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Xenova Group PLC (XEN)

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Tuesday 14 August, 2001

Xenova Group PLC

Interim Results

Xenova Group PLC
14 August 2001

                                                                14 August 2001



                  Xenova: Interim Results Announcement 2001



Announced Today:



*        Multi-drug resistance programme - US$105m (£75m) North American
         collaboration with QLT Inc for multi-drug resistance modulator XR9576

         o       See separate press announcement



*        US$21m (£15m) licence and collaboration agreement signed between
         Phogen (Xenova's Joint Venture with Marie Curie Cancer Care) with      
         Genencor International Inc

         o       See separate press announcement



*        Product pipeline - strategic review and update



Half Year Highlights:



*        Completion of merger with Cantab Pharmaceuticals plc



*        Cancer: Multi-drug resistance programme

         -  Positive data from Phase IIa Vinorelbine study



*        Addiction:  Cocaine programme

         -  Positive Phase IIa study results



*        Cash and liquid resources as at 30 June 2001 £18.1m (US$25.4m)





Commenting, Chief Executive Officer, David Oxlade said:



'The XR9576 deal announced today with QLT allows us to proceed as planned with
pivotal studies in Europe and the US, and gives us a strong development
partner with a commitment to establishing a dedicated oncology marketing and
sales infrastructure in the US.



'In addition, we are very pleased to be able to announce the Phogen
relationship with Genencor, which represents an important step in realising
the potential of Phogen's drug delivery enhancing technology.



'Our recent strategic review, which followed our merger with Cantab, has
resulted in a company with a focused pipeline and an emphasis on cancer.  We
are most encouraged by the progress made by our products in the year to date.
With four products in or having completed Phase II trials and a further four
in or having completed Phase I, our product pipeline is progressing as
planned.'





                                   Contacts


UK
Xenova Group plc                                  Financial Dynamics
Tel: +44 (0) 1753 706600                          Tel: +44 (0) 207 831 3113
David Oxlade: Chief Executive Officer             David Yates/Fiona Noblet
Daniel Abrams: Finance Director
Hilary Reid Evans: Corporate Communications




A presentation for analysts will be held at 9am at the offices of Nomura
International plc, Nomura House, 1 St. Martin's le Grand, London EC1A 4NP.
Please contact Mo Noonan on 0207 269 7116 for further details.



Notes to Editors



Xenova Group plc's product pipeline focuses principally on the therapeutic
area of cancer, with a secondary focus on infectious, autoimmune and
cardiovascular diseases.  The Group has a well-established track record in the
identification, development and partnering of innovative products and
technologies and haspartnerships with a number of major pharmaceutical
companies including Glaxo SmithKline, Lilly, Pfizer and Celltech.



For further information about Xenova and its products please visit the Xenova
website at www.xenova.co.uk.



Safe Harbor Statement under the US Private Securities Litigation Reform Act of
1995: Some or all of the statements in this document that relate to future
plans, expectations, events, performances and the like are forward-looking
statements, as defined in the US Private Securities Litigation Reform Act of
1995.  Actual results of events could differ materially from those described
in the forward-looking statements due to a variety of factors, including those
set forth in the Company's filings with the US Securities and Exchange
Commission.





Chairman's Statement



During the first six months of 2001 Xenova has made considerable progress.  We
have broadened our pipeline through our merger with Cantab Pharmaceuticals plc
('Cantab'), seen the positive development of a number of products through the
clinic, rationalised our cost base and we have today signed two important
collaborations, which we believe will produce significant value for our
shareholders.



Following completion of the merger with Cantab, we have undertaken a
wide-ranging strategic review.  Our primary product focus remains oncology,
with a secondary focus on infectious, autoimmune and cardiovascular diseases.
For each programme we have a specific commercial and partnering strategy,
based on an assessment of the programme's commercial value, risk profile and
technological status.  Further details of the R&D review can be found in the
Product Pipeline Update section of this report and is summarised as follows:


Medium Term R&D Focus          Value Realisation            Existing Corporate
                               Opportunities                Partnerships
Cancer:                        Development:                 QLT - XR9576

Multi Drug Resistance - MRP    DISC-PRO                     Genencor - VP22
                                                            (Phogen)
Cytoreduction - Dual           TA-HPV/TA-CIN (following
Topiosomerase Inhibitors       Phase II prime/boost study)  GlaxoSmithKline -
(XR11576)                                                   TA-HSV
                               TA-NIC (with Phase I data)
Angiogenesis - PAI-1                                        Lilly -
                               Research:                    PAI-Cardiovascular
Immunostimulation -            CTB-Men.B
DISC-GMCSF, OX40L                                           Celltech - OX40
                               DISC-Neuro                   (Autoimmune
Other: Autoimmunity - OX40, M3                              Disease)
                               DISC-CMV
Infectious Disease - OX40L                                  Pfizer - Bovine and
                                                            Feline Herpes

                                                            NIDA - TA-CD





The implementation of the strategic review, together with the elimination of
duplicated activities and other efficiency improvements made since the merger
with Cantab, will result in a significant reduction in overall cash burn. Net
cost savings of up to £2m ($2.8m) are anticipated in the second half of 2001,
which on an annualised basis are of the order of £9m ($12.7m).



Merger with Cantab Pharmaceuticals plc



It was announced on 19 February 2001 that we had agreed terms for a merger
with Cantab and the merger was declared unconditional on 6 April.  Cantab's
shares were delisted from the London Stock Exchange on 9 May and its ADRs were
delisted from the Nasdaq exchange on 19 July.  Following the merger, former
Cantab directors Nick Hart, Stephen Inglis and John St Clair Roberts joined
the Xenova board as Commercial Director, Executive Director (Research
Collaborations) and Medical Director respectively.  Former Cantab
non-executive Director Gerard Fairtlough has also joined the Xenova Board in a
non-executive capacity and heads Xenova's Remuneration Committee.



Product Pipeline Update - Clinical Trials



Cancer:



XR9576 - XR9576, a potent small-molecule inhibitor of the P-glycoprotein pump,
has completed a series of three Phase IIa open label studies.  The studies
showed that the combination of XR9576 with the cytotoxic drugs vinorelbine,
doxorubicin and paclitaxel respectively was well tolerated.  In the paclitaxel
trial, which was conducted in twelve patients with recurring ovarian cancer,
following independent assessment of responses, four patients were judged to
have obtained a partial remission and one patient a complete disease
remission. The twenty-five patient vinorelbine study concluded that XR9576 is
a potent P-glycoprotein antagonist, without significant side effects, and
without clinically significant pharmacokinetic (drug:drug) interference.  The
results of these two trials were presented at the 2001 annual meeting of the
American Society of Clinical Oncology, in San Francisco, California, USA.
Positive results of the XR9576/doxorubicin trial were announced in late 2000.



Xenova has been in discussions with the US FDA and with a number of regulatory
agencies in Europe with respect to the further development of this compound
and the establishment of pivotal Phase III registration studies in these
countries.



As separately announced today, Xenova has entered into an agreement with QLT
Inc for the development and North American marketing of XR9576.  This
agreement could be worth up to £75m (US$105m) for Xenova in the form of
licence and milestone payments and  research and development funding to gain
product marketing approval.  QLT Inc. will provide up to US$45m (£32m) in
funding for all development activities related to Phase III clinical studies
for XR9576 in North America and Europe.  Royalties in the range of 15 to 22
per cent, depending on the level of North American sales, are also payable to
Xenova.  Xenova retains the rights to commercialise XR9576 in Europe and the
Rest of the World and intends to establish further collaborations to maximise
the value of this potentially first-in-class drug.



DISC-GMCSF - Immunotherapy is a key area of Xenova's research. DISC-GMCSF, an
innovative immunotherapeutic vaccine, is designed as a treatment for a broad
range of solid tumours. DISC-GMCSF delivers the gene for the expression of
GM-CSF, a potent stimulator of anti-tumour immune responses, direct to the
tumour site through the use of a disabled virus vector (DISC) and is
administered using direct injection. DISC-GMCSF is currently undergoing a
Phase I clinical trial at three centres in the UK, in patients with metastatic
melanoma. In preclinical studies DISC-GMCSF was shown to be effective in
models of breast and colorectal cancer.  Results of the Phase I trial are
expected in early 2002.



TA-HPV/TA-CIN - TA-HPV is an immunotherapeutic vaccine, designed to prevent
the recurrence of cervical cancer.  The product is being developed as a
therapeutic vaccine to be used alongside standard treatments, such as surgery,
for cervical cancer.  TA-HPV is currently in two open label, physician
sponsored Phase II clinical trials.  TA-CIN is a recombinant fusion protein,
designed as a treatment for women with cervical dysplasia.  TA-CIN has
completed a double blind, randomised, placebo-controlled and dose-escalating
Phase I trial to assess the product's safety and immunogenicity.  TA-CIN was
found to be very well tolerated with no serious adverse events reported during
the trial.  It was also found to be immunogenic.



Preclinical studies have suggested that use of these two products in
combination results in a greatly enhanced immune response.  A 'prime-boost'
study is planned to investigate this immunisation regimen in the clinic.  Open
label, physician sponsored trials, targeting the treatment of HPV associated
ano-genital neoplasias, are expected to begin in late 2001.  We intend to seek
a partner for the further development of this programme.



Infectious Diseases:



DISC-PRO - A prophylactic vaccine designed to prevent genital and oro-labial
herpes, DISC-PRO has completed Phase I trials. These Phase I trials
demonstrated that DISC-PRO was well tolerated and immunogenic. We expect to
secure a corporate partner ahead of Phase III clinical trials for the further
development of this programme.



TA-HSV - TA-HSV is a vaccine designed for the treatment of recurrent genital
herpes.  It is currently undergoing Phase II clinical trials with our partner,
GlaxoSmithKline.  Results are awaited, and we anticipate that these will be
announced in November 2001, following review by GlaxoSmithKline.



Addiction:



TA-CD -  TA-CD is a vaccine for the treatment of cocaine addiction for which a
Phase IIa clinical trial, supported by the US National Institute on Drug Abuse
(NIDA), has recently been completed.  The successful results of this trial,
which was designed to evaluate the safety and immunogenicity of the vaccine,
were announced in July 2001.  Attenuation of the usual euphoric effects of
cocaine was reported amongst patients who relapsed during the study, providing
anecdotal evidence of the benefit TA-CD may provide.  A new Phase II '
Challenge' study, funded by NIDA, is expected to begin towards the end of
2001.  This study is designed to provide an assessment of the efficacy of
TA-CD, as determined by quantitative behavioural and other measurements.





Product Pipeline Review and Update - Preclinical



Cancer:



XR11576 -  XR11576, a novel, orally administerable dual topoisomerase
inhibitor, is designed for the treatment of common solid tumours.  XR11576,
which was discovered and developed by Xenova in collaboration with the
Auckland Cancer Research Laboratory, New Zealand, has a significantly improved
biological profile when compared with first generation topoisomerase
inhibitors, including oral bioavailability and a marked enhancement of
potency. Topoisomerase inhibition remains the focus of Xenova's cytoreductive
approach to cancer. It is planned for this programme to enter Phase I clinical
trials in the latter part of 2001.



XR5944 - XR5944 is a further second generation intravenous dual topoisomerase
I/II inhibitor drug candidate, which complements the XR11576 programme. XR5944
has shown exceptionally high potency as a cytotoxic agent in preclinical
studies with a number of tumour cell lines.  It is structurally distinct from
XR11576 and has been shown to be unaffected by atypical multi-drug resistance
mechanisms.



PAI-Cancer - In collaboration with the Institute for Cancer Research, we are
developing an active novel inhibitor of a protein released by platelets and
the cells lining the blood vessels and known as PAI-1.  PAI is targeted at the
treatment and prevention of metastatic cancer.  Lilly has an option to acquire
exclusive rights to develop and commercialise PAI-1 inhibitors in the cancer
field, which, if exercised, would realise an upfront and milestone payments of
up to $16.5m, with additional royalties payable on commercialised products.



OX40L - We have demonstrated that a product candidate for OX40L (a ligand
known to bind to the OX40 receptor) has anti-tumour activity in preclinical
models and work is now underway to test the product in a broader range of
disease models.



MRP - Multi-Drug Resistance Protein (MRP) acts as a pump which, like the
p-glycoprotein pump, expels small molecules out of cells and thus can help
protect tumour cells from certain chemotherapeutic agents.  We are currently
carrying out a lead optimisation programme for a compound for the inhibition
of MRP to further strengthen our position in the field of multi-drug
resistance.



Other:



TA-NIC - Designed as a treatment for nicotine dependence, TA-NIC is a nicotine
conjugate vaccine which is administered through a course of intramuscular
injections.  The vaccine will prime the immune system to produce anti-nicotine
antibodies and, on smoking a cigarette, the nicotine will bind to these
antibodies, which are too large to cross the blood-brain barrier, thus
reducing or removing the pleasurable stimulus which usually accompanies
smoking.   It is expected that TA-NIC will enter Phase I clinical trials
towards the end of 2001.  We intend to seek a partner for the further
development of this programme following the availability of data from the
Phase I study.



OX40 - OX40 is a platform technology which is capable of producing multiple
drug candidates primarily targeting cancer and autoimmune disease.  A
partnership has been established with Celltech Group plc to develop an
antibody-based product against OX40 for the treatment of autoimmune disease.



M3 - M3 is a viral protein with the capacity to bind to a broad range of
chemokines which have multiple biological functions, including mediation of
inflammation and promotion of angiogenesis. Consequently, chemokine inhibition
is a potential approach to treatment of a wide range of diseases. Work is in
progress in several preclinical models to evaluate potential efficacy.



PAI-CV - In conjunction with our partner Lilly, we are carrying out a research
and development programme for the development of a new class of oral
antithrombotic drugs suitable for chronic use.  Research is focused on the
development of small molecule inhibitors of PAI-1 that are designed to enhance
the break-up of blood clots without the bleeding side-effects of other
marketed antithrombotic drugs.  Xenova and Lilly entered into this
collaboration in 1998.



DISC-VET - DISC-VET is currently undergoing development for the treatment of
multiple diseases in animals.  A product candidate, DISC-BHV, for the
treatment of bovine herpes virus induced respiratory disease in cattle, is in
development in partnership with Pfizer.



Phogen:



An equal voting rights joint venture between Xenova and Marie Curie Cancer
Care, Phogen Limited is developing a novel technology, known as VP22, for the
enhanced delivery of gene-based therapeutics.  It was announced today that
Phogen has entered into a £15m ($21m) licensing agreement with Genencor
International Inc, for the utilisation of Phogen's VP22 technology in the area
of therapeutic vaccines for certain infectious viral diseases.  Phogen will
receive £1.2m ($1.7m) in the first year in licence, option and contract
research payments. In addition, Genencor has an opt-in provision for
additional therapeutic vaccine products in the field of infectious viral
diseases and cancer.  Phogen intends to seek further partnering opportunities
for its novel technologies.



Data relating to VP22 were published in the 4 May 2001 issue of the Journal of
Biological Chemistry, and highlighted the light-activated properties of the
technology.  This property is of particular interest for cell-based screens
and assays and for photodynamic therapy, allowing the targeted delivery of
test molecules to specific cells and/or tissues.



Financial Summary



Acquisition of Cantab Pharmaceuticals plc



On 6 April 2001, the Group announced the successful completion of the merger
with Cantab. The Xenova shares issued and to be issued as consideration to
Cantab shareholders to enable Xenova to acquire 100% of Cantab were valued at
49p on 5 April 2001, valuing Cantab at £34.2m ($48.1m). With £16.8m ($23.7m)
of cash and liquid resources, this effectively valued the technology and other
assets in Cantab at £17.4m ($24.5m).



In addition to acquiring Cantab and its UK trading company Cantab
Pharmaceuticals Research Limited (now renamed Xenova Research Limited), the
Group acquired as part of this transaction the 45% equity share in Phogen
referred to elsewhere in this announcement.



Operating Performance



Consolidated into the Group's results from 6 April 2001, the acquired Cantab
business has contributed to a net loss per share of 6p, which compares with
the net loss per share in the same period in 2000 of 7p.



In the 6 months to 30 June 2001 the Group's revenue, arising from the acquired
Cantab business, increased to £0.5m ($0.7m) (2000: £0.1m, $0.1m). With ongoing
partnerships with GlaxoSmithKline, Lilly, Pfizer and Celltech, revenues in the
period primarily reflect the continued Phase II clinical trial work with
GlaxoSmithKline in respect of the TA-HSV programme.



Total research and development (R&D) expenditure of £6.6m ($9.3m) (2000: £
3.2m, $4.4m) relates to the preclinical development of the second-generation
topoisomerase programme and the completion of Phase II clinical development of
XR9576 plus R&D expenditure in respect of the acquired Cantab business of £
2.9m ($4.0m). Cantab Research and Development expenditure reflects the ongoing
pre-clinical and clinical developments, and includes the cost of the Group's
own clinical trial manufacturing facility.



Total administrative expenses of £2.3m ($3.2m) have increased by £1.5m ($2.1m)
from the prior period partly due to the one-off costs of both integrating the
Cantab business and relocating the Slough based operations to improved
facilities. Included within administrative expenses are the exceptional costs,
primarily severance pay of £0.7m ($0.9m), in respect of the reorganisation
performed in the second quarter.



Amortisation costs of £0.3m ($0.4m) relate to the amortisation of goodwill
arising upon acquisition of the Cantab business of £11.7m ($16.5m), which is
being amortised over the 10 year estimated useful life of the business.



The increased net interest income reflects the increased cash and liquid
resources balance held throughout the period. Following the rise since 31
December 2000 in the listed market price of the 88,668 Cubist Pharmaceuticals
shares held by the Group, £0.7m ($0.9m) has been written back to the profit
and loss account to mark the shares held to their market price.



Subsequent Events



XR9576: On 13 August 2001 an agreement was signed with QLT Inc. to licence
XR9576.  Under the terms of this agreement, Xenova could receive up to £42.7
million (US$60m) in the form of upfront, licence and milestone payments.  In
addition QLT Inc. will support development of Phase III trials up to a value
of £32 million (US$45m).  Xenova will also receive royalties on future North
American sales in the range of 15 to 22 per cent.



Phogen: On 13 August 2001 an agreement was signed between the Group's 45%
joint venture, Phogen, and Genencor International Inc. to licence the VP22
technology.  Under the terms of this agreement, Phogen could receive over £15
million ($21 million) in the form of licence, option and milestone payments
plus research and development funding.  In addition, Phogen will receive
royalties on future sales.



Reorganisation



Since April this year, the Group has made significant progress towards the
integration of the Xenova and Cantab businesses. As part of this process, the
Group has consolidated all head office functions and administrative services
in order to maximise the costs savings achieved by the enlarged Group. Surplus
building space will be sublet to minimise the Group's ongoing commitments. In
addition, the Group is currently reviewing opportunities to exploit excess
manufacturing capacity.



As part of the strategic review of both the research and development pipeline
and other activities, announced on 21 June 2001, 45 positions have been lost
across both the head office and research and development functions. Included
within the administrative expenses for this period is £0.7m ($0.9m) in respect
of the severance payments payable.



As a result of the product pipeline announcements and the integration measures
already undertaken, the Group anticipates making up to £2m ($2.8m) of net cost
savings in the second half of this year, which on an annualised basis are of
the order of up to £9m ($12.7m).





Cash and liquid investments



Cash and liquid resources at 30 June 2001 totalled £18.1m ($25.4m) (2000: £
6.2m ($8.7m)).



Cash of £15.7m ($22.0m) and liquid resources of £2.4m ($3.4m) at 30 June 2001
(2000: cash £6.2m($8.7m), liquid resources nil) remain despite both the
exceptional facilities relocation expenditure of £2.2m ($3.1m) and the Cantab
related transaction costs paid to 30 June 2001 of £1.8m ($2.5m). Transaction
costs paid by both Cantab and Xenova total £3.5m ($4.9m).



As a result of today's collaboration announcement with QLT Inc., Xenova will
receive £7.2m ($10m) during 2001.



Based upon the expected monthly cash burn rate for the second half of the
year, the cash and liquid resources are sufficient to fund current operations
for in excess of a year.



Revenue recognition policy



In accordance with emerging best practice on revenue recognition, the Group
has adopted a modified accounting policy from 1 January 2001. This policy
states that license fees and milestone payments will be spread over the life
of the relevant agreement in proportion to the work performed by the Group,
but be limited to the non refundable amounts actually received.



Share capital



The number of shares in issue and to be issued rose to 139.0 million as at 30
June 2001, from 69.2 million at 31 December 2000, due principally to the 69.8
million shares provided in consideration for the Cantab business acquired.



As at 30 June 2001, 11.5 million warrants from the July 2000 Placing and Open
Offer were outstanding, exercisable at 85p up to 31 October 2001. The Group
could potentially raise a further £9.8m upon the exercise of these warrants.



The Directors do not propose an interim dividend for 2001 (2000: nil).



Consolidated Profit and Loss Account (unaudited)


                                   Notes Unaudited Unaudited Unaudited  Audited
                                               Six       Six       Six     Year
                                            Months    Months    Months    Ended
                                             Ended     Ended     Ended       31
                                           30 June   30 June   30 June December
                                              2001      2001      2000     2000
                                              $000      £000      £000     £000
Turnover (including share of joint
venture)
    Continuing operations            1           -         -        78       78

    Acquisitions                               709       504         -        -
    Less: share of joint venture               (4)       (3)         -        -
    revenue
                                             _____     _____     _____    _____
Turnover                                       705       501        78       78

Operating expenses
Research and development costs
    Continuing operations                  (5,315)   (3,779)   (3,162)  (7,422)

    Acquisitions                           (4,028)   (2,864)         -        -

                                             _____     _____      ____    _____
                                           (9,343)   (6,643)   (3,162)  (7,422)
Administrative expenses
    Continuing operations                  (1,526)   (1,085)     (796)  (2,033)
    Continuing operations:
    exceptional
    reorganisation costs             2        (87)      (62)         -        -

                                              ____      ____      ____     ____
                                           (1,613)   (1,147)     (796)  (2,033)
    Acquisitions                             (366)     (260)         -        -
    Acquisitions: exceptional        2       (838)     (596)         -        -
    reorganisation costs
    Acquisitions: amortisation of    2       (412)     (293)         -        -
    goodwill
                                              ____     _____      ____     ____
                                           (1,616)   (1,149)         -        -
                                              ____      ____      ____     ____
Total administrative expenses              (3,229)   (2,296)     (796)  (2,033)

Total operating expenses                  (12,572)   (8,939)   (3,958)  (9,455)

Group operating loss
    Continuing operations                  (6,928)   (4,926)   (3,880)  (9,377)

    Acquisitions                           (4,939)   (3,512)         -        -

                                             _____     _____     _____    _____
                                          (11,867)   (8,438)   (3,880)  (9,377)


    Acquisitions: share of                    (41)      (29)         -        -
operating loss of joint venture
                                             _____     _____     _____    _____
    
Total operating profit: Group and         (11,908)   (8,467)   (3,880)  (9,377)
share of joint venture



Loss on sale of businesses:
   Adjustment to consideration                   -         -         -  (1,279)

                                              ____     _____     _____    _____
Loss on ordinary activities before        (11,908)   (8,467)   (3,880) (10,656)
interest


Interest (net)                                 563       400       290      661
Amounts written back on              3         949       675         -        -
investments
                                             _____     _____     _____    _____
Loss on ordinary activities before        (10,396)   (7,392)   (3,590)  (9,995)
taxation

Tax on loss on ordinary activities   4       1,275       907         -      690

                                             _____     _____     _____    _____

Loss on ordinary activities after    5     (9,121)   (6,485)   (3,590)  (9,305)
taxation attributable to members
of Xenova Group plc                          _____     _____     _____    _____

Loss per share (basic and diluted)            (9c)      (6p)      (7p)    (15p)

                                             _____     _____     _____    _____

Shares used in computing net loss          104,044   104,044    54,772   60,486
per share (thousands)
                                             _____     _____     _____    _____



 Statement of Total Recognised Gains and Losses (unaudited)


                                         Unaudited Unaudited Unaudited  Audited
                                               Six       Six       Six     Year
                                            months    months    months    Ended
                                             Ended     Ended     Ended       31 
                                           30 June   30 June   30 June December 
                                              2000      2001      2000     2000
                                              $000      £000      £000     £000
                                                                   

Loss attributable to Xenova Group          (9,080)   (6,456)   (3,590)  (9,305)
Plc
Loss attributable to joint venture            (41)      (29)         -        -

                                             _____     _____     _____    _____
Total loss attributable to members         (9,121)   (6,485)   (3,590)  (9,305)
of Xenova Group Plc

Translation difference                           3         2        10       54

                                             _____     _____     _____    _____
Total recognised gains and losses          (9,118)   (6,483)   (3,580)  (9,251)
in the period attributable to
members of Xenova Group Plc                  _____     _____     _____    _____



US Dollar amounts have been translated at the closing rate on 30 June 2001 (£
1.00: $1.4064) solely for information.



Consolidated Balance Sheet (unaudited)


                                         Unaudited Unaudited Unaudited  Audited
                                             As at     As at     As at    As at
                                           30 June   30 June   30 June       31
                                              2001      2001      2000 December
                                                                           2000
                                   Notes      $000      £000      £000     £000
                                                                           

Fixed Assets

   Intangible assets                        16,004    11,379         -        -
   Tangible assets                          13,895     9,880       335      543
   Investments                                   -         -     1,500        -

                                             _____     _____     _____    _____
                                            29,899    21,259     1,835      543
Current Assets

   Debtors:
   Due within one year                       7,808     5,552       563    1,510
   Due after more than one year                  -         -     1,500        -

                                             _____     _____     _____    _____
                                             7,808     5,552     2,063    1,510

   Investments                       3       3,370     2,396         -    1,721
   Cash at bank and in hand                 22,047    15,676     6,246   10,512

                                             _____     _____     _____    _____
                                            33,225    23,624     8,309   13,743

Creditors: amounts falling due             (8,021)   (5,703)   (1,858)  (2,390)
within one year
                                             _____     _____     _____    _____
Net current assets                          25,204    17,921     6,451   11,353



Total assets less current                   55,103    39,180     8,286   11,896
liabilities


Creditors: amounts falling due
after more than one year                     (516)     (367)         -        -
                                             

Provisions for liabilities and                (35)      (25)         -     (20)
charges

Investment in joint venture:
    Share of gross assets                       56        40         -        -
    Share of gross liabilities                (97)      (69)         -        -

                                             _____     _____     _____    _____
                                              (41)      (29)         -        -
                                             _____     _____     _____    _____

Total net assets                            54,511    38,759     8,286   11,876

                                             _____     _____     _____    _____

Capital and reserves


Called up share capital                     18,370    13,062     5,482    6,924
Shares to be issued                          5,804     4,127         -        -
Share premium account                      103,968    73,925    66,980   74,781
Merger reserve                              33,660    23,933         -        -
Other reserves                              25,177    17,902    17,902   17,902
Profit and loss account                  (132,468)  (94,190)  (82,078) (87,731)
                                             _____     _____     _____    _____
Shareholders' funds - equity         5      54,511    38,759     8,286   11,876
interests
                                             _____     _____     _____    _____





US Dollar amounts have been translated at the closing rate on 30 June 2001 (£
1.00: $1.4064) solely for information.









Consolidated Cash Flow Statement (unaudited)


                                   Notes Unaudited Unaudited Unaudited  Audited
                                               Six       Six       Six     Year
                                            months    months    months    Ended 
                                             Ended     Ended     Ended       31
                                           30 June   30 June   30 June December
                                              2001      2001      2000     2000
                                              $000      £000      £000     £000
                                                                  

Net cash outflow from operating      6    (11,453)   (8,144)   (4,275)  (9,354)
activities
Returns on investments and
servicing of finance
Interest received                              529       376       290      606
Interest element of finance lease              (7)       (5)         -        -
rental payments
                                              ____     _____      ____    _____
Net cash inflow from returns on                522       371       290      606
investments and servicing of
finance


Capital expenditure and financial
investment
Purchase of tangible fixed assets          (3,128)   (2,224)      (96)    (303)

                                              ____     _____     _____    _____
Net cash outflow from capital
expenditure and financial
investment                                 (3,128)   (2,224)      (96)    (303)


Acquisitions and disposals
Purchase of subsidiary                     (1,080)     (768)         -        -
undertakings
Cash at bank and in hand acquired           23,658    16,822         -        -
with subsidiary
                                             _____      ____      ____     ____
Net cash inflow for acquisitions            22,578    16,054         -        -

Management of liquid resources
Net sale of Investments                          -         -       519      514

                                             _____     _____     _____    _____
Net cash inflow/(outflow) before             8,519     6,057   (3,562)  (8,537)
financing

Financing
Issue of ordinary share capital                 12         9       327   10,252

Expenses on issue of shares                (1,215)     (864)      (90)    (772)
Capital element of finance lease              (56)      (40)         -        -
rental payments
                                             _____     _____      ____    _____
Net cash (outflow)/inflow from             (1,259)     (895)       237    9,480
financing
                                             _____     _____      ____    _____

Increase / (decrease) in cash                7,260     5,162   (3,325)      943
during the period
                                             _____     _____     _____    _____





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


                              Unaudited Unaudited         Unaudited    Audited
                                              Six  Six Months Ended       Year
                                    Six    Months           30 June      Ended
                                 Months     Ended              2000         31
                                  Ended   30 June                     December  
                                30 June      2001                         2000  
                                   2001                       
                                   $000      £000              £000       £000
                                                                      
                                             
                                                                      

Increase / (decrease) in cash     7,260     5,162             (3,325)      943
during the period
Capital element of finance           56        40                   -        -
lease payments
                                      
Change in liquid resources            -         -               (519)    (514)
                                  _____      ____                ____     ____
Change in net funds resulting     7,316     5,202             (3,844)      429
from cash flows

Finance leases acquired with      (142)     (101)                   -        -
subsidiary operations
                                    
Movement in value of liquid         949       675                   -    1,721
investments
Translation difference                3         2                   9        2

                                   ____     _____               _____    _____
Change in net funds               8,126     5,778             (3,835)    2,152

Net funds at 1 January           17,205    12,233              10,081   10,081

                                   ____     _____               _____    _____
Net funds at 30 June / 31        25,331    18,011               6,246   12,233
December
                                  _____      ____               _____     ____



US Dollar amounts have been translated at the closing rate on 30 June 2001 (£
1.00: $1.4064) solely for information.





Notes to the Interim Statement



1  Basis of preparation



These unaudited interim 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 2000 Annual
Report and Accounts except as set out below. The 2000 Annual Report and
Accounts received an unqualified auditor's report and have been delivered to
the Registrar of Companies.



These consolidated financial statements have been prepared to include the
revenues, costs and cash flows of the Cantab Pharmaceuticals Plc ('Cantab')
group from 6 April 2001, using acquisition accounting principles (Note 2).



Following the acquisition of Cantab the Group has adopted the following
accounting policy in respect of intangible fixed assets. Goodwill arising from
the purchase of subsidiary undertakings, representing the difference between
the fair value of the purchase consideration and the fair value of the net
assets acquired, is capitalised as an intangible asset and amortised on a
straight line basis over its estimated useful economic life. Goodwill
similarly arising on the acquisition of associates or joint ventures is
recorded as part of the related investment.



Other intangible fixed assets, including acquired intellectual property, are
capitalised at cost and amortised on a straight line basis over the estimated
useful economic life of the asset, having taken into account the risk factors
associated with developing a pharmaceutical product.



In accordance with emerging best practice on revenue recognition, the Group
has adopted a modified accounting policy from 1 January 2001. This policy
states that license fees and milestone payments are spread over the life of
the relevant agreement in proportion to the work performed by the Group, but
is limited to the non refundable amounts received. The revenue recognised in
2000, under the former policy of recognising such payments on receipt, would
not have been materially different under the revised accounting policy adopted
from 2001.



There have been no other changes to the Group's accounting policies in 2001.



2  Acquisition of Cantab Pharmaceuticals plc



On 6 April 2001 the Group announced the successful merger with Cantab. Under
the terms of the offer made to Cantab shareholders, 11 shares in Xenova Group
plc were issued in exchange for 7 shares held in Cantab. On this basis Cantab
was valued on 5 April 2001 at £34.2m based upon a closing Xenova Group plc
share price of 49p.



Details of the book value and provisional fair value of the assets and
liabilities of Cantab as at 6 April 2001 are set out below:


                                                    Book  Adjustments      Fair
                                                  values                 values
                                                    £000        £000       £000
Fixed assets
    Tangible                                         7,463           -    7,463

    Intangible                                       1,415     (1,415)        -
Debtors                                              3,686           -    3,686
Cash and liquid investments                         16,822           -   16,822
Creditors falling due within one year              (4,243)           -  (4,243)
Creditors falling due after more than one            (438)           -    (438)
year
Investment in joint venture - share of                (32)           -     (32)
gross liabilities
                                                     _____       _____    _____
Net assets acquired                                 24,673     (1,415)   23,258

Satisfied by:
Shares issued and to be issued                                           34,197
Expenses of acquisition                                                     768

                                                                          _____
Total consideration                                                      34,965

                                                                          _____

Goodwill arising on acquisition                                          11,707

                                                                          _____





There have been no accounting policy adjustments made to the balance sheet
values stated at 6 April 2001. Intangible assets acquired comprised licence
fees which have not been capitalised separately from goodwill. In addition to
the £768,000 of acquisition expenses paid, share issue costs of £864,000 were
incurred.



In accordance with the accounting policy set out in the basis of preparation
note, the goodwill arising on the acquisition has been capitalised and
amortised over the 10 year estimated useful life of the acquired business.



In addition to the planned acquisition of 100% of Cantab Pharmaceuticals plc
and the UK trading company Cantab Research Limited (now renamed Xenova
Research Limited), the Group acquires as part of this transaction, a 45% share
in Phogen, a joint venture with Marie Curie Cancer Care.



As part of the strategic review of both the research and development pipeline
and other activities, announced on 21 June 2001, 45 positions have been lost
across both the head office and research and development functions. Included
within the administrative expenses for this period is £0.7m ($0.9m) in respect
of the severance payments payable.



The audited consolidated results of the Cantab Pharmaceuticals plc group for
the year ended 31 December 2000, including the Group's share of Phogen,
included revenues of £8,403,000, an operating loss of £6,452,000 and a net
loss of £3,913,000. Consolidated net assets of the Cantab group at 31 December
2000 stood at £28,374,000 of which £15,257,000 comprised cash and liquid
resources.





3   Amounts written back on investments



The £675,000 written back on investments reflects the unrealised gain on the
Group's holding of 88,668 Cubist Pharmaceutical shares following a rise in the
listed market price since 31 December 2000.



4   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 R&D tax credit in respect of the
first half of the year that will be received in 2002.



5   Reconciliation of movement in shareholders' funds


                                                 Unaudited   Unaudited  Audited
                                                Six Months  Six Months     Year
                                                     Ended       Ended    Ended
                                                   30 June     30 June       31
                                                      2001        2000 December
                                                      £000        £000     2000
                                                                           £000

At start of period                                  11,876      11,620   11,620


Allotments of shares in the period                       9         327   10,252

Issue of shares in respect of                       30,070           -        -
acquisition

Shares to be issued                                  4,127           -        -

Expenses on issue of shares                          (864)        (90)    (772)

Shares to be issued under long term                     24           9       27
incentive scheme

Retained loss for the period                       (6,485)     (3,590)  (9,305)

Exchange movement                                        2          10       54

                                                     _____       _____    _____

At end of period                                    38,759       8,286   11,876

                                                     _____       _____    _____









6   Reconciliation of operating loss to net cash outflow from operating
activities


                                              Unaudited     Unaudited   Audited
                                             Six Months    Six Months      Year
                                                  Ended         Ended     Ended
                                                30 June       30 June        31
                                                   2001          2000  December
                                                   £000          £000      2000
                                                                           £000

Group operating loss                            (8,438)       (3,880)   (9,377)


Depreciation and amortisation                       802            89       212

Provision for liabilities and                         5             -        20
charges

Decrease / (increase) in debtors                    580         (101)     (253)

(Decrease) / increase in creditors              (1,117)         (392)        17

Charge for long term incentive                       24             9        27
scheme
                                                  _____          ____     _____

Net cash outflow from operating                 (8,144)       (4,275)   (9,354)
activities

                                                  _____          ____     _____



7   Subsequent events



XR9576



On 13 August 2001 an agreement was signed with QLT Inc. to licence the XR9576
product.  Under the terms of this agreement, Xenova could receive up to £42.7
million in the form of licence and milestone payments.  In addition QLT Inc.
will support development of Phase III trials up to a value of £32 million.
Xenova will receive royalties on future sales.



Phogen



On 13 August 2001 an agreement was signed between the Group's 45% joint
venture Phogen and Genencor International Inc. to licence the VP22 technology.
Under the terms of this agreement, Phogen could receive up to £15.3 million
in the form of licence, option and milestone payments plus research and
development funding.  In addition Phogen will receive royalties on future
sales.



8   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.





Independent review report to Xenova Group plc



Introduction



We have been instructed by the company to review the financial information
which comprises the consolidated profit and loss account, consolidated
statement of total recognised gains and losses, consolidated balance sheet,
consolidated cash flow statement, reconciliation of net cash flow to movement
in net funds and notes 1 to 8 thereto. We have read the other information
contained in the interim report and considered whether it contains any
apparent misstatements or material inconsistencies with the financial
information.



Directors' responsibilities



The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.



Review work performed



We conducted our review in accordance with guidance contained in Bulletin 1999
/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of Xenova Group plc management
and applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than
an audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.



Review conclusion



On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2001.



PricewaterhouseCoopers
Chartered Accountants
Uxbridge
13 August 2001