Final Results

Ardana PLC 29 June 2006 Ardana: Preliminary Announcement for the year ended 31 March 2006 Edinburgh, UK, 29 June, 2006; Ardana plc (LSE: ARA) today announces its Preliminary Results for the year ended 31 March 2006. Ardana is an emerging pharmaceutical company focused on the discovery, development and marketing of innovative products to improve human reproductive health, in order to address areas of considerable unmet need in this $25.5 billion market*. Highlights Pipeline development - Positive results in Phase I trial of EP01572 oral Growth Hormone Secretagogue (GHS) - Positive results in Phase II trial of Teverelix LA in prostate cancer - Positive results in Phase II trial of Teverelix LA in benign prostatic hyperplasia (BPH) - Pre-Investigational New Drug (IND) application meeting with the United States Food & Drug Administration (FDA) on the development of Teverelix LA in prostate cancer - Pre-IND application meeting with the FDA on development of Teverelix LA in BPH - Agreement reached at Pre-IND meeting with the FDA on the next steps in the development of Testosterone Cream for testosterone replacement in male hypogonadism Commercial - Striant(TM) SR launched in Germany, the Nordic region and the Republic of Ireland - Discussions with potential development partners for Teverelix Long Acting (LA) ongoing Financial - Loss before tax for the year ended 31 March 2006 of £8.8 million (2005: £8.5 million) after writing off research and development costs of £6.4 million (2005: £4.0 million) - Cash and cash equivalents at 31 March 2006 of £19.1 million (2005: £29.2 million) People - Carol Ferguson appointed as Non-executive Director - Klaus Falk appointed as Vice President of Sales & Marketing - John Hawkins appointed Director of Human Resources Post Balance Sheet events - Positive results in Phase II dose ranging study of Testosterone Cream for testosterone replacement in male hypogonadism - IND opened with the FDA for Testosterone Cream - IND opened with the FDA for Teverelix LA in prostate cancer - Dr Huw Jones appointed as Non-executive Director Dr Maureen Lindsay, CEO, commented 'The year has been an extremely busy one for Ardana as we concentrated on developing our pipeline and building the profile of the Company. We have made significant progress towards our objective of building a successful pharmaceutical business in the field of reproductive health. Our first product, Striant(TM) SR was launched in the UK in 2004 through our own specialist sales force, and is being rolled out elsewhere in Europe starting with launches in Germany, the Nordic region and the Republic of Ireland in this financial year. A marketing agreement for the Nordic Region has also been agreed. A second product, Invicorp(TM), is being prepared for European Mutual Recognition to enable marketing to commence, with a potential launch by the end of 2006. Our key development programmes for Teverelix and Testosterone Cream are progressing well and we are delighted with the successful outcome of the pre-IND meetings with the FDA to agree the development plans going forward for these programmes. Discussions with a number of potential partners for the development of Teverelix LA are ongoing, which the Directors anticipate concluding successfully before starting the relevant Phase III programmes.' Enquiries For more information contact: Maureen Lindsay + 44 (0) 131 226 8550 Ardana Julia Phillips/John Gilbert +44 (0) 20 7831 3113 Financial Dynamics Notes for Editors Ardana plc is an emerging pharmaceutical company focused on the development and marketing of innovative products to improve human reproductive health, a $25.5 billion market*. Ardana's strategy is to manage risk by maintaining a broad and balanced product pipeline through its network of leading research institutions and through the acquisition of products and intellectual property rights. The Group's four lead products reflect this strategy: Striant(TM) SR, a testosterone replacement therapy that has already been launched as a treatment for men with confirmed hypogonadism through Ardana's own specialist sales force in the UK and through partners in Germany, the Nordic region and the Republic of Ireland; Teverelix LA, in development for three initial indications (prostate cancer, benign prostatic hyperplasia (BPH) and endometriosis); Testosterone Cream, a dermal testosterone delivery system to treat male hypogonadism, which will shortly enter Phase III trials; and Invicorp(TM), a combination drug treatment for male erectile dysfunction, for which the Company has license rights in Europe. In addition, Ardana has a strong portfolio of follow-on products in development, including the oral Growth Hormone Secretagogue, EP01572. Ardana has been listed on the main market of the London Stock Exchange since March 2005 when it raised £21 million before expenses. For further information please see www.ardana.co.uk *Source: Company estimates, based on independent market data Statements contained within this press release may contain forward-looking comments which involve risks and uncertainties that may cause actual results to vary from those contained in the forward-looking statements. In some cases, you can identify such forward-looking statements by terminology such as 'may', ' will', 'could', 'forecasts', 'expects', 'plans', 'anticipates', 'believes', ' estimates', 'predicts', 'potential', or 'continue'. Predictions and forward-looking references in this press release are subject to the satisfactory progress of research which is, by nature, unpredictable. Forward projections reflect management's best estimates based on information available at the time of issue. Chairman and Chief Executive's Statement Since Ardana's foundation in 2000, we have pursued a four-part strategy to create value from the business by: • Maintaining a broad and balanced portfolio to manage risk, focusing on the therapeutic area of human reproductive health; • Actively pursuing an in-licensing and acquisition programme for products and technologies to maintain a robust pipeline, including near-term commercial products and potential high value development candidates; • Retaining value by building a sales and marketing capability in leading European markets, through both our own infrastructure and partnerships; and • Maintaining a lean organisation by selective outsourcing in order to achieve flexibility. During the financial year we have made significant progress across all aspects of Ardana's business. In addition to the UK, Striant(TM) SR has now been launched in Germany, the Nordic region and the Republic of Ireland. Our second commercial-stage product, Invicorp(TM), an injectable treatment for erectile dysfunction, is proceeding towards an anticipated launch in the second half of 2006. In clinical development, our compounds are advancing well and, in particular, we are pleased with the positive outcomes of our Phase II trials and discussions held with the FDA in relation to Testosterone Cream and Teverelix LA for both prostate cancer and BPH. We are also progressing our development of Teverelix LA for the indication of endometriosis. We are very encouraged with the outcome of the Phase I trial for EP01572, an oral Growth Hormone Secretagogue. The results show that it has the ability to stimulate growth hormone release selectively without affecting other hormone levels and appears to be well tolerated. Plans are in progress to further develop this product which could have significant patient advantages in this $3.1 billion market (Source: Company estimates, based on independent market data). Ardana's strategy is to manage risk by continuing to maintain a broad and balanced pipeline of products and product candidates through relationships with leading research institutions and the acquisition of products and intellectual property rights. We have already established a targeted sales force in the UK and it is our intention to establish a sales and marketing infrastructure in the five largest European markets to support the future launch of additional products, as and when commercially appropriate. This infrastructure will be in place to support the planned launch of Teverelix LA in Europe. Having our own sales and marketing capability will allow us to keep more value in the Group for the benefit of our shareholders. In the interim, commercialisation will be by a combination of our own sales teams and strategic partnerships. Currently, Ardana's key customers are endocrinologists and urologists and, as the portfolio expands, the customer profile will include other reproductive health specialists such as obstetricians and gynaecologists. These are small, well circumscribed groups of clinicians easily addressed by a small team of sales representatives. Striant(TM) SR An effective, unique and innovative controlled-release buccal tablet containing 30 mg of testosterone indicated for testosterone replacement therapy in men with hypogonadism, the most common hormone deficiency in men. The Striant(TM) SR tablet is applied twice daily to the gum above the front incisor tooth, providing a novel method of delivery compared with existing testosterone replacement products. Ardana commenced UK commercial sales in June 2004 and, following a positive opinion under the Mutual Recognition Procedure, has now launched in Germany, the Republic of Ireland and the Nordic region, and is planning launches in several other European countries. Striant(TM) SR is the first-to-market buccal adhesive tablet and marketing to urologists and endocrinologists in the UK by Ardana's own sales force continues to progress. During June 2005 we announced that Ardana had signed an agreement granting Cytochemia AG exclusive rights to market Striant(TM) SR in Germany and in October we announced that Cytochemia had commenced marketing the product. Ardana received initial revenues during the period and will receive future revenues for the supply of Striant(TM) SR to Cytochemia. The German launch of Striant(TM) SR was announced at the 57th Congress of the German Society of Urology meeting in Dusseldorf, which was attended by approximately 3,000 urologists. Striant(TM) SR is now available on prescription in Germany which, with an estimated market size of €15.2 million per annum (Source: Company estimates, based on independent market data), is the largest market for testosterone replacement therapies in Europe. Cytochemia will target all 3,500 urologists plus andrologists in the country. Cytochemia has considerable experience in Germany selling to the same specialists through their targeted sales force, which has a strong track record in the education of physicians on product usage. Cytochemia has a very complementary portfolio to Ardana and its product ImmuCyst(TM), which has been on the market for 13 years, is an established agent for the treatment and prevention of superficial bladder cancer. Striant(TM) SR represents an excellent fit with Cytochemia's product portfolio and will be an important addition. As the biggest and most developed market in Europe for testosterone replacement, Germany is key for Striant(TM) SR. In partnering with Cytochemia we believe that the product is in good hands to ensure a successful introduction in that market. We continue to develop our distribution capability in Europe with the granting of exclusive rights to market Striant(TM) SR in the Republic of Ireland and to Pharmacuro ApS for the Nordic region. Pharmacuro, established in 2003, is a young, dynamic, pharmaceutical marketing and distribution company that provides the medical communities of Denmark, Sweden, Norway and Finland with a range of products. Pharmacuro is also an excellent strategic partner for Ardana: its focused marketing and sales force targets endocrinologists and it has already established strong relationships in the Nordic region. The market size for testosterone replacement in the Nordic region is estimated at approximately €3 million per annum (Source: Company estimates, based on independent market data). Pharmacuro launched Striant(TM) SR in the Nordic market in June 2006. Teverelix LA A long-acting formulation of a GnRH (gonadotrophin releasing hormone) antagonist that binds with a receptor in the pituitary gland, to provide dose-dependent control of the release of sex hormones such as testosterone in men and oestrogen in women. GnRH is considered to be the master switch by which the body controls the production of sex hormones. The benefit of Teverelix LA is that its mode of action means that it can be used as either an 'on/off' or ''dimmer'' switch for hormone release. This is important in those diseases where the progression of the disease relies on a supply of the sex hormones. Thus for the malignant diseases Teverelix LA can switch off and stop the production of either testosterone or oestrogen and for the benign diseases it can reduce (or 'dim') the levels of the sex hormones in a dose dependent manner thus alleviating the effects of the disease with minimal risk of the side-effects of castration. Ardana is developing Teverelix LA initially to treat three major indications: • prostate cancer, • benign prostatic hyperplasia (BPH); and • endometriosis. In trials conducted to date, Teverelix LA has shown to be well tolerated and demonstrates a dose-dependent reduction of testosterone in men and oestradiol in women. Teverelix LA - Prostate Cancer The progression of prostate cancer is driven by male sex hormones (androgens) such as testosterone. It is widely accepted that reducing levels of these hormones in advanced disease can help slow the growth of the cancer and prolong survival. The production of testosterone can be reduced either surgically, with the removal of the testes, or through medicines that affect production of testosterone. Previous studies have confirmed that Teverelix LA can attain and maintain suppression of testosterone to castration levels in patients with advanced prostate cancer. On 7 September we announced that Ardana had a pre-Investigational New Drug (IND) application meeting with the FDA to discuss the development of Teverelix LA for the treatment of prostate cancer. The FDA has confirmed that serum testosterone levels can serve as a reliable surrogate marker for efficacy in the treatment of prostate cancer. The meeting reached agreement on the path forward for the development of Teverelix LA for the treatment of prostate cancer, which should allow us to meet our registration timelines and previously announced launch target of the end of 2009. We submitted to the FDA the first study to be performed under an IND in the pursuit of this indication in March 2006. Additional Phase II dose confirming studies are ongoing, and results from these studies should be available by the end of H2 2006. These studies give Ardana further insight into how Teverelix LA should be used to achieve the optimal clinical effect in the treatment of prostate cancer, which is widely acknowledged to be a multi-billion dollar market. Our target date for a potential product launch is by the end of 2009. Teverelix LA - Benign Prostatic Hyperplasia (BPH) BPH is a common benign disease occurring in men over the age of 50, and increases in prevalence with age. BPH is characterised by an enlargement of the prostate gland, which results in urinary flow problems such as hesitancy, weak or interrupted stream, urgency and more frequent urination, especially at night. The growth of prostatic tissue is driven by male sex hormones (androgens), primarily testosterone and its more potent metabolite dihydrotestosterone (DHT). Reducing levels of these hormones can reduce the size and growth of the prostate. In previous clinical studies, Teverelix LA has been shown to decrease serum testosterone levels and subsequently DHT in a dose-dependent manner. Therefore, Teverelix LA can reduce serum testosterone levels to the low end of the normal range, avoiding a chemical castration and its related symptoms. In our first Phase II study in patients with BPH, Teverelix LA demonstrated a statistically significant improvement in symptoms of BPH as measured by the International Prostate Symptom Score (IPSS). The FDA has confirmed that improvements in symptoms according to IPSS can serve as a single endpoint for therapeutic and regulatory review. We are very encouraged by this Phase II study which provides proof-of-concept of Teverelix LA as a potential treatment for BPH. Teverelix LA was well tolerated in this trial, without any signs of allergic reactions, and caused a rapid and prolonged improvement of the symptoms of BPH. These findings suggest that Teverelix LA, administered by subcutaneous injection two to six times per year, could be used not only for the improvement of symptoms but also to delay the progression of BPH. We believe that this compound has considerable potential in the treatment of BPH which currently has a substantial pharmaceutical market worth about $4.9 billion per annum (Source: Company estimates, based on independent market data). On 21 September we announced that the launch of Teverelix LA in BPH could be advanced by up to two years from earlier estimates, following a pre-IND application meeting with the FDA at which consensus on the company's development plan for the therapy was reached. We now expect that Teverelix LA in BPH could reach the market in 2010. Another European Phase II study in patients with BPH has commenced and results are expected by the end of 2006. Teverelix LA - Endometriosis Endometriosis is a hormone responsive condition arising in women in which the tissue lining the uterus (the endometrium) grows outside the uterus. These ectopic deposits are usually benign but are associated with pelvic pain, heavy menstruation and infertility. Reducing levels of female sex hormones (ie oestrogen) can cause endometrial growths to shrink. Our first Phase I trial completed last year showed that Teverelix LA can decrease oestrogen in a dose-dependent manner. The first Phase II trial to evaluate clinical proof-of-concept in patients is expected to commence in H2 2006. Testosterone Cream Testosterone Cream is a novel transdermal testosterone delivery system based on our Bi-gel technology, which is in development for the treatment of male hypogonadism. On 31 October 2005 we announced positive results of a second Phase I study. The study was in healthy female subjects to provide a control group equivalent to hypogonadal men with low serum testosterone levels. The study not only provided proof-of-concept on the delivery technology but also indicates that, using this cream, testosterone can be effectively delivered through the skin to bring testosterone levels to within the normal range observed in healthy males. These Phase I results are very encouraging. In April 2006 we announced positive results of Testosterone Cream in a Phase II study in hypogonadal men. This Phase II dose-finding study provided clear evidence of the effectiveness of Ardana's Bi-gel technology for the transdermal delivery of testosterone. We have commenced a further one month Phase II study in hypogonadal men to evaluate the steady state levels of serum testosterone and longer-term tolerability. Additionally, a Phase II dose-titration study is on track to commence in H2 2006. We expect Testosterone Cream to have high patient acceptability. The cream is fast drying, has low alcohol content, and only requires application to a small area of the body. In January 2006 we reported on a pre-IND meeting with the FDA to discuss the development of Testosterone Cream. Agreement was reached on the next steps in development of the product, which should allow Ardana to meet its registration timelines, with the product ready for launch by H1 2008. Ardana's IND with the FDA was opened in June 2006. Based upon the knowledge we have gained on our Bi-gel technology, Ardana can develop not only additional compounds to market ourselves but also offer this platform to other companies and thereby generate licensing income. In 2005, the testosterone replacement market in Europe and in the US was estimated to be approximately $527 million. The US market is by far the most attractive with sales of $470 million, growing at 8%, of which $367 million were sales of testosterone gels (Source: Company estimates, based on independent market data). Other therapies for male hypogonadism include injectable formulations of testosterone, oral preparations, transdermal patches, topical gels and subcutaneous implants. We have also completed a pilot Phase I study in women for female androgen replacement. Invicorp(TM) We acquired the marketing rights for Invicorp(TM) in June 2004 from Senetek plc for the European market. It is an injectable treatment for erectile dysfunction. Marketing authorisation for Invicorp(TM) has been granted in Denmark and we intend to initiate European Mutual Recognition proceedings and launch in 2006. Oral GHS We have been conducting early stage clinical development on an oral formulation of a Growth Hormone Secretagogue (EP01572), which is potentially useful as a treatment for growth hormone deficiency disorders and metabolic complications associated with critical illness. EP01572 is a novel synthetic compound that is orally active and stimulates the secretion of growth hormone (GH) from the patient's pituitary gland for the treatment of growth hormone disorders. Phase I trial results show that EP01572 stimulates GH release in a selective manner without affecting the stimulation of other hormones and suggests it is well tolerated. Potential applications for EP01572 include the diagnosis and treatment of growth hormone deficiency disorders (especially in children), and frailty in the elderly as well as metabolic complications associated with critical illness such as cachexia in cancer and AIDS, cancer, trauma, uremia, and lipodystrophy. The growth hormone market is worth about $3.1 billion per annum worldwide (Source: Company estimates, based on independent market data) and as the majority of products are injectables we believe that EP01572 could offer an attractive alternative for patients. Terbutaline Vaginal Gel Phase II trials on Terbutaline formulated as a bio-adhesive vaginal gel for use as a treatment for infertility linked to endometriosis are ongoing. Due to delays caused by additional regulatory requirements in one country we expect the results from this trial to be available later in 2006. Commercial opportunities Our business development team, alongside expanding our portfolio in the field of reproductive medicine, continues to look to create value by out-licensing other compounds we own which are not core to our strategy. Operationally we continue to maximise value and manage risk in the business through our flexible and low cost business model. We are building our sales and marketing capability across Europe as strategically and financially appropriate with our lead commercial product Striant(TM) SR, to be followed by Invicorp(TM) and Testosterone Cream, so that we can build a solid relationship with our customers, develop our understanding of the market and demonstrate Ardana's commitment to the area in advance of the launch of Teverelix LA. We are rapidly expanding our partnerships in research, regulatory and manufacturing all of whom are directed by our in house team of experienced managers. Our intention is to ensure that Teverelix LA, Testosterone Cream and GHS are optimally developed and marketed worldwide. To this end Ardana plans to partner the development and commercialisation of these products. Board and management team We continue to expand and develop our Board and management team. We are pleased to welcome Huw Jones, Klaus Falk and John Hawkins to Ardana, bringing considerable pharmaceutical and commercial expertise to the business. Huw Jones, who joins Ardana as Non-executive Director, was formerly president of CV Therapeutics Europe Ltd, senior vice-president Northern Europe of Elan Pharmaceuticals and UK marketing director for SmithKline Beecham Pharmaceuticals. We welcome Klaus Falk into the role of Vice-President, Sales & Marketing. Klaus has over 20 years of experience in the pharmaceutical industry covering general management, sales and marketing and investor relations. As vice-president (Europe) of Merck KGaA he was involved in the successful launch of the oncology product, Erbitux(TM). John Hawkins is appointed as Director of Human Resources has and brings over 19 years experience in Human Resources with organisations such as Royal Bank of Scotland plc. Prior to his appointment, John worked with Ardana as a consultant. These appointments will bring significant benefits to Ardana, in particular as we build further on our sales and marketing capabilities in the UK and Europe. Outlook We are very pleased with the progress across our product portfolio and are highly encouraged by the feedback we have received from the FDA for Teverelix LA in the treatment of both prostate cancer and BPH and also for Testosterone Cream. The clinical development and launch of Teverelix LA for prostate cancer is on track according to our original schedule in this multi-billion dollar market, and the opportunity to bring forward the launch date for BPH is very exciting for ourselves and potential partners. We look forward to announcing further progress with our development programmes including the development of the third Teverelix LA indication of endometriosis. Ardana is in discussions with potential partners to collaborate on the future development and commercialisation of Teverelix LA. Currently there are a number of opportunities in terms of indications and territories which will allow Ardana to maximise shareholder value. This range of opportunities, combined with the recent emergence of new potential partners, has meant that the Company wishes to take more time to explore all the options. We expect to have agreements in place before the start of the first Phase III trials. Operationally we continue to manage risk in the business by looking for significant co-development partners for our products, through our flexible and low cost business model and by developing a mix of products in our pipeline. We intend to actively pursue product and technology in-licensing and acquisition opportunities, and look to create value by out-licensing other compounds we own which are not core to our strategy. Through these activities we aim to maximise the value in our portfolio. Anticipated newsflow in next twelve months • Results from Phase II trial of Terbutaline • Launch Invicorp(TM) in Europe • Results from Phase II trial of Testosterone Cream • Commence Phase III trial of Testosterone Cream • Data from Phase II trial of Teverelix LA in the indication of BPH • Data from Phase II trial of Teverelix LA in the indication of prostate cancer • Phase III data and regulatory submission of Testosterone Cream • Data from Phase II trial of Teverelix LA in the indication of endometriosis • Partnership collaborations for Teverelix LA and other products Financial Review Summary Ardana is an early-stage pharmaceutical company investing in the development of its product portfolio and marketing infrastructure. As such, the Group expects to continue to incur operating losses for a number of years. The Group's principal source of finance has been the issue of new share capital to shareholders. We intend to expand the sources of finance to include revenues from out-licensing to third parties of products in development and further in-licensing of marketed products to increase product revenue. We continue to manage our development spend in a controlled and consistent way and deliver results from our pipeline in accordance with expectations. This year we have managed to increase our spending in research and development by 60% without significantly increasing our overall loss for the period. The financials statements are the first under which the Group is required to adopt International Financial Reporting Standards (IFRS). The Company financial statements have also been prepared under IFRS. All comparatives have been restated to comply with the requirements of IFRS. A reconciled balance sheet at 1 April 2004 and 31 March 2005 and an IFRS reconciliation of the Group's results for the year ended 31 March 2005 were published in the Group's interim review for the six month ended 30 September 2005. Operating results Of the total revenues for the year ended 31 March 2006 Striant(TM) SR product sales were £384,000 (2005: £60,000) in territories where launched. Sales of services for the year ended 31 March 2006 were £106,000 (2005: £75,000). Ardana made an operating loss of £10.0 million in the year compared to a loss of £9.0 million in 2005. This increase was due principally to increasing research and development activity as our pipeline progresses. Research and development costs this year represent 60% of our operating expenses compared to 43% in 2005. Other operating costs have decreased primarily due to the one off nature of expenses incurred in 2005 such as the launch costs for Striant(TM) SR in the UK, restructuring costs and IPO expenses. The income statement shows a taxation credit of £0.6 million (2005: £0.5 million). This relates to research and development tax relief in respect of qualifying expenditure incurred. Liquidity and capital resources On 31 March 2006 Ardana had cash and cash equivalents of £19.1 million (2005: £29.2 million). Net cash used by operating activities in the year was £11.4 million (2005: £9.9 million) due principally to the operating loss incurred during the year. Net cash from investing activities was £1.2 million (2005: £0.5 million). The Group invests funds which are surplus to short-term operational requirements in fixed rate deposits placed with major clearing banks for up to twelve months. Changes in returns from investing activities reflect differences in average cash balances and interest received on invested funds. Net assets at 31 March 2006 were £17.4 million (2005: £25.4 million). This reduction is due to the continued investment in our product pipeline as described in the Chairman and Chief Executive's Statement. Foreign currency risk Ardana translates transactions in foreign currencies at the rates applying on the invoice date and retranslates foreign currency assets and liabilities at the rate applying on the balance sheet date. Ardana's policy is to minimise foreign currency exposure on the balance sheet by naturally balancing foreign currency assets and liabilities wherever possible. The Group does not use derivative financial instruments for speculative, hedging or any other purpose. Loss per share Loss per share in 2006 is 14.7p (2005: 20.7p). Financial outlook Ardana will continue to invest in its primary product development programmes for Teverelix LA, Invicorp(TM) and Testosterone Cream and roll out the sale and distribution of Striant(TM) SR across European-licensed territories. We intend to actively pursue in-license opportunities to increase the number of marketed products to improve our product contribution to the business. The focus of activity for our business development team will be to out-license products within our portfolio to partners who will help to develop and market the products as well as share in the costs and risk. We would expect that out-license deals will contribute significantly to cash flows after any in-licensing costs in future years and prior to the more expensive Phase III studies. Consolidated income statement For the year ended 31 March 2006 Notes 2006 2005* £'000 £'000 Revenue: continuing operations Product revenue 384 60 Revenue from sales of services 106 75 ______ ______ Total revenue 2 490 135 ______ ______ Operating expenses Cost of product sales (142) (11) Research and development (6,359) (3,977) Other operating expenses (4,021) (5,163) ______ ______ Total operating expenses (10,522) (9,151) Operating loss: continuing operations (10,032) (9,016) Gain on sale of available-for-sale investment 229 - Interest received 1,002 523 ______ ______ Loss on ordinary activities before taxation (8,801) (8,493) Taxation 5 633 479 ______ ______ Loss on ordinary activities after taxation (8,168) (8,014) attributable to equity holders ______ ______ Basic loss per share 3 (14.7p) (20.7p) During the year ended 31 March 2005, the Group carried out a corporate restructuring including the incorporation of a new holding company. The income statement for the year ended 31 March 2005 has been prepared using merger accounting and the financial information is presented on a proforma basis as if the new holding company had been in existence and had been the parent of all group subsidiaries thoughout the entire comparative period. Consolidated balance sheet As at 31 March 2006 Notes 2006 2005* £'000 £'000 Non-current assets Property, plant and equipment 15 33 _____ _____ Current assets Inventories 76 107 Trade and other receivables 1,619 1,308 Cash and cash equivalents 19,051 29,182 _____ _____ 20,746 30,597 Total assets 20,761 30,630 Current liabilities Trade and other payables (3,360) (3,841) Non-current liabilities Trade and other payables - (1,373) _____ _____ Total liabilities (3,360) (5,214) _____ _____ Net assets 2 17,401 25,416 _____ _____ Equity Share capital 556 556 Other equity 240 93 Share premium account 26,949 26,949 Merger reserve 34,451 34,451 Own shares (95) (101) Retained earnings (44,700) (36,532) _____ _____ Total equity 17,401 25,416 _____ _____ During the year ended 31 March 2005, the Group carried out a corporate restructuring including the incorporation of a new holding company. The balance sheet as at 31 March 2005 has been prepared using merger accounting and the financial information is presented on a proforma basis as if the new holding company had been in existence and had been the parent of all group subsidiaries thoughout the comparative period. Consolidated statement of changes in equity Year ended 31 March 2006 Share Other Share Merger Retained Own capital equity premium reserve earnings shares Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 556 93 26,949 34,451 (36,532) (101) 25,416 (01/04/2005) _____ _____ _____ _____ _____ _____ _____ Recognised directly in equity Movement in own shares - - - - - 6 6 Share-based payment - 147 - - - - 147 _____ _____ _____ _____ _____ _____ _____ Net change directly in - 147 - - - 6 153 equity _____ _____ _____ _____ _____ _____ _____ Loss for the year - - - - (8,168) - (8,168) _____ _____ _____ _____ _____ _____ _____ Total movements - 147 - - (8,168) 6 (8,015) _____ _____ _____ _____ _____ _____ _____ Equity at the end of 556 240 26,949 34,451 (44,700) (95) 17,401 the year _____ _____ _____ _____ _____ _____ _____ Consolidated cash flow statement For the year ended 31 March 2006 Notes 2006 2005* £'000 £'000 Cash flows from operating activities Cash used by operations 4 (11,775) (10,305) Corporation tax received 418 384 Net cash used by operating activities (11,357) (9,921) Investing activities Interest received 1,002 523 Realised gain on sale of available-for-sale investment 229 - Proceeds on disposal of property, plant and equipment - 8 Purchase of property, plant and equipment (11) (36) _____ _____ Net cash from investing activities 1,220 495 Financing activities Issue of shares - 27,349 Purchase of own shares 6 105 _____ _____ Net cash from financing activities 6 27,454 _____ _____ Net (decrease)/increase in cash and cash equivalents (10,131) 18,028 Cash and cash equivalents at beginning of year 29,182 11,154 Cash and cash equivalents at end of year 19,051 29,182 _____ _____ * During the year ended 31 March 2005, the Group carried out a corporate restructuring including the incorporation of a new holding company. The cash flow statement for the year ended 31 March 2005 has been prepared using merger accounting and the financial information is presented on a proforma basis as if the new holding company had been in existence and had been the parent of all group subsidiaries thoughout the entire comparative period. Notes to the financial information 1. Basis of Preparation of Financial Information The financial information set out in the announcement does not constitute the Company's statutory financial statements for the years ended 31 March 2006 or 2005. The financial information for the year ended 31 March 2005 is derived from the statutory financial statements for that year which have been delivered to the Registrar of Companies and which have been restated under IFRS. The auditors reported on those financial statements; their report was unqualified and did not contain a statement under s. 237 (2) or (3) Companies Act 1985. The financial information for the year ended 31 March 2006 is derived from the statutory financial statements for that year which have been approved by the Board of Directors but which have not, at the date of this preliminary announcement, been delivered to the Registrar of Companies. The auditors reported on these financial statements, their report was unqualified and did not contain a statement under s. 237 (2) or (3) Companies Act 1985. The financial statements for the year ended 31 March 2006 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. While the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in July 2006. The Company's accounting policies under IFRS were disclosed in the interim report for the 6 months ended 30 September 2005. The financial information herein has been prepared in accordance with those accounting policies. The company's financial statements for the year ended 31 March 2006 are the first financial statements to be prepared in accordance with IFRS. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS, including a reconciled opening balance sheet as at 1 April 2004 and comparative balance sheet as at 31 March 2005, and an IFRS reconciliation of the Group's results for the year ended 31 March 2005, are included in the statutory financial statements of the Company for the year ended 31 March 2006. This information was included in the Company's interim report for the 6 months ended 30 September 2005. There were no significant differences between the results, position and cash flows of the Group under UK GAAP and IFRS. 2. Business and geographical segments Primary reporting format - business segments The Directors consider that the primary reporting format is by business segment. The Group discovers, develops and markets a range of pharmaceutical products. The Directors consider that there is only one business segment, being pharmaceuticals. Revenue and the carrying value of assets in respect of marketing are less than 10% in the current year and so have not been disclosed separately. This may change as the business develops through the sale or licensing of intellectual property or other development rights and services. Secondary reporting format - geographical segments The Group's operations are located in the UK, with commercialisation and development activities being carried out in the UK and the rest of Europe. The following table provides an analysis of the Group's revenue by geographical market: Revenue from external customers by geographical market 2006 2005 £'000 £'000 UK 207 60 Rest of Europe 283 75 _____ _____ 490 135 _____ _____ The following table provides an analysis of the carrying amount of segment assets: Total assets by geographical market 2006 2005 £'000 £'000 UK 17,401 25,416 Rest of Europe - - _____ _____ 17,401 25,416 _____ _____ 3. Loss per share Basic loss per share is calculated by dividing the loss for the financial period after taxation by the weighted average number of ordinary shares in issue during the period. The basic loss per share is calculated as follows: 2006 2005 Loss after taxation (£'000) (8,168) (8,014) Weighted average number of ordinary shares in issue 55,562,806 38,717,240 ______ ______ Basic loss per share (14.7p) (20.7p) ______ ______ 4. Net cash used by operations 2006 2005 £'000 £'000 Operating loss (10,032) (9,016) Depreciation 29 29 Decrease/(increase) in inventories 31 (107) Increase in trade and other receivables (96) (184) Decrease in trade and other payables (1,854) (1,095) Share-based payments 147 68 _____ _____ Net cash used by operations (11,775) (10,305) _____ _____ 5. Taxation 2006 2005 £'000 £'000 UK corporation tax credit 669 492 Adjustment in respect of prior years (36) (13) _____ _____ Total tax credit for the year 633 479 _____ _____ 6. Approval by the Directors This announcement was approved by the Directors on 28 June 2006. This information is provided by RNS The company news service from the London Stock Exchange

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