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Xenova Group PLC (XEN)

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Monday 19 February, 2001

Xenova Group PLC

Final Results

Xenova Group PLC
19 February 2001

                                                         FOR IMMEDIATE RELEASE

                               Xenova Group plc

           Preliminary Results for the Year Ended 31 December 2000

Slough, UK, 19th February 2001 - Xenova Group plc (Nasdaq NM: XNVA; London
Stock Exchange: XEN) today announces its results for the year to 31 December

Announced Today

  * Merger with Cantab Pharmaceuticals plc
      + See separate press announcement

  * XR9576: Phase II Multi-Drug Resistance Programme
      + Third Phase IIa study shows positive interim results
      + Positive responses noted in a number of patients
      + Licensing discussions underway with potential partners

  * Completion of Phase II First Generation Dual Topoisomerase Inhibitor
      + No further development planned for XR5000

  * Significant progress with Second Generation Dual Topoisomerase
      + Phase I/II trials planned for H2 2001

Financial Highlights

  * Operating loss from continuing operations unchanged at £9.4m

  * Total operating expenses decline to £9.5m (1999:£13.6m)

Commenting on the results, David Oxlade, Chief Executive Officer of Xenova
Group plc said: 'We have made substantial progress in 2000. We are delighted
with the positive Phase IIa clinical trial results for our MDR inhibitor
XR9576. The first generation dual topoisomerase inhibition programme has
provided much useful information which can be applied to speedily advance our
second generation compounds, XR11576 and XR5944. These are progressing well
and we expect one or other of these compounds to enter clinical trials in

Chief Executive's Review

Product Development

Both of Xenova's lead drug candidates, the multidrug resistance modulator
XR9576 and the novel cytotoxic XR5000, continued to progress through a total
of seven Phase II clinical trials during the course of 2000. A number of
preclinical programmes were also progressed, and the product pipeline extended
with the signing of a research agreement with Brunel University for the
development of novel telomerase inhibitors.

XR9576 - Xenova's P-glycoprotein modulator, which targets the reversal of
multi-drug resistance in cancer, progressed through a series of three separate
Phase IIa clinical trials during 2000. These trials were designed to assess
the extent of pharmacokinetic (PK) interaction, if any, between XR9576 and the
marketed cytotoxics paclitaxel, doxorubicin and vinorelbine. The desired
outcome of these trials was to show limited or no clinically significant
interaction. This outcome would allow the marketed cytotoxic to be
administered at or close to its normal therapeutic dose when given in
combination with XR9576. Each of the three trials achieved the desired

Previously Announced Trial Results

The successful conclusion of the paclitaxel trial, which was conducted in
relapsed ovarian cancer patients who had previously been treated with a
variety of cytotoxic drugs, was announced in March 2000. Although not designed
as an efficacy study, complete or partial responses were observed in 6 out of
12 patients.

Further positive data was announced in October 2000 for the second of the
Phase IIa trials, in which XR9576 was administered in combination with
doxorubicin. Patients participating in this trial suffered from a number of
differing relapsed cancers.

Announced Today

Positive interim data has been obtained from the third and final Phase IIa PK
interaction study for XR9576, which was given in combination therapy with the
cytotoxic drug, vinorelbine (Navelbine). The study has confirmed that, at dose
levels of vinorelbine of 15mg and 20mg/m(2), no clinically significant PK
interaction was observed and the administration of XR9576 with vinorelbine was
well tolerated. Positive responses in several of the patients in the study
have been obtained, providing some further anecdotal evidence of efficacy in
addition to that obtained in the earlier reported trials.

This open label study, which is being conducted under a US investigational new
drug (IND) at the National Cancer Institute, Washington DC, USA, has
investigated rising doses of vinorelbine with a single, fixed, once daily
administration of 150mg of XR9576 given intravenously. 16 patients have
received the combination at dose levels of 15 and 20mg/m(2). The positive PK
and toxicity data confirms that XR9576 can be used with the cytotoxic drug
vinorelbine administered close to its normal clinical dose, as has been
previously reported with prior Phase IIa studies involving XR9576 with
paclitaxel and doxorubicin.

A further 12 patients are completing the PK study using a slightly higher dose
of vinorelbine of 22.5mg/m(2) and the full results of this Phase IIa
vinorelbine study will be presented at the American Society for Clinical
Oncology (ASCO) meeting in San Francisco, USA, in May 2001.

Dr Tito Fojo of the National Cancer Institute, and Principal Investigator for
the vinorelbine trial, commented:

'The ideal multi-drug resistance modulator should allow cytotoxic drugs to be
administered at or as close as possible to their normal dose. XR9576 itself is
non-toxic and leaves cytotoxic drug levels largely unaffected. Assays have
indicated that a single dose of XR9576 is sufficient to block the action of
the P-gp pump for in excess of 24 hours and imaging studies have also
indicated that XR9576 can effectively block the P-gp mediated efflux from
tumours. Additionally, it is encouraging to see a number of positive responses
amongst patients taking part in this study.'

Licensing discussions in relation to XR9576 are currently underway with a
number of potential partners, with the objective of taking XR9576 into
partner-supported Phase III registration studies during 2001.

XR5000 - Four Phase II clinical trials were carried out during the course of
2000 for the first generation dual topoisomerase inhibitor known as XR5000.
XR5000 is licensed from the Cancer Research Campaign. Along with the second
generation compounds XR11576 and XR5944, which are in preclinical development,
XR5000 forms part of Xenova's cytotoxic inhibitor programme for the treatment
of common solid tumours. Topoisomerases are enzymes which are critically
involved in the replication of DNA during the process of cell division and
which therefore play a key role in the proliferation of cancer cells. The
trials for XR5000 were conducted on an 'open label' basis in conjunction with
the European Organisation for the Research and Treatment of Cancer.

Previously Announced Trial Results

The results of the first trial, in which the efficacy of XR5000 was
investigated in patients with colorectal cancer, were announced in June 2000.
At the study dose no complete or partial responses to treatment were observed
and as a result no further recruitment took place in this study.

Announced Today

A further three investigative Phase II studies in ovarian, glioblastoma and
non small cell lung cancer patients, which are being carried out with the
European Organisation for the Research and Treatment of Cancer (EORTC) are
close to completion for XR5000.

Although a number of minor responses have been observed in patients during the
course of these studies, the level of these responses has been judged unlikely
to provide XR5000 with a commercially attractive profile in the four tumour
types studied. Xenova will, therefore, focus its resources going forward on
the further development of its second generation dual topoisomerase inhibitor
compounds, XR11576 and XR5944. No further development of XR5000 is currently

Pre-Clinical Development

XR11576 - A novel, orally active second generation dual topoisomerase
inhibitor, XR11576 has been undergoing final pharmacological and toxicity
testing prior to its planned entry into clinical development. XR11576 has a
significantly improved biological profile when compared with XR5000, including
oral bioavailability and a marked enhancement of potency. It is structurally
dissimilar to XR5000.

XR5944 - XR5944 is a further novel inhibitor of topoisomerases I and II and
has shown exceptionally high potency as a cytotoxic in preclinical studies
with a number of cell lines. XR5944 is structurally distinct from both XR5000
and XR11576 and has been shown to be unaffected by atypical multi-drug

Both XR11576 and XR5944 are the product of Xenova's in-house research and
development. Patents have been applied for with respect to both compounds.

It is currently planned that one of these second generation compounds will
enter Phase I/II clinical trials during 2001.

PAI-1 Inhibitors (Anti-Thrombotic) - Research continued throughout 2000 on
this programme, which is based on compounds from Xenova's in-house research.
These compounds are active in both venous and arterial models of thrombosis
and are orally absorbed. Xenova established a partnership with Lilly for this
pre-clinical research area in February 1998.

PAI-1 Inhibitors (Anti-Cancer) - Research is also continuing on this programme
in which Xenova is collaborating with the Institute for Cancer Research. PAI-1
is believed to play a role in the spread (metastasis) of cancer. A poster was
presented at the VIIIth Congress of the Metastasis Society in September 2000,
demonstrating that antibodies to PAI-1 suppress the growth of blood vessels in
a solid tumour in vitro.

Multi-Drug Resistance Protein (MRP) - Research continued during 2000 and it is
expected that compounds will enter preclinical development during 2001. Like
P-gp, MRP acts as a pump and expels small molecules such as cytotoxics out of
cells. Xenova is also exploring the potential application of MRP inhibitors in
the prevention of lung inflammation in asthma patients.

Telomerase - Telomerase is an enzyme known to play a role in cancer
progression. In February 2000 Xenova entered into an exclusive collaborative
research agreement with Professor Rob Newbold and his team at Brunel
University, UK. Professor Newbold and his team are acknowledged as being
amongst the world's leading experts in the field of telomerase inhibition.


Peter Gillett joined Xenova's Board as a non-executive Director in February
2000. He chairs Xenova's Audit Committee and was until June 2000 a partner in
Ernst & Young, the audit and professional services firm.

Stephen B. Howell, Professor of Medicine at the University of California, San
Diego, joined Xenova's Scientific Advisory Board in January 2000.

Financial Summary

Operating Performance

Turnover for the year was £0.1m ($0.1m) (1999: £2.7m ($4.0m)). There was no
turnover in the six months to 31 December 2000 (1999: £0.9m ($1.3m)), with the
decrease for the year attributable to the transfer in-house to Lilly during
1999 of work in connection with the ongoing Xenova/Lilly strategic
cardiovascular research and development programme.

Operating expenses declined to £9.5m ($14.1m) (1999: £13.6m ($20.3m)) and
comprised £7.4m ($11.1m) (1999: £11.3m ($16.9m)) of research and development
costs and £2.0m ($3.0m) (1999: £2.3m ($3.4m)) of administrative expenses.
Research and development costs for continuing operations remained in line with
1999 at £7.4m ($11.1m) (1999: £7.8m ($11.7m)) reflecting further progress
through clinical trials by XR9576, XR5000 and the pre-clinical development of
the second generation topoisomerase programme in the second half of the year.
Continuing administrative costs were £2.0m ($3.0m) (1999: £2.0m ($3.0m)). The
operating loss for the year in respect of continuing operations was £9.4m
($14.0m) (1999: £9.4m ($14.0m)) and for the six months to 31 December 2000 was
£5.5m ($8.2m) (1999: £5.0m ($7.4m)).


In August 2000 Xenova made a placing and open offer of 2,885,108 Units at 345p
raising an initial £9.8m ($14.6m). The exercise of warrants linked to this
placing and open offer could potentially raise a further £9.8m ($14.6m) net of
expenses in 2001. The exercise period for warrants runs from 1 January to 31
October 2001.

Capital expenditure during the year was £0.4m ($0.6m) (1999: £0.1m ($0.2m).
There were no proceeds from disposals of tangible fixed assets (1999: £0.2m

Net interest of £0.7m ($1.0m) was earned in the year (1999: £0.5m ($0.7m)).
Cash (£10.5m ($15.7m)) and liquid resources (£1.7m ($2.6m)) at year-end
totalled £12.2m ($18.3m) (1999: £10.1m ($15.1m)).

Called up shares at 31 December 2000 were 69,242,577.

The Directors do not recommend the payment of a dividend (1999: nil).


                       (See attached Notes to Editors)

UK:                                           US:
Xenova Group plc                              Noonan/Russo Communications Inc
Tel: +44 (0)1753 706600                       Tel: 001 212 696 4455
David A Oxlade, Chief Executive Officer       Tony Ho Loke
Daniel Abrams, Group Finance Director         Amy Martini
Hilary Reid Evans, Corporate Communications

Financial Dynamics
Tel: +44 (0)207 831 3113
David Yates/Sarah Mehanna

Xenova Group plc is a London Stock Exchange techMARK listed company.

                               Notes to Editors

Xenova Group plc is a bio-pharmaceutical company specialising in the
development of new small molecule drugs. The group's strategy is to develop
commercially attractive new drugs, primarily in the area of cancer

In addition to its Phase II programme for p-glycoprotein pump inhibitor
XR9576, which is nearing completion, Xenova is also currently undertaking
cancer research projects targeting next generation topoisomerase inhibitors,
MRP-related multi-drug resistance, telomerase (with Brunel University) and
plasminogen activator inhibitor-1 (PAI-1). Xenova has a drug development
agreement with Lilly, based on small molecule inhibitors of PAI-1, to develop
novel antithrombotic drugs for chronic use.

For further information about Xenova and its products please visit the Xenova
website at

Consolidated Profit and Loss Account (unaudited)

                                   Notes Unaudited Unaudited Unaudited  Audited
                                              Year      Year    6 mths     Year
                                             ended     ended     ended    ended
                                                31        31        31       31
                                          December  December  December December
                                              2000      2000      2000     1999
                                              $000      £000      £000     £000

                                             _____     _____     _____    _____
                                               117        78         -      383
Continuing operations
                                                 -         -         -    2,310
Discontinued operations
                                             _____     _____     _____    _____
                                               117        78         -    2,693
Operating expenses
Research and development costs
Continuing operations                     (11,087)   (7,422)   (4,260)  (7,793)
Discontinued operations                          -         -         -  (3,501)

                                             _____     _____     _____    _____
                                          (11,087)   (7,422)   (4,260) (11,294)
Administrative expenses
Continuing operations                      (3,037)   (2,033)   (1,237)  (2,002)
Discontinued operations                          -         -         -    (323)

                                             _____     _____     _____    _____
                                           (3,037)   (2,033)   (1,237)  (2,325)

Total operating expenses                  (14,124)   (9,455)   (5,497) (13,619)

Operating loss
Continuing operations                     (14,007)   (9,377)   (5,497)  (9,412)
Discontinued operations                          -         -         -  (1,514)

                                             _____     _____     _____    _____
                                          (14,007)   (9,377)   (5,497) (10,926)
Profit / (loss) on sale of
Profit on disposal                   2           -         -         -      271
Adjustment to Discovery              2     (1,911)   (1,279)   (1,279)        -
                                             _____     _____     _____    _____
Loss on ordinary activities before        (15,918)  (10,656)   (6,776) (10,655)

Interest (net)                                 987       661       371      541

                                             _____     _____     _____    _____
Loss on ordinary activities before        (14,931)   (9,995)   (6,405) (10,114)

Tax on loss on ordinary activities   3       1,031       690       690        -

                                             _____     _____     _____    _____

Loss on ordinary activities after         (13,900)   (9,305)   (5,715) (10,114)
taxation attributable to members
of Xenova Group plc                          _____     _____     _____    _____

Loss per share (basic and diluted)           (23c)     (15p)      (9p)    (22p)

Shares used in computing net loss           60,486    60,486    66,187   46,870
per share (thousands)
                                             _____     _____     _____    _____

Statement of Total Recognised Gains and Losses (unaudited)

                                         Unaudited Unaudited Unaudited  Audited
                                              Year      Year    6 mths     Year
                                             ended     ended     ended    ended
                                                31        31        31       31
                                          December  December  December December
                                              2000      2000      2000     1999
                                              $000      £000      £000     £000

Loss attributable to members of Xenova    (13,900)   (9,305)   (5,715) (10,114)
Group plc

Unrealised profit on sale of business            -         -         -    2,167

Translation difference                          81        54        44        7

                                             _____     _____     _____    _____
Total recognised gains and losses in the  (13,819)   (9,251)   (5,671)  (7,940)
period attributable to members of Xenova
Group plc                                    _____     _____     _____    _____

US Dollar amounts have been translated at the closing rate on 31 December 2000
(£1.00 : $1.4938) solely for information.

Consolidated Balance Sheet (unaudited)

                                         Unaudited Unaudited Unaudited  Audited
                                             As at     As at     As at    As at
                                                31        31   30 June       31
                                          December  December           December
                                              2000      2000     2000     1999
                                   Notes      $000      £000     £000     £000

Fixed Assets
Tangible fixed assets                          811       543       335      328
Investments                            2         -         -     1,500    1,500
                                             _____     _____     _____    _____
                                               811       543     1,835    1,828
Current Assets
Due within one year                          2,256     1,510       563      462
Due after more than one year                     -         -     1,500    1,500
                                             _____     _____     _____    _____
                                             2,256     1,510     2,063    1,962

Investments                            2     2,571     1,721         -      514
Cash at bank and in hand                    15,702    10,512     6,246    9,567
                                             _____     _____     _____    _____
                                            20,529    13,743     8,309   12,043

Creditors: amounts falling due             (3,570)   (2,390)   (1,858)  (2,251)
within one year
                                             _____     _____     _____    _____

Net current assets                          16,959    11,353     6,451    9,792

Total assets less current                   17,770    11,896     8,286   11,620

Provisions for liabilities and                (30)      (20)         -        -
                                            ______     _____     _____    _____

Total net assets                            17,740    11,876     8,286   11,620
                                             _____     _____     _____    _____

Capital and reserves

Called up share capital                     10,343     6,924     5,482    5,463
Share premium account                      111,708    74,781    66,980   66,762
Other reserves                              26,742    17,902    17,902   17,902
Profit and loss deficit                  (131,053)  (87,731)  (82,078) (78,507)
                                            ______     _____     _____    _____

Shareholders' funds - equity           4    17,740    11,876     8,286   11,620
                                            ______     _____     _____    _____

US Dollar amounts have been translated at the closing rate on 31 December 2000
(£1.00 : $1.4938) solely for information.

Consolidated Cash Flow Statement (unaudited)

                                   Notes Unaudited Unaudited Unaudited  Audited

                                              Year      Year    6 mths     Year
                                             ended     ended     ended    ended
                                                31        31        31       31
                                          December  December  December December
                                              2000      2000      2000     1999
                                              $000      £000      £000     £000

Net cash outflow from operating        5  (13,973)   (9,354)   (5,079) (11,101)
Returns on investments and
servicing of finance
Interest received                              905       606       316      552

Interest element of finance lease                -         -         -     (35)
rental payments
                                             _____     _____     _____    _____

Net cash inflow from returns on                905       606       316      517
and servicing of finance

Capital expenditure and financial
Purchase of tangible fixed assets            (453)     (303)     (207)    (102)
Proceeds on disposal of tangible                 -         -         -      220
fixed assets
                                             _____     _____     _____    _____
Net cash (outflow) / inflow from             (453)     (303)     (207)      118
capital expenditure and financial
investment                                   _____     _____     _____    _____

Acquisitions and disposals
Net cash received from businesses                -         -         -      937
Management of Liquid Resources
Net sale / (purchase) of                       768       514       (5)      (6)
                                             _____     _____     _____    _____
Net cash outflow before financing         (12,753)   (8,537)   (4,975)  (9,535)

Issue of ordinary share capital             14,162     9,480     9,243    8,375
net of expenses
                                                 -         -         -      (2)
Repurchase of shares by subsidiary
Capital element of finance lease                 -         -         -    (159)
rental payments
                                             _____     _____     _____    _____
Net cash inflow from financing              14,161     9,480     9,243    8,214

                                             _____     _____     _____    _____

Increase / (decrease) in cash                1,409       943     4,268  (1,321)
during the period
                                             _____     _____     _____    _____

Reconciliation of Net Cash Flow to Movement in Net Funds (unaudited)

                                   Notes Unaudited Unaudited Unaudited  Audited
                                              Year      Year    6 mths     Year
                                             ended     ended     ended    ended
                                                31        31        31       31
                                          December  December  December December
                                              2000      2000      2000     1999
                                              $000      £000      £000     £000

Increase / (decrease) in cash                1,409       943     4,268  (1,321)
during the period
Capital element of finance lease                 -         -         -      159
Change in liquid resources                   (768)     (514)         5        6
                                             _____     _____     _____    _____
Change in net funds resulting from             641       429     4,273  (1,156)
cash flows

Disposal of finance leases in                    -         -         -      675
respect of discontinued operations
Transfer of fixed asset to current     2     2,571     1,721     1,721        -
asset investments
Translation difference                           3         2       (7)     (19)
                                             _____     _____     _____    _____
Change in net funds                          3,215     2,152     5,987    (500)

Net funds at 1 January / 1 July             15,059    10,081     6,246   10,581
                                             _____     _____     _____    _____
Net funds at 31 December                    18,274    12,233    12,233   10,081
                                             _____     _____     _____    _____

US Dollar amounts have been translated at the closing rate on 31 December 2000
(£1.00 : $1.4938) solely for information.

Notes to the Preliminary Statement

1     Basis of preparation

These unaudited preliminary statements, which do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985, have
been prepared using the accounting policies set out in the Group's 1999 Annual
Report and Accounts. The 1999 Annual Report and Accounts received an
unqualified auditor's report and have been delivered to the Registrar of
Companies. There have been no changes to the Group's accounting policies in

2     Profit / (loss) on sale of business

On 8 April 1999 Xenova completed the sale of substantially all the assets of
its Discovery business to TerraGen Diversity Inc ('TerraGen') and TerraGen's
wholly owned subsidiary TerraGen Discovery (UK) Limited. Under the terms of
the agreement Xenova received £1,000,000 in the period to December 1999.
Xenova also acquired a 6% equity interest in TerraGen comprising one million
class B preferred shares valued at £1,500,000 based upon the issued share
price of C$3.75 per share. Xenova additionally received an interest bearing
convertible loan note of £1,500,000. The loan note carried interest at 1%
above LIBOR and was convertible to TerraGen equity at the option of either
party after 24 months or automatically after 36 months.

Of the net gain on disposal, £800,000 was taken to the profit and loss account
for the year and the unrealised element of £2,167,000 was taken to the
Statement of Recognised Gains and Losses.

In September 2000, the shareholders of TerraGen approved the sale of TerraGen
to Cubist Pharmaceuticals ('Cubist'). The allocation of 88,668 Cubist shares
to the Group, in exchange for the Group's equity (£1,500,000) and convertible
loan note (£1,500,000) held in TerraGen, was recorded within 'Fixed assets -
Investments' at the net book value of the TerraGen investments previously
owned (£3,000,000).

To reflect the intentions of the Group not to hold this investment for
continuing use in the business, this investment has been included within
current assets and written down at the year-end (£1,279,000) to the net
realisable value (£1,721,000), reflecting the listed market price of the
Cubist shares at 31 December 2000.

3     Taxation

Following the changes introduced as part of the Finance Act 2000 in respect of
Scientific Research Allowances (now renamed 'Research and Development
Allowances'), the Group has recognised the payable R&D tax credit to be
received in 2001.

Notes to the Preliminary Statement (continued)

4     Reconciliation of movement in shareholders' funds

                                                 Unaudited Unaudited    Audited
                                                     As at     As at      As at
                                                        31   30 June         31
                                                  December             December
                                                      2000      2000       1999
                                                      £000      £000       £000

At start of period                                  11,620    11,620     11,181

Allotments of shares in the period                  10,252       327      8,462

Expenses on issue of shares                          (772)      (90)       (87)

Repurchase of shares by subsidiary                       -         -        (2)

Shares to be issued under long term incentive           27         9          6

Retained loss for the period                       (9,305)   (3,590)   (10,114)

Unrealised profit on sale of business                    -         -      2,167

Exchange movement                                       54        10          7
                                                     _____     _____      _____

At end of period                                    11,876     8,286     11,620
                                                     _____     _____      _____

5     Reconciliation of operating loss to net cash outflow from operating

                                            Unaudited     Unaudited     Audited
                                           Year ended      6 months  Year ended
                                          31 December   31 December 31 December
                                                 2000          2000       1999
                                                 £000          £000       £000

Operating loss                                (9,377)       (5,497)    (10,926)

Depreciation                                      212           123         580

Loss on disposal of tangible fixed assets           -             -          83

Provision for liabilities and charges              47            38       (134)

(Increase) / decrease in debtors                (253)         (152)         502

Increase / (decrease) in creditors                 17           409     (1,206)

                                               ______        ______     _______
Net cash outflow from operating               (9,354)       (5,079)    (11,101)
                                                _____         _____       _____

Notes to the Preliminary Statement (continued)

6     Going concern

The Group is an emerging pharmaceutical business and as such expects to absorb
cash until products are commercialised. The Directors have a reasonable
expectation that the Group has, or can reasonably expect to obtain, adequate
cash resources to enable it to continue in operational existence for the
foreseeable future, and have therefore prepared the financial statements on
the going concern basis.