration Report compl y with the Companies 
Act 1985 and, as r egar ds the Gr oup financial statements, Articl e 4 of the IAS Regulation. They ar e also r esponsibl e for safeguar ding the assets of the 
Company and the Gr oup and hence for taking r easonabl e steps for the pr evention and detection of fraud and other irr egularities.
The Dir ectors ar e r esponsibl e for the maintenance and integrity of the Gr oup’ s website and l egislation in the United Kingdom governing the pr eparation 
and dissemination of financial statements may differ fr om l egislation in other jurisdictions.
Audit Inf ormation
In the case of each of the persons who ar e Dir ectors of the Company at the date when this r eport is appr oved:
so far as each of the Dir ectors is awar e, ther e is no r el evant audit information (as defined in the Companies Act 1985) of which the Company’ s • 
auditors ar e unawar e; and
each of the Dir ectors has tak en all steps that he ought to have tak en as a Dir ector to mak e himself awar e of any r el evant audit information (as • 
defined) and to establish that the Company’ s auditors ar e awar e of that information.
This confirmation is given and should be interpr eted in accor dance with the pr ovisions of s243ZA of the Companies Act 1985
Auditors
A r esolution to r eappoint PricewaterhouseCoopers LLP as auditors to the Company will be pr oposed at the next annual general meeting.
Dr D D Rees
Chief Ex ecutive
19 Dec ember 2007 29 Phytopharm plc Report and accounts 2007
Remuneration report
Remuneration report 
of the Board of Directors
This r eport has been pr epar ed in accor dance with the Dir ectors ’ Remuneration Regulations 2002 which intr oduced statutory r equir ements for the 
discl osur e of Dir ectors ’ r emuneration in r espect of periods ending on or after 31 December 2002 of the UK Listing Authority and describes how the Boar d 
has applied the principl es of the Combined Code published in June 2006 r elating to Dir ectors ’ r emuneration. A r esolution to appr ove this r eport will be 
proposed to shareholders at the Annual General Meeting in 2008. 
The r egulations r equir e the auditors to r eport to the Company’ s members on certain parts of the Dir ectors ’ r emuneration r eport and to state whether in 
their opinion those parts of the r eport have been pr operl y pr epar ed in accor dance with the Companies Act (as amended by the Regulations). The r eport 
has ther efor e been divided into separate sections for audited and unaudited information.
Unaudited inf ormation
Remuneration c ommittee
The Remuneration Committee (“the Committee”) is comprised ex clusivel y of independent Non-Ex ecutive Dir ectors. The Dir ectors who have served on 
the Committee during the period ar e as foll ows:
Dr P R Bl ower (Chairman) (appointed 5 September 2006)
Mr A D Morrison (appointed 5 September 2006)
Mr A H T ayl or (appointed 18 Jul y 2007)
Dr P M Whitney (r esigned 18 Jul y 2007)
Mr G K G Stevens (r esigned 5 September 2006)
Dr T H Flanagan (r esigned 5 September 2006)
The Committee decides the r emuneration policy that applies to Ex ecutive Dir ectors and all of the Gr oup’ s empl oyees including other senior management. 
This comprises the setting of salaries for the Executive Directors, the setting of salary scales for other employees, approving the format and range of all 
performance-r elated arrangements (both annual and l ong term equity incentive arrangements), and determining the extent to which the el ements of 
variabl e pay vest.
T o assist the Committee in establishing its policy the Gr oup has r etained the services of New Bridge Str eet Consultants, who ar e experts in advising 
on r emuneration in the biotech industry . The Chief Ex ecutive is invited to attend the Committee meetings to mak e r ecommendations on compensation 
l evels for empl oyees.
During the period ended 30 September 2007 the Committee met six times and ther e was full attendance at each meeting ex cept for one occasion as 
noted on page 38. 
Remuneration of Non-Ex ecutive Dir ectors
The Non-Ex ecutive Dir ectors each r eceive a fee for their services, which is agr eed by the Boar d foll owing r ecommendation by the Committee in r espect 
of the Chairman and by the Chairman in r espect of the other Non-Ex ecutive Dir ectors with the assistance of independent advice, wher e necessary, 
concerning comparabl e or ganisations and appointments.
Neither the Chairman nor the other Non-Ex ecutive Dir ectors r eceive any pension or other benefits fr om the Company .
Remuneration policy f or Ex ecutive Dir ectors
The Company’ s r emuneration policy for Ex ecutive Dir ectors is to:
have r egar d to the Dir ectors ’ e xperienc e and the natur e and c ompl e xity of their work, and r egar d to Dir ectors ’ r emuneration in c omparabl e c ompanies, • 
in or der to pay a competitive salary, including a performance r elated cash bonus that attracts and r etains management of the highest quality;
link individual r emuneration packages to the Gr oup’ s l ong-term performance thr ough the awar d of shar e options via the Phytopharm Shar e Option • 
Plan 2007 and the Phytopharm Long T erm Incentive Plan 2007; and
pr ovide post r etir ement benefits thr ough the Gr oup’ s pension schemes. •  30 Phytopharm plc Report and accounts 2007
Remuneration report
Remuneration report 
of the Board of Directors continued
Consis t ent with the abo v e policy, c ompensation awar ded t o Ex ecutiv e Dir ect or s c omprises f our main perf ormanc e and non-perf ormanc e r elat ed el ements:
basic salary and bonuses; • 
benefits in kind; • 
shar e options and performance shar e awar ds (awar ded by r efer ence to annual performance); and • 
pension arrangements. • 
Basic salary
The Committee sets the annual salaries for Ex ecutive Dir ectors, having r egar d to personal performance and r esponsibilities of each Dir ector and their 
expected futur e contribution. 
Shar e schemes
The Gr oup operates incentive schemes to assist in attracting and r etaining high calibr e empl oyees and to focus the performance of senior Ex ecutives on 
cr eating l ong-term shar eholder value. The awar ds to individuals ar e link ed to the performance tar gets of the Gr oup and the individual. The Gr oup tar gets 
and those for Ex ecutive Dir ectors ar e appr oved by the Boar d.
During the period the Remuneration Committee r eviewed the effectiveness and appr opriateness of the existing l ong-term incentive and shar e option 
schemes. As a r esult of this r eview, new incentive arrangements wer e appr oved by shar eholders at a general meeting in June 2007. Subsequentl y, 
empl oyees and Ex ecutive Dir ectors surr ender ed existing options and r eceived grants under the new arrangements. The pr evious schemes have been 
r etained to all ow former empl oyees under “good l eaver” status to r etain their options for the periods agr eed by the Remuneration Committee. Details 
of the numbers of options outstanding and the r emaining ex er cise periods ar e shown in note 22. No further grants of options will be made under these 
schemes.
The total number of unissued Or dinary Shar es in the capital of the Company which may be placed under option on any day under the Phytopharm shar e 
option schemes may not ex ceed, when added to the aggr egate number of shar es that have been or may be issued pursuant to rights granted for the 
past ten years, 10 per cent. of the issued or dinary shar e capital of the Company immediatel y prior to that day .
Shar e option schemes
Shar e options ar e granted under the Phytopharm Shar e Option Plan 2007 and the Phytopharm Shar esave Plan 2007, which ar e open to all empl oyees. 
The Phytopharm Shar e Option Plan 2007 complies with the tax favour ed Enterprise Management Incentive Legislation. Wher e possibl e the Company 
will grant tax advantaged options. The Remuneration Committee determines the l evel of awar ds. T o pr ovide maximum fl exibility, the Committee has 
discr etion to mak e awar ds up to an annual 400% of salary individual limit although the Committee would onl y envisage making an awar d at such a l evel 
in very ex ceptional cir cumstances. Performance shar e awar ds will normall y vest thr ee years after the date of grant subject to continued empl oyment 
and the extent to which a performance tar get has been satisfied. The actual grants made in the period wer e significantl y l ower than this limit and ar e 
specified for each Ex ecutive Dir ector in the tabl e on page 34.
The vesting of a shar e option will depend on total shar eholder r eturn (“TSR”) performance conditions being met. The Company’ s TSR will be compar ed 
to that of the companies making up the FTSE Small Cap Index at or within thr ee months of the vesting date. No option or awar d can be ex er cised for 
bel ow median performance.
The Committee considers TSR to be the most appr opriate method of measuring performance at this stage of the Gr oup’ s devel opment wher e income 
str eams have not stabilised and the Gr oup has not yet made a pr ofit. The Committee seeks independent verification of the TSR conditions befor e 
confirming that a shar e option has vested.
The Phytopharm Shar esave Plan 2007 is an HMRC appr oved scheme and the first offer was made to empl oyees and Ex ecutive Dir ectors on 13 August 
2007 and vests on 30 September 2010. 31 Phytopharm plc Report and accounts 2007
Remuneration report
Long-term inc entives
The Gr oup operates the Phytopharm Long T erm Incentive Plan 2007 under which performance shar e awar ds can be made to sel ected senior managers 
of the Company and its subsidiaries. The Committee determines the l evel of awar ds to pr ovide maximum fl e xibility . The Committee has discr etion to mak e 
awar ds up to an annual 400% of salary individual limit although the Committee would onl y envisage making an awar d at such a l evel in very ex ceptional 
cir cumstances. Performance shar e awar ds will normall y vest thr ee years after the date of grant subject to continued empl oyment and the extent to 
which a performance tar get has been satisfied. The actual grants made in the period wer e significantl y l ower than this limit and ar e specified for each 
Ex ecutive Dir ector in the tabl e on page 36.
The Committee’ s policy is that the same TSR performance condition as described above for shar e options will appl y to the vesting of performance shar e 
awar ds. This is for the same r easons as given above. The r el evant distinction is that the grant of shar e options depends on annual performance wher eas 
it is envisaged that performance shar e awar ds will be granted each period in or der to ensur e that ther e is a continual and material l ong term incentive 
el ement to the Ex ecutives ’ r emuneration packages.
Shar e pur chase Scheme
The Gr oup operates the Phytopharm Shar e Incentive Plan 2007 which will pr ovide matching shar es to empl oyees on a one for one basis. This scheme 
was not active in the period to 30 September 2007.
Pensions
All the Ex ecutive Dir ectors have money pur chase pension schemes to which the Gr oup c ontributes 16% (8% f or the period to 30 June 2007) of basic salary .
F ees r etained f or Non-Ex ecutive Dir ectorships in other c ompanies
The Committee r ec ognised that Ex ecutive Dir ectors may be invited to tak e up Non-Ex ecutive Dir ectorships and that these can br oaden the e xperienc e and 
knowl edge of the Dir ector, fr om which the Company would benefit. Ac c or dingl y, subject to Boar d appr oval, they may ac c ept Non-Ex ecutive appointments, 
as l ong as they ar e not lik el y to l ead to a conflict of inter est. They ar e also all owed to r etain any fees paid under such appointments.
Perf ormanc e graph
The foll owing shows the Company’ s performance, measur ed by total shar eholder r eturn compar ed with the performance of the FTSE SmallCap Index 
also measur ed by total shar eholder r eturn. T otal shar eholder r eturn l ooks at the value at 30 September 2007 of £100 invested in the Company on 
1 September 2002 compar ed with the value of £100 invested in the FTSE SmallCap Index over the same period. This index has been sel ected for this 
comparison because, in the opinion of the Dir ectors, it is the most appr opriate index against which the total shar eholder r eturn of the Company should 
be measur ed.
The graph looks at the value, by 30 September 2007, of £100 invested in Phytopharm on 1 September 2002 compared with the value of £100 invested in the FTSE Small Cap Index. 
The other points plotted are the values at intervening ﬁ nancial year-ends.









 32 Phytopharm plc Report and accounts 2007
Remuneration report
Remuneration report 
of the Board of Directors continued
Ex ecutive Dir ectors ’ c ontracts
It is the Gr oup’ s policy that Ex ecutive Dir ectors should have contracts with an indefinite term but which pr ovide for a maximum period of notice to be 
served by the Company or by the Dir ector . The details of the Dir ectors ’ contracts ar e summarised in the tabl e bel ow:
Date of Notice
Contract period
Dr D D Rees 22 September 2000 6 months
Mr P J Morgan 9 January 2007 6 months
In the event of termination, the Ex ecutive Dir ectors ’ contracts pr ovide for compensation up to a maximum of basic salary for the notice period. 
Non-Ex ecutive Dir ectors ’ c ontracts
The terms of servic e f or Non-Ex ecutive Dir ectors ar e specified in l etters of appointment. Curr entl y appointments ar e f or a period of 12 months, which may 
be r enewed, and ar e summarised in the tabl e bel ow:
Date of Notice
Contract period
Mr A H Taylor 18 July 2007 3 months
Mr A D Morrison 1 June 2007 3 months
Dr P R Blower 21 July 2007 3 months
In addition, one third of all Directors are required under the Articles of Association to resign and offer themselves for re-election at each annual 
general meeting.
Dir ectors ’ inter ests in shar es 
The inter ests of the Dir ectors in the shar es of the Company at 30 September 2007 and 31 August 2006 (or date of appointment) wer e:
Ordinary shares of 1 pence
30 September 2007 31 August 2006
Dr P R Blower 9,494 –
Dr R P Dixey
(i)
– 543,964
Mr P J Morgan 18,989 –
Mr A D Morrison 9,494 –
Dr D D Rees 18,989 –
Mr A H Taylor
(ii)
– –
Dr P M Whitney
(iii)
– –
All Dir ectors ’ inter ests ar e beneficiall y held.
(i) Dr R P Dixey resigned on 31 January 2007
(ii) Mr A H Taylor was appointed on 18 July 2007
(iii) Dr P M Whitney resigned on 18 July 2007
Apart fr om the inter ests discl osed above no Dir ectors wer e inter ested at any time during the period in the shar e capital of the Company or other 
Group companies.  33 Phytopharm plc Report and accounts 2007
Remuneration report
Audited inf ormation
Dir ectors ’ detail ed emoluments and c ompensation
Details of individual Dir ectors ’ emoluments for the period ar e as foll ows:
2007 2006
Compensation Total Total
Salary for loss Monetary value excluding Pension excluding Pension
Executive
& fees of ofﬁ ce Bonus of beneﬁ ts pensions contributions pensions contributions
£ £ £ £ £ £ £ £
Dr D D Rees 181,401 – 77,000  16,778  275,179  14,029  215,734  11,499 
Mr P J Morgan
(i)
 91,954 – 48,125  15,378  155,457  9,856 – –
Dr R P Dixey
(ii)
 78,850  37,109 –  9,158  125,117  186,308  485,067  14,899 
Dr G W Chong
(iii)
– – – – – –  80,813  2,459 
 352,205  37,109  125,125  41,314  555,753  210,193  781,614  28,857 
Non-executive
Mr A H Taylor
(iv)
 7,174 – – –  7,174 – – – 
Mr A D Morrison 25,833 – –  472  26,305 –  5,156 – 
Dr P R Blower 25,833 – –  318  26,151 –  2,203 – 
Dr P W Whitney
(v)
 29,497 – – –  29,497 –  20,000 – 
Mr G K G Stevens
(vi)
 345 – – – 345 –  30,000 – 
Dr T H Flanagan
(vii)
 230 – – – 230 –  20,000 – 
 88,912 – –  790  89,702 –  77,359 – 
Total 441,117  37,109  125,125  42,104  645,455  210,193  858,973  28,857 
From 9 January 2007 (i) 
From 1 September 2006 to 31 January 2007 (ii) 
From 1 September 2005 to 2 December 2005 (iii) 
From 18 July 2007 (iv) 
From 1 September 2006 to 18 July 2007 (v) 
From 1 September 2006 to 5 September 2006 (vi) 
From 1 September 2006 to 5 September 2006 (vii) 
The Dir ectors r ec eive c ertain benefits in kind. The benefits pr ovided to the Chief Ex ecutive ar e the pr ovision of a full y e xpensed c ompany car, lif e insuranc e 
and private medical insurance. The benefits pr ovided to the Chief Financial Officer ar e the pr ovision of a car all owance, life assurance and permanent 
health insurance. 
No Dir ectors waived emoluments in the financial period ended 30 September 2007 (2006: nil)
Ther e wer e no gains made by individual Dir ectors fr om the ex er cise of shar e options for the period ended 30 September 2007 (2006: nil). 34 Phytopharm plc Report and accounts 2007
Remuneration report
Remuneration report 
of the Board of Directors continued
Dir ectors ’ inter est in shar e options
Details of options over shar es of the Company held by Dir ectors, all of which have been granted at no cost to the Dir ectors, ar e set out bel ow:
Number Number
of options of options Number Number
At surrendered granted of options of options At Date from
31 August during during exercised lapsed in 30 September Exercise which Expiry
2006 the year the year in the year the year 2007 Note* price exercisable date
Dr D D Rees 13,043  13,043  –  –  –  – 1a £2.30 24 June 2002 23 June 2009
 10,000  –  –  –  10,000  – 1b £3.89 15 December 2002 14 December 2006
 10,000  –  –  –  10,000  – 2b £3.89 15 December 2002 14 December 2006
 20,000  –  –  –  20,000  – 3 £3.89 15December 2004 14 December 2006
 5,704  5,704  –  –  –  – 1b £6.575 7 December 2003 6 December 2007
 5,703  5,703  –  –  –  – 2b £6.575 7 December 2003 6 December 2007
 11,406  11,406  –  –  –  – 3 £6.575 7 December 2005 6 December 2007
 7,500  7,500  –  –  –  – 1b £4.60 2 August 2004 1 August 2008
 7,500  7,500  –  –  –  – 2b £4.60 2 August 2004 1 August 2008
 15,000  15,000  –  –  –  – 3 £4.60 2 August 2006 1 August 2008
 13,215  13,215  –  –  –  – 1b £4.775 21 May 2005 20 May 2009
 13,214  13,214  –  –  –  – 2b £4.775 21 May 2005 20 May 2009
 26,430  26,430  –  –  –  – 3 £4.775 21 May 2007 20 May 2009
 33,342  33,342  –  –  –  – 4b £1.425 2 May 2006 1 May 2013
 10,582  10,582  –  –  –  – 4b £2.125 9 December 2006 8 December 2013
 51,722  51,722  –  –  –  – 4c £2.125 9 December 2006 8 December 2013
 20,000  20,000  –  –  –  – 4c £1.85 5 May 2007 4 May 2014
 400,000  400,000  –  –  –  – 4c £0.545 14 December 2008 13 December 2015
 25,864  25,864  –  –  –  – 4c £0.56 8 May 2009 7 May 2016
 –  –  52,724  –  52,724  – 4c £0.4675 8 November 2009 7 November 2016
 –  –  350,000  –  –  350,000 6 £0.45 9 January 2010 8 January 2017
 –  –  712,949  –  –  712,949 7 £0.445 3 August 2009 2 August 2017
– –  19,585  –  –  19,585 10 £0.4825 1 October 2010 31 March 2011
 700,225  660,225  1,135,258  –  92,724  1,082,534 
Mr P J Morgan –  –  250,000  –  –  250,000 6 £0.45 9 January 2010 8 January 2017
 –  –  19,585  –  –  19,585 10 £0.4825 1 October 2010 31 March 2011
 –  –  269,585  –  –  269,585 
*Further details of the terms of the share option schemes are contained in note 22 to the ﬁ nancial statements under the note reference in the above table.
During the period the Remuneration Committee r eviewed the effectiveness and appr opriateness of the existing l ong-term incentive and shar e option 
schemes. As a r esult of this r eview, new incentive arrangements wer e appr oved by Shar eholders at a general meeting in June 2007. Subsequentl y the 
Ex ecutive Dir ectors surr ender ed existing options and r eceived grants under the new arrangements. 35 Phytopharm plc Report and accounts 2007
Remuneration report
Number Number
of options of options Number Number
At surrendered granted of options of options At Date from
31 August during during exercised lapsed in 30 September Exercise which Expiry
2006 the year the year in the year the year 2007 Note* price exercisable date
Dr R P Dixey
(i)
 8,564  –  –  –  8,564  – 1b £3.89 15 December 2002 14 December 2006
 8,563  –  –  –  8,563  – 2b £3.89 15 December 2002 14 December 2006
 17,127  –  –  –  17,127  – 3 £3.89 15 December 2004 14 December 2006
 8,555  –  –  –  8,555  – 1b £6.575 7 December 2003 6 December 2007
 8,555  –  –  –  8,555  – 2b £6.575 7 December 2003 6 December 2007
 17,110  –  –  –  17,110  – 3 £6.575 7 December 2005 6 December 2007
 9,816  –  –  –  9,816  – 1b £4.775 7 December 2004 6 December 2008
 9,817  –  –  –  9,817  – 2b £4.775 7 December 2004 6 December 2008
 19,634  –  –  –  19,634  – 3 £4.775 7 December 2006 6 December 2008
 24,746  –  –  –  24,746  – 1b £1.165 6 December 2005 5 December 2009
 24,745  –  –  –  24,745  – 2b £1.165 6 December 2005 5 December 2009
 49,490  –  –  –  49,490  – 3 £1.165 6 December 2007 5 December 2009
 48,649  –  –  –  48,649  – 4b £1.425 2 May 2006 1 May 2013
 14,435  –  –  –  14,435  – 4b £2.125 9 December 2006 8 December 2013
 36,814  –  –  –  36,814  – 4c £2.125 9 December 2006 8 December 2013
 20,000  –  –  –  20,000  – 4c £1.85 5 May 2007 4 May 2014
 35,175  –  –  –  35,175  – 4c £0.56 8 May 2009 7 May 2016
 361,795  –  –  –  361,795  – 
Total 1,062,020  –  1,404,843  –  454,519  1,352,119 
*Further details of the terms of the share option schemes are contained in note 22 to the ﬁ nancial statements under the note reference in the above table.
(i) Dr R P Dixey left the Group on 31 January 2007 and subsequently his options lapsed on 31 July 2007.
During the period the Remuneration Committee r eviewed the effectiveness and appr opriateness of the existing l ong-term incentive and shar e option 
schemes. As a r esult of this r eview, new incentive arrangements wer e appr oved by Shar eholders at a general meeting in June 2007. Subsequentl y the 
Ex ecutive Dir ectors surr ender ed existing options and r eceived grants under the new arrangements. 36 Phytopharm plc Report and accounts 2007
Remuneration report
Remuneration report 
of the Board of Directors continued
Dir ectors ’ inter ests in l ong-term inc entive plans
Number Number
of awards of awards Number Number Market
At surr ender ed awarded of awards of awards At price at
31 August during the during vested lapsed in 30 September date of Exercise Date from Expiry
2006 year the year in the year the year 2007 Note* grant price which vesting date
Dr D D Rees 41,463  41,463 – – – – 5 £1.82 £0.01 3 December 2007 2 June 2008
 16,952  16,952 – – – – 5 £1.26 £0.01 11 May 2007 10 December 2007
 47,610  47,610 – – – – 5 £0.48 £0.01 3 November 2008 2 May 2009
– – 106,025 – – 106,025 8 £0.45 £0.01 3 August 2009 **
– – 90,000 – – 90,000 9 £0.45 £0.01 3 August 2010 **
 106,025  106,025  196,025 – – 196,025 
Mr P J Morgan – – 65,000 – – 65,000 8 £0.45 £0.01 3 August 2010 **
– – 65,000 – – 65,000 
Dr R P Dixey
(i)
 56,389 – – – 56,389 – 5 £1.82 £0.01 3 December 2007 2 June 2008
 23,055 – – – 23,055 – 5 £1.26 £0.01 11 May 2007 10 December 2007
 32,375 – – – 32,375 – 5 £0.48 £0.01 3 November 2008 2 May 2009
 111,819 – – – 111,819 –
Total 217,844  106,025  261,025 – 111,819  261,025 
*Further details of the terms of the long term incentive plan are contained in note 22 to the ﬁ nancial statements under the note reference in the above table.
** These shares shall be transferred to the participant at the end of the performance period to the extent that any performance conditions have been satisﬁ ed.
(i) Dr R P Dixey left the Group on 31 January 2007 and subsequently his options lapsed on 31 July 2007.
During the period the Remuneration Committee r eviewed the eff ectivenes s and appr opriatenes s of the e xisting l ong-term inc entive and shar e option 
schemes. As a r esult of this r eview, new inc entive arrangements wer e appr oved by Shar eholders at a general meeting in June 2007. Subsequentl y the 
Ex ecutive Dir ectors surr ender ed e xisting options and r ec eived grants under the new arrangements.
The mark et pric e of the Company’ s shar es at the end of the financial period was 40 penc e (31 August 2006: 58 penc e) and the range of mark et pric es 
during the period was between 38.25 penc e and 62.75 penc e.
Appr oval
This r eport was appr oved by the Boar d of Dir ectors on 19 December 2007 and signed on its behalf by:
Dr P R Bl ower
Chairman of the Remuneration Committee 37 Phytopharm plc Report and accounts 2007
Corporate governance
Corporate governance
The Combined Code
The Dir ectors ar e ac c ountabl e to shar eholders f or the good c orporate governanc e of the Gr oup and seek to uphold and r eport on c omplianc e with curr ent 
best practice in Corporate Governance.
The Dir ectors ar e satisfied that the Gr oup has complied thr oughout the period with the best practice pr ovisions of the 2003 FRC Combined Code on 
corporate governance in effect for the financial period to 30 September 2007. The new Combined Code published in June 2006, becomes effective for 
the financial period commencing 1 October 2007. This r eport together with the Report of the Boar d on r emuneration sets out the manner in which the 
Gr oup has applied all the principl es contained in the 2003 Combined Code.
See page 27 for the statement of Dir ectors ’ r esponsibilities in r espect of the Annual Report, the Dir ectors ’ Remuneration Report and the 
financial statements.
Complianc e statement
The Boar d has carried out a r eview of its corporate governance pr ocedur es (including internal contr ols) during the period and is pl eased to confirm that 
the Gr oup has complied thr oughout the period with the pr ovisions of the Combined Code. 
The principl es set out in the Combined Code c over f our ar eas: the Boar d, Dir ectors ’ r emuneration, ac c ountability and audit and r elations with shar eholders. 
With the ex ception of Dir ectors ’ r emuneration (which is dealt with separatel y in the r emuneration r eport) the f oll owing section sets out how the Boar d has 
applied such principl es.
The Boar d 
The Boar d is chair ed by Mr A H T ayl or (appointed 18 Jul y 2007) and met for r egular business nine times during the period under r eview . It was chair ed 
by Dr P M Whitney eight times in the period to 18th Jul y 2007 and by Mr A H T ayl or once in the period since 18th Jul y 2007. Of these, apol ogies for Boar d 
meetings wer e r eceived fr om Mr A D Morrison on 18 Jul y 2007. Otherwise, all meetings wer e attended by all members. In addition, further meetings ar e 
held when cir cumstances and ur gent business dictate.
The Boar d has agr eed a schedul e of items that ar e specificall y r eserved f or its c onsideration, which is r eviewed on an annual basis. This schedul e includes 
business strategy, financing arrangements, material acquisitions and divestments, appr oval of budgets, major capital expenditur e pr ojects, risk 
management, tr easury policies, and establishing and monitoring internal contr ols. The Boar d is r esponsibl e for the overall dir ection and strategy of the 
Gr oup and for securing the optimum performance fr om Gr oup assets. At each meeting, the Boar d r eviews strategy and pr ogr ess of the Gr oup towar ds 
its objectives, particularl y in r espect of r esear ch and devel opment pr ojects, and monitors financial pr ogr ess against budget.
The Boar d of Dir ectors consists of two Ex ecutive and thr ee independent Non-Ex ecutive Dir ectors. Mr A D Morrison is the Senior Non-Ex ecutive Dir ector . 
Biographies of the Dir ectors ar e set out on page 23. Details of the Dir ectors ’ shar eholdings ar e shown on page 32.
All Dir ectors ar e r equir ed to r etir e and submit themsel ves for r e-el ection at the first Annual General Meeting after appointment and, ther eafter, at l east 
every thr ee years. Subject to their r e-el ection and Companies Act pr ovisions, the Non-Ex ecutive Dir ectors ar e appointed for specified terms.
Ther e is cl ear separation of the r ol es of Chairman and Chief Ex ecutive on terms which have been agr eed by the Boar d and r eviewed on an annual basis. 
The Chairman is r esponsibl e f or overseeing the running of the Boar d, enc ouraging all Dir ectors to participate full y in discus sions with the aim of r eaching 
a consensus and ensuring that the Non-Ex ecutive Dir ectors ar e pr operl y briefed on matters. The Chief Ex ecutive has r esponsibility for impl ementing the 
Boar d’ s strategy and managing day to day business activities of the Gr oup with the Ex ecutive Dir ectors and senior managers. The Company Secr etary, 
thr ough the Chairman, is r esponsibl e for advising the Boar d on all governance matters.
The Boar d has agr eed pr ocedur es to all ow individual Dir ectors to seek independent pr ofessional advice at the Company’ s expense for the furtherance 
of their duties, and all Dir ectors have access to the services of the Company Secr etary . The Company Secr etary is accountabl e to the Boar d thr ough 
the Chairman on governance matters. It is the r esponsibility of the Company Secr etary to ensur e that Boar d pr ocedur es ar e foll owed and all rul es and 
r egulations ar e complied with. Newl y appointed Dir ectors r eceive a compr ehensive, formal and tail or ed intr oduction to the Gr oup’ s business as well as 
information on their r esponsibilities and r ol es as a Dir ector of the Company .
The Boar d is mindful of the r equir ement to undertak e annual evaluation of its performance and that of its Committees and individual Dir ectors. 
All Dir ectors have conducted a self assessment of the performance of the Boar d during the period by r efer ence to an evaluation checklist pr ovided by 
the Gr oup’ s external auditors. The r esults wer e compil ed and anal ysed by the Company Secr etary . Ar eas for impr ovement identified by the assessment 
will be addr essed accor dingl y . 38 Phytopharm plc Report and accounts 2007
Corporate governance
Corporate governance continued
Boar d Committees
In accor dance with best practice, the Company has established Audit, Remuneration and Nominations Committees with written terms of r efer ence for 
each that deal with their authorities and duties. The full terms of r efer ence of all the Committees have been published on the Company’ s website.
Audit Committee
The Audit Committee comprises the independent Non-Ex ecutive Dir ectors, Mr A D Morrison, Dr P R Bl ower and Mr A H T ayl or (appointed 18 Jul y 2007), 
who the Boar d considers has r ecent and r el evant financial experience and is chair ed by Mr A D Morrison. Dr P M Whitney r esigned on 18 Jul y 2007. 
The Committee met two times during the period under r eview, with the Gr oup’ s external auditors and Ex ecutive Dir ectors attending wher e appr opriate. 
All meetings wer e full y attended.
The Committee assists the Boar d in ensuring that the Gr oup’ s published financial statements give a true and fair view and in securing r eliabl e internal 
financial inf ormation f or decision making. The Committee r eviews the findings of the e xternal auditors and r eviews k ey ac c ounting policies and judgments. 
The Audit Committee is also r esponsibl e for monitoring the effectiveness of the external audit pr ocess and the independence of the external auditors, 
recommending audit fee proposals to the Board and considering the scale and nature of non-audit work. Non-audit services provided by the external 
auditors ar e discussed to ensur e the Committee is satisfied r egar ding the objectivity and independence of the external audit, including any r el evant 
safeguar ds. Any material non-audit fees ar e appr oved by the Committee befor e being committed. 
The Gr oup has a Quality As suranc e manager but does not have an internal financial audit function. The Audit Committee c onsiders that this is appr opriate 
at this time given the size of the Gr oup. The Audit Committee r eviews the Company’ s Pr otected Discl osur e policy and pr ocedur e on an annual basis to 
ensur e that adequate arrangements ar e in place by which members of staff may, in confidence, raise concerns about possibl e impr oprieties in matters 
of financial r eporting or other ar eas. The Committee considers that appr opriate arrangements ar e in place for the pr oportionate and independent 
investigation of such matters and for appropriate follow up action. 
The Audit Committee conducted a self-assessment of its performance during the period by r efer ence to an evaluation checklist pr ovided by the Gr oup’ s 
external auditors. The r esults wer e compil ed and anal ysed by the Company Secr etary . Ar eas for impr ovement identified by the assessment will be 
addr essed accor dingl y . 
The terms of r efer ence of the Audit Committee include the foll owing r esponsibilities:
to monitor the integrity of the Gr oup’ s financial statements; • 
to r eview annuall y the need for an internal audit function; • 
to r eview the effectiveness of the Gr oup’ s internal contr ol and risk management systems; and • 
to consider and mak e r ecommendations to the Boar d r egar ding the appointment of the Gr oup’ s external auditors. • 
Remuneration Committee
The Remuneration Committee comprises the independent Non-Ex ecutive Dir ectors Mr A D Morrison, Dr P R Bl ower and Mr A H T ayl or (appointed 
18 Jul y 2007) and is chair ed by Dr Bl ower . Dr P M Whitney r esigned on 18 Jul y 2007. The Committee met six times during the period under r eview . 
Of these, apol ogies for Remuneration Committee meetings wer e r eceived fr om Mr A D Morrison on 18 Jul y 2007. Otherwise, all meetings wer e 
attended by all members. 
The Committee is r esponsibl e for making r ecommendations to the Boar d on r emuneration policy for all members of staff and Ex ecutive Dir ectors. 
The policy r ecommendations include setting salary scal es, and appr oving the format and range of incentive payments and shar e option grants to all 
staff . Remuneration of Non-Ex ecutive Dir ectors is under the contr ol of the Ex ecutive Dir ectors. 
The Remuneration Committee conducted a self-assessment of its performance during the period by r efer ence to an evaluation checklist pr ovided by 
the Gr oup’ s external auditors. The r esults wer e compil ed and anal ysed by the Company Secr etary . Ar eas for impr ovement identified by the assessment 
will be addressed accordingly .  39 Phytopharm plc Report and accounts 2007
Corporate governance
The terms of r efer ence of the Remuneration Committee include the foll owing r esponsibilities:
to determine and agr ee with the Boar d the framework and policy for the r emuneration of the Ex ecutive Dir ectors and other members of the • 
Ex ecutive T eam;
to determine tar gets for any performance r elated pay scheme; • 
to appr ove overall r emuneration structur e; and • 
to r eview empl oyee benefit structur es. • 
The r emuneration r eport, which includes details of the Gr oup’ s r emuneration policy, is set out on pages 29 to 36.
Nomination Committee
The Nomination Committee comprises Mr A D Morrison, Dr P R Bl ower and Mr A H T ayl or (appointed 18 Jul y 2007) and is chair ed by Dr P R Bl ower . 
Dr P M Whitney r esigned on 18 Jul y 2007. It met four times during the period under r eview, with all meetings being full y attended. Both Mr P J Mor gan 
and Mr A H T ayl or, who wer e appointed to the Boar d during the period, wer e sel ected fr om a list of potential candidates pr ovided by the Company’ s 
advisors and contacts and interviewed by the Committee members prior to their appointment.
The Committee is r esponsibl e to the Boar d for determining the qualities and experience r equir ed of the Company’ s Ex ecutive and Non-Ex ecutive 
Dir ectors and for identifying suitabl e candidates. In appr opriate cases, r ecruitment consultants assist in the pr ocess. The Committee is also r esponsibl e 
for succession planning.
The terms of r efer ence of the Nomination Committee include the foll owing r esponsibilities:
to identify and nominate candidates to fill Boar d positions as they arise; • 
to pr epar e a description of the r ol e and capabilities r equir ed for a particular appointment; and • 
to give full consideration to succession planning. • 
Relationship with shar eholders
The Gr oup is c ommitted to maintaining good r elations with its institutional and private shar eholders and r eports f ormall y to shar eholders on a six monthl y 
basis thr ough the pr ovision of interim and annual r eports. In addition, the Gr oup k eeps shar eholders informed of significant events for the Gr oup during 
the period by issuing pr ess r el eases which ar e immediatel y made availabl e on the Gr oup’ s website www .phytopharm.com. The Gr oup’ s website also 
pr ovides an overview of the business including its strategy, pr oducts and objectives. 
The Gr oup also maintains communication by making pr esentations during the period to institutional shar eholders on r equest and to all shar eholders 
thr ough the Gr oup’ s website www .phytopharm.com. This contains information on all of the Gr oup’ s pr oducts and all financial r eports and pr ess r el eases 
issued by the Gr oup. Details of the curr ent shar e price and historic shar e price performance ar e also included.
The Boar d is k ept up to date at its r egular meetings with the views of shar eholders and anal ysts by the Chairman and Chief Ex ecutive.
Annual general meeting
The principal forum for discussion with shar eholders is the annual general meeting and their participation is encouraged. F ormal notification together 
with an e xplanation of each pr oposed r esolution is sent to shar eholders at l east twenty working days in advanc e of the meeting. At the meeting the Boar d 
pr ovides a summary of the period’ s events after which all the Dir ectors ar e availabl e to answer questions fr om shar eholders. 
In accor dance with the Combined Code r ecommendations, the Company counts all pr o xy votes. On each r esolution which is voted on a show of hands, 
the Company indicates the l evel of pr o xies l odged, the number of pr o xy votes for and against each r esolution and the number of abstentions. The Chairs 
of the Audit, Remuneration and Nomination Committees attend to answer questions.
Corporate social r esponsibility
Details of the Gr oup’ s activities in the ar ea of corporate social r esponsibility ar e set out on pages 20 to 22. 40 Phytopharm plc Report and accounts 2007
Corporate governance
Corporate governance continued
Internal c ontr ols
The Boar d acknowl edges that it is r esponsibl e for the Gr oup’ s system of internal contr ol and for r eviewing its effectiveness at l east annuall y . However, 
the Boar d acknowl edges that such a system can onl y pr ovide r easonabl e and not absolute assurance against material misstatement or l oss, as it is 
designed to manage rather than eliminate the risk of failur e to achieve business objectives.
The key procedures that the Board has established are designed to provide effective internal controls within the Group and comply with the Internal Control 
Guidance for Dir ectors on the Combined Code issued by the Financial Reporting Council. Ther e is an ongoing pr ocess for identifying and managing 
significant risks faced by the Gr oup which has been in place thr oughout the period and the effectiveness of all the Gr oup’ s internal contr ols in effect 
during the period has been r eviewed by the Boar d.
The Gr oup’ s k ey internal contr ol pr ocedur es include the foll owing:
Contr ol envir onment
The Gr oup’ s contr ol envir onment is the r esponsibility of the Gr oup’ s Dir ectors and managers at all l evels. The Gr oup’ s or ganisational structur e has cl ear 
lines of r eporting and r esponsibility . Regular r esear ch and de v el opment pr ogr amme r e vie ws ar e held t o r e vie w pr ogr es s agains t plan f or each pr ogr amme. 
The inf ormation fr om these meetings is r eported on a r egular basis to a management gr oup c omprising the Ex ecutive Dir ectors and k ey senior managers 
to compar e pr ogr ess against plan for the business as a whol e. Overall contr ol of the business r ests with the Boar d of Dir ectors.
Risk identification and evaluation
Regular assessments of ongoing risks facing the business ar e undertak en as part of the operational r eviews and r egular management gr oup meetings 
in the k ey ar eas such as management of working capital, compliance, l egal and operational issues.
Operational c ontr ols
Quality . Investigational medicinal pr oducts and the Gr oup’ s mark eted functional food pr oduct (Phytopica
®
) ar e manufactur ed on behalf of Phytopharm 
and ar e pr oduced in accor dance with Good Manufacturing Practice (GMP) to ensur e that the pr oducts ar e manufactur ed consistentl y to the appr opriate 
quality standar ds. The Company also has agr eements with a number of plantations operating under the principl es of Good Agricultural Practice (GAP) 
to ensur e that raw material suppl y is consistentl y contr oll ed and of appr opriate quality .
Non-clinical studies. Key non-clinical studies to determine the safety and efficacy of new pr oducts ar e conducted in accor dance with Good Laboratory 
Practic e (GLP) at c ontractors who operate under those r egulations. Each c ontractor is audited to as ses s c omplianc e with GLP prior to initiation of studies.
Clinical studies. All clinical studies carried out by the Group are in accordance with Good Clinical Practice (GCP). This ensures that the health and well 
being of the subjects is car efull y monitor ed during the study and that the data gather ed is compl ete and r eliabl e. All studies ar e audited for compliance 
under the management of Phytopharm’ s quality assurance gr oup.
Financial c ontr ols
Financial r eporting. Budgets and l ong term for ecasts ar e normall y pr epar ed twice a year to all ow management to monitor the k ey business and 
financial risks. F urther, mor e fr equent, for ecasts ar e pr epar ed if cir cumstances r equir e. The budgets ar e r eviewed and appr oved by the Boar d prior to 
adoption by the Company . Management accounts ar e pr epar ed on a monthl y basis and performance against budget is anal ysed in detail and r eported 
on monthl y .
Contr ol pr oc edur es. The Gr oup has established detail ed policies, and ac c ounting and administrative pr oc edur es ar e in plac e c overing all significant ar eas 
and k ey systems. These include formal authorisation pr ocedur es for the transfer of funds, capital expenditur e and r ecruitment. Any commitment of 
expenditur e r equir es documentary appr oval which is subject to pr escribed limits of authority . Any major expenditur e or commitment including the 
appointment of senior members of staff r equir es Boar d appr oval.
Complianc e
The Gr oup has established policies and standar d operating pr ocedur es (SOPs) that pr ovide instruction on all aspects of the operation of the business. 
These SOPs ar e designed to ensur e compliance with the quality management r equir ements of the Gr oup and external r egulations wher e appr opriate. 
All SOPs ar e r eviewed on a r egular basis and updated wher e necessary .
Insuranc e
The Gr oup has r eviewed its portfolio of insurance policies with its insurance br ok er to ensur e that the policies ar e appr opriate to the Gr oup’ s activities. 41 Phytopharm plc Report and accounts 2007
Corporate governance
Announc ements
All announc ements ar e appr oved by the Boar d of Dir ectors prior to is sue. The Gr oup also has internal and e xternal checks to guar d against unauthorised 
r el ease of information.
Human Resour c es
The Gr oup endeavours to appoint empl oyees with appr opriate skills, experience and knowl edge for the r ol es they undertak e. The Gr oup has a range of 
polices which ar e aimed at r etaining and incentivising k ey staff . Empl oyees have cl ear objectives based on the Gr oup’ s business objectives.
Going c onc ern
The Dir ectors have a r easonabl e expectation that the Gr oup and the Company have adequate r esour ces to continue in operational existence for the 
for eseeabl e futur e. F or this r eason, they continue to adopt the going concern basis in pr eparing the Gr oup’ s financial statements.
The BioIndustry Association (BIA) Code of Practic e.
Phytopharm is a member of the BIA who have published a code of eight principl es which ar e br oad statements of best practice for information 
communication and management for its members. The Gr oup has complied with the Code for the period under r eview .
By or der of the Boar d
Dr D D Rees
Chief Ex ecutive
19 Dec ember 2007 42 Phytopharm plc Report and accounts 2007
Independent auditors’ report
Independent auditors’ report to the members of Phytopharm plc 
W e have audited the Gr oup and par ent company financial statements (the ‘‘financial statements ’’) of Phytopharm pl c for the period ended 30 September 
2007 which comprise the Consolidated Income Statement, the Consolidated and Company Balance Sheets, the Gr oup and Company Statements of 
Changes in Shar eholders ’ Equity, the Consolidated and Company Cash Fl ow Statements and the r elated notes. These financial statements have been 
pr epar ed under the accounting policies set out ther ein. W e have also audited the information in the Dir ectors ’ Remuneration Report that is described as 
having been audited.
Respective r esponsibilities of Dir ectors and auditors
The Directors ’ responsibilities for preparing the Annual Report, the Directors ’ Remuneration Report and the financial statements in accordance 
with applicable law and International Financial Reporting Standar ds (IFRSs) as adopted by the Eur opean Union ar e set out in the Statement of 
Dir ectors ’ Responsibilities.
Our responsibility is to audit the financial statements and the part of the Directors’ Remuneration Report to be audited in accordance with relevant legal 
and r egulatory r equir ements and International Standar ds on Auditing (UK and Ir eland). This r eport, including the opinion, has been pr epar ed for and 
onl y for the Company’ s members as a body in accor dance with Section 235 of the Companies Act 1985 and for no other purpose. W e do not, in giving this 
opinion, accept or assume r esponsibility for any other purpose or to any other person to whom this r eport is shown or into whose hands it may come 
save wher e expr essl y agr eed by our prior consent in writing.
W e r eport to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the 
Dir ectors ’ Remuneration Report to be audited have been pr operl y pr epar ed in accor dance with the Companies Act 1985 and, as r egar ds the Gr oup 
financial statements, Articl e 4 of the IAS Regulation. W e also r eport to you whether in our opinion the inf ormation given in the Dir ectors ’ Report is c onsistent 
with the financial statements. The information given in the Dir ectors ’ Report includes that specific information pr esented in the Business r eview: 
Pharmaceutical pr oducts and the Business r eview: F unctional foods that is cr oss r eferr ed fr om the Review of the business and futur e devel opments 
section of the Directors’ Report. 
In addition we r eport to you if, in our opinion, the Company has not k ept pr oper accounting r ecor ds, if we have not r eceived all the information and 
explanations we r equir e for our audit, or if information specified by law r egar ding Dir ectors ’ r emuneration and other transactions is not discl osed.
W e r eview whether the Corporate Governanc e Statement r efl ects the Company’ s c omplianc e with the nine pr ovisions of the Combined Code 2005 
specified for our r eview by the Listing Rul es of the Financial Services Authority, and we r eport if it does not. W e ar e not r equir ed to consider whether the 
boar d’ s statements on internal contr ol cover all risks and contr ols, or form an opinion on the effectiveness of the Gr oup’ s corporate governance 
pr ocedur es or its risk and contr ol pr ocedur es.
W e r ead other inf ormation c ont ained in the Annual Report and c onsider whether it is c onsis t ent with the audit ed financial s t at ements. The other inf ormation 
comprises onl y the Chairman’ s Statement and Chief Ex ecutive’ s r eview, the other pr eliminary sections (Business Highlights, Our strategic objectives, 
Our business strategy, Our pipeline), the Business r eview: Pharmaceutical pr oducts and the Business r eview: F unctional foods, the Financial r eview, 
the Corporate social r esponsibility r eview, the Boar d of Dir ectors section and the Dir ectors ’ r eport, the unaudited part of the Dir ectors ’ r emuneration 
r eport and the Corporate Governance Statement. W e consider the implications for our r eport if we become awar e of any appar ent misstatements or 
material inconsistencies with the financial statements. Our r esponsibilities do not extend to any other information.
Basis of audit opinion
W e conducted our audit in accor dance with International Standar ds on Auditing (UK and Ir eland) issued by the Auditing Practices Boar d. An audit 
includes examination, on a test basis, of evidence r el evant to the amounts and discl osur es in the financial statements and the part of the Dir ectors ’ 
Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgments made by the Dir ectors in the pr eparation 
of the financial statements, and of whether the accounting policies ar e appr opriate to the Gr oup’ s and Company’ s cir cumstances, consistentl y applied 
and adequatel y discl osed.
W e planned and performed our audit so as to obtain all the information and explanations which we consider ed necessary in or der to pr ovide us with 
sufficient evidence to give r easonabl e assurance that the financial statements and the part of the Dir ectors ’ Remuneration Report to be audited ar e 
fr ee fr om material misstatement, whether caused by fraud or other irr egularity or err or . In forming our opinion we also evaluated the overall adequacy 
of the pr esentation of information in the financial statements and the part of the Dir ectors ’ Remuneration Report to be audited. 43 Phytopharm plc Report and accounts 2007
Independent auditors’ report
Opinion
In our opinion:
the Gr oup financial statements give a true and fair view, in accor dance with IFRS as adopted by the Eur opean Union, of the state of the Gr oup’ s affairs • 
as at 30 September 2007 and of its l oss and cash fl ows for the period then ended;
the par ent company financial statements give a true and fair view, in accor dance with IFRSs as adopted by the Eur opean Union as applied in • 
accor dance with the pr ovisions of the Companies Act 1985, of the state of the par ent company’ s affairs as at 30 September 2007 and of its cash fl ows 
for the period then ended;
the financial statements and the part of the Dir ectors ’ Remuneration Report to be audited have been pr operl y pr epar ed in accor dance with the • 
Companies Act 1985 and, as r egar ds the Gr oup financial statements, Articl e 4 of the IAS Regulation; and
the information given in the Dir ectors ’ Report is consistent with the financial statements. • 
Pric ewaterhouseCoopers LLP
Charter ed Ac c ountants and Register ed Auditors
Cambridge
19 Dec ember 2007 44 Phytopharm plc Report and accounts 2007
Consolidated income statement
Consolidated income statement
for the thirteen month period ended 30 September 2007
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
Note £ £
Revenue 2 3,121,018  1,882,501 
Cost of sales (250,057) (341,067)
Gross proﬁ t 2,870,961  1,541,434 
Net operating expenses 3 (9,422,744) (8,164,952)
Operating loss (6,551,783) (6,623,518)
Interest receivable and similar income 217,396  380,484 
Interest payable and similar charges 6 (30) – 
Loss on ordinary activities before taxation 7 (6,334,417) (6,243,034)
Tax on loss on ordinary activities 8 521,168  604,421 
Loss for the period (5,813,249) (5,638,613)
Basic and diluted loss per ordinary share (pence) 10 (10.9) (11.0)
All r evenues and expenses shown above wer e generated fr om continuing operations. 45 Phytopharm plc Report and accounts 2007
Consolidated and Company balance sheets
Consolidated and Company balance sheets
at 30 September 2007
Group Company
30 September 31 August 30 September 31 August
2007 2006 2007 2006
Note £ £ £ £
Non-current assets
Property, plant and equipment 11 199,832  201,521  –  – 
Investments 12 –  –  2,330,855  1,767,653 
Amounts due from subsidiary undertaking 13 –  –  43,922,738  39,684,675 
Non-current assets 199,832  201,521  46,253,593  41,452,328 
Current assets
Inventories 14 683,483  842,899  –  – 
Trade and other receivables 15 508,613  568,882  50,348  21,996 
Current tax receivable 8 521,168  604,421  –  – 
Cash and cash equivalents 16 2,240,947  5,997,428  1,980,557  5,520,988 
Current assets 3,954,211  8,013,630  2,030,905  5,542,984 
Current liabilities
Trade and other payables 17 (1,353,381) (1,737,547) (96,607) (92,501)
Net current assets 2,600,830  6,276,083  1,934,298  5,450,483 
Net assets 2,800,662  6,477,604  48,187,891  46,902,811 
Equity
Share capital 21 556,063  511,809  556,063  511,809 
Share premium 48,685,559  47,156,708  48,190,152  46,661,301 
Other reserves (deﬁ cit) (204,211) (204,211) –  – 
Proﬁ t and loss account (deﬁ cit) (46,236,749) (40,986,702) (558,324) (270,299)
Shareholders’ funds 2,800,662  6,477,604  48,187,891  46,902,811 
The financial statements comprising the consolidated income statement, the consolidated and company balance sheets, the Gr oup and Company 
statements of changes in equity, the consolidated and company cash fl ow statements and the r elated notes, wer e appr oved by the Boar d of Dir ectors 
on 19 December 2007 and wer e signed on its behalf by:
Mr P J Mor gan
Chief Financial Officer  46 Phytopharm plc Report and accounts 2007
Statements of changes in shareholders’ equity
Statements of changes in shareholders’ equity
 
Share capital 
 
Share premium 
 Other reserves
(deﬁ cit) 
Proﬁ t and loss
account (deﬁ cit) Total
Group
£ £ £ £ £
Balance at 1 September 2005 511,809  47,156,708 (204,211) (35,650,581) 11,813,725 
Loss for the period – – – (5,638,613) (5,638,613)
Equity share options charge – – – 302,492  302,492 
Balance at 31 August 2006 511,809  47,156,708 (204,211) (40,986,702) 6,477,604 
Loss for the period – – – (5,813,249) (5,813,249)
Issue of equity share capital 44,254  1,489,287 – – 1,533,541 
Share issue costs recovered – 39,564 – – 39,564 
Equity share options charge – – – 563,202 563,202
Balance at 30 September 2007 556,063  48,685,559 (204,211) (46,236,749) 2,800,662 
 
Share capital 
 
Share premium 
Proﬁ t and loss
account (deﬁ cit) Total
Company
£ £ £ £
Balance at 1 September 2005 511,809  46,661,301  11,146  47,184,256 
Loss for the period – – (583,937) (583,937)
Equity share options charge – – 302,492  302,492 
Balance at 31 August 2006 511,809  46,661,301 (270,299) 46,902,811 
Loss for the period – – (851,227) (851,227)
Issue of equity share capital 44,254  1,489,287 – 1,533,541 
Share issue costs recovered – 39,564 – 39,564 
Equity share options charge – – 563,202 563,202
Balance at 30 September 2007 556,063  48,190,152 (558,234) 48,187,891 47 Phytopharm plc Report and accounts 2007
Consolidated and Company cash ﬂ ow statements
Consolidated and Company cash ﬂ ow statements
for the thirteen month period ended 30 September 2007
Group Company
Thirteen months Twelve months Thirteen months Twelve months
to 30 September to 31 August to 30 September to 31 August
2007 2006 2007 2006
£ £ £ £
Cash ﬂ ow from operating activities
Operating loss (6,551,783) (6,623,518) (1,055,543) (939,369)
Depreciation 97,164  108,259 – –
(Gain)/loss on disposal of property, plant and equipment (4,576) 10,068 – –
Share option charge 563,202 302,492 – –
(5,895,993) (6,202,699) (1,055,543) (939,369)
Changes in working capital
Decrease/(increase) in trade and other receivables 60,269  96,207 (28,352) (9,817)
(Decrease)/increase in trade and other payables (384,166) (520,725) 4,105  4,081 
Decrease in inventories 159,416  104,325 – –
Cash used in operations (6,060,474) (6,522,892) (1,079,790) (945,105)
Taxation received 604,421  674,341 – –
Interest paid (30) – (30) –
Net cash used in operating activities (5,456,083) (5,848,551) (1,079,820) (945,105)
Cash ﬂ ows from investing activities
Purchase of tangible ﬁ xed assets (127,760) (234,596) – –
Sale of property, plant and equipment 36,861  60,750 – –
Interest received 217,396  380,484  204,347  355,432 
Net cash generated from investing activities 126,497  206,638  204,347  355,432 
Cash ﬂ ows from ﬁ nancing activities
Issue of shares 1,681,659 – 1,681,659 –
Share issue costs (148,118) – (148,118) –
Share issue costs recovered 39,564 – 39,564 –
Change in ﬁ nancing of Group company – – (4,238,063) (5,504,938)
Capital element of ﬁ nance leases – (1,398) – –
Net cash generated from/(used in) ﬁ nancing activities 1,573,105 (1,398) (2,664,958) (5,504,938)
Movements in cash and cash equivalents in the period (3,756,481) (5,643,311) (3,540,431) (6,094,611)
Cash and cash equivalents at the beginning of the period 5,997,428  11,640,739  5,520,988  11,615,599 
Cash and cash equivalents at end of period 2,240,947  5,997,428  1,980,557  5,520,988  48 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
1 Ac c ounting policies and basis of pr eparation
The principal accounting policies adopted in the pr eparation of these financial statements ar e set out bel ow . These policies have been consistentl y 
applied to both periods presented. 
Basis of pr eparation
These financial statements have been pr epar ed in accor dance with International Financial Reporting Standar ds
 
and IFRIC interpr etations endorsed by 
the EU and with those parts of the Companies Act 1985 applicabl e to companies r eporting under IFRS.
 
The financial statements have been pr epar ed on 
a historical cost basis.
The Company changed its y ear end t o 30 Sept ember during the period f or adminis tr ativ e r easons. The financial r esults ther ef or e c omprise thirt een months 
of trading for the period ended 30 September 2007; r esults for the comparative period comprise trading for the twel ve months ended 31 August 2006.
Ac c ounting policies
Basis of c onsolidation
The acquisition by the Company’ s subsidiary, Phytotech Limited (formerl y Phytopharm Limited), of Phytodevel opments Limited on 21 Mar ch 1996 has 
been accounted for as a mer ger in the consolidated financial statements, and all transactions between the two companies have been eliminated.
On 3 April 1996 the Gr oup structur e was r eor ganised and a new holding Company established by way of a shar e ex change.
 
This has been accounted for 
as a mer ger in the consolidated accounts, and all transactions within the Gr oup have been eliminated.
Ther e has been no change to the basis set out as a r esult of the impl ementation of IFRS, as permitted by IFRS1.
Critical ac c ounting judgements
The pr epar ation of the c onsolidated financial s tatements r equir es the Dir ector s to mak e judgements, es timates and as sumptions that aff ect the applic ation 
of policies and r eported amounts of assets and liabilities, income and expenses. The main accounting judgements r elate to inventory valuation, the shar e 
option char ge and the underl ying assumptions. The estimates and associated assumptions ar e based on historical experience and various other factors 
that ar e believed to be r easonabl e under the cir cumstances, the r esults of which f orm the basis of making judgements about carrying value of assets and 
liabilities that ar e not r eadil y appar ent fr om other sour ces. Actual r esults may diff er fr om these estimates. The estimates and underl ying as sumptions ar e 
r eviewed on an ongoing basis. Revisions to accounting estimates ar e r ecognised in the period in which the estimate is r evised if the r evision affects onl y 
that period, or in the period of r evision and futur e periods if the r evision affects both curr ent and futur e periods.
Shar e-based payments
The Gr oup mak es equity-settl ed shar e-based payments to its empl oyees and Dir ectors. Equity-settl ed shar e-based payments ar e measur ed at f air 
value at the date of grant and ar e expensed on a straight line basis over the vesting period of the awar d.
 
At each balance sheet date, the Gr oup r evises its 
estimate of the number of options that ar e expected to become ex er cisabl e.
 
The shar e-based payment char ge is all ocated to r esear ch and devel opment 
expenses and selling, general and administrative expenses on the basis of staff numbers with a corr esponding adjustment to equity .
Empl oyee benefits
All empl oyee benefit costs, notabl y holiday pay and contributions to Gr oup or personal defined contribution plans, ar e char ged to the income statement 
on an accruals basis. The Gr oup operates a defined contribution pension scheme. The assets of this scheme ar e held separatel y fr om those of the Gr oup 
in independentl y administer ed funds. The Gr oup does not offer any other post r etir ement benefits.
Cash and cash equival ents
Cash and cash equivalents include cash in hand, bank deposits repayable on demand and other short-term highly liquid investments with original 
maturities at inception of 90 days or l ess.
Pr operty, plant & equipment
The cost of pr operty, plant & equipment is its pur chase cost, together with any incidental expenses of acquisition. Depr eciation is cal culated so as to 
write off the cost of pr operty, plant & equipment, l ess its estimated r esidual value, on a straight line basis over the expected useful economic lives of 
the assets concerned.
Notes to the ﬁ nancial statements 49 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
1 Ac c ounting policies and basis of pr eparation c ontinued
The principal rates used for this purpose ar e:
Plant and machinery 20%
Computer equipment 33%
Fixtur es and fittings 20%
Motor vehicl es 25%
Leasehold impr ovements ar e amortised over the shorter of the l ease term and the asset’ s useful economic life.
Impairment of assets
Non-curr ent assets ar e r eviewed for impairment at each r eporting date. An impairment l oss is r ecognised for the amount by which the asset’ s carrying 
amount ex ceeds its r ecoverabl e amount. The r ecoverabl e amount is the higher of an asset’ s fair value l ess costs to sell and its value in use. 
Investments in subsidiary
The investment in Phytotech Limited was originall y r ecor ded at the nominal value of the shar es issued at the time of the shar e for shar e ex change on 
3 April 1996.
 
The fair value of the options granted after 7 November 2002 by Phytopharm pl c to the empl oyees of Phytotech Limited which had not vested 
by 1 September 2005 is now also included in the value of the investment.
Resear ch and devel opment expenditur e
All on-going r esear ch expenditur e is curr entl y expensed in the period in which it is incurr ed. Due to the r egulatory and other uncertainties inher ent in the 
devel opment of the Gr oup’ s pr oducts, the criteria for devel opment costs to be r ecognised as an asset, as pr escribed by IAS 38 “Intangibl e assets”, ar e not 
met until the pr oduct has been submitted for r egulatory appr oval, and such appr oval has been r eceived, and it is pr obabl e that futur e economic benefit 
will fl ow to the Gr oup. The Gr oup does not curr entl y have any such internal devel opment costs that qualify for capitalisation as intangibl e assets.
Operating l eases
Costs in r espect of operating l eases ar e char ged to the income statement on a straight line basis over the l ease term. 
F or eign curr encies
T ransactions denominated in for eign curr encies ar e translated into sterling, being the functional curr ency of the Company, at actual rates of ex change 
ruling at the date of transaction. Monetary assets and liabilities expr essed in for eign curr encies ar e translated into sterling at rates of ex change ruling at 
the end of the financial period.
 
All for eign curr ency ex change differ ences ar e tak en to the income statement in the period in which they arise.
Revenue
Revenue, which ex cludes value added tax, r epr esents the invoiced value of goods and services supplied, net of certain pr omotional activity .
Amounts r ec eived or r ec eivabl e in r espect of r esear ch and devel opment c ontracts, c ollaborative r esear ch agr eements, lic enc e f ees or mil estone payments 
ar e r ecognised as r evenue when the licence rights ar e granted or the specific conditions stipulated in the agr eements have been satisfied.
 
These amounts 
ar e shown gr oss of any withholding tax.
 
Cost of sal es and operating expenses
Cost of sal es comprises the pr oportion of mil estone and r oyalty income earned by the Gr oup and due to thir d parties under licence agr eements and the 
dir ect cost of goods sold, including distribution costs.
 
All r esear ch and devel opment c osts, whether funded by thir d parties under licence and devel opment 
agr eements or not, ar e included within operating expenses and classified as r esear ch and devel opment costs.
Def err ed taxation
Deferr ed income tax is pr ovided in full, using the liability method, on temporary differ ences arising between the tax bases of assets and liabilities and 
their carrying amounts in the consolidated financial statements in accor dance with IAS 12 “Income tax es”.
 
Deferr ed tax is not accounted for if it arises 
fr om initial r ecognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither the 
accounting nor taxabl e pr ofit or l oss. A deferr ed tax asset is r ecognised onl y to the extent that it is pr obabl e that sufficient taxabl e pr ofit will be availabl e 
in futur e periods to utilise the temporary differ ence.
Inventory
Inventory including raw materials, work in pr ogr ess and finished goods is stated on a first in first out basis at the l ower of cost and net r ealisabl e value.
 
Cost r epr esents dir ect materials and wher e applicabl e pr oduction overheads. Wher e necessary, pr ovision is made for obsol ete, sl ow-moving or 
defective inventory . 50 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Notes to the ﬁ nancial statements continued
Equity instruments
Equity instruments issued by the Gr oup ar e r ecor ded at the pr oceeds r eceived, net of dir ect issue costs.
T rade r ec eivabl es
T r ade r ec eiv abl es ar e non-int er es t bearing and ar e s t at ed at their nominal v alue, as r educ ed by appr opriat e all o wanc es f or es timat ed irr ec o v er abl e amounts.
T rade payabl es
T rade payabl es ar e non-inter est bearing and ar e stated at their nominal value.
Basis f or segments
A business segment is a gr oup of assets and operations engaged in pr oviding pr oducts or services that ar e subject to risks and r eturns that ar e differ ent 
fr om those of other business segments. A geographical segment is engaged in pr oviding pr oducts or services within a particular economic envir onment 
that ar e subject to risks and r eturns which ar e differ ent fr om those segments operating in other economic envir onments.
New IFRS standar ds and interpr etations not applied
The IASB and IFRIC issued additional standar ds and interpr etations which ar e effective for periods starting after the date of these financial statements. 
The foll owing standar ds and interpr etations have yet to be adopted by the Gr oup:
International Financial Reporting Standards (IFRS/IAS) Effective date
IFRS7 – Financial Instruments: disclosures 1 January 2007
IFRS8 – Operating Segments 1 January 2009
IAS1 – Presentation of Financial Statements; comprehensive revision requiring a statement of comprehensive income 1 January 2009
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC12 – Service Concession Agreements 1 January 2008
IFRIC13 – Customer Loyalty Programmes 1 July 2008
IFRIC14 – IAS19 – The Limit of a Deﬁ ned Beneﬁ t Asset 1 January 2008
The Gr oup does not anticipate that these standar ds and interpr etations will have a material effect on its financial statements on initial adoption.
2. Business and geographical segments
The Gr oup’ s devel opment and other functions operate acr os s both pharmac eutical pr oducts and functional f oods, ar e managed c entrall y and ar e r eported 
internall y as a singl e business. This also applies to the Gr oup’ s mark eted pr oducts. Accor dingl y, the Dir ectors consider that ther e is onl y one primary 
r eporting segment. Geographic segments ar e secondary as neither geographical origin nor destination is central to management’ s assessment of risk 
and r eturn.
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
By geographical area by destination:
United Kingdom 163,822  218,229 
Europe 2,957,196  1,653,751 
Asia – 10,521 
 3,121,018  1,882,501 
All the Gr oup’ s turnover, l oss befor e taxation and net assets ar ose in the United Kingdom.  51 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
3. Net operating expenses
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
Continuing operations
Research and development 7,500,404  6,540,173 
Administrative expenses 1,922,340  1,624,779 
 9,422,744  8,164,952 
4. Dir ectors ’ emoluments
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
Aggregate emoluments 608,346 815,499 
Compensation for loss of ofﬁ ce 37,109 43,474 
Contributions to money purchase pension schemes 210,193 28,857 
855,648 887,830 
Ther e wer e no gains made by individual Dir ectors fr om the ex er cise of shar e options for the period ended 30 September 2007 (2006: nil).
Detail ed discl osur es of Dir ectors ’ individual r emuneration and shar e options ar e given in the r eport of the Boar d on r emuneration on pages 29 to 36.
All the Ex ecutive Dir ectors, comprising thr ee this period (2006: two) had r etir ement benefits accruing to them fr om money pur chase pension schemes in 
r espect of qualifying services.
5. Empl oyee inf ormation
The average monthl y number of persons (including Ex ecutive Dir ectors) empl oyed during the period was:
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
Number Number
Administration 10  10 
Research and development 27  27 
 37  37 
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
Staff costs (for the above persons):
Wages and salaries 1,691,278  1,942,058 
Social security costs 192,276  233,677 
Other pension costs 278,383  82,880 
Share option charge 563,202  302,492 
 2,725,139  2,561,107  52 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Notes to the ﬁ nancial statements continued
5. Empl oyee inf ormation c ontinued
Key management c ompensation
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
Wages and salaries 893,616  1,119,562 
Social security costs 114,447  142,849 
Other pension costs 224,212  44,565 
Share option charge 272,034  186,476 
 1,508,309  1,493,452 
Key management personnel ar e those persons having authority and r esponsibility f or planning, dir ecting and c ontr olling the activities of the Gr oup, dir ectl y 
or indir ectl y, including all Ex ecutiv e Dir ector s and Non-Ex ecutiv e Dir ector s. The number of management per sonnel whose r emuner ation is included abo v e 
is 10 (2006:11).
The Company has no empl oyees.
6. Inter est payabl e and similar char ges
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
Other interest payable 30 –
7. Loss on or dinary activities bef or e taxation
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
Loss on ordinary activities before taxation is stated after charging:
Depreciation charge for the period:
Owned property, plant and equipment 97,164  108,259 
(Gain)/loss on disposal of property, plant and equipment (4,576)  10,068 
Fees payable to the Company’s auditors for the audit of the parent company 
and consolidated ﬁ nancial statements 25,000  19,000 
Fees payable for other services supplied pursuant to legislation 8,900  8,500 
Fees payable for the audit of the Company’s subsidiaries pursuant to legislation 6,000  5,000 
Tax services 12,530  10,290 
Other services 950 –
Operating lease charges:
Plant and machinery 7,573  31,136 
Other assets 91,975  84,900  53 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
8. T ax on l oss on or dinary activities
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
Current tax:
Current UK corporation tax credit on loss for the period 521,168  604,421 
Ther e is no c orporation tax char ge bec ause of the incidenc e of tax l os ses (2006: £nil). The Company has tak en advantage of the Resear ch and Devel opment 
c orpor ation t ax cr edits intr oduc ed in the Financ e Act 2000 wher eby a c ompany may surr ender c orpor ation t ax l os ses incurr ed on r esear ch and de v el opment 
expenditur e for a corporation tax r efund at the rate of 24 pence in the pound of actual spend.
F actors aff ecting the curr ent tax cr edit f or the year
Thirteen months Twelve months
to 30 September to 31 August
2007 2006
£ £
Loss on ordinary activities before tax (6,334,417) (6,243,034)
Loss on ordinary activities multiplied by the standard rate for research 
and development tax credits of 16% (2006: 16%) (1,013,507) (998,885)
Effect of:
Difference between depreciation and capital allowances 11,950  15,221 
Short term timing differences (1,211) 250 
Expenses not deductible for tax purposes 776  2,084 
Effect of share option compensation charge 90,112  48,399 
Enhanced research & development expenditure (173,722) (201,474)
Carried forward losses 564,434 529,984
Tax credit for the period (521,168) (604,421)
9. Loss f or the financial year
As permitted by section 230 of the Companies Act 1985, the par ent Company’ s pr ofit and l os s ac c ount has not been included in these financial statements. 
The par ent Company’ s l oss for the period to 30 September 2007 was £ 851,227 (2006: £583,937).
10. Loss per or dinary shar e
The cal culation of basic and diluted l oss per shar e on the net basis is based on the l oss on or dinary activities after taxation, namel y £5,813,249 
(2006: £5,638,613) and on 53,567,257 (2006: 51,180,893) or dinary shar es, being the weighted average number of or dinary shar es in issue and ranking 
for dividend during the period.
The Company has no dilutive potential or dinary shar es in issue because it is l oss making. 54 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Notes to the ﬁ nancial statements continued
11. Pr operty, plant and equipment
 Short  Computer  Motor  Plant and  Fixtures  
 leasehold  equipment  vehicles  machinery  and ﬁ ttings Total
 £  £  £  £  £  £ 
Cost 
At 1 September 2006  3,363  278,994  168,471  24,739  175,588  651,155 
Additions – 31,194  76,616 – 19,950  127,760 
Disposals – (3,477) (54,760) – (5,047) (63,284) 
At 30 September 2007  3,363  306,711  190,327  24,739  190,491  715,631 
Depreciation 
At 1 September 2006  3,363  235,586  59,419  19,588  131,678  449,634 
Charge for year – 33,634  43,494  2,148  17,888  97,164 
Disposals – (2,392) (23,710) – (4,897) (30,999) 
At 30 September 2007  3,363  266,828  79,203  21,736  144,669  515,799 
Net book value 
At 30 September 2007 – 39,883  111,124  3,003  45,822  199,832 
Net book value 
At 31 August 2006 – 43,408  109,052  5,151  43,910  201,521 
Company
The Company has no pr operty, plant and equipment.
12. Investments
Group Company
2007 2006 2007 2006
Investment in group undertakings
£ £ £ £
At 1 September – – 1,767,653  1,465,161 
Share option charge 563,202  302,492 
At 30 September – – 2,330,855  1,767,653 
Other investments
Cost at 1 September and 31 August 30,098  30,098  30,098  30,098 
Provision for impairment in value at 1 September and 31 August (30,098) (30,098) (30,098) (30,098)
Carrying value at 1 September and 30 September – – – –
Total ﬁ xed asset investments – – 2,330,855  1,767,653 
The other inv es tment sho wn abo v e is in equity shar es of Saklaspur Bio T ech Limit ed (f ormerl y T umkur Chemic als Limit ed), a priv at e c ompany inc orpor at ed 
in India. This investment r epr esents 10% of the voting rights and nominal value of is sued shar es. The investment was full y impair ed as at 31 August 2002. 
The operations of Saklaspur Bio T ech Limited ceased in 2002 and the entity has since then not generated r evenues and it is not lik el y that the investment 
value will be r ecover ed. 55 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
12. Investments c ontinued
Inter ests in Gr oup undertakings
Proportion of voting rights and nominal 
value of issued shares held by
Name of undertaking Country of incorporation Description of shares held Group % Company %
Phytotech Limited England and Wales Ordinary 10 pence shares 100 100
Phytodevelopments Limited England and Wales Ordinary £1 shares 100 –
Both the above companies have been included in these financial statements and operated principall y in their country of incorporation or r egistration.
The principal business activities of these subsidiary undertakings ar e:
Phytotech Limited – devel opment of pharmaceutical pr oducts and functional foods
Phytodevel opments Limited – dormant
13. Amounts due fr om subsidiary undertaking
Group Company
30 September 31 August 30 September 31 August
2007 2006 2007 2006
£ £ £ £
Amounts due from subsidiary undertaking – – 43,922,738  39,684,675 
Ther e ar e no fix ed terms in r espect of amounts owed by subsidiary undertakings. These ar e non-inter est bearing, unsecur ed and not payabl e on demand.
14. Inventories
30 September 31 August
2007 2006
£ £
Raw materials and consumables 433,595 482,056
Work in progress 249,888  360,843 
 683,483  842,899 
In the period ended 30 September 2007, finished goods to the value of £215,453 have been r ecognised as an expense in cost of sal es (2006: £149,946), 
£107,516 of raw materials and finished goods near to or past their expiry date have been written off (2006: £104,636) and no pr ovision has been made 
against obsol ete raw materials, work in pr ogr ess and finished goods (2006: £79,266).
The Company has no inventories.
15. T rade and other r ec eivabl es
Group Company
30 September 31 August 30 September 31 August
2007 2006 2007 2006
£ £ £ £
Trade receivables 227,568  324,396 – –
Other receivables 96,477  34,740  25,950  489 
Prepayments and accrued income 184,568  209,746  24,398  21,507 
 508,613  568,882  50,348  21,996  56 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Notes to the ﬁ nancial statements continued
16. Cash and cash equival ents
Group Company
30 September 31 August 30 September 31 August
2007 2006 2007 2006
£ £ £ £
Cash and cash equivalents 2,240,947  5,997,428  1,980,557  5,520,988 
The Company holds its ex cess cash r eserves in a combination of fix ed inter est accounts and fix ed term money mark et deposits. At 30 September 2007 
and 31 August 2006 these did not ex ceed thr ee months in duration.
17. T rade and other payabl es
Group Company
30 September 31 August 30 September 31 August
2007 2006 2007 2006
£ £ £ £
Trade payables 242,839  522,222  44,551  2,440 
Other payables 15,064  73 – –
Other taxation and social security 48,165  61,598 – –
Accruals and deferred income 1,047,313  1,153,654  52,056  90,061 
 1,353,381  1,737,547  96,607  92,501 
Included within other payabl es for the Gr oup is an amount of £15,032 (2006: £73) r elating to pensions.
18. Pr ovisions
Pr ovision f or empl oyer’ s National Insuranc e on shar e option gains
Ther e is no pr ovision for empl oyer’ s National Insurance on shar e option gains at the period end as the option price of the shar e options granted after 
5 April 1999 (but befor e 7 November 2002) under the 1996 shar e option scheme, which have not vested at 30 September 2007, is gr eater than the 
mark et value of the shar es under option. Options granted after 18 September 2000 under the 1996 shar e options schemes and all options granted 
under the 2003 and the 2007 shar e option schemes have transferr ed the liability for National Insurance to the empl oyee.
Def err ed taxation
The Gr oup and Company have the potential assets shown bel ow, which ar e not r ecognised due to uncertainty as to the timing of their utilisation.
Group Company
30 September 31 August 30 September 31 August
2007 2006 2007 2006
£ £ £ £
Tax effect of timing differences:
Excess of tax allowances over depreciation 292,026  290,404  3,073  3,293 
Accumulated losses 9,642,553  9,322,398  746,389  546,611 
Other – 2,271 – –
 9,934,579  9,615,073  749,462  549,904  57 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
19. Financial instruments and financial risk management
The Gr oup’ s financial instruments comprise primaril y cash and liquid r esour ces, and various items such as trade r eceivabl es and trade payabl es, which 
arise dir ectl y fr om its operations. The Gr oup does not enter into derivative transactions.
The Gr oup’ s ongoing objectives in using financial instruments ar e to maximise the r eturns on funds held on deposit, to minimise e x change rate risk wher e 
appr opriate, and to generate additional cash r esour ces thr ough the issue of shar es when mark et conditions ar e appr opriate. In addition, the Gr oup has 
fr om time to time conserved cash r esour ces by entering into financing arrangements for the acquisition of major capital assets. 
The balance sheet positions at 30 September 2007 and 31 August 2006 ar e not r epr esentative of the positions thr oughout the period as cash and 
short-term investments fluctuate considerabl y depending on when mil estone r eceipts have occurr ed and on the timing of shar e issues. 
Inter est rate risk pr ofil e of the Gr oup’ s financial assets
The Gr oup held all cash, bank and deposits in Sterling accounts with UK banks. Inter est rates on curr ent accounts ar e fl oating and ar e based on LIBID, 
whil e inter est rates on term deposits ar e fix ed for the duration of deposit and earned inter est between 5 % and 5.75% in the period ended 30 September 
2007 (2006: between 4.65% and 4.91%).
Inter est rate risk pr ofil e of the Gr oup’ s financial liabilities
The Gr oup’ s liabilities wer e all in Sterling at fix ed rates of inter est and ar e in r espect of l ease agr eements for the pur chase of capital assets, or wer e non 
inter est-bearing.
Curr ency risk pr ofil e
The Gr oup had no significant commitments in for eign curr encies thr oughout the period.
Borr owing f acilities
The Gr oup had no borr owing facilities at 30 September 2007 (2006: £nil).
F air values
Ther e is no material diff er enc e between the f air value and the carrying values of the financial instruments r ef err ed to above, because of the short maturity 
period of these financial instruments or their intrinsic size and risk.
Cr edit risk
Other than trade r eceivabl es, the financial instruments that subject the Gr oup to a potential cr edit risk comprise principall y of cash and short term 
investments and the funds advanc ed to suppliers of inventory . The Gr oup’ s policy is to minimise the risks as sociated with c ash and short term investments 
by placing these deposits with institutions with a r ecognised high rating, or with one of the major cl earing banks. T rade r eceivabl es ar e lar gel y with highl y 
r eputabl e, cr editworthy trading partners.
20. Pensions and similar obligations
The Gr oup operates a number of defined contribution pension schemes for empl oyees. The assets of the schemes ar e held separatel y fr om those of 
the Gr oup in independentl y administer ed funds. The pension cost r epr esents contributions paid and payabl e by the Gr oup to the funds and amounted 
to £278,383 (2006: £82,880).
21. Call ed-up shar e capital
30 September 31 August
2007 2006
£ £
Authorised
100,000,000 (2006: 100,000,000) ordinary shares of 1pence each 1,000,000  1,000,000 
Allotted, called-up and fully paid
55,606,309 (2006: 51,180,893) ordinary shares of 1pence each 556,063  511,809 
During the period 4,425,416 shar es wer e issued for cash consideration of £1,681,659. The nominal amount of these shar es was £44,254. In the year 
ended 31 August 2006, no shar es wer e issued for cash. 58 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Notes to the ﬁ nancial statements continued
22. Options over shares of Phytopharm plc 
Potential issues of shar es
The Company may grant shar e options to sel ected empl oyees on joining the Company and any such grants ar e made foll owing the pr eliminary and 
interim announcements together with performance r elated grants to all empl oyees. Performance criteria must be satisfied befor e shar e options can 
be ex er cised and these ar e detail ed bel ow . In addition the Company has a l ong-term incentive scheme under which l ong-term shar e incentives may be 
granted to sel ected Senior Ex ecutives. During the period the Remuneration Committee r eviewed the effectiveness and appr opriateness of the existing 
l ong-term incentive and shar e option schemes. As a r esult of this r eview, new incentive arrangements wer e appr oved by Shar eholders at a general 
meeting in June 2007. Subsequentl y empl oyees and Ex ecutive Dir ectors surr ender ed e xisting options and r ec eived grants under the new arrangements.
The outstanding shar e scheme options and l ong-term incentive awar ds at 30 September 2007 ar e shown bel ow anal ysed accor ding to the ex er cise 
criteria. Other than those described in notes 6 to 10 bel ow, all options wer e originall y granted under the 1996 and 2003 plans. The conditions attaching 
to these wer e not affected by the surr ender and r eplacement described above.
Number Currently Currently
outstanding Exercise Date Exercisable Exercisable vested exercisable
30/092007 price Note granted From To 30/092007 30/092007
 450  £4.50 1a 02/07/2002 02/07/2005 01/07/2012 450 –
 1,304  £1.165 1b 06/12/2002 06/12/2005 05/12/2012 1,304 –
 1,754  1,754 –
 450  £4.50 2a 02/07/2002 02/07/2005 01/07/2012 450 –
 1,304  £1.165 2b 06/12/2002 06/12/2005 05/12/2012 1,304 –
 1,754  1,754 –
 900  £4.50 3 02/07/2002 02/07/2007 01/07/2009 900 –
 2,607  £1.165 3 06/12/2002 06/12/2007 05/12/2009 – –
 3,507  900 –
 15,426  £1.815 4b 03/12/2004 03/12/2007 02/12/2014 – –
 5,612  £1.255 4b 11/05/2005 11/05/2008 10/05/2015 – –
 7,881  £0.48 4b 03/11/2005 03/11/2008 02/11/2015 – –
 7,524  £0.56 4b 08/05/2006 08/05/2009 07/05/2016 – –
 21,464  £0.4675 4b 08/11/2006 08/11/2009 07/11/2016 – –
 57,907 – –
 600,000  £0.45 6 09/01/2007 09/01/2010 08/01/2017 – –
 600,000 – –
 2,532,484  £0.445 7 03/08/2007 03/08/2009 02/08/2017 – –
 2,532,484 – –
 151,136  £0.01 8 03/08/2007 03/08/2009 * – –
 155,000  £0.01 9 03/08/2007 03/08/2010 * – –
 306,136 – –
 121,817  £0.4825 10 12/09/2007 01/10/2010 30/09/2011 – –
 121,817 – –
* these shares shall be transferred to the participant at the end of the performance period to the extent that any performance conditions have been satisﬁ ed. 59 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
22. Options over shar es of Phytopharm pl c c ontinued
Note
These options vest in tranches of one thir d on each of the first, second and thir d anniversaries of the date of grant, and have been granted under 1a 
a scheme appr oved by HMRC. Each option is subject to the foll owing condition which must be satisfied befor e it can be ex er cised, namel y that the 
incr ease between an amount equal to 91% of the option price for those options originall y granted on 24 April 1996 or the option price for later grants 
and the middl e mark et quotation of a shar e on a date falling no earlier than the thir d anniversary of the date of grant of that option shall be at l east 
one and a half times the incr ease over the period fr om the date of grant to such date in the FT Actuaries All Shar e Index. The options r emain 
ex er cisabl e until the tenth anniversary of the date of grant.
These options vest in the same way and must satisfy the same conditions as those under 1a above. However, these options remain exercisable until 1b 
the seventh anniversary of the date of grant and have not been submitted to HMRC for appr oval.
These options vest in tranches of one thir d on each of the first, second and thir d anniversaries of the date of grant and have been granted under 2a 
a scheme appr oved by HMRC. Each option is subject to the foll owing condition which must be satisfied befor e it can be ex er cised, namel y that the 
incr ease between an amount equal to 91% of the option price for those options originall y granted on 24 April 1996 or the option price for later grants 
and the middl e mark et quotation of a shar e on a date falling no earlier than the thir d anniversary of the date of grant of that option shall be at l east 
twice the incr ease over the period fr om the date of grant to such date in the FT Actuaries All Shar e Index. The options r emain ex er cisabl e until the 
tenth anniversary of date of the grant.
These options vest in the same way and must satisfy the same conditions as those under 2a above. However, these options remain exercisable until 2b 
the seventh anniversary of the date of grant and have not been submitted to HMRC for appr oval.
These options vest in tranches of one fifth on each of the first, second, thir d, fourth and fifth anniversaries of the date of grant. Each option is subject 3 
to the foll owing condition which must be satisfied befor e it can be ex er cised, namel y that the incr ease between an amount equal to 91% of the option 
price for those options originall y granted on 24 April 1996 or the option price for later grants and the middl e mark et quotation of a shar e on a date 
falling no earlier than the fifth anniversary of the date of grant of that option shall be at l east one and a half times the incr ease over the period fr om 
the date of grant to such date in the Pharmaceuticals Index as published by the Financial Times as a constituent part of the FT Actuaries All Shar e 
Index. The options r emain ex er cisabl e until the seventh anniversary of the date of grant.
These options vest on the thir d anniversary of the date of grant and have been granted under a scheme appr oved by HMRC. The number of options 4a 
ex er cisabl e will be determined by the Company’ s T otal Shar eholder Return (TSR). T wo thir ds will become ex er cisabl e by r efer ence to the Company’ s 
performance compar ed to a gr oup of UK listed biotechnol ogy companies applicabl e at the time of grant. The r emaining one thir d will be ex er cisabl e 
by r efer ence to the Company’ s performance compar ed to the constituents of the FTSE Small Cap Index. 
The value of options (at date of grant) granted up to 100% of base salary will be ex er cisabl e if the Company’ s TSR in the r el evant ranking Gr oup is 
above the median. The value of options (at date of grant) granted in ex cess of 100% of base salary will be ex er cisabl e at 25% for median performance 
against the comparator Gr oup rising to 100% for upper quartil e and above performance. The performance of the Company will initiall y be measur ed 
over thr ee years foll owing grant date. If the tar get has not been met after thr ee years, it can be r e-tested after years four and five. F or options 
originall y granted in 2004 ther e will be onl y one option to r e-test after four years and for options originall y granted in 2005 and later ther e will be no 
opportunity to r e-test.
These options vest in the same way and must satisfy the same conditions as those under note 4a above and have been granted under the Enterprise 4b 
Management Incentive Scheme.
These options vest in the same way and must satisfy the same conditions as those under note 4a above and have not been submitted to HMRC 4c 
for appr oval.
These awar ds made under l ong-term incentive plans ar e subject to performance conditions and the benefits ar e not pensionabl e. The performance 5 
conditions ar e based on TSR over a thr ee year period (with no r etesting opportunities) when compar ed to a peer Gr oup comprising other UK listed 
biotech and pharmaceutical companies (as above) for two thir ds of the shar es and compar ed to the FTSE Small Cap index for the r emaining one 
thir d. In each case 25% of the shar es will vest for median performance against the comparator Gr oup rising pr orate to 100% for upper decil e and 
above performance. None of the shar es awar ded will vest for bel ow median performance. TSR is consider ed by the r emuneration committee to be 
the most r obust method of measuring Company performance over the period. The terms of these awar ds will not be amended to the benefit of 
Dir ectors without shar eholder appr oval. 60 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Notes to the ﬁ nancial statements continued
22. Options over shar es of Phytopharm pl c c ontinued
On 9 January 2007 the Remuneration Committee made a performance shar e awar d of 350,000 or dinary shar es to Dr D Rees, and 250,000 or dinary 6 
shar es to Mr P Mor gan at an ex er cise price of 45 pence per shar e. The Remuneration Committee consider ed that ther e was a considerabl e risk of 
Dr Rees l eaving the Company as his existing shar e option awar ds wer e at option prices significantl y in ex cess of the curr ent shar e price and this 
performance shar e awar d was granted, as permitted by Listing Rul e 9.4.2 (2) to r etain the services of Dr Rees. The Remuneration consider ed that 
the awar d to Mr Mor gan was necessary and as permitted by Listing Rul e 9.4.2 (2), to secur e the services of Mr Mor gan. The awar ds ar e subject to 
performance conditions and the benefits ar e not pensionabl e. The performance condition is based on TSR over a thr ee year period (with no r etesting 
opportunities) when compar ed to the FTSE Small Cap Index. 100% of the shar es awar ded will vest for performance above the comparator gr oup. 
None of the shar es awar ded will vest for performance bel ow the comparator gr oup. TSR is consider ed by the Remuneration Committee to be the 
most r obust method of measuring company performance over the period. The terms of the awar d will not be amended to the benefit of Dr Rees or 
Mr Mor gan without seeking shar eholder appr oval.
These options vest on the second anniversary of the date of grant and have been granted under the Enterprise Management Incentive Scheme. 7 
The number of options ex er cisabl e will be determined by the Company’ s TSR compar ed to the constituents of the FTSE Small Cap Index. The value 
of options (at date of grant) will be ex er cisabl e if the Company’ s TSR in the r el evant ranking Gr oup is above the median.
These options vest on the second anniversary of the date of grant and have been granted under the l ong-term incentive plan. The number of options 8 
ex er cisabl e will be determined by the Company’ s TSR compar ed to the constituents of the FTSE Small Cap Index. The value of options (at date of 
grant) will be e x er cisabl e at 25% if the Company’ s TSR in the r el evant ranking Gr oup is above the median rising to 100% f or upper decil e perf ormanc e.
These options vest on the thir d anniversary of the date of grant and have been granted under the l ong-term incentive plan. The number of options 9 
ex er cisabl e will be determined by the Company’ s TSR compar ed to the constituents of the FTSE Small Cap Index. The value of options (at date of 
grant) will be e x er cisabl e at 25% if the Company’ s TSR in the r el evant ranking Gr oup is above the median rising to 100% f or upper decil e perf ormanc e.
These options ar e granted under a save as you earn plan appr oved by HMRC. The last offer under the plan was made to all empl oyees and Ex ecutive 10 
Dir ectors on 13 August 2007.
Option valuations
Options wer e valued using a stochastic model (also known as a Monte Carl o model). The fair value per option granted and the assumptions used in the 
cal culation for options granted since 6 December 2002 ar e set out in the tabl es r espectivel y bel ow . The Company’ s effective date for IFRS2, “Shar e Based 
Payments” impl ementation is 1 September 2005 and the IFRS has been applied to all options granted after 7 November 2002 which have not vested by 
this effective date and options granted befor e this effective date which have been subsequentl y modified.
The fair value per option granted and the assumptions used in the cal culation for options granted since 6 December 2002 ar e set out bel ow:
Grant 
date
Exercise 
price
Number 
of shares 
outstanding at
30 September 
2007
Fair value 
per option at
 grant date Modiﬁ cation 
date
Share price 
on date of 
modiﬁ cation
Number of 
shares 
surrendered 
and replaced
Incremental 
fair value of 
replacement 
options
Award £ £ £ £ £ £
1996 Share Option Plans
(i)
03/08/2007 0.445 292,989  0.2030 
1996 Share option plan (part 1a) 06/12/2002 1.165 30,163  0.6700 03/08/2007 0.445 28,859  0.0636 
1996 Share option plan (part 1b) 06/12/2002 1.165 27,184  0.6700 03/08/2007 0.445 27,184  0.1971 
1996 Share option plan (part 2a) 06/12/2002 1.165 30,157  0.6780 03/08/2007 0.445 28,853  0.0708 
1996 Share option plan (part 2b) 06/12/2002 1.165 27,181  0.6664 03/08/2007 0.445 27,181  0.1998 
1996 Share option plan (part 3) 06/12/2002 1.165 106,951  0.6641 03/08/2007 0.445 104,344  0.1789 
2003 Share option plan 02/05/2003 1.425 97,449  0.8137 03/08/2007 0.445 97,449  0.1491 
2003 Share option plan 02/05/2003 1.425 48,725  0.8137 03/08/2007 0.445 48,725  0.2034 
2003 Share option plan 09/12/2003 2.125 163,564  1.2559 03/08/2007 0.445 163,564  0.1847 
2003 Share option plan 09/12/2003 2.125 81,782  1.2559 03/08/2007 0.445 81,782  0.2016  61 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Grant 
date
Exercise 
price
Number 
of shares 
outstanding at
30 September 
2007
Fair value 
per option at
 grant date Modiﬁ cation 
date
Share price 
on date of 
modiﬁ cation
Number of 
shares 
surrendered 
and replaced
Incremental 
fair value of 
replacement 
options
Award £ £ £ £ £ £
2003 Share option plan 05/05/2004 1.85 37,939  1.0360 03/08/2007 0.445 37,939  0.1994 
2003 Share option plan 05/05/2004 1.85 18,970  1.0360 03/08/2007 0.445 18,970  0.2034 
2003 Share option plan 05/05/2004 1.85 15,599  1.0360 03/08/2007 0.445 15,599  0.1954 
2003 Share option plan 05/05/2004 1.85 7,800  1.0360 03/08/2007 0.445 7,800  0.2034 
2003 Share option plan 03/12/2004 181.5 103,837  0.6411 03/08/2007 0.445 88,411  0.1749 
2003 Share option plan 03/12/2004 181.5 44,206  0.6411 03/08/2007 0.445 44,206  0.1936 
2003 Share option plan 11/05/2005 1.255 124,220  0.6250 03/08/2007 0.445 118,608  0.1802 
2003 Share option plan 11/05/2005 1.255 59,304  0.6250 03/08/2007 0.445 59,304  0.2025 
2003 Share option plan 03/11/2005 0.48 162,570  0.2352 03/08/2007 0.445 154,689  0.0423 
2003 Share option plan 03/11/2005 0.48 77,344  0.2352 03/08/2007 0.445 77,344  0.1166 
2003 Share option plan 14/12/2005 0.545 266,667  0.6670 03/08/2007 0.445 266,667  0.0062 
2003 Share option plan 14/12/2005 0.545 133,333  0.6670 03/08/2007 0.445 133,333  0.1562 
2003 Share option plan 08/05/2006 0.56 100,996  0.6234 03/08/2007 0.445 93,472  – 
2003 Share option plan 08/05/2006 0.56 46,736  0.6234 03/08/2007 0.445 46,736  0.0329 
2003 Share option plan 08/11/2006 0.4675 242,448  0.2436 03/08/2007 0.445 220,984  – 
2003 Share option plan 08/11/2006 0.4675 110,492  0.2436 03/08/2007 0.445 110,492  0.0156 
2003 Share performance plan 03/12/2004 0.01 57,716  1.2741 03/08/2007 0.445 57,716  0.2817 
2003 Share performance plan 03/12/2004 0.01 28,858  1.2741 03/08/2007 0.445 28,858  0.2817 
2003 Share performance plan 11/05/2005 0.01 11,301  0.8095 03/08/2007 0.445 11,301  0.2750 
2003 Share performance plan 11/05/2005 0.01 5,651  0.8095 03/08/2007 0.445 5,651  0.2817 
2003 Share performance plan 03/11/2005 0.01 31,740  0.2741 03/08/2007 0.445 31,740  0.1135 
2003 Share performance plan 03/11/2005 0.01 15,870  0.2741 03/08/2007 0.445 15,870  0.1135 
Exceptional award 09/01/2007 0.45 600,000  0.2213 03/08/2007 – –  – 
2007 Share option plan 03/08/2007 0.445 137,000  0.2034 03/08/2007 – –  – 
2007 Long term incentive plan 03/08/2007 0.01 155,000  0.2801 03/08/2007 – –  – 
2007 Sharesave plan 12/09/2007 0.4825 121,817  0.1900 03/08/2007 – –  – 
(i)  These awards were awarded prior to the effective date for IFRS2 and were surrendered and replaced on 3 August 2007. Their fair value has been calculated at the date of modiﬁ cation.
22. Options over shar es of Phytopharm pl c c ontinued 62 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Notes to the ﬁ nancial statements continued
22. Options over shar es of Phytopharm pl c c ontinued
The fair values of the original shar e options granted but not vested as at 30 September 2007 wer e cal culated using the foll owing assumptions:
Expected Expected Performance
Grant Expected dividend yield volatility Risk free rate condition
Award date term (note(b)) (note (c)) (note (d)) (note)
1996 Share option plan (part 1a) 06/12/2002 See note (a) below 0% 63.0% 5.0% 1a
1996 Share option plan (part 2a) 06/12/2002 See note (a) below 0% 63.0% 5.0% 2a
1996 Share option plan (part 3) 06/12/2002 See note (a) below 0% 63.0% 5.0% 3
2003 Share option plan 03/12/2004 See note (a) below 0% 61.0% 5.0% 4
2003 Share option plan 11/05/2005 3 years 0% 62.0% 4.0% 4
2003 Share option plan 03/11/2005 3 years 0% 64.0% 4.0% 4
2003 Share option plan 08/05/2006 3 years 0% 68.2% 4.8% 4
2007 Share option plan 03/08/2007 2 years 0% 67.5% 5.4% 7
2007 Long term incentive plan 03/08/2007 2 years 0% 71.3% 5.6% 8
2007 Long term incentive plan 03/08/2007 3 years 0% 71.3% 5.6% 9
2007 Sharesave Plan 12/09/2007 3 Y ears 0% 64.5% 4.9% 10
The fair values of the options surr ender ed and r eplaced on 3 August 2007 wer e cal culated using the foll owing assumptions:
Expected Expected Performance
Grant Expected dividend yield volatility Risk free rate condition
Award date term (note(b)) (note (c)) (note (d)) (note)
1996 Share option plan (part 1a) 06/12/2002 See note (a) below 0% 67.9% 5.5% 1a
1997 Share option plan (part 1b) 06/12/2002 See note (a) below 0% 47.5% 5.6% 1b
1996 Share option plan (part 2a) 06/12/2002 See note (a) below 0% 67.9% 5.5% 2a
1997 Share option plan (part 2b) 06/12/2002 See note (a) below 0% 47.5% 5.6% 2b
1996 Share option plan (part 3) 06/12/2002 See note (a) below 0% 53.0% 5.6% 3
2003 Share option plan 02/05/2003 See note (a) below 0% 64.5% 5.5% 4
2003 Share option plan 09/12/2003 See note (a) below 0% 62.8% 5.5% 4
2003 Share option plan 05/05/2004 See note (a) below 0% 62.6% 5.5% 4
2003 Share option plan 03/12/2004 See note (a) below 0% 69.1% 5.4% 4
2003 Share option plan 11/05/2005 3 years 0% 67.8% 5.4% 4
2003 Share option plan 03/11/2005 3 years 0% 67.7% 5.4% 4
2003 Share option plan 14/12/2005 3 years 0% 52.7% 5.6% 4
2003 Share option plan 08/05/2006 3 years 0% 69.1% 5.4% 4
2003 Share option plan 08/11/2006 3 years 0% 67.8% 5.4% 4
2003 Share performance plan 03/12/2004 3 years 0% 43.7% 5.6% 5
2003 Share performance plan 11/05/2005 3 years 0% 43.7% 5.6% 5
2003 Share performance plan 03/11/2005 3 years 0% 47.6% 5.6% 5 63 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
22. Options over shar es of Phytopharm pl c c ontinued
Notes to assumptions:
i) 40% of participants ex er cise after 3 years if a gain of 40% is availabl e. If this gain is not availabl e, these individuals hold on to their shar es until such (a) 
a gain can be made. The performance test must be satisfied. If the test has not been satisfied at the date of l eaving, the awar ds lapse.
ii) 25% of the r emainder ex er cise fr om the 3r d anniversary onwar ds using a r educing balance methodol ogy, pr oviding that a gain of 20% is availabl e. 
If this gain is not availabl e, these individuals r efrain fr om ex er cising until such a gain can be made.
iii) 15% of the total participants ar e “good l eavers” (wher e the empl oyee may have up to twel ve months to ex er cise options).
iv) 5% of the participants ex er cise per annum in years 4 onwar ds on a r educing balance methodol ogy, pr oviding that the options ar e “in the money” 
(irr espective of the l evel of gain) to all ow for l eavers in these periods. This is r educed to 7 years for the 7 year options granted under the ESOS.
v) any r emaining options ar e e x er cised at maturity pr oviding that they ar e “in the money”. Any awar ds that ar e “underwater” ther ef or e lapse at maturity
This ex er cise strategy is subject to the passing of the performance conditions described above.
The dividend yield of 0% r efl ects the absence of a history of paying dividends and a cl ear dividend policy statement at the r el evant grant dates. (b) 
Expected volatility is the measur ement of the amount by which a shar e price is expected to fluctuate during a period. The expected volatility has been (c) 
cal culated using the standar d appr oach of cal culating the standar d deviation of the natural l ogarithm of historical shar e price movements.
UK Gilt rates pr eval ent on the date of grant with a period commensurate with the term of the awar d. (d) 
A r econciliation of shar e option scheme movements for the periods ended 31 August 2006 and 30 September 2007 is set out bel ow:
2007 2006
Weighted Weighted
average average
exercise price exercise price
Number £ Number £
At 1 September 3,132,918  1.67  3,417,276  1.87 
Surrendered (2,546,620) 1.39 – –
Granted 3,960,436  0.42  1,048,792  0.48 
Exercised – – – –
Lapsed (921,375) 1.97 (1,333,150) 2.14 
At 30 September (31 August) 3,625,359  0.42  3,132,918  1.29 
The f oll o wing t abl es summarise the inf ormation about the r ange of e x er cise pric es f or shar e options outs t anding at 31 Augus t 2006 and 30 Sept ember 2007:
30 September 2007 31 August 2006
Weighted Weighted Weighted Weighted
average average average average
exercise remaining life exercise remaining life
price Number contractual price Number contractual
Range of exercise prices
£ of shares years £ of shares years
£0.01 0.01  306,136  10.00  0.01  262,955  8.46 
£0.48–£0.56 0.45  3,291,170  9.76  0.53  937,109  9.22 
£1.165–£1.85 1.57  26,253  6.52  1.40  1,090,711  6.46 
£2.125–£2.915 – – – 2.20  341,484  6.32 
£3.89 – – – 3.89  124,808  0.42 
£4.20–4.95 4.50  1,800  3.50  4.65  249,072  2.55 
£5.42–£5.62 – – – 5.53  10,573  4.09 
£6.00–£6.89 – – – 6.59  116,206  1.35 
The total char ge for the period r elating to empl oyee shar e-based payment plans was £563,202 (2006: £302,492) all of which r elated to the above equity 
based transactions. 64 Phytopharm plc Report and accounts 2007
Notes to the ﬁ nancial statements
Notes to the ﬁ nancial statements continued
23. Post balanc e sheet events
Ther e ar e no balance sheet events of significance.
24. Capital c ommitments
Neither the Gr oup nor the Company had capital commitments contracted but not pr ovided for at 30 September 2007 (2006: £nil).
25. Contingent liabilities
Ther e wer e no contingent liabilities in the Gr oup or Company at 30 September 2007 (2006: £nil).
26. Financial c ommitments
At 30 September 2007 ther e wer e the foll owing commitments under non-cancellabl e operating l eases:
Gr oup
30 September 2007 31 August 2006
Land and Land and
buildings Other buildings Other
£ £ £ £
Within one year 25,900 – 25,900 1,263
Between two and ﬁ ve years inclusive 6,474 – 34,528 22,267
32,374 – 60,428 23,530
Company
The Company has no annual commitments under non-cancellabl e operating l eases.
The Gr oup has pur chase obligations of £488,180 in r espect of its sub-contracted r esear ch and devel opment activities as at 30 September 2007 
(2006: £1,590,186). The Company had no such commitments.
27. Related party transactions
Gr oup
Under IAS 24 “Related Party Discl osur es” the Gr oup is not r equir ed to discl ose inter-gr oup transactions which ar e eliminated on consolidation.
The Dir ectors r egar d Phytopharm pl c as the ultimate contr olling party of the Gr oup.
Company
The inter-company balances outstanding at 30 September 2007 and 31 August 2006 ar e shown on the Company balance sheet.
The Company has been char ged £674,615 (2006: £633,619) for corporate services pr ovided by subsidiary undertakings.
The r emuneration r eceived by k ey management personnel, including the Dir ectors, is discl osed in note 5. Contents Shareholder information
01 Business highlights
02 Chairman ’s statement
03  Chief Executive’s review
04 Our strategic objectives
08 Our business strategy
09 Our pipeline
10 Business review: Pharmaceutical products
14 Business review: Functional foods
18 Financial review
20  Corporate social responsibility review
23 Board of Directors
24 Directors’ report
29  Remuneration report of the Board of Directors
37 Corporate governance
42  Independent auditors’ report to the members of Phytopharm plc
44  Consolidated income statement
45  Consolidated and Company balance sheets
46  Statement of changes in shareholders’ equity
47  Consolidated and Company cash ﬂ ow statements
48 Notes to the ﬁ nancial statements
We develop novel products in areas of high unmet health needs, 
to deliver cures and relieve suffering for healthier lives, for longer.
Inspired by nature…
Registered ofﬁ ce
Corpus Christi House
9 West Street
Godmanchester
Cambridgeshire PE29 2HY
Phytopharm plc is a company registered in 
England & Wales, which is listed on the 
London Stock Exchange (symbol: PYM).
Company number
3131723
Registrars
Equiniti Registrars Limited
The Causeway
Worthing
West Sussex BN99 6DA
Brokers
KBC Peel Hunt Limited
111 Old Broad Street
London EC2N 1PH
Auditors
PricewaterhouseCoopers LLP
Abacus House
Castle Park
Cambridge CB3 0AN
Solicitors
White & Case LLP
5 Old Broad Street
London EC2N 1DW
Financial Public Relations
Financial Dynamics
Holborn Gate
26 Southampton Buildings
London WC2A 1PB
Financial Advisers
NM Rothschilds & Sons Ltd
New Court
St Swithins Lane
London EC4P 4DU
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Report and accounts  
2007
The pharmaceutical 
development and  
functional food company
Developing & Delivering
Phytopharm Report & accounts 2007
Phytopharm plc
Corpus Christi House
9 West Street
Godmanchester
Cambs PE29 2HY
United Kingdom
Tel +44 (0) 1480 437697
Fax +44 (0) 1480 417090
Company number 3131723
www.phytopharm.com