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Xenova Group PLC (XEN)

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Wednesday 14 August, 2002

Xenova Group PLC

Interim Results

Xenova Group PLC
14 August 2002

                                                                  14 August 2002

                   Xenova: Interim Results Announcement 2002

Half Year Highlights:

•        Phase III trials begin for multi-drug resistance modulator tariquidar
•        Successful results of Phase IIa trial for therapeutic vaccine TA-HPV
•        Patient dosing begins in Phase IIa study for anti-cocaine addiction
         vaccine TA-CD
•        First evaluation of anti-nicotine vaccine in man - positive Phase I
         results for TA-NIC
•        Positive Phase I results for immunotherapeutic anti-cancer vaccine
•        Anti-cancer compound XR11576 enters Phase I clinical trials
•        $63m (£43.2m) development and licence agreement with Genentech Inc for
         novel drugs in immune inflammatory disease
•        Cash and liquid resources as at 30 June £15.1m, ($23.0m)

Commenting, Chief Executive Officer, David Oxlade said:

'Xenova has made considerable progress in the first six months of 2002, both in
terms of advancing its clinical pipeline and in expanding its revenue-generating

'Tariquidar's entry to Phase III studies in June was an important step forward
and highlights the maturity of our growing clinical product portfolio. The
licence agreement announced in April with Genentech, to develop novel therapies
for auto-immune disease, underlines the potential of our early stage product


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
Fiona Noblet / Jonathan Birt

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 programmes in clinical development.  The Group has a well-established
track record in the identification, development and partnering of innovative
products and technologies and has partnerships with significant pharmaceutical
companies including Lilly, Pfizer, Celltech, Genentech, QLT and Millennium

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

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.

Chairman's Statement

During the first six months of 2002 we have made considerable progress in
advancing our clinical pipeline.  Our clinical portfolio now includes one Phase
III, two Phase II and four Phase I drug candidates, plus an animal disease
product in the equivalent of Phase I trials.  We believe we have established a
strong and well-balanced product pipeline, strengthened by a further eight
products in preclinical development.

We aim to create a robust, sustainable and revenue generating company in the
medium term and, with this objective in mind, we seek to optimise revenues from
upfront and milestone payments by entering into licensing agreements for our
products.  To this end, we entered into a development and licence agreement with
Genentech Inc (Genentech), in April 2002, worth a potential $63m (£43.2m),
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. Good progress has also been made under
some of our existing partnership agreements during the first half of 2002,
evidenced by the progress into clinical trials of XR11576, with our partner
Millennium Pharmaceuticals Inc (Millennium), and the start of Phase III trials
for tariquidar, with our partner QLT Inc (QLT).

Our commercial strategy is to consider the optimal time for partnering of our
products on a project by project basis. You will find details of the progress
made by all our programmes, and of the agreements in place, in the Product
Pipeline Update section of this statement.

Revenues increased to £6.8m ($10.3m) from £0.5m ($0.8m), when compared with the
first six months of 2001, due primarily to revenues recorded in relation to the
three major partnerships outlined above. Total net operating expenses remained
constant at £11.0m ($16.8m) when compared with the last six months of 2001
(£11.2m ($17.1m)).

Based on our expected net monthly cash outflow, cash and liquid resources as at
the end of June were sufficient to fund our current operations for in excess of
one year.

Product Pipeline Update - Clinical Trials


XR9576 (tariquidar) - Discovered by Xenova, tariquidar, a potent small-molecule
inhibitor of the P-glycoprotein pump, is being developed for the treatment of
multidrug resistance (MDR) in cancer.  In August 2001, Xenova signed an
exclusive licence agreement with QLT Inc for the development and marketing in
the United States, Canada and Mexico of tariquidar for the treatment of MDR in
cancer.  Under the terms of the agreement, QLT has assumed responsibility for
the further development of tariquidar in those territories covered by the
agreement. QLT made an immediate upfront licence payment to Xenova of US$10m
(£7.1m) and will provide up to US$45m (£32m) in funding for all development
activities related to Phase III clinical studies for tariquidar in North America
and Europe.  Milestones of up to US$50m (£35.6m) and royalties in the range of
15 to 22 per cent, depending on the level of North American sales, are also
receivable by Xenova. Xenova retains substantially all commercial rights to
tariquidar outside the United States, Canada and Mexico, including European and
Rest of World rights.

Tariquidar entered two pivotal Phase III clinical trials, in which tariquidar is
being used as an adjunctive treatment in combination with first-line
chemotherapy for non-small cell lung cancer (NSCLC) patients, in June 2002.  The
two double-blind, randomised, placebo-controlled trials are being carried out in
patients with stage IIIb/IV NSCLC at approximately 100 centres located
throughout North America and Europe.  An interim analysis is planned for
mid-2003 and it is anticipated that, on successful completion of the Phase III
programme, QLT will file for approval of tariquidar in North America for use in
combination with first-line chemotherapy in advanced NSCLC by the end of 2005
and Xenova will file for marketing approval in Europe.

DISC-GMCSF - 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. In preclinical studies DISC-GMCSF was
shown to be effective in models of breast and colorectal cancer.  As announced
in June 2002, DISC-GMCSF successfully completed a Phase I dose-escalating safety
study at three centres in the UK, in patients with metastatic melanoma.
DISC-GMCSF was found to be well tolerated, with no serious adverse events
reported.  The DISC vector was shown to be localised at the site of injection
and had not spread beyond the required therapeutic area, a key objective of the

TA-HPV/TA-CIN - TA-HPV is an immunotherapeutic vaccine, which is being developed
to prevent the recurrence of cervical cancer.  The product is intended to be
used as a therapeutic vaccine alongside standard treatments, such as surgery,
for cervical cancer.  The results of two physician-initiated Phase IIa trials,
in which TA-HPV was tested in patients with high-grade vulval intra-epithelial
neoplasia (VIN 3), have shown the vaccine to be safe and well tolerated, with a
complete or partial response being shown in over 40% of cases.

TA-CIN is a recombinant fusion protein, designed as a treatment for women with
cervical dysplasia.  Preclinical studies have suggested that use of this product
together with TA-HPV results in a greatly enhanced immune response.  An open
label, physician sponsored Phase II 'prime-boost' study, targeting the treatment
of HPV associated ano-genital neoplasias, began in October 2001.  Results of
this trial are anticipated by the end of the current year.

XR11576 (MLN576) - XR11576, XR5944 and XR11612 are novel DNA targeting agents,
whose method of action includes dual inhibition of topoisomerases I and II.
XR11576 is the subject of a licence agreement with Millennium Pharmaceuticals
Inc, announced in December 2001. The other compounds covered by this agreement,
XR5944 (MLN944) and XR11612 (MLN612), are currently in preclinical development.
XR11576 entered Phase I clinical trials in February 2002.  The open label Phase
I trial is being carried out at centres in the UK and the Netherlands and
comprises multiple ascending oral doses in patients with solid tumours.
Patients are being monitored for safety, tolerability, pharmacokinetics and
anti-tumour activity. Xenova retains responsibility for performing development
activities associated with the programme to the end of Phase II clinical trials.
  Millennium will provide funding for the programme commencing in 2003, up to
the agreed level of $20m.


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 intend to secure a
corporate partner ahead of Phase III clinical trials for the further development
of this programme.

TA-NIC - Designed as a treatment for nicotine addiction, TA-NIC is a nicotine
conjugate vaccine which is administered through a course of intramuscular
injections. The vaccine is designed to prime the immune system to produce
anti-nicotine antibodies such that, 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.  The successful results of a Phase I trial for TA-NIC, reported in June
2002, showed the vaccine to be safe and well tolerated both systemically and
locally in the 60 smokers and non-smokers who took part in the trial, and that
the vaccine generated a specific anti-nicotine response. This is the first time
such a vaccine has been tested in man.

TA-CD - TA-CD is a therapeutic vaccine which is under development for the
treatment of cocaine addiction.  It's mechanism of action is similar to that of
TA-NIC.  A Phase IIa dose escalation trial, supported by the US National
Institute on Drug Abuse (NIDA), began in April 2002. The results of an earlier
Phase IIa dose escalation study, which were reported in July 2001, showed TA-CD
to be well tolerated both systemically and locally. Cocaine specific antibodies
were found to persist throughout the 12 weeks of the study and an 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.

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 the
equivalent of Phase I clinical development in partnership with Pfizer.

Product Pipeline Review and Update - Preclinical


XR5944 (MLN944) and XR11612 (MLN612) - XR5944 and XR11612 form, with XR11576,
the programme of novel anti-cancer agents which was partnered with Millennium in
December 2001. XR5944 has shown exceptionally high potency as a cytotoxic agent
in preclinical studies with a number of human tumour cell lines both in vitro
and in vivo.  It is structurally distinct from XR11576 and has been shown to be
unaffected by atypical multi-drug resistance mechanisms. XR11612 is in
preclinical testing as a back-up to XR11576.

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 known as PAI-1.  PAI is an unfavourable
prognostic indicator in many human cancers and is strongly implicated in the
metastatic process.  Lilly has an option to acquire exclusive rights to develop
and commercialise PAI-1 inhibitors in the cancer field, which, if exercised,
would realise upfront and milestone payments of up to $16.5m, with additional
royalties payable on commercialised products.

OX40L - OX40 is a platform technology which is capable of producing multiple
drug candidates primarily targeting cancer and autoimmune disease.  We have
demonstrated that a product candidate for OX40L (the ligand which binds to the
OX40 receptor) elicits anti-tumour activity in preclinical models and work is
underway to test the product in a broader range of disease models, including
those for infectious diseases. A £43.2m development and licence agreement was
signed in April 2002 with Genentech for the 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. Under
this agreement, Xenova retains all rights to the up-regulation of the immune
system using the OX40:OX40L interaction, including for use in oncology and
infectious disease therapy.

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.


OX40 - A partnership has been established with Celltech Group plc to develop an
antibody-based product against OX40 for the treatment of autoimmune disease.
Along with OX40L, OX40 is also the subject of a development and licence
agreement with Genentech (see above).

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 side-effects of bleeding associated with
other marketed antithrombotic drugs.  Xenova and Lilly entered into this
collaboration in 1998.

MEN-B - Xenova is currently developing a vaccine for the prevention of
meningitis caused by meningococcal group B infections.  This programme is being
carried out in collaboration with the Institute for Infections and Immunity,
based at Nottingham University.  The aim is to construct a live attenuated
vaccine, which should give good protection against all group B strains.  The
programme is currently at the lead product evaluation stage.


A 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.  Phogen entered into a £15.0m ($21.0m) 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, in August 2001.  A further research collaboration was announced with
Cell Genesys in October 2001. Phogen intends to seek additional partnering
opportunities for its novel technologies.

Financial Summary

Operating Performance

In the six months to 30 June 2002, the Group's revenues from licensing
agreements, strategic partnerships and manufacturing outsourcing were £6.8m
($10.3m) (2001 £0.5m ($0.8m)).

In accordance with the Group's revenue recognition policy, of the £6.9m ($10.6m)
received from QLT in 2001 as part of the tariquidar licensing agreement, £1.2m
($1.8m) was included in the 6 months to 30 June 2002, with a further £5.2m
($7.9m) being deferred to future periods. Of the £7.9m ($12.0m) received from
Millennium, £4.9m ($7.4m) was recognised by the Group in the six months to 30
June 2002, with a further £3.0m ($4.6m) being deferred to future periods.
Following the successful completion of a further licensing deal in the period in
respect of the OX40 program with Genentech, £0.3m ($0.5m) of the upfront licence
fee of £2.7m ($4.2m) has been recognised in this half year. Other revenue
included £0.4m ($0.6m) in respect of ongoing contract vaccine manufacturing.

The net operating expenses for the six months to 30 June 2002 were £11.0m
($16.8m) (2001: £8.9m ($13.6m)). The total net operating expenses in the 6
months to 30 June 2002 of £11.0m ($16.8m) remained in line with the second half
of 2001 (£11.2m ($17.1m)) which reflected the ongoing savings resulting from the
2001 mid year strategic review following the acquisition of Cantab on 4 April
2001. Accordingly, the first half results in 2001 included only one quarter of
the Cantab results.

Total research expenditure for the six months to 30 June 2002 was £8.4m ($12.9m)
(2001: £6.6m ($10.1m)). Research expenditure included substantial preclinical
and clinical development of the programme of novel DNA targeting agents, one of
which (XR11576) entered Phase I clinical trials in February, and completion of
Phase I clinical development of TA-NIC. 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 the programme of novel DNA targeting agents.

Total administration expenditure for the six months to 30 June 2002 was £2.8m
($4.3m) (2001: £2.3m ($3.5m)). The cost reductions realised in quarter one 2002
were maintained in quarter two 2002, with administrative expenses (excluding the
amortisation of goodwill) falling slightly to £1.1m ($1.7m) (Q1 2002: £1.2m
($1.8m)). The subletting of excess facilities reduced net operating expenses by
£0.2m ($0.3m) in the first six months of 2002 (2001: nil).

Of the total administrative expenses for the six months to 30 June 2002 of £2.8m
($4.3m), £0.6m ($0.9m) relates to the amortisation, over a 10-year period, of
the goodwill in respect of the acquisition of Cantab in 2001.

Cash outflow before financing and acquisitions in the six months to 30 June 2002
of £7.3m ($11.1m) has been reduced from 2001 (£10.0m ($15.3m)). Cash received
from licensing activity during the six months ended 30 June 2002 was £2.7m
($4.2m) (2001: nil).

The Company continues to explore licensing opportunities to maximise value for
shareholders and reduce cash outflow.

The net loss per share in the six months to 30 June 2002 was 3.3p (2001: 6.2p).

Cash and liquid resources

Cash and liquid resources at 30 June 2002 totalled £15.1m ($23.0m) (2001: £18.1m
($27.6m)). Of this balance, cash was £14.5m ($22.2m) and liquid resources were
£0.5m ($0.8m) at 30 June 2002 (2001: cash £15.7m ($23.9m), liquid resources
£2.4m ($3.7m)).

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 30 June 2002 the share price was
$9.41 valuing the investment held at £0.5m ($0.8m), representing a decline of
£1.7m ($2.6m) from the valuation at 31 December 2001 of £2.2m ($3.4m).

Based upon the expected net monthly cash outflow, the cash and liquid
investments are sufficient to fund current operations for in excess of one year.

Share capital

The number of shares in issue stood at 139.1 million as at 30 June 2002 (2001:
139.0 million).

The Directors do not propose to pay an interim dividend for 2002 (2001: nil).

Consolidated Profit and Loss Account (unaudited)

                                                           Unaudited     Unaudited     Unaudited       Audited
                                                          Six Months    Six Months    Six Months          Year
                                                               Ended         Ended         Ended         Ended
                                                             30 June       30 June       30 June   31 December
                                                 Notes          2002          2002          2001          2001
                                                                $000          £000          £000          £000

Turnover (including share of joint venture)                   10,549         6,914           504         1,877
    Less: share of joint venture revenue                       (230)         (151)           (3)          (95)

                                                               _____         _____         _____         _____
Turnover                                                      10,319         6,763           501         1,782

Operating expenses
Research and development costs                              (12,853)       (8,424)       (6,643)      (15,374)

                                                               _____         _____         _____         _____
                                                            (12,853)       (8,424)       (6,643)      (15,374)

                                                               _____         _____         _____         _____

    Administrative expenses                                  (3,441)       (2,255)       (1,345)       (2,961)
    Administrative expenses: exceptional                           -             -         (658)       (1,035)
     reorganisation costs
    Administrative expenses: amortisation of                   (894)         (586)         (293)         (879)
                                                               _____         _____         _____         _____
Total administrative expenses                                (4,335)       (2,841)       (2,296)       (4,875)

Other operating income                                           417           273             -           115

Total net operating expenses                                (16,771)      (10,992)       (8,939)      (20,134)

                                                                ____          ____          ____          ____

Group operating loss                                         (6,452)       (4,229)       (8,438)      (18,352)

Share of operating profit/(loss) of joint                         53            35          (29)          (33)
                                                                ____          ____          ____          ____

Total operating loss: Group and share of joint               (6,399)       (4,194)       (8,467)      (18,385)

Interest (net)                                                   514           337           400           754
Amounts written (off) / back to investments       2          (2,498)       (1,637)           675           463

                                                                ____          ____          ____          ____

Loss on ordinary activities before taxation                  (8,383)       (5,494)       (7,392)      (17,168)

Tax on loss on ordinary activities                3            1,329           871           907         1,797

                                                                ____          ____          ____          ____

Loss on ordinary activities after taxation                   (7,054)       (4,623)       (6,485)      (15,371)
attributable to members of Xenova Group plc
                                                  4             ____          ____          ____          ____

Loss per share (basic and diluted)                            (5.1c)        (3.3p)        (6.2p)       (12.6p)

                                                                ____          ____          ____          ____

Shares used in computing net loss per share                  139,057       139,057       104,044       121,596

US Dollar amounts have been translated at the closing rate on 30 June 2002
(£1.00: $1.5258) solely for information.

Statement of Total Recognised Gains and Losses (unaudited)

                                                            Unaudited     Unaudited     Unaudited      Audited
                                                           Six months    Six months    Six months         Year
                                                                Ended         Ended         Ended        Ended          
                                                              30 June       30 June       30 June   31 December         
                                                                 2002          2002          2001          2001
                                                                 £000          $000          £000          £000

Loss attributable to Xenova Group plc                         (7,115)       (4,663)       (6,456)      (15,341)
Loss attributable to joint venture                                 61            40          (29)          (30)

                                                                _____         _____         _____         _____
Total loss attributable to members of Xenova
Group plc                                                     (7,054)       (4,623)       (6,485)      (15,371)

Translation difference                                            (1)           (1)             2             -
                                                                _____         _____         _____         _____

Total recognised gains and losses in the period               (7,055)       (4,624)       (6,483)      (15,371)
attributable to members of Xenova Group plc
                                                                _____         _____         _____         _____

US Dollar amounts have been translated at the closing rate on 30 June 2002
(£1.00: $1.5258) 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 December
                                                                 2002          2002          2001         2001
                                               Notes             $000          £000          £000         £000

Fixed Assets
   Intangible assets                                           15,585        10,214        11,379       10,798
   Tangible assets                                             13,813         9,053         9,880        9,586

   Investment in joint venture:
     Share of gross assets                                        638           418            40          438
     Share of gross liabilities                                 (671)         (440)         (101)        (500)
     Goodwill arising on acquisition                               42            28            32           30
                                                                _____         _____         _____        _____
                                                                    9             6          (29)         (32)
                                                                _____         _____         _____        _____
                                                               29,407        19,273        21,230       20,352
Current Assets

   Debtors                                                      6,875         4,506         5,552        4,135
   Investments                                   2                834           547         2,396        2,184
   Cash at bank and in hand                                    22,158        14,522        15,676       21,816
                                                                _____         _____         _____        _____
                                                               29,867        19,575        23,624       28,135

Creditors: amounts falling due within one        6           (20,424)      (13,386)       (5,703)     (18,420)
                                                                _____         _____         _____        _____
Net current assets                                              9,443         6,189        17,921        9,715

Total assets less current liabilities                          38,850        25,462        39,151       30,067

Creditors: amounts falling due after more                       (323)         (212)         (367)        (221)
than one year

Provisions for liabilities and charges                           (20)          (13)          (25)         (10)
                                                                _____         _____         _____        _____

Total net assets                                               38,507        25,237        38,759       29,836
                                                                _____         _____         _____        _____

Capital and reserves

Called up share capital                                        21,218        13,906        13,062       13,904
Shares to be issued                                                 -             -         4,127            -
Share premium account                                         112,714        73,872        73,925       73,870
Merger reserve                                                 41,529        27,218        23,933       27,218
Other reserves                                                 27,315        17,902        17,902       17,902
Profit and loss account                                     (164,269)     (107,661)      (94,190)    (103,058)
                                                                _____         _____         _____        _____
Shareholders' funds - equity interests           4             38,507        25,237        38,759       29,836
                                                                _____         _____         _____        _____

US Dollar amounts have been translated at the closing rate on 30 June 2002
(£1.00: $1.5258) solely for information.

Consolidated Cash Flow Statement (unaudited)

                                             Notes          Unaudited     Unaudited     Unaudited       Audited
                                                           Six months    Six months    Six months          Year
                                                                Ended         Ended         Ended         Ended
                                                              30 June       30 June       30 June   31 December
                                                                 2002          2002          2001          2001
                                                                 $000          £000          £000          £000

Net cash outflow from operating activities     5             (11,295)       (7,403)       (8,144)       (3,836)

Returns on investments and servicing of
Interest received                                                 517           339           376         1,023
Interest element of finance lease rental                          (3)           (2)           (5)          (15)
                                                                _____         _____         _____         _____
Net cash inflow from returns on                                   514           337           371         1,008
investments and servicing of finance

Taxation                                       3                    -             -             -         1,870

Capital expenditure and financial
Purchase of tangible fixed assets                               (351)         (230)       (2,224)       (2,797)
                                                                _____         _____         _____         _____
Net cash outflow from capital expenditure                       (351)         (230)       (2,224)       (2,797)
and financial investment

Acquisitions and disposals                                         

Purchase of subsidiary undertakings                                 -             -         (768)         (768)
Cash at bank and in hand acquired with                              -             -        16,822        16,822
                                                                _____         _____         _____         _____

Net cash inflow from acquisitions                                   -             -        16,054        16,054
                                                                _____         _____         _____         _____

Net cash (outflow)/inflow before financing                   (11,132)       (7,296)         6,057        12,299

Issue of ordinary share capital                                     6             4             9             9
Expenses on issue of shares                                         -             -         (864)         (919)
Capital element of finance lease rental                           (3)           (2)          (40)          (87)
                                                                _____         _____         _____         _____
Net cash inflow/(outflow) from financing                            3             2         (895)         (997)
                                                                _____         _____         _____         _____

(Decrease)/increase in cash during the                       (11,129)       (7,294)         5,162        11,302
                                                                _____         _____         _____         _____

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

                                                            Unaudited     Unaudited     Unaudited       Audited
                                                           Six Months    Six Months    Six Months          Year
                                                                Ended         Ended         Ended         Ended
                                                              30 June       30 June       30 June   31 December         
                                                                 2002          2002          2001          2001
                                                                 $000          £000          £000          £000
(Decrease)/increase in cash during the period                (11,129)       (7,294)         5,162        11,302
Capital element of finance lease payments                           3             2            40            87

                                                                _____         _____         _____         _____
Change in net funds resulting from cash flows                (11,126)       (7,292)         5,202        11,389

Finance leases acquired with subsidiary operations                  -                       (101)         (101)
Change in value of liquid investments                         (2,498)       (1,637)           675           463
Translation difference                                              -             -             2             2
                                                                _____         _____         _____         _____
Change in net funds                                          (13,624)       (8,929)         5,778        11,753

Net funds at 1 January                                         36,598        23,986        12,233        12,233
                                                                _____         _____         _____         _____
Net funds at 30 June / 31 December                             22,974        15,057        18,011        23,986
                                                                _____         _____         _____         _____

US Dollar amounts have been translated at the closing rate on 30 June 2002
(£1.00: $1.5258) 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 2001 Annual Report and
Accounts except as set out below. The 2001 Annual Report and Accounts received
an unqualified auditor's report and have been delivered to the Registrar of

Following the issue of Financial Reporting Standard Number 19 - 'Deferred tax'
the group has adopted the incremental liability approach ('Full' provision
basis) from 1 January 2002. The Group's policy now states, 'Deferred tax is
recognised in respect of timing differences that have originated but not
reversed by the balance sheet date, but only when transactions or events that
result in a right to pay less tax or an obligation to pay more tax in the future
have occurred at the balance sheet date. The likelihood of these rights or
obligations arising is based upon the estimated probabilities of future events
occurring, taking into account the relevant factors pertinent to the industry
sector in which the Group operates. Deferred tax is measured on a non-discounted
basis'.  The deferred tax recognised in 2001 under the former policy (nil) would
not have been different under the revised policy adopted from 2002.

There have been no other changes to the Group's accounting policies in 2002.

2          Amounts written back on investments

The £1,637,000 written off on investments reflects the unrealised loss on the
Group's holding of 88,668 Cubist Pharmaceuticals Inc shares following a fall in
the listed market price since 31 December 2001.

3          Taxation

The Group has recognised the R&D tax credit in respect of the first half of the
year that will be received in 2003. The Group has not recognised any deferred
tax assets or liabilities in the period.

4          Reconciliation of movements in shareholders' funds

                                                                  Unaudited        Unaudited           Audited
                                                                 Six Months       Six Months              Year
                                                                      Ended            Ended             Ended
                                                                    30 June          30 June       31 December
                                                                       2002             2001              2001
                                                                       £000             £000              £000

At start of period                                                   29,836           11,876            11,876

Allotments of shares in the period                                        4                9                 9

Issue of shares in respect of acquisition                                 -           30,070            34,197

Shares to be issued                                                       -            4,127                 -

Expenses on issue of shares                                               -            (864)             (919)

Shares to be issued under long term incentive scheme                     21               24                44

Loss for the period                                                 (4,623)          (6,485)          (15,371)

Exchange movement                                                       (1)                2                 -
                                                                      _____            _____             _____

At end of period                                                     25,237           38,759            29,836
                                                                      _____            _____             _____

5          Reconciliation of operating loss to net cash outflow from operating

                                                                   Unaudited        Unaudited          Audited
                                                                  Six Months       Six Months             Year
                                                                       Ended            Ended            Ended
                                                                     30 June          30 June      31 December          
                                                                        2002             2001             2001
                                                                        £000             £000             £000
Group operating loss                                                 (4,229)          (8,438)         (18,352)

Depreciation                                                             763              509            1,201

Amortisation                                                             588              293              879

Provision for liabilities and charges                                      3                5             (10)

Net loss on disposal of tangible fixed assets                              -                -               16

Decrease in debtors                                                      500              580              734

Decrease in creditors                                                (1,478)          (1,117)          (2,573)

Charge for long term incentive scheme                                     21               24               44

(Decrease)/increase in deferred income                               (3,571)                -           14,225
                                                                       _____            _____            _____

Net cash outflow from operating activities                           (7,403)          (8,144)          (3,836)
                                                                       _____            _____            _____

6          Deferred income

Included in Creditors is £10,654,000 (30 June 2001: £nil, 31 December 2001:
£14,225,000) in respect of deferred income.

7          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


We have been instructed by the company to review the financial information set
out on pages 9 to 15. 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 2002.

Chartered Accountants
14 August 2002


(a)    The maintenance and integrity of the Xenova Group plc website
is the responsibility of the directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the interim
report since it was initially presented on the website.

(b)    Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other

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