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Xenova Group PLC (XEN)

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Monday 19 February, 2001

Xenova Group PLC

Merger - Part 1

Xenova Group PLC
19 February 2001



Part 1


CANTAB PHARMACEUTICALS PLC                          XENOVA GROUP PLC

Under Embargo - not to be released until 0700 19 February 2001


Not for release, distribution or publication in or into the United States,
Canada, Australia or Japan


    Recommended Merger of Xenova Group plc with Cantab Pharmaceuticals plc

The Boards of Xenova and Cantab today announce that they have agreed terms for
a recommended merger of their businesses.


Transaction Highlights


The Merger:


  * Creates an Enlarged Group with one of the largest clinical development
    pipelines within the European biopharmaceutical sector, with four product
    candidates in Phase II and three in Phase I.


  * Broadens and enhances the product portfolio with a key area of focus on
    cancer, where both companies have substantial expertise and exciting
    product opportunities.


  * Brings together the complementary drug discovery and development skills
    of the two companies with which to develop current and future drug
    candidates.


  * Establishes an Enlarged Group with a number of valuable partnerships
    with major pharmaceutical companies and with the potential for more
    partnerships to follow.


  * Strengthens and broadens the experience of the management team.


  * Values the Enlarged Group at £123.7 million based on the Closing Price
    of Xenova Shares on 16 February 2001 on the assumption that the Merger
    Offer is accepted in full.


Details of the Merger Offer


The Merger will be achieved through a recommended all share offer to be made
by Nomura, on behalf of Xenova, for all of the issued (and to be issued) share
capital of Cantab.


  * The Merger Offer will be made on the basis of 11 New Xenova Shares for
    every 7 Cantab Shares.


  * The Merger Offer values each Cantab Share at approximately 140 pence and
    the entire existing issued share capital of Cantab at £62.1 million
    (before taking account of the exercise of any options under the Cantab
    Share Option Schemes) based on the Closing Price of 89 pence per Xenova
    Share on 16 February 2001, the business day immediately prior to the date
    of this announcement.


  * The Merger Offer represents a premium of 16.5 per cent. to the Closing
    Price of 120 pence per Cantab Share on 16 February 2001 based on the
    Closing Price of Xenova Shares on the same date.


  * The Cantab Directors, who have been so advised by their financial
    advisers, Credit Suisse First Boston, consider the terms of the Merger
    Offer to be fair and reasonable. In providing its advice to the Cantab
    Directors, Credit Suisse First Boston has taken into account the
    commercial assessment of the Cantab Directors. Accordingly, the Cantab
    Directors will be unanimously recommending Cantab Shareholders to accept
    the Merger Offer, as they have undertaken to do in respect of their own
    aggregate holdings of 196,006 Cantab Shares, representing approximately
    0.44 per cent. of Cantab's existing issued share capital.


  * In view of its size, the Merger Offer is conditional, inter alia, on the
    approval of Xenova Shareholders. The Xenova Directors, who have received
    financial advice from Nomura in relation to the Merger Offer, consider the
    Merger Offer to be in the best interests of the Xenova Shareholders as a
    whole. In providing its advice to the Xenova Directors, Nomura has taken
    into account the Xenova Directors' commercial assessment of the Merger.
    Accordingly, the Xenova Directors will be unanimously recommending Xenova
    Shareholders to vote in favour of the Merger Offer as they have undertaken
    to do in respect of their own beneficial holdings of, in aggregate,
    314,916 Xenova Shares, representing approximately 0.45 per cent. of
    Xenova's existing issued share capital.




Management


Following the Merger Offer becoming or being declared unconditional in all
respects, the executive directors of the Enlarged Group will be:

Name                                  Position
David A Oxlade                        Chief Executive Officer
Nicholas L Hart*                      Commercial Director
Daniel Abrams                         Chief Financial Officer
Stephen C Inglis*                     Research Director
Michael Moore                         Chief Scientific Officer
John St Clair Roberts*                Medical Director
John Waterfall                        Development Director


* Current Cantab Directors


John Jackson, Chairman of Xenova, will continue in his role as non-executive
Chairman. Simon Duffy, Chairman of Cantab, will join as non-executive Deputy
Chairman and Gerard Fairtlough will join as non-executive director from the
Cantab Board. Upon completion of the Merger, Paul Bevan will resign as a
non-executive director from the Xenova Board and Jeremy Curnock Cook and
Michael Redmond will resign as non-executive directors from the Cantab Board.


Commenting on the Merger, David Oxlade, Chief Executive Officer of Xenova,
said:


'The merger of our two companies creates a larger, stronger biotechnology
group with a broad pipeline of products in development and a number of
valuable partnerships with major pharmaceutical companies. Shareholders will
benefit from the improved risk-reward profile that comes through a broadening
and deepening of the product pipeline.'


Simon Duffy, Chairman of Cantab, commented:


'In announcing a strategic review in October 2000, we recognised the need for
consolidation in the industry. We believe that the merger with Xenova
represents good value for our shareholders and provides a foundation for the
further development of our pipeline, technologies and expertise.'


Nick Hart, Acting Chief Executive Officer of Cantab, added:

'The enlarged group brings together two companies with a joint focus on cancer
and complementary technologies in drug discovery, providing a foundation for
the continued development of innovative medicines with high commercial
potential.'


THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE FULL TEXT OF THE FOLLOWING
ANNOUNCEMENT ABOUT THE MERGER OFFER


A presentation for analysts will be held at the offices of Financial Dynamics,
Holborn Gate, 26 Southampton Buildings, London WC2A 1PB, at 9.30am today, 19
February 2001. Coffee will be available from 9.15am.

Please call Mo Noonan for further details on 020 7269 7116.


Enquiries:

Xenova                   David Oxlade     Tel: 01753 706 600
                         Daniel Abrams    Tel: 020 7831 3113 (Financial
                                          Dynamics)
                         Hilary
                         Reid-Evans
Nomura                   David Porter     Tel: 020 7521 2000

Cantab                   Nick Hart        Tel: 01223 423 413
                         Andy Burrows     Tel: 020 7831 3113 (Financial
                                          Dynamics)
                                          Tel: 01223 436 503

Credit Suisse First      Chris Lloyd      Tel: 020 7888 1000
Boston                   Stephanie
                         Leouzon
                         Asim Mullick

Financial Dynamics       David Yates      Tel: 020 7831 3113


Nomura, which is regulated in the United Kingdom by The Securities and Futures
Authority Limited, is acting for Xenova and no one else in connection with the
Merger Offer and will not be responsible to anyone other than Xenova for
providing the protections afforded to customers of Nomura, or for providing
advice in relation to the Merger Offer or the New Xenova Shares.


Credit Suisse First Boston, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for Cantab and no one else
in connection with the Merger Offer and will not be responsible to anyone
other than Cantab for providing the protections afforded to customers of
Credit Suisse First Boston, or for providing advice in relation to the Merger
Offer.


This announcement does not constitute an offer or an invitation to purchase
any securities.


This announcement does not constitute an offer of securities for sale in the
United States and the New Xenova Shares have not been, and will not be,
registered under the United States Securities Act of 1933, as amended, nor
under any laws of any state of the United States, and the relevant clearances
have not been and will not be obtained from the relevant authorities in
Canada, Australia or Japan. Accordingly, New Xenova Shares may not be offered,
sold or delivered, directly or indirectly, in or into the United States,
Canada, Australia or Japan except pursuant to exemptions from applicable
requirements of such jurisdictions.


The Merger Offer will not be made, directly or indirectly, in or into, by use
of mails or any means of instrumentality (including, without limitation,
facsimile transmissions, telex, telephone or e-mail) of interstate or foreign
commerce of, or any facilities of a securities exchange of, the United States
nor is it being made in or into Canada, Australia, or Japan and the Merger
Offer will not be capable of acceptance by any such use, means,
instrumentality or facilities or from or within the United States, Canada,
Australia or Japan. Accordingly, copies of this press announcement are not
being, and must not be, mailed or otherwise distributed or sent in, into or
from the United States, Canada, Australia or Japan and persons receiving this
press announcement (including custodians, nominees and trustees) must not
distribute or send it in, into or from the United States, Canada, Australia or
Japan.

Appendix 3 contains the definitions and a glossary of terms used in this
announcement.



Not for release, distribution or publication in or into the United States,
Canada, Australia or Japan

    Recommended Merger of Xenova Group plc with Cantab Pharmaceuticals plc

1.     Introduction

The Boards of Xenova and Cantab today announce that they have agreed terms for
a proposed merger of their businesses. The Merger will be achieved through a
recommended all share offer to be made by Nomura, on behalf of Xenova, for all
of the issued (and to be issued) share capital of Cantab.


The Merger Offer will be made on the basis of 11 New Xenova Shares for every 7
Cantab Shares and so in proportion for any other number of Cantab Shares held.
The Merger Offer will value each Cantab Share at approximately 140 pence and
the entire existing issued share capital of Cantab at £62.1 million (based on
the Closing Price of 89 pence per Xenova Share on 16 February 2001 (the
business day immediately prior to this announcement)).

 2. Recommendation and undertakings

    The Cantab Directors, who have been so advised by their financial
    advisers, Credit Suisse First Boston, consider the terms of the Merger
    Offer to be fair and reasonable. In providing its advice to the Cantab
    Directors, Credit Suisse First Boston has taken into account the
    commercial assessment of the Cantab Directors.


    Accordingly, the Cantab Directors will be unanimously recommending Cantab
    Shareholders to accept the Merger Offer, as they have undertaken to do in
    respect of their own aggregate holdings of 196,006 Cantab Shares,
    representing approximately 0.44 per cent. of Cantab's existing issued
    share capital.


    The Xenova Directors, who have received financial advice from Nomura in
    relation to the Merger Offer, consider the Merger Offer to be in the best
    interests of Xenova Shareholders as a whole. In providing its advice to
    the Xenova Directors, Nomura has taken into account the Xenova Directors'
    commercial assessment of the Merger.


    Given its size, the Merger Offer is conditional, inter alia, upon the
    approval of Xenova Shareholders.


    The Xenova Directors will be unanimously recommending Xenova Shareholders
    to vote in favour of the resolutions necessary to effect the Merger Offer
    as they have undertaken to do in respect of their own beneficial holdings
    of, in aggregate, 314,916 Xenova Shares, representing approximately 0.45
    per cent. of Xenova's existing issued share capital.

 3. Merger Offer

    On behalf of Xenova, Nomura will offer to acquire, subject to the
    conditions and further terms set out in Appendix 1 of this announcement
    and to be set out in the Offer Document and Form of Acceptance, all the
    Cantab Shares on the following basis:
    For every 7 Cantab Shares                  11 New Xenova Shares

    and so in proportion for any other number of Cantab Shares held.

    On the basis of the Closing Price of 89 pence per Xenova Share on 16
    February 2001 (the business day immediately prior to the date of this
    announcement), the Merger Offer values each Cantab Share at approximately
    140 pence and the entire existing issued share capital of Cantab at £62.1
    million. Based on the Closing Price of Xenova Shares on that date, the
    Merger Offer represents a premium of 16.5 per cent. over the Closing Price
    of 120 pence per Cantab Share on the same date and a premium of 52.0 per
    cent. over the Closing Price of 92 pence per Cantab Share on 31 October
    2000, the day before Cantab announced it had received a number of
    approaches that might or might not lead to the sale or merger of Cantab.

    Full acceptance of the Merger Offer (without taking into account the
    exercise of any options under the Cantab Share Option Schemes) would
    result in the issue of 69.8 million New Xenova Shares to Cantab
    Shareholders, representing 50.2 per cent. of the enlarged issued ordinary
    share capital of Xenova.

    The Merger Offer will extend to all Cantab Shares unconditionally allotted
    or issued as at the date on which the Merger Offer is made and any further
    Cantab Shares unconditionally allotted or issued while the Merger Offer
    remains open for acceptance.

    The Cantab Shares that are the subject of the Merger Offer will be
    acquired by Xenova fully paid and free from all liens, charges,
    encumbrances, rights of pre-emption and any other third party rights of
    any nature whatsoever and together with all rights attaching thereto,
    including the right to receive all dividends and other distributions (if
    any), declared, made or paid after the date of this announcement. The
    Cantab Board has not declared or recommended any dividends since
    incorporation.

    The New Xenova Shares to be issued pursuant to the Merger Offer will be
    issued credited as fully paid and will rank pari passu in all respects
    with the existing Xenova Shares.
 4. Reasons for and benefits of the Merger

Both the Xenova Directors and the Cantab Directors believe that the Enlarged
Group created by the Merger will have enhanced prospects of introducing
commercially important new drugs to the healthcare market. Key features of the
Enlarged Group will include: a significant portfolio of potential
first-in-class and innovative products, including seven products in clinical
development; valuable partnerships with major pharmaceutical companies
including Celltech, Eli Lilly, GlaxoSmithKline and Pfizer, with the potential
for further collaborations in the current year; strong drug discovery and
development capabilities in both the biopharmaceutical and medicinal chemistry
fields; and a significantly strengthened proprietary technology base.


The Enlarged Group will have the benefit of an internationally experienced
management team to drive the focus and development of the extended portfolio
of programmes. The proposed combined management team has a proven track record
in identifying, developing and partnering innovative products and
technologies.


The Xenova Directors and the Cantab Directors believe that the expanded
product pipeline and broader technology platform of the Enlarged Group will
increase the chances of successfully bringing new products to market and
reduce the overall risk profile, thereby increasing the potential to unlock
inherent values within Xenova and Cantab. Furthermore, the Merger will create
a broader shareholder base that should ensure greater liquidity and therefore
promote a broader level of interest in the equity of the Enlarged Group.


A broad range of potential first-in-class and innovative products


The principal therapeutic areas of focus for the Enlarged Group will be
cancer, infectious diseases and addiction, with both companies combining their
expertise in the area of cancer where each company has a number of exciting
product opportunities. The Enlarged Group will have one of the largest
clinical pipelines among public companies within the European
biopharmaceutical sector, with four product candidates in Phase II and three
in Phase I, and a further five in pre-clinical development. Of particular
importance is the potential for the Enlarged Group to bring product candidates
into Phase III registration clinical trials through the involvement of
corporate partners for late stage development and commercialisation. Details
of the Enlarged Group's product candidates are outlined in paragraph 5 below.


Strong drug discovery and development capabilities


The Xenova Directors and the Cantab Directors consider that the two companies
have highly complementary research and development skill sets. Xenova has
significant expertise in the discovery and clinical development of small
molecule drug candidates and has capabilities in the areas of bioinformatics,
medicinal chemistry and computer modelling. Cantab has strengths in the areas
of virology, immunology and gene therapy. The Enlarged Group will therefore
have an enhanced range of technologies with which to develop its current and
future products. It will also benefit from important relationships established
by both companies with leading academic centres and institutions in their
respective fields, providing access to expertise, new intellectual property
and new product opportunities.


Research and development for the Enlarged Group's programmes will be located
within state-of-the-art facilities in Slough and Cambridge, with 163 employees
involved in areas including research and development, medical, quality
assurance, quality control and manufacturing.


Corporate partnerships


The Enlarged Group intends to continue the corporate collaborations of each of
Xenova and Cantab with their existing partners, Celltech, Eli Lilly,
GlaxoSmithKline and Pfizer. The Xenova Directors and the Cantab Directors
expect that the Enlarged Group has the potential to enter into further
partnerships with these and other pharmaceutical companies for the further
development and commercialisation of products that each company is currently
developing.

Financial position

Xenova and Cantab on a combined basis had cash and liquid investments of £27.5
million as at 31 December 2000 (before taking into account any merger costs).
In addition, Cantab received £5.75 million in January 2001 from
GlaxoSmithKline arising from the regulatory requirement by the US Federal
Trade Commission for GlaxoSmithKline to return the prophylactic rights to the
DISC-PRO programme following the merger of GlaxoWellcome plc with SmithKline
Beecham plc. The financial position of the Enlarged Group may also benefit
during 2001 from the exercise of the Xenova Warrants (exercisable at 85 pence
per Xenova Share) which, if fully exercised, would raise additional funds of £
9.8 million during the period to 31 October 2001. It may also benefit from any
upfront payments from the licensing of existing programmes.



As an additional benefit of the Merger, the Xenova Directors and the Cantab
Directors anticipate cost efficiencies by eliminating duplication from the
combined infrastructure.


5. Enlarged Group's products


The Enlarged Group will focus on the therapeutic areas of cancer, infectious
diseases and addiction. The principal clinical development programmes,
including those expected to enter clinical trials during 2001, in each of
these therapeutic areas are described below:


Cancer


  * XR9576 (P-gp MDR inhibitor) is potentially a first-in-class drug to
    combat multi-drug resistance in cancer. The Xenova Directors expect that a
    corporate partnership agreement to fund Phase III clinical trials as well
    as the marketing of this product will be entered into during 2001.


  * TA-HPV (Vaccinia vector HPV 16/18 vaccine) is an immunotherapeutic
    vaccine, consisting of a live recombinant vaccinia virus, designed to
    prevent the recurrence of cervical cancer. This vaccine is currently in
    Phase II clinical trials.


  * TA-CIN (HPV16 fusion protein vaccine) is a recombinant fusion protein,
    derived from the HPV16 protein, designed as a treatment for women with
    cervical dysplasia. Phase I clinical trials have been completed.


  * DISC-GMCSF (DISC vectored GMCSF immunotherapeutic) is an
    immunotherapeutic vaccine comprising a DISC-HSV vector expressing human
    GMCSF. It is designed as a treatment for a broad range of solid tumours
    and is currently in Phase I clinical trials.


  * XR 11576 (Dual topoisomerase I/II inhibitor) a second generation
    intravenous and oral cytotoxic drug candidate and XR5944 (Dual
    topoisomerase I/II inhibitor), a second generation intravenous drug
    candidate, one of which is expected to enter Phase I/II clinical trials
    during 2001. This replaces the first generation candidate, XR5000, which
    failed to demonstrate competitive efficacy in an initial Phase II clinical
    trial. No further work on XR5000 is planned.

Infectious diseases


  * TA-HSV (Herpes simplex therapeutic vaccine) is a vaccine designed for
    the treatment of recurrent genital herpes and is in Phase II clinical
    trials with partner GlaxoSmithKline.


  * DISC-PRO (Herpes simplex prophylactic vaccine) is a prophylactic vaccine
    designed to prevent genital and oro-labial herpes. Phase I clinical trials
    are complete and preparations are under way for a clinical immunogenicity
    study and Phase III registration studies for which the Xenova Directors
    and the Proposed Directors intend to identify a corporate partner.


Addiction


  * TA-CD (Cocaine conjugate vaccine) is a vaccine for the treatment of
    cocaine addiction for which a Phase IIa clinical trial, supported by NIDA,
    has been completed. Results from recently completed toxicology and
    clinical studies are due to be submitted to the FDA in the near future and
    further Phase II studies are expected to commence later in the current
    year.


  * TA-NIC (Nicotine conjugate vaccine) is a vaccine designed as a treatment
    for nicotine dependence. Phase I clinical trials are scheduled to begin in
    2001.


Other programmes


The Enlarged Group will also have a strong pipeline of earlier stage product
programmes and technologies to progress to clinical development or with which
to form corporate partnerships. These include:


  * OX40/OX40L - a platform for the creation of multiple product candidates
    targeting cancer and autoimmune disease. A partnership has already been
    established with Celltech to develop an antibody-based product against
    OX40 for treatment of autoimmune disease.


  * DISC Vaccine technology - applicable to multiple disease targets. A
    product candidate for prevention of bovine herpes (DISC-BHV) is in
    development in partnership with Pfizer.


  * PAI-1 inhibitor technology - a platform for the development of drugs
    targeting cancer and cardiovascular disease. Research in the
    cardiovascular area is being carried out in collaboration with Eli Lilly.


  * VP22 technology - a novel technology for enhancing delivery of
    gene-based therapeutics, being developed under a joint venture, Phogen
    Limited, with Marie Curie Cancer Care.

 6. Information on Xenova

    Xenova is a biopharmaceutical company based in Slough with approximately
    60 employees, specialising in the discovery and development of novel drugs
    in which it creates and retains ownership of the intellectual property.


    Xenova's key area of focus is the development of novel cancer drugs that
    address clear unmet clinical needs and offer attractive commercial
    opportunities. Xenova currently has one key product in clinical
    development, which is designed to address the problems of multi-drug
    resistance in cancer. Xenova is currently in discussions with a number of
    potential corporate partners with the intention of funding the product
    candidate through Phase III clinical trials and into sales and marketing.
    Xenova has a further five products at the preclinical and research stages
    involving cancer projects targeting MRP-related multi-drug resistance,
    topoisomerase inhibitors, telomerase and PAI-1, as well as a drug
    development agreement with Eli Lilly, based on small molecule inhibitors
    of PAI-1, to develop novel antithrombotic drugs for chronic use. Xenova
    has a total of 54 granted patents and a further 100 individual patent
    applications.


    Xenova has the ability to access new targets for drug screening and lead
    identification research through collaborations with various academic
    research centres and by utilising its own diverse synthetic small molecule
    library.


    Xenova seeks to commercialise its development products through partnering
    with major pharmaceutical companies. It considers the optimal timing for
    partnering on a project by project basis following an assessment of the
    scientific and commercial risks and returns for each individual project.
    However, in general, a licensing partner will be sought to assist with the
    Phase III trials and to take on the marketing and distribution.


    Xenova announces its unaudited preliminary results for the year ended 31
    December 2000 today. For the year ended 31 December 2000, Xenova incurred
    a loss on ordinary activities before taxation and R&D tax credits of £10.0
    million (1999: £10.1 million) and as at that date had net assets of £11.9
    million (1999: £11.6 million) and cash and liquid investments of £12.2
    million (1999: £10.1 million).

 7. Information on Cantab

    Cantab is a biotechnology company based in Cambridge with over 130
    employees, focused on the development of novel human biopharmaceuticals
    using its innovative expertise in vaccines, immunotherapy and gene
    delivery.


    Cantab currently has six products in clinical development and a further
    seven at the preclinical and research stages. These products fall into the
    categories of vaccines (prophylactic and therapeutic), immunotherapeutics
    and gene therapeutics. Cantab's product portfolio addresses areas of high
    unmet clinical need and significant commercial potential, such as
    infectious disease, cancer and drug addiction. In addition, Cantab has
    developed novel proprietary platform technologies for vaccine construction
    and gene therapy and through Phogen Limited, its joint venture with Marie
    Curie Cancer Care, for enhanced gene and drug delivery. This product and
    technology pipeline is supported by a strong intellectual property
    portfolio with 66 patents granted and a further 134 individual patent
    applications.


    Cantab also operates a pilot plant for manufacture of clinical grade
    material that has capacity available for contract manufacturing for other
    biotechnology companies without such facilities.


    Cantab announces its unaudited preliminary results for the year ended 31
    December 2000 today. For the year ended 31 December 2000, Cantab incurred
    a loss on ordinary activities before taxation and R&D tax credits of £5.1
    million (1999: £8.7 million) and as at that date had net assets of £28.4
    million (1999: £31.7 million) and cash and liquid investments of £15.3
    million (1999: £26.1 million).


 8. Directors, management and employees


    Following the Merger Offer becoming or being declared unconditional in all
    respects, the board of the Enlarged Group will be:


    Non-executives
    John BH Jackson                       Chairman
    Simon P Duffy*                        Deputy Chairman
    Gerard H Fairtlough*                  Non-executive Director
    Peter L Gillett                       Non-executive Director
    Adrian L Harris                       Non-executive Director
    T Ronald Irwin                        Non-executive Director
    Howard S Wachtler                     Non-executive Director


    Executives
    David A Oxlade                        Chief Executive Officer
    Nicholas L Hart*                      Commercial Director
    Daniel Abrams                         Chief Financial Officer
    Stephen C Inglis*                     Research Director
    Michael Moore                         Chief Scientific Officer
    John St Clair Roberts*                Medical Director
    John Waterfall                        Development Director


    *Proposed Directors who will join the Xenova Board from Cantab upon the
    Merger Offer becoming or being declared wholly unconditional in all
    respects


    Upon the Merger Offer becoming or being declared unconditional in all
    respects, Paul Bevan will resign as a non-executive director from the
    Xenova Board and Jeremy Curnock Cook and Michael Redmond will resign as
    non-executive directors from the Cantab Board.


    The Proposed Directors will join the Xenova Board upon the Merger Offer
    becoming or being declared wholly unconditional in all respects. It is
    currently anticipated that shortly after Nicholas Hart, Stephen Inglis and
    John St Clair Roberts are appointed to the Xenova Board, their respective
    basic annual salaries will be adjusted to £140,000, £120,000 and £115,000
    respectively, and that each will be entitled to a bonus of up to 40 per
    cent. of his basic salary. Otherwise it is intended that the current terms
    of service of the Proposed Directors will not be changed significantly
    upon their appointment to the Xenova Board, although these arrangements
    will be reviewed after such appointment and where appropriate salary and
    benefits arrangements may be altered to integrate them appropriately into
    the Xenova Board structure.


    The Xenova Directors and the Proposed Directors have confirmed that the
    existing employment rights, including the pension rights, of all
    management and employees of Cantab will be fully safeguarded following
    completion of the Merger.


 9. Cantab Share Option Schemes


    All options under the Cantab Share Option Schemes will become exercisable
    once the Merger Offer becomes or is declared unconditional in all
    respects.


    Optionholders who decide to exercise their options will be able to accept
    the Merger Offer (while it remains open for acceptance) in respect of the
    Cantab Shares they receive on exercise. However, it may not be in the
    interests of all Cantab optionholders to exercise their options, depending
    on the relevant option exercise price and the value of the Xenova Shares.
    Xenova will write to Cantab optionholders in more detail on this subject
    in due course.


10. Settlement, listing and dealing


    Application will be made for the New Xenova Shares to be admitted to the
    Official List and to be admitted to trading on the London Stock Exchange's
    market for listed securities. It is expected that listing will become
    effective and that dealings, for normal settlement, will begin on the
    first business day following the day on which the Merger Offer becomes or
    is declared unconditional in all respects (save for any condition relating
    to admission to the Official List).


    After the Merger Offer becomes or is declared unconditional in all
    respects, Xenova intends to procure the making of an application by Cantab
    to delist the Cantab Shares from the Official List. It is anticipated that
    such cancellation will take effect no earlier than 20 business days after
    the Merger Offer becomes or is declared unconditional in all respects.


    If Xenova receives acceptances under the Merger Offer in respect of, and/
    or otherwise acquires, 90 per cent. or more of the Cantab Shares to which
    the Merger Offer relates, Xenova will exercise its rights pursuant to the
    provisions of sections 428 to 430F of the Companies Act 1985 to acquire
    compulsorily the remaining Cantab Shares to which the Merger Offer
    relates.


    Certificates for New Xenova Shares to be issued to Cantab Shareholders and
    cheques in respect of fractional entitlements will be despatched no later
    than 14 days after the Merger Offer becomes or is declared unconditional
    in all respects. No certificates for New Xenova Shares will be issued in
    respect of the entitlements of those Cantab Shareholders who hold their
    shares in uncertificated form in CREST, settlement for which will be made
    through the applicable CREST procedure (unless Xenova decides otherwise).


    Further details on settlement, listing and dealing will be included in the
    formal documents to be sent to Cantab Shareholders and Xenova Shareholders
    in due course.


11. Overseas shareholders


    The availability of the Merger Offer to persons not resident in the UK may
    be affected by the laws of the relevant jurisdictions. In particular, the
    Merger Offer will not be made, directly or indirectly, in or into the
    United States, Canada, Australia or Japan. Cantab Shareholders who are not
    resident in the UK should inform themselves about and observe any
    applicable requirements.


    Further details in relation to overseas shareholders will be contained in
    the Offer Document.


12. General


Save for the irrevocable undertakings obtained from Cantab Directors referred
to in paragraph 2 above of this announcement, neither Xenova, nor any of its
directors, nor, so far as Xenova is aware, any person deemed to be acting in
concert with it, owns or controls any Cantab Shares or has any option to
acquire any Cantab Shares, or has entered into any derivative referenced to
securities of Cantab which remains outstanding. However, it has not been
possible to ascertain holdings of certain parties who may be deemed to be
acting in concert with Xenova for the purposes of the Merger Offer in respect
of Cantab Shares. Any such holdings would be included in the Offer Document.


The formal Offer Document, setting out full details of the Merger Offer,
together with Listing Particulars and a Form of Acceptance, will be posted to
Cantab Shareholders as soon as practicable. The Offer Document and the Listing
Particulars will also be despatched to Cantab optionholders for information
only. A circular containing a notice convening an Extraordinary General
Meeting of Xenova Shareholders to approve the Merger, together with the
Listing Particulars (and the Offer Document for information only), will be
despatched at the same time to Xenova Shareholders and to Xenova optionholders
and warrantholders for information only.


Enquiries:

Xenova                   David Oxlade     Tel: 01753 706 600

                         Daniel Abrams    Tel: 020 7831 3113 (Financial
                                          Dynamics)
                         Hilary
                         Reid-Evans

Nomura                   David Porter     Tel: 020 7521 2000

Cantab                   Nick Hart        Tel: 01223 423 413

                         Andy Burrows     Tel: 020 7831 3113 (Financial
                                          Dynamics)

                                          Tel: 01223 436 503

Credit Suisse First      Chris Lloyd      Tel: 020 7888 1000
Boston
                         Stephanie
                         Leouzon

                         Asim Mullick

Financial Dynamics       David Yates      Tel: 020 7831 3113


Nomura, which is regulated in the United Kingdom by The Securities and Futures
Authority Limited, is acting for Xenova and no one else in connection with the
Merger Offer and will not be responsible to anyone other than Xenova for
providing the protections afforded to customers of Nomura, nor for providing
advice in relation to the Merger Offer or the New Xenova Shares.


Credit Suisse First Boston, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for Cantab and no one else
in connection with the Merger Offer and will not be responsible to anyone
other than Cantab for providing the protections afforded to customers of
Credit Suisse First Boston, or for providing advice in relation to the Merger
Offer.


This announcement does not constitute an offer or an invitation to purchase
any securities.


This announcement does not constitute an offer of securities for sale in the
United States and the New Xenova Shares have not been, and will not be,
registered under the United States Securities Act of 1933, as amended, nor
under any laws of any state of the United States, and the relevant clearances
have not been and will not be obtained from the relevant authorities in
Canada, Australia or Japan. Accordingly, New Xenova Shares may not be offered,
sold or delivered, directly or indirectly, in or into the United States,
Canada, Australia or Japan except pursuant to exemptions from applicable
requirements of such jurisdictions.


The Merger Offer will not be made, directly or indirectly, in or into, by use
of mails or any means of instrumentality (including, without limitation,
facsimile transmissions, telex, telephone or e-mail) of interstate or foreign
commerce of, or any facilities of a securities exchange of, the United States
nor is it being made in or into Canada, Australia, or Japan and the Merger
Offer will not be capable of acceptance by any such use, means,
instrumentality or facilities or from or within the United States, Canada,
Australia or Japan. Accordingly, copies of this press announcement are not
being, and must not be, mailed or otherwise distributed or sent in, into or
from the United States, Canada, Australia or Japan and persons receiving the
press announcement (including custodians, nominees and trustees) must not
distribute or send it in, into or from the United States, Canada, Australia or
Japan.


Appendix 3 contains the definitions and glossary of terms used in the
announcement.



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