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Xenova Group PLC (XEN)

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Thursday 09 May, 2002

Xenova Group PLC

1st Quarter Results

Xenova Group PLC
9 May 2002


FOR IMMEDIATE RELEASE



Xenova Group plc

First Quarter Results 2002



Slough, UK, 9 May, 2002 - Xenova Group plc (Nasdaq NM: XNVA; London Stock
Exchange: XEN) today announces its results for the quarter ended 31 March 2002.



Year to Date Highlights


-            Anti-cancer compound XR11576 enters Phase I clinical trials


-            Successful results of Phase IIa trial for therapeutic vaccine
             TA-HPV


-            Patient dosing begins in Phase IIa trial for anti-cocaine addiction
             vaccine TA-CD


-            £44.2m ($63m) development and licence agreement with Genentech Inc
             for novel drugs in immune inflammatory disease


-            Revenue recognised in quarter of £2.8m ($3.9m) (2001 £nil ($nil))


-            Cash and liquid resources £17.1m ($24.3m) at 31 March 2002 (2001:
             £8.1m ($11.5m)), excluding £3.5m ($5m) licence payment from 
             Genentech agreement



Commenting, Chief Executive Officer David Oxlade said: 'Xenova has made
substantial progress both clinically and commercially, as exemplified by the new
collaborations we have entered into recently.  There is every indication that
this momentum will continue, with, for example, the anticipated entry of our
lead compound, Tariquidar, to Phase III clinical trials around the middle of
this year.'



Contacts:


UK:                                                   US:
Xenova Group plc                                      Trout Group/BMC Communications
Tel: +44 (0)1753 706600                               Tel: 001 212 477 9007
David A Oxlade, Chief Executive Officer               Press: Brad Miles (Ext 17) Lauren Tortorete (Ext 20)
Daniel Abrams, Group Finance Director                 Investors: Jonathan Fassberg (Ext 16) Lee Stern (Ext
                                                      22)
Hilary Reid Evans, Corporate Communications

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





Notes to Editors



Xenova Group plc's product pipeline focuses principally on the therapeutic areas
of cancer and immune system disorders.  Xenova currently has a broad pipeline of
eight products in clinical development.  Xenova's lead programme is a
P-glycoprotein antagonist for the treatment of multi-drug resistance in cancer,
known as tariquidar or XR9576.  Tariquidar has completed a successful series of
three Phase IIa clinical trials and is expected to enter Phase III clinical
development in mid 2002.  Tariquidar is partnered for the North American market
with QLT Inc. The Group has a well-established track record in the
identification, development and partnering of innovative products and
technologies and has partnerships with other major pharmaceutical companies
including Lilly, Pfizer, Celltech, Millennium Pharmaceuticals and Genentech.



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



For Xenova: Disclaimer to take advantage of the 'Safe Harbor' provisions of the
US Private Securities Litigation Reform Act of 1995. This press release contains
'forward-looking statements,' including statements about the discovery,
development and commercialisation of products. Various risks may cause Xenova's
actual results to differ materially from those expressed or implied by the
forward looking statements, including: adverse results in our drug discovery and
clinical development programs; failure to obtain patent protection for our
discoveries; commercial limitations imposed by patents owned or controlled by
third parties; our dependence upon strategic alliance partners to develop and
commercialise products and services; difficulties or delays in obtaining
regulatory approvals to market products and services resulting from our
development efforts; the requirement for substantial funding to conduct research
and development and to expand commercialisation activities; and product
initiatives by competitors.  For a further list and description of the risks and
uncertainties we face, see the reports we have filed with the Securities and
Exchange Commission.  We disclaim any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.





Quarterly Review

Product Pipeline Update



Multi-drug resistance programme:  A £73.7m ($105m) collaboration with QLT Inc
for the development and North American marketing of Tariquidar (the P-gp pump
inhibitor formerly known as XR9576) was announced in August 2001.  Since then,
good progress has been made towards the anticipated commencement of Phase III
clinical trials in mid-2002.  Initiation of trial centres is continuing on
schedule and all necessary FDA approvals are now in place.



Tariquidar is being developed to address the large, frequently occurring problem
of multidrug resistance faced by cancer patients whose tumours do not respond to
chemotherapy.



Data were presented at the American Association for Cancer Research (AACR)
meeting in April 2002 relating to the pharmacokinetic (PK) interaction between
Tariquidar and the cytotoxic drugs paclitaxel, doxorubicin and vinorelbine and
demonstrating that no significant interaction occurred.  Further data also
presented at the AACR conference related to in vitro studies for Tariquidar and
demonstrated that clinically significant interaction is unlikely between
Tariquidar and chemotherapy agents.



An abstract has been accepted for the May 2002 meeting of the American Society
of Clinical Oncology (ASCO), which demonstrates that Tariquidar has minimal
effects on the PK interaction of paclitaxel, doxorubicin and vinorelbine and can
be administered with full-dose chemotherapy in patients with cancer.



Novel mechanism of action anti-cancer programme:  Following the December 2001
announcement that Xenova had entered into a North American licensing agreement
with Millennium Pharmaceuticals Inc (Millennium) for its compounds XR11576,
XR5944 and XR11612, it was announced in February 2002 that patient dosing began
in an open-label Phase I trial for the oral compound, XR11576. Preclinical
studies continue for compounds XR5944 and XR11612.  These compounds comprise a
programme for the treatment of solid tumours.  The compounds are believed to be
novel DNA targeting agents that affect the DNA replication process through a
mechanism of action which involves the dual inhibition of topoisomerases I and
II. Sales of the two leading single topoisomerase inhibitor compounds alone are
estimated to have been in excess of $800m in 2000.  There are no currently
marketed dual topoisomerase inhibitors.



TA-HPV:  As announced in March 2002, successful results of a physician-initiated
Phase IIa trial of Xenova's therapeutic vaccine, TA-HPV were published at the
meeting of the British Society of Investigative Dermatology.  Researchers at
Addenbrooke's Hospital, Cambridge, UK showed the vaccine to be safe and well
tolerated in a study of 12 women with high grade human papillomavirus positive
ano-genital intraepithelial neoplasia.  TA-HPV is currently undergoing an
open-label, physician-sponsored Phase IIa 'prime-boost' trial in conjunction
with a further Xenova vaccine, TA-CIN, the results of which are anticipated in
the second half of 2002.



TA-CD:  It was announced in April 2002 that patient dosing had begun in a Phase
IIa dose escalation trial for Xenova's anti-cocaine addiction vaccine, TA-CD.
The trial is being conducted by Dr Thomas Kosten of Yale University School of
Medicine and is designed to evaluate the safety and immunogenicity of TA-CD
using a 4 or 5 dose vaccination schedule.  The study is being funded in part by
the US National Institute on Drug Abuse.



OX40:  It was also announced in April 2002 that Xenova has signed an exclusive
development and licence agreement with Genentech Inc, worth up to £44.2m ($63m),
granting Genentech worldwide rights to develop and market products primarily
targeting disorders of the immune system based on Xenova's OX40 receptor protein
and anti-OX40 ligand antibody programmes.  Xenova retains all rights to OX40
ligand and stimulatory anti-OX40 antibodies for its proprietary development and
commercialisation in oncology and other applications.



Other Programmes: Research and development continued throughout the first
quarter for the Group's other programmes, and includes a Phase I trial in
melanoma for the vaccine DISC-GMCSF and a Phase I trial for the anti-nicotine
vaccine, TA-NIC.  Xenova's research pipeline includes programmes such as those
for PAI-1 inhibition in the treatment of cancer and cardiovascular disease, and
multi-drug resistance protein (MRP) inhibition in the treatment of cancer.  An
update will be provided for all of Xenova's product development programmes at
the time of the interim (Quarter 2) results in August this year.





Financial Summary

Operating Performance



In the three months to 31 March 2002, the Group's revenues from licensing
agreements, strategic partnerships and manufacturing outsourcing were £2.8m
($3.9m) (2001 £nil ($nil)).



In accordance with the Group's revenue recognition policy, of the £6.9m ($10m)
received from QLT in 2001 as part of the Tariquidar licensing agreement, £0.6m
($0.9m) was included in the quarter to 31 March 2002, with a further £5.7m
($8.2m) being deferred to future periods. Of the £7.9m ($11.3m) received from
Millennium £2.0m ($2.8m) was recognised by the Group in the three months to 31
March 2002, with a further £5.9m ($8.4m) being deferred to future periods. Other
revenue included £0.2m ($0.3m) in respect of ongoing contract vaccine
manufacturing.



Total operating expenses have reduced from £5.7m ($8.1m) in the fourth quarter
2001 by 2% to £5.6m ($7.9m) in the first quarter of 2002.  The first quarter
operating expenses for 2001 of £2.4m ($3.4m) preceded the acquisition of Cantab
Pharmaceuticals plc (Cantab).



Research expenditure of £4.3m ($6.1m) remained in line with the fourth quarter
2001 (£4.3m ($6.1m)). Research expenditure in the first quarter of 2001, prior
to the acquisition of Cantab, was £1.9m ($2.7m).  There is not expected to be a
significant impact to research expenditure following the licensing agreements
with QLT and Millennium until 2003 when cost reimbursement commences under the
latter agreement relating to a programme of novel DNA targeting agents. The cost
reductions made in quarter four 2001 were maintained in quarter one 2002, with
administration expenses (excluding the amortisation of goodwill) remaining at
£1.5m ($2.1m). The subletting of excess facilities reduced net operating
expenses by £0.2m ($0.3m) in quarter one (2001: nil).



Of the total administrative expenses for the three months to 31 March 2002 of
£1.5m ($2.1m), £0.3m ($0.4m) relates to the amortisation over a 10-year period
of the goodwill in respect of the acquisition of Cantab in 2001.



The increased net interest income reflects the increased cash and liquid
resources balance held throughout the three months to 31 March 2002.



The net loss per share in quarter one was 2p (2001: 3p).



Cash and liquid investments



Cash and liquid resources at 31 March 2002 totalled £17.1m ($24.3m) (2001: £8.1m
($11.5m)).  Cash of £15.9m ($22.7m) and liquid resources of £1.2m ($1.6m) at 31
March 2002 (2001: cash £8.1m ($11.5m), liquid resources nil), excludes the
receipt of £3.5m ($5m) in respect of licence fees payable by Genentech in
respect of the OX40 deal announced in April 2002.



Included in liquid resources is an investment in Cubist Pharmaceuticals Inc
which subsequent to the 2001 year end fell in value, following an announcement
by Cubist of clinical trial data, such that at the 31March 2002 the share price
was $18.48 valuing the investment held at £1.2m ($1.6m), representing a decline
of £1.0m ($1.5m) from the valuation at 31 December 2001 of £2.2m ($3.1m).



Share capital



The number of shares in issue stood at 139.1 million as at 31 March 2002.



The Directors do not currently propose a dividend for 2002 (2001: nil).



                                     -ends-



Consolidated Profit and Loss Account (unaudited)


                                                                    Three Months Ended

                                                         Unaudited     Unaudited    Unaudited
                                                          31 March      31 March     31 March
                                                              2002          2002         2001
                                                              $000          £000         £000

                                                            ______        ______       ______
Turnover (including share of joint venture)                  3,972         2,789            -
Less: share of joint venture revenue                          (37)          (26)            -
                                                            ______        ______       ______
Turnover                                                     3,935         2,763            -

Operating expenses
Research and development costs                             (6,109)       (4,290)      (1,873)
Administrative expenses                                    (2,081)       (1,461)        (480)
                                                            ______        ______       ______

Total operating expenses                                   (8,190)       (5,751)      (2,353)
Other operating income                                         262           184            -
                                                            ______        ______       ______

Group operating loss                                       (3,993)       (2,804)      (2,353)

Loss on sale of business:
    Adjustment to Discovery consideration                        -             -        (186)
    Share of operating loss of joint venture                  (46)          (32)            -

                                                            ______        ______       ______
Total operating loss: Group and share of joint
venture                                                    (4,039)       (2,836)      (2,539)

Interest (net)                                                 247           173          131
Amounts written off investments                            (1,471)       (1,033)            -
Loss on ordinary activities before taxation                (5,263)       (3,696)      (2,408)

Tax on loss on ordinary activities (R&D tax credit)            642           451          231

Loss on ordinary activities after taxation
attributable to members of Xenova Group plc                (4,621)       (3,245)      (2,177)

                                                            ______        ______       ______

Loss per share (basic and diluted)                            (3c)          (2p)         (3p)

Shares used in computing net loss per share
(thousands)                                                139,057       139,057       69,251



US Dollar amounts have been translated at the closing rate on 31 March 2002
(£1.00: $1.4241) solely for information.



Condensed Consolidated Balance Sheet (unaudited)

                                                           Unaudited     Unaudited     Unaudited
                                                               As at         As at         As at
                                                            31 March      31 March      31 March
                                                                2002          2002          2001
                                                                $000          £000          £000

                                                              ______        ______        ______
Cash and liquid resources                                     24,326        17,082         8,105
Other current assets                                           6,347         4,457         1,292

  Fixed assets (including goodwill)                           28,182        19,789         1,957

                                                              ______        ______        ______

Total assets                                                  58,855        41,328        11,354

                                                              ______        ______        ______


Current liabilities (including provisions & deferred
income)                                                     (20,953)      (14,713)       (1,636)
Shareholders' equity                                        (37,902)      (26,615)       (9,718)

Total liabilities and shareholders' equity                  (58,855)      (41,328)      (11,354)

                                                              ______        ______        ______



US Dollar amounts have been translated at the closing rate on 31 March 2002
(£1.00: $1.4241) solely for information.



Notes to the Statement

Basis of preparation



These unaudited 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 2001 Annual Report and Accounts.
The 2001 Annual Report and Accounts received an unqualified auditor's report and
will be delivered to the Registrar of Companies.





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.



                      This information is provided by RNS
            The company news service from the London Stock Exchange