Information  X 
Enter a valid email address

Xenova Group PLC (XEN)

  Print      Mail a friend

Monday 24 February, 2003

Xenova Group PLC

Final Results

Xenova Group PLC
24 February 2003

                                Xenova Group plc

            Preliminary Results for the Year Ended 31 December 2002



Slough, UK, 24th February, 2003 - Xenova Group plc (NASDAQ NM: XNVA; London
Stock Exchange: XEN) today announces its results for the year ended 31 December
2002.

Summary

  • Tariquidar (XR9576) commences Phase III clinical trials and granted Fast
    Track status by FDA

      o Temporary suspension of new patient enrolment announced 21st February
        2003

  • Novel DNA targeting agent XR11576 begins Phase I clinical trials

  • Anti-cocaine addiction vaccine TA-CD starts Phase IIa dose escalation
    trial

  • Positive results of Phase I trials for anti-nicotine addiction vaccine
    TA-NIC

  • Positive results of Phase IIa physician-initiated trials for anti-HPV
    vaccine TA-HPV

  • Successful conclusion of Phase I trial for gene therapy product DISC-GMCSF

  • Potential $63.0m (£43.2m) Development and Licence Agreement signed
    with Genentech  Inc for Novel Drugs in Immune Inflammatory Disease

Financial Highlights

   • Fully underwritten Rights Issue raises £9.8m net of expenses

   • Revenues from licensing agreements, strategic partnerships and
     manufacturing outsourcing £12.2m (2001: £1.8m)

   • Cash, short term deposits and investments at 31 December 2002 £19.2m
     (2001: £24.0m)

Commenting, David Oxlade, Chief Executive Officer of Xenova Group plc, said: '
During 2002, Xenova made solid clinical progress with our portfolio of mid and
late stage products, strengthening the pipeline and expanding our corporate
partnerships.  Although enrolment has been temporarily suspended for tariquidar,
the trials continues and both we and our partner QLT Inc. remain confident in
the long-term potential of the drug.'

                                    - ends -

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/Ben Atwell




Notes to Editors

Xenova Group plc's product pipeline focuses principally on the therapeutic areas
of cancer and immune system disorders.  Xenova has a broad pipeline of
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
Pharmaceuticals.

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.

Chairman's Statement and Chief Executive's Review

The last financial year was a good year for Xenova. Following the merger with
Cantab Pharmaceuticals in 2001, Xenova has continued to focus its resources on
the research and development of both small molecule and biologic drug
candidates.  Xenova currently has a development pipeline of 8 programmes
undergoing clinical trials, backed up by an extensive pipeline of research-stage
programmes.  As a result of this year's operational review, we have applied our
'virtual' development approach, which we have used successfully with our
pharmaceutics programmes, to our biologics portfolio.  This has allowed us to
reduce the level of in-house resources involved in the early development of
biologics.  Details of the latest stage of development of all our programmes,
including information relating to two new programmes, known as HIF-1 alpha and
MEN-B, (which entered preclinical research in 2002), can be found in the
following section headed Operating Review.

Xenova was amongst the small number of biotechnology companies who were
successful in raising funds in the market in 2002, raising £9.8m net through a
fully underwritten 8 for 33 Rights Issue.  As a result, Xenova had £19.2m
($30.9m) in cash, short-term deposits and investments at the year end.  The
impact of the December 2002 operational review is expected to produce annual
cost savings of approximately £2m.  Exceptional reorganisation costs of £3.8m
($6.2m) have been recognised in the current year.  This comprises (£0.5m ($0.9m)
in respect of redundancy and £3.3m ($5.3m)) in respect of fixed assed
impairments.

Xenova employed approximately 147 people at 31 December 2002 at its facilities
in Slough and Cambridge, UK.  The company's head office and small molecule
discovery and development facilities are based in Slough, while the Cambridge
site houses Xenova's biologics capabilities.

Our objectives for the coming year include the further advancement of our
clinical programmes and potentially further commercial partnerships for certain
products currently in development.  We generally seek to finance the development
of new drugs up to the completion of Phase II trials, at which point a licensing
partner would be sought for further development and marketing of the product.
However, in certain instances we may consider licensing a product at an earlier
stage, for example, when an attractive commercial arrangement can be negotiated.
Within the area of oncology, it is our practice to seek to retain rights to
certain significant geographic territories in order to maximise the value to
Xenova of each product through further out-licensing at a later stage.

Operating Review

Drug Candidates - Cancer

Tariquidar (XR9576) - 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.  There is a substantial market opportunity
for a drug that overcomes MDR, since it is estimated that, depending on the type
of cancer, between 30% and 80% of solid tumours will develop resistance to
anti-cancer drugs.

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.

In June 2002, tariquidar entered two pivotal Phase III clinical trials, in which
it is being used as an adjunctive treatment in combination with first-line
chemotherapy for non-small cell lung cancer (NSCLC) patients.  The double-blind,
randomised, placebo-controlled trials are being carried out on patients with
stage IIIb/IV NSCLC at centres located throughout North America and Europe.
Tariquidar was granted fast track status by the US Food and Drug Administration
(FDA) in October 2002.  On successful completion of the Phase III programme, it
is anticipated that QLT Inc. 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.

Xenova retains substantially all rights to commercialise tariquidar in Europe
and the Rest of the World, and we intend to establish further collaborations in
order to maximise the value of this potentially first-in-class drug.

On 21st February 2003, QLT Inc. announced that enrolment of additional patients
in the ongoing Phase III studies of tariquidar in non-small cell lung cancer
patients was being suspended for approximately three months pending the
completion of the planned interim safety and efficacy analysis by an Independent
Data and Safety Monitoring Committee (DSMC).

The DSMC recommended to QLT Inc. that accrual to the trials be temporarily
halted until all patients currently enrolled have been followed for a minimum of
three months and that the patients should continue to be treated and followed
according to the protocol. The committee also stated that all data should remain
blinded and that the intention of this halt in accrual is to permit, for those
patients already entered, acquisition and review of additional data on safety
and efficacy. The DSMC concluded that the recommendations above 'provided the
best opportunity for these trials to remain intact and to serve, in their
entirety as pivotal registration trials for regulatory purposes.'

The DSMC is an independent panel of experts who are not participating in the
studies. The primary responsibility of the DSMC is to oversee the studies and
safeguard the interests of current and future participants in these trials.  The
DSMC has not reviewed any efficacy data for the trials. Accrual in the two Phase
III studies had already reached the threshold number of patients required for
the three-month interim analysis.  The DSMC felt that a review of the patients
enrolled to date would be sufficient 'to permit an assessment of differences in
response rates between the two arms of the trial, and to provide information on
short to mid term differences in survival' and to make an initial assessment of
therapeutic benefit to potential risk.

The Phase IIb trial underway at MD Anderson in chemo refractory breast cancer is
unaffected.

XR11576 (MLN576) - XR11576, XR5944 and XR11612 are novel DNA targeting agents,
whose mode of action includes dual inhibition of topoisomerases I and II.
XR11576, XR5944 and XR11612 are the subject of a licence agreement with
Millennium Pharmaceuticals Inc, announced in December 2001. 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. The other compounds covered
by this agreement, XR5944 (MLN944) and XR11612 (MLN612), are currently in
preclinical development.  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 $20.0m (£12.4m).  Xenova retains
substantially all commercialisation rights for all products arising from the
collaboration outside the United States, Canada and Mexico.

DISC-GMCSF - DISC-GMCSF, an innovative immunotherapeutic vaccine, is designed as
a treatment for a broad range of solid tumours. 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 study.

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.
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 partial responses
being shown in over 40% of cases in these studies.

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 an immune response that is significantly greater
than that observed with either product alone.  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 during the course of 2003.

Drug Candidates - Other

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.  TA-NIC is intended as an aid to smoking cessation and has been
designed to generate anti-nicotine antibodies. 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.  It is expected that TA-NIC will enter further Phase I dose escalation
trials during the course of 2003.

TA-CD - TA-CD is a therapeutic vaccine which is under development for the
treatment of cocaine addiction.  Its 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.  A Phase II 'cocaine
administration' study, which has been designed to provide a preliminary
assessment of the efficacy of TA-CD, as determined by quantative behavioural and
other measurements, is expected to begin during the course of 2003.

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.

DISC-VET - DISC-VET is a programme to develop Xenova's DISC technology 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.
Xenova's DISC vaccine technology is applicable to multiple disease targets
including diseases which affect other animal species.

Preclinical

Cancer

OX40/OX40L - OX40 is a platform technology which is capable of producing
multiple drug candidates primarily targeting cancer and autoimmune disease.
OX40 and OX40L (OX40 Ligand) are a pair of interacting cell-surface proteins. A
development and licence agreement worth up to $63.0m (£43.2m) was entered into
in April 2002 with Genentech for 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 use in oncology and infectious
disease therapy.

PAI-Cancer - In collaboration with the Institute for Cancer Research, Xenova has
been 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 (£10.0m), with
additional royalties payable on commercialised products.

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

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).

PAI-CV - In conjunction with our partner Lilly, we have been carrying out a
research and development programme for the development of a new class of oral
anti-thrombotic 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 anti-thrombotic 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.   The aim is to construct
a live attenuated vaccine, which should give good protection against all group B
strains, and which can be developed as a paediatric vaccine for universal
vaccination.  We envisage a secondary market for adolescent vaccination, and
estimate the US and European markets for both paediatric and adolescents to be
valued at about $1b.  The programme entered preclinical development in late
2002.

HIF-1 Alpha - Hypoxia inducible factor (HIF) 1 alpha is a complex molecular
structure which plays a role in gene expression, promoting cell survival.
Xenova is developing small molecule inhibitors of HIF-1 alpha, which may have
anti-cancer and anti-angiogenic activity.

Phogen:

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 licensing agreement with
Genencor International Inc, worth up to £15.0m ($21.0m), 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 and a collaboration with PowderJect
Pharmaceuticals plc was announced in January 2003. Phogen intends to seek
additional partnering opportunities for its novel technologies.

Financial Summary

Operating Performance

In the year to 31 December 2002, the Group's revenues from licensing agreements,
strategic partnerships and manufacturing outsourcing were £12.2m ($19.7m) (2001:
£1.8m ($2.9m)).

In accordance with the Group's revenue recognition policy, of the £6.9m ($11.1m)
received from QLT Inc. in 2001 as part of the tariquidar licensing agreement,
£2.5m ($4.0m) was recognised in the year, with a further £3.9m ($6.2m) being
deferred to future periods. All of the £7.9m ($12.7m) received from Millennium
in 2001 has been recognised by the Group in the year to 31 December 2002,
matching the commitments under this agreement. Following the successful
completion of a further licensing deal in the year in respect of the OX40
programme with Genentech, £0.9m ($1.5m) of the upfront licence fee of £2.7m
($4.4m) has been recognised this year. Other revenue included £0.9m ($1.5m) in
respect of ongoing contract vaccine manufacturing.

Total research and development (R&D) expenditure of £17.7m ($28.4m) (2001:
£15.4m, $24.7m) includes substantial preclinical and clinical development of the
programme of novel DNA targeting agents, one of which (XR11576) entered Phase I
clinical trials in February 2002.  This programme was licensed to Millennium
Pharmaceuticals Inc in December 2001 and cost reimbursement under this agreement
commences in 2003.  Additionally, Phase I clinical development of the
anti-nicotine vaccine, TA-NIC, was completed during 2002 as was initial Phase II
clinical development of the P-gp inhibitor, tariquidar.  Tariquidar, which is
the subject of a North American licensing agreement with QLT Inc. also entered
Phase III clinical development during the course of 2002.

Total administrative expenses of £9.3m ($15.0m) (2001: £4.9m ($7.8m)) have
increased by £4.4m ($7.2m) from the prior year primarily due to the exceptional
reorganisation costs of £3.8m ($6.2m). Amortisation costs of £1.2m ($1.9m)
(2001: £0.9m ($1.5m)) relate to the amortisation of goodwill arising on the
acquisition of the Cantab business in 2001 of £11.7m ($18.8m).  The goodwill is
being amortised over the 10 year estimated useful life of the business.

Total net operating expenses for the second half of the year increased to £15.5m
($25.0m) from £11.0m ($17.7m) in the first half of the year principally as a
result of the increased research and development activity totalling £0.8m
($1.3m) and the additional exceptional reorganisation costs of £3.8m ($6.2m).

The reduced net interest income reflects the lower average cash and liquid
resources balance held throughout the year. Following the fall, since 31
December 2001, in the listed market price of the 88,668 Cubist Pharmaceuticals
Inc shares held by the Group, £1.7m ($2.8m) has been written off to the profit
and loss account.

Exceptional charge - Reorganisation

On 11 December 2002, the Group announced the completion of an operational
review. Following this review, approximately 40 staff have been made redundant
resulting in an exceptional reorganisation charge of £0.5m ($0.9m).

Additionally, excess property at the Cambridge facility is expected to be sublet
during the course of 2003. An impairment charge of £3.3m ($5.3m) has been
provided against leasehold improvements, plant and equipment at the Cambridge
facility for those assets no longer expected to be used in the business.

Rights issue

On 11 September 2002, the Group announced a fully underwritten 8 for 33 rights
issue to raise £9.8m ($15.8m) net of expenses. The rights issue of approximately
33.7 million New Ordinary Shares was made at a price of 32.5 pence per New
Ordinary Share. The total number of shares in issue following the rights issue
was approximately 172.8 million.

Cash, short-term deposits and investments

Cash, short-term deposits and investments at 31 December 2002 total £19.2m
($30.9m) (2001: £24.0m ($38.6m)). The Group had cash of £2.6m ($4.2m) and liquid
resources of £16.6m ($26.7m) at 31 December 2002 (2001: cash £9.0m ($14.5m),
liquid resources £15.0m ($24.1m)).

Included in liquid resources is an investment in Cubist Pharmaceuticals Inc.,
which subsequent to the year end fell in value such that at 17 January 2003 the
share price was $6.70 valuing the investment held at £0.4m ($0.6m), representing
a decline from the valuation at 31 December 2002 of £0.1m ($0.1m).

Share capital

The number of shares in issue rose to 172.8 million as at 31 December 2002 from
139.0 million at 31 December 2001, due principally to the rights issue of 33.7
million shares.

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

Subsequent Events

On 15 January 2003, the Group announced that it had reached agreement with
ImmuLogic Pharmaceutical Corporation Liquidating Trust ('ImmuLogic') under which
Xenova has bought out the remaining ImmuLogic rights to future milestone and
royalty payments relating to two of Xenova's development stage vaccine
programmes, TA-CD and TA-NIC, for £0.6m ($1.0m).

In order to fund the buyout of ImmuLogic's interests, Xenova has raised £0.7m
($1.1m), before expenses, through the placing for cash of 1,766,235 new ordinary
shares of 10 pence each. The new shares, which represent approximately 1.02 per
cent of the Company's issued share capital prior to the placing, were placed by
Nomura International plc at a price of 38.5 pence per share.  Following this
transaction, the total number of shares in issue was 174.5 million.

Consolidated Profit and Loss Account (unaudited)


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

Turnover (including share of joint venture)                   20,442        12,701         5,787         1,877
   Less: share of joint venture revenue                        (735)         (457)         (306)          (95)

                                                               _____         _____         _____         _____
Turnover                                                      19,707        12,244         5,481         1,782

Operating expenses
Research and development costs                              (28,419)      (17,657)       (9,233)      (15,374)
                                                               _____         _____         _____         _____
Administrative expenses                                      (6,983)       (4,339)       (2,084)       (2,961)
Administrative expenses: exceptional              2          (6,150)       (3,821)       (3,821)       (1,035)
reorganisation costs
Administrative expenses: amortisation of                     (1,880)       (1,168)         (584)         (879)
goodwill
                                                               _____         _____         _____         _____
Total administrative expenses                               (15,013)       (9,328)       (6,489)       (4,875)

Other operating income                                           745           463           190           115

Total net operating expenses                                (42,687)      (26,522)      (15,532)      (20,134)
                                                               _____         _____         _____         _____
Group Operating loss                                        (22,980)      (14,278)      (10,051)      (18,352)


Share of operating profit/(loss) of joint                        272           169           136          (33)
venture
                                                               _____         _____         _____         _____


Total operating loss: Group and share of joint              (22,708)      (14,109)       (9,915)      (18,385)
venture

Interest (net)                                                 1,007           626           289           754
Amounts written (off)/ back to investments        3          (2,784)       (1,730)          (93)           463
                                                               _____         _____         _____         _____
Loss on ordinary activities before taxation                 (24,485)      (15,213)       (9,719)      (17,168)

Tax on loss on ordinary activities                4            3,236         2,011         1,140         1,797

                                                               _____         _____         _____         _____

Loss on ordinary activities after taxation                  (21,249)      (13,202)       (8,579)      (15,371)
attributable to members of Xenova Group plc


Loss per share (basic and diluted)                           (14.4c)        (9.0p)        (5.5p)       (12.6p)

                                                               _____         _____         _____         _____


                                                               _____
Shares used in computing net loss per share                  147,484       147,484       155,912       121,596
(thousands)
                                                               _____         _____         _____         _____




US Dollar amounts have been translated at the closing rate on 31 December 2002
(£1.00: $1.6095) solely for information.





Statement of Total Recognised Gains and Losses (unaudited)


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

                                                                _____         _____         _____         _____

Loss attributable to Xenova Group plc                        (21,505)      (13,361)       (8,700)      (15,341)
Profit/(loss) attributable to joint venture                       256           159           121          (30)

                                                                _____         _____         _____         _____

Total loss attributable to members of Xenova                 (21,249)      (13,202)       (8,579)      (15,371)
Group plc

Translation difference                                            (2)           (1)             -             -

                                                                _____         _____         _____         _____
Total recognised gains and losses in the period              (21,251)      (13,203)       (8,579)      (15,371)
attributable to members of Xenova Group plc
                                                                _____         _____         _____         _____



US Dollar amounts have been translated at the closing rate on 31 December 2002
(£1.00: $1.6095) solely for information.





Consolidated Balance Sheet (unaudited)


                                                           Unaudited     Unaudited     Unaudited       Audited
                                                               As at         As at         As at         As at
                                                         31 December   31 December       30 June   31 December
                                                                2002          2002          2002          2001
                                              Notes             $000          £000          £000          £000

                                                               _____         _____         _____         _____

Fixed Assets
   Intangible assets                                          15,500         9,630        10,214        10,798
   Tangible assets                              2              8,839         5,492         9,053         9,586

   Investment in joint venture:
   Share of gross assets                                         312           194           418           438
   Share of gross liabilities                                  (108)          (67)         (440)         (500)
   Goodwill arising on acquisition                                 -             -            28            30

                                                               _____         _____         _____         _____
                                                                 204           127             6          (32)

                                                               _____         _____         _____         _____

                                                              24,543        15,249        19,273        20,352
Current Assets

   Debtors                                                     5,092         3,164         4,506         4,135
   Short-term deposits and investments          8             26,694        16,585        12,650        15,027
   Cash at bank and in hand                     8              4,236         2,632         2,419         8,973

                                                               _____         _____         _____         _____
                                                              36,022        22,381        19,575        28,135

Creditors: amounts falling due within one       7           (17,878)      (11,108)      (13,386)      (18,420)
year
                                                               _____         _____         _____         _____

Net current assets                                            18,144        11,273         6,189         9,715



Total assets less current liabilities                         42,687        26,522        25,462        30,067


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

Provisions for liabilities and charges                          (19)          (12)          (13)          (10)

                                                               _____         _____         _____         _____


Total net assets                                              42,668        26,510        25,237        29,836

                                                               _____         _____         _____         _____


Capital and reserves


Called up share capital                                       27,807        17,277        13,906        13,904
Share premium account                                        129,304        80,338        73,872        73,870
Merger reserve                                                43,807        27,218        27,218        27,218
Other reserves                                                28,813        17,902        17,902        17,902
Profit and loss account                                    (187,063)     (116,225)     (107,661)     (103,058)

                                                               _____         _____         _____         _____

Shareholders' funds - equity interests          5             42,668        26,510        25,237        29,836

                                                               _____         _____         _____         _____




US Dollar amounts have been translated at the closing rate on 31 December 2002
(£1.00: $1.6095) solely for information.





Consolidated Cash Flow Statement (unaudited)


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

                                                               _____         _____         _____         _____

Net cash outflow from operating activities      6           (24,369)      (15,141)       (7,738)       (3,836)


Returns on investments and servicing of
finance
Interest received                                                996           619           280         1,023
Interest element of finance lease rental                         (6)           (4)           (2)          (15)
payments
                                                               _____         _____         _____         _____

Net cash inflow from returns on investments                      990           615           278         1,008
and servicing of finance

Taxation                                        4              3,689         2,292         2,292         1,870

Capital expenditure and financial
Investment
Purchase of tangible fixed assets                            (1,045)         (649)         (419)       (2,797)

                                                               _____         _____         _____         _____

Net cash outflow from capital expenditure                    (1,045)         (649)         (419)       (2,797)
and financial investment

Acquisitions and disposals
Purchase of subsidiary undertakings                                -             -             -         (768)
Cash at bank and in hand acquired with                             -             -             -        16,822
subsidiary
                                                               _____         _____         _____         _____
Net cash inflow from acquisitions                                  -             -             -        16,054


Management of Liquid Resources
Increase in short-term deposits                 8            (5,292)       (3,288)       (4,028)       (2,644)

                                                               _____         _____         _____         _____
Net cash (outflow)/inflow before financing                  (26,027)      (16,171)       (9,615)         9,655

Financing
Issue of ordinary share capital                               17,637        10,958        10,954             9
Expenses on issue of shares                                  (1,798)       (1,117)       (1,117)         (919)
Capital element of finance lease rental                         (18)          (11)           (9)          (87)
payments
                                                               _____         _____         _____         _____
Net cash inflow/(outflow) from financing                      15,821         9,830         9,828         (997)

                                                               _____         _____         _____         _____

(Decrease)/increase in cash during the                      (10,206)       (6,341)           213         8,658
period
                                                               _____         _____         _____         _____




US Dollar amounts have been translated at the closing rate on 31 December 2002
(£1.00: $1.6095) solely for information.





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




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

                                                                _____         _____         _____         _____


(Decrease)/increase in cash during the period                (10,206)       (6,341)           213         8,658

Capital element of finance lease payments                          18            11             9            87
Cash outflow from increase in liquid resources                  5,292         3,288         4,028         2,644

                                                                _____         _____         _____         _____
Change in net funds resulting from cash flows                 (4,896)       (3,042)         4,250        11,389

Finance leases acquired with subsidiary operations                  -             -             -         (101)
Movement in value of liquid investments                       (2,784)       (1,730)          (93)           463
Translation difference                                              -             -             -             2

                                                                _____         _____         _____         _____
Change in net funds                                           (7,680)       (4,772)         4,157        11,753

Net funds at 1 January / 1 July                                38,605        23,986        15,057        12,233

                                                                _____         _____         _____         _____

Net funds at 31 December                                       30,925        19,214        19,214        23,986

                                                                _____         _____         _____         _____



US Dollar amounts have been translated at the closing rate on 31 December 2002
(£1.00: $1.6095) solely for information.





Notes to the Preliminary Announcement

1          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
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
Companies.

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          Reorganisation

On 11 December 2002, the Group announced the completion of an operational
review. Following this review, approximately 40 staff have been made redundant
resulting in an exceptional reorganisation charge of £0.5m ($0.9m).

Additionally, excess property at the Cambridge facility is expected to be sublet
during the course of 2003. An impairment charge of £3.3m ($5.3m) has been
provided against leasehold improvements, plant and equipment at the Cambridge
facility for those assets no longer expected to be used in the business.

3          Amounts written off investments

The £1.7m written off investments reflects the write down on the Group's holding
of 88,668 Cubist Pharmaceuticals Inc. shares following a fall in the listed
market price since 31 December 2001 (Note 10).

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 an R&D tax credit of £2.0m in respect of
the year that will be received in 2003 (2001: £1.8m).


5                    Reconciliation of movements in shareholders' funds


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

                                                                      _____            _____            _____

At start of period                                                   29,836           25,237           11,876


Shares issued in the period                                          10,958           10,954                9

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

Expenses on issue of shares                                         (1,117)          (1,117)            (919)

Shares to be issued under long term incentive                            36               15               44
scheme

Retained loss for the period                                       (13,202)          (8,579)         (15,371)

Exchange movement                                                       (1)                -                -

                                                                      _____            _____            _____

At end of period                                                     26,510           26,510           29,836

                                                                      _____            _____            _____



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


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

                                                                       _____            _____            _____

Group operating loss                                                (14,278)         (10,051)         (18,352)


Depreciation                                                           1,478              715            1,201

Amortisation                                                           1,168              584              879

Exceptional impairment of fixed assets                2                3,265            3,265                -

Provision for liabilities and charges                                      2              (1)             (10)

Loss on disposal of tangible fixed assets                                  -                -               16

Decrease in debtors                                                      711              211              734

Increase/(decrease) in creditors (excluding                              975            2,451          (2,573)
deferred income)

(Decrease)/Increase in deferred income                               (8,498)          (4,927)           14,225

Charge for long term incentive scheme                                     36               15               44

                                                                       _____            _____            _____

Net cash outflow from operating activities                          (15,141)          (7,738)          (3,836)

                                                                       _____            _____            _____




Cash outflow in respect of exceptional reorganisation costs was £nil (2001:
£1,035,000).


7          Deferred income

Included within creditors is £5.7m (2001: £14.2m) in respect of deferred
revenue.


8          Cash and short-term deposits and investments

Cash and short-term deposits have been reclassified for the year ended 31
December 2001.  Short-term deposits of £16.1m ($25.9m) (2001: £12.8m ($20.6m))
are now included in short-term deposits and investments in the balance sheet,
and as liquid resources in the cash flow statement.  The remaining balance in
short-term deposits and investments relates to the investment in Cubist
Pharmaceuticals Inc. of £0.5m ($0.7m) (2001: £2.2m ($3.5m).

9          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.

10         Subsequent events

Included in liquid resources is an investment in Cubist Pharmaceuticals Inc.,
which subsequent to the year end fell in value such that at 17 January 2003 the
share price was $6.70 valuing the investment held at £0.4m ($0.6m), representing
a decline from the valuation at 31 December 2002 of £0.1m ($0.1m).

On 15 January 2003, the Group announced that it had reached agreement with
ImmuLogic Pharmaceutical Corporation Liquidating Trust ('ImmuLogic') under which
Xenova has bought out the remaining ImmuLogic rights to future milestone and
royalty payments relating to two of Xenova's development stage vaccine
programmes, TA-CD and TA-NIC, for £0.6m (US$1.0m).

In order to fund the buyout of ImmuLogic's interests, Xenova has raised £0.7m
before expenses through the placing for cash of 1,766,235 new ordinary shares of
10 pence each. The new shares, which represent approximately 1.02 per cent of
the Company's issued share capital prior to the placing, were placed by Nomura
International plc at a price of 38.5 pence per share.

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