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Xenova Group plc (XEN)

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Tuesday 24 February, 2004

Xenova Group plc

Xenova Group plc - Final Results

Slough, UK, 24 February, 2004 - Xenova Group plc (NASDAQ: XNVA;
London Stock Exchange: XEN) today announced its results for the year
ended 31 December 2003.


Highlights

  * Acquisition of KS Biomedix Holdings plc ("KS Biomedix") including
    Phase III product candidate TransMIDTM

  * XR5944:  start of Phase I clinical trial of novel DNA targeting
    agent

  * TA-CD: patient dosing begins in Phase IIa cocaine administration
    trial and Phase IIb efficacy trial.  Results of second Phase IIa
    study reported

  * Tariquidar (XR9576): review of Phase III data concluded.  US
    National Cancer Institute (NCI) conducting new exploratory
    clinical trials

  * Initiation of further Phase I clinical trial for TA-NIC

  * Vaccines of addiction (TA-NIC & TA-CD): buyout of residual
    interests from ImmuLogic

  * Signing of a two-year Manufacturing, Development and Clinical
    Supply Agreement with Pharmexa A/S

  * Clinical Trials Manufacturing Facility received EU GMP
    accreditation from the Medicines and Healthcare products
    Regulatory Agency

  * Sale of Farnham research facility to Bioventix raising £0.8m
    ($1.4m)


Financial Highlights

  * Fully underwritten UK placing, US private placement and open
    offer that raised approximately £21.1m ($37.8m) gross, £19.4m
    ($34.7m) net of expenses

  * Cash, short-term deposits and investments £27.5m ($49.2m) at 31
    December 2003 (31 December 2002: £19.2m ($34.4m))

  * Implementation of both a headcount reduction and programme
    prioritisation review expected to realise annualised cost savings
    of approximately £10m ($17.9m)

  * Revenue recognised in the full year of £7.7m ($13.8m) (2002:
    £12.2m ($21.8m))
  * Loss on ordinary activities after taxation £15.0m ($26.9m) (2002:
    £13.2m ($23.6m))

  * Loss per share 7.1p (12.6c) (2002: 9.0p (16.1c))


David Oxlade, Chief Executive Officer, said: "We have completed the
integration of KS Biomedix and the resulting broader portfolio has
allowed us to prioritise and focus on the highest potential clinical
stage programmes.  The £21 million fundraising enables us to fund the
first Phase III trial for TransMIDTM and to advance the development
of the company's later stage programmes.  We have also announced
today that the NCI has commenced new exploratory Phase II clinical
trials with tariquidar."

Xenova Group plc's product pipeline focuses principally on the
therapeutic areas of cancer, vaccines for addiction 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 and
biopharmaceutical companies including Celltech, Genentech, Lilly,
Millennium Pharmaceuticals, Nycomed, Pfizer and QLT.

A meeting will take place on Tuesday 24 February at 09:30 GMT at the
offices of Financial Dynamics, Holborn Gate, 26 Southampton
Buildings, London, WC2A 1PB.  In addition, Xenova will host a
conference call at 14:30 GMT (09:30 EST) to discuss the preliminary
results.  For further information on this and the meeting, please
call Mo Noonan at Financial Dynamics on +44 (0)20 7269 7116.

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

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 our ability to integrate acquired businesses and realize cost
savings from integration, and the discovery, development and
commercialization of products. Various risks may cause Xenova's
actual results to differ materially from those expressed or implied
by the forward looking statements, including: unexpected costs and
delays in integrating acquired businesses into our group, 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
commercialize 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
commercialization 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

This last financial year has seen a number of key events take place
to shape the future of Xenova.  Despite the setback relating to
tariquidar in the early part of the year, Xenova has continued to
focus its resources on advancing the development of both small
molecules and biologics programmes.

On September 12 Xenova announced that the acquisition of KS Biomedix
had become unconditional (save for admission) and the integration of
the business followed shortly afterwards.  As announced at the time
of the acquisition, the estimated cost saving of £10m per annum
across both businesses is expected to be achieved, based on
reductions in headcount, facilities and R&D costs.

Xenova raised additional funds in 2003 through a UK placing, US
private placement and open offer, raising approximately £21.1m gross
($37.8m), £19.4m ($34.7m) net of expenses.  As a result, Xenova had
£27.5m ($49.2m) in cash, short term deposits and investments at the
year end.

As part of the disposal of non-core assets associated with the
acquisition of KS Biomedix, Xenova has completed the sale of certain
premises at its Farnham research facility together with related
assets to Bioventix Limited for £0.8m.  The sale included certain
rights to intellectual property relating to super high-affinity
antibodies that are not being developed by Xenova, and provides for
the continuation of work by Bioventix on novel three-part proteins
(trimers) being developed under an option agreement with Isis
Innovations Ltd.  Xenova has retained an option to develop certain
therapeutic candidates arising from this work.

Xenova employed 112 people at 31 December 2003.


Operating Review

Following the acquisition of KS Biomedix and the integration of the
two businesses, Xenova undertook a review of the product pipeline
with the aim of prioritising key candidates/programmes for further
development in the core business areas of cancer, addiction and
immunotherapy.  Described below are the prioritised programmes that
currently make up the active pipeline of Xenova.

TransMIDTM treatment for high-grade glioma
Following the acquisition of KS Biomedix, TransMIDTM is now the most
advanced product in Xenova's pipeline, having already commenced Phase
III development.  Plans to progress TransMIDTM into Phase III trials
in adults with recurrent and/or progressive non resectable
glioblastoma multiforme had already been submitted by KS Biomedix and
have been agreed with the FDA.  However, following its acquisition of
KS Biomedix, Xenova is seeking FDA approval to change the current
Phase III programme design from one large Phase III trial to two
smaller Phase III trials.  Xenova is ready to start these trials as
soon as FDA approval is obtained.

TransMIDTM is a treatment for high-grade glioma (brain cancer), a
disease for which improved treatment would be welcomed, as there
remains a poor prognosis for patients.  TransMIDTM is a modified
diphtheria toxin conjugated to transferrin.  When TransMIDTM binds to
transferrin receptors on the surface of the cell, the diphtheria
toxin gains entry to the cell.  Once inside the cell, the diphtheria
toxin interferes with protein synthesis and ultimately kills the
cell.  Transferrin receptors are particularly prevalent on rapidly
dividing cells, and the high level of transferrin receptor expression
on glioma cells makes transferrin an appropriate targeting mechanism
for the diseased cells.

TransMIDTM is pumped directly into the brain tumour using CED
(Convection Enhanced Delivery - licensed from the National Institute
of Health, US).  CED enhances the distribution of TransMIDTM through
the tumour mass and produces high local concentrations of drug.
Since TransMIDTM is directly infused into the tumour, it circumvents
the usual obstacles present in drug delivery to the brain caused by
the blood-brain barrier and also reduces systemic side effects.

As stated at the time of the November 26th 2003 Prospectus issued to
shareholders, Xenova has been in discussion with Amersham Health
A.S., Nycomed Danmark A/S and the National Institute of Health (NIH)
regarding the licensed rights pertaining to the development,
manufacture and commercialisation of TransMIDTM in various
territories.  Following these discussions, Xenova has now reached a
revised agreement with Amersham concerning the intellectual property
licensed by Amersham to Xenova.

Revised arrangements for the development and commercialisation of
TransMIDTM in the European territories covered by the License
Agreement between Nycomed and Xenova have been agreed in principle,
and an agreement between Nycomed and Xenova is expected to be signed
shortly.  Discussions with the NIH regarding amendments to the terms
under which Xenova has licensed certain other intellectual property
rights concerning TransMIDTM are at an advanced stage.

Under the terms of these new arrangements, Xenova's future financial
obligations on successful commercialisation of TransMIDTM in North
America have been significantly reduced.

Tariquidar Multi-Drug Resistance (MDR) Programme
In June 2002, tariquidar entered two pivotal Phase III clinical
trials as an adjunctive treatment in combination with first-line
chemotherapy for non-small cell lung cancer (NSCLC) patients.  On 12
May 2003, QLT announced that the Phase III trials would be stopped
following a recommendation from the independent Data and Safety
Monitoring Committee (DSMC) which had just completed the un-blinded
interim review of the data for the two ongoing trials.  On 23 July
2003, QLT announced that enrolment in the Phase IIb trial for
patients with chemo-refractory breast cancer, which is being carried
out at the MD Anderson Centre, Texas, had been sufficiently completed
at 17 patients.

The review of the data arising from the Phase III NSCLC trials has
been completed.  This review has confirmed that the levels of
toxicities associated with the cytotoxic drugs administered to
patients in the trial were increased in those patients receiving
tariquidar compared with those receiving placebo.  Following this
review, we have announced today that the National Cancer Institute in
the USA (NCI) has commenced further exploratory Phase I/II and Phase
II studies with tariquidar in combination with various cytotoxic
drugs.  Discussions are also ongoing between Xenova and QLT
concerning the possibility of further Phase II studies being
undertaken.

Novel DNA Targeting Agents - XR11576 & XR5944
On 3 July 2003, Xenova announced the initiation of a Phase I clinical
trial of XR5944, the second of three novel DNA targeting agents that
are the subject of a licence agreement with Millennium
Pharmaceuticals Inc.  The first of these compounds, XR11576, entered
Phase I clinical trials in February 2002.  The third, XR11612, is in
pre-clinical development as a back-up.

The XR5944 Phase I clinical trial is being conducted at three centres
in the United Kingdom and will include approximately 40 patients with
advanced solid tumours.  In pre-clinical studies, XR5944 has
demonstrated a high level of anti-tumour activity against a number of
human tumour models, causing both partial and complete regression of
large established tumours.  Recent data published in the Proceedings
for the 2003 Annual Meeting of the American Association for Cancer
Research, suggest that XR5944 acts through a novel mechanism of
action distinct from other current cytotoxic agents by binding
tightly to DNA and inhibiting RNA synthesis.  Further exploration
into the mechanism of action of XR5944 is ongoing.

XR303
XR303 is the first radioimmunotherapy product utilising a super high
affinity chimaeric (human-sheep) monoclonal antibody to be evaluated
in man.  It was developed using Xenova's proprietary sheep monoclonal
antibody technology, and binds to CEA (Carcinoembryonic antigen),
which is widely expressed in solid tumours.  The antibody is used to
deliver a radionuclide, Iodine-131, to the tumour.  The intention is
to deliver a dose of radiation to the tumour that is sufficient to
kill tumour cells whilst causing minimal damage to normal tissues.

XR303 has completed a Phase I imaging study in patients with
metastatic colorectal cancer.  This study, conducted in 10 patients,
provided favourable results, with tumour images still clearly visible
after eight days as a result of the radiolabelled antibody remaining
bound to the tumour surface.  There were no drug-related severe
adverse events.

In view of these encouraging results, development of XR303 was also
initiated as a therapeutic product for the treatment of pancreatic
cancer, where the majority of tumours examined have been shown to
express CEA.  A Phase I/II dose escalation study in patients with
non-resectable pancreatic cancer was commenced in October 2002 and is
expected to complete in 2005.

In May 2003 both the European Commission and the FDA granted orphan
drug designation to XR303 for pancreatic cancer.

Vaccines of Addiction
On 15 January 2003, Xenova announced that it had reached an agreement
with ImmuLogic Pharmaceutical Corporation Liquidating Trust
("ImmuLogic") to buy out all ImmuLogic's remaining rights to future
milestone and royalty payments relating to two of Xenova's
therapeutic vaccines, TA-CD for the treatment of cocaine addiction
and TA-NIC for nicotine addiction.

TA-CD
The start of a Phase IIa cocaine administration trial was announced
on 14 April 2003.  The ten-patient open label trial is being
conducted in the United States and is designed to evaluate the effect
of TA-CD on behavioural changes associated with cocaine
administration under laboratory controlled conditions.

The results of a second Phase IIa dose escalation trial were reported
on 17 June 2003. This study, which started in April 2002, was
designed to evaluate the safety and immunogenicity of TA-CD using 4
or 5 dose vaccination schedules.  The trial involved the enrolment of
13 subjects, all of whom were cocaine abusers seeking help with their
addiction at the start of the trial.  Patients were treated with up
to five injections of the vaccine over a twelve week period using
doses up to 360 �g each.  Of the 13 enrolled, 12 subjects completed
the 12 month evaluation period to assess safety, immune response and
cocaine usage.

As for the previous study, the results showed the vaccine to be safe
and well tolerated with a dose-related immune response.  Of those 16
patients in the two Phase IIa studies who used cocaine at any time
following vaccination, 14 reported a reduction of the usual euphoric
effect normally associated with cocaine use, providing further
anecdotal evidence of the vaccine's proposed mode of action.

On 24 October 2003, Xenova announced the initiation of the first
randomised, placebo controlled Phase IIb clinical trial for TA-CD.
 The primary objective of this new study is to determine the efficacy
of TA-CD in addicts seeking treatment for cocaine abuse, and to
determine appropriate end-points for a Phase III study.

Up to 132 subjects, all of whom are methadone-dependent cocaine
addicts being treated for drug dependency, will be recruited into
this clinical study. Half the subjects will be treated with active
TA-CD and half will be given a placebo.  Subjects will be monitored
three times a week to assess cocaine usage, including testing for
cocaine metabolites in urine, for a period of 20 weeks.   Patients
will also undergo medical examinations and blood tests for
anti-cocaine antibodies to assess the immunogenicity of the dosing
schedule.  The trial is expected to last up to two years (depending
upon the rate of recruitment) and will allow an objective assessment
of the efficacy of the TA-CD vaccine against placebo.

The TA-CD investigations are being supported by the National
Institute on Drug Abuse (NIDA) which recognises cocaine abuse to be a
major problem in the U.S.  NIDA has also supported earlier clinical
work as part of this programme.

TA-NIC
Xenova announced the initiation of a second Phase I clinical trial
for TA-NIC on 8 October 2003.  This second Phase I study builds upon
the findings of a previous Phase I trial which were announced in June
2002.  The results of the first study, which was the first evaluation
of an anti-nicotine vaccine in man, showed that the vaccine generated
a specific anti-nicotine response and that it was safe and well
tolerated both systemically and locally.

In the new dose ranging Phase I study approximately 60 smokers have
been recruited into a double-blind, randomised, placebo-controlled
trial which is being run at a European clinical centre experienced in
testing smoking related therapies.  The objective of the trial is to
further establish safety and tolerability, and to determine the
optimum vaccination dose and schedule required to induce the optimal
anti-nicotine antibody response.  Three different doses of the
vaccine are being evaluated.  The impact of vaccination on
nicotine-induced changes in heart rate and skin temperature will also
be monitored.

OX-40
On 20 October 2003 novel findings relating to a research
collaboration, involving Xenova's OX40 technology and its potential
for the treatment of influenza, were published by Imperial College,
London.

Pre-clinical studies conducted by Imperial College demonstrated that
down-regulation of the immune response, through blocking the
OX40-OX40 ligand interaction, could alleviate the symptoms of
influenza, without affecting the ability to clear the virus.  This
new research suggests that the down-regulation of OX40 signalling may
play an important role in the fight against the symptoms of influenza
and perhaps other diseases similarly characterised by excessive
immune response.

OX40 is a platform technology capable of producing multiple drug
candidates targeting cancer, autoimmune and other diseases where the
immune system is involved.  Xenova has retained rights to the OX40
technology relating to the up-regulation of the immune system which
may be used for the development of novel treatments for cancer and
infectious disease.  Xenova's rights to down-regulate the immune
system have been the subject of development and licence agreements
entered into with Celltech and Genentech.

Clinical Trials Manufacturing

Xenova's Clinical Trial Manufacturing Facility (CTMF) has been
manufacturing the Company's own internal clinical trial supplies
since 1995 and this remains the primary purpose of the facility.
Xenova recently announced that it is offering surplus capacity in the
facility and its supporting development organisation for contract
manufacturing.

On 5 June 2003, Xenova announced the signing of a two-year
Manufacturing, Development and Clinical Supply Agreement with
Pharmexa A/S (CSE: PHARMX) for the contract manufacture of clinical
supplies of a vaccine targeting the human HER-2 protein. Manufacture
is taking place at Xenova's CTMF in Cambridge.

On 8 September 2003 Xenova received notification that its CTMF had
been successfully inspected by the Medicines and Healthcare products
Regulatory Agency (MHRA).  The inspection took place under the
Voluntary Scheme for Inspection of Manufacturers.  Xenova has
received a letter from the MHRA confirming that its operations are in
compliance with EU Good Manufacturing Practices (GMP).  Accreditation
by the MHRA will enable Xenova to continue to manufacture in full
compliance with the forthcoming Clinical Trials Directive into 2004.

As well as its own CTMF facility in Cambridge, Xenova acquired
additional manufacturing facilities in Edmonton, Canada though the
acquisition of KS Avicenna, a wholly-owned subsidiary of KS
Biomedix.  KS Avicenna manufactures TransMIDTM for clinical trials.

Changes to the Xenova Group plc Board

On 13 August 2003, Research Director and Chief Scientific Officer
Michael Moore, and Medical Director John St Clair Roberts resigned
from the Company and the Xenova Board.  Further changes to the Xenova
Board were announced, as planned, following the acquisition of KS
Biomedix:  on 12 October 2003 John Rennocks and Dr Michael Young,
non-executive directors of KS Biomedix, joined the Board of Xenova as
non-executive directors. Howard Wachtler and Gerard Fairtlough
resigned their positions as non-executive directors of Xenova on 17
October 2003.


Financial Summary

Operating Performance

In the year to 31 December 2003, the Group's revenues from licensing
agreements, strategic partnerships and manufacturing outsourcing were
£7.7m ($13.8m) (2002: £12.2m ($21.8m)).

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, £2.3m ($4.1m) was recognised in the
year, with the remaining £1.5m ($2.7m) being deferred to future
periods.  Following receipt of the balance of the first milestone of
£0.7m ($1.2m) in the year in respect of the OX40 programme with
Genentech, £1.4m ($2.5m) of the upfront licence fee and milestone of
£3.5m ($6.2m) has been recognised in the year, with the remaining
£1.2m ($2.2m) being deferred to future periods.  Contract development
revenue of £3.2m ($5.7m) (2002: £nil) was also recognised in the year
in respect of the ongoing Millennium collaboration on the novel DNA
targeting agents.  Other revenue included £0.8m ($1.4m) in respect of
the Pharmexa contracts.

Total net operating expenses of £24.0m ($43.0m) were reduced from
£26.5m ($47.5m) in 2002.  Net operating expenses for continuing
operations in the year were £20.3m ($36.3m) (2002 £26.5m ($47.5)).
Excluding exceptional reorganisation costs of £2.0m ($3.6m) net
operating expenses of £18.3m ($32.7m) declined 20% compared to the
prior year (£22.7m ($40.6m)), as a result of the programme
prioritisation and headcount reductions made in the year.

Overall research and development (R&D) expenditure of £15.1m ($27.0m)
fell from £17.7m ($31.6m) in 2002.  Continuing operations R&D
expenditure of £13.7m ($24.5m) is lower than for the previous year
(2002: £17.7m, $31.6m) as a result of the reorganisations announced
in December 2002 and May 2003.  R&D expenditure includes £3.2m
($5.7m) for pre-clinical and clinical development of the programme of
novel DNA targeting agents.  These costs have been reimbursed by
Millennium under the terms of the licence agreement.  Other R&D
expenditure was incurred in respect of the Vaccines of Addiction
programme including the completion of a Phase II dose escalation
study with TA-CD, the start of a Phase IIa cocaine administration
study with TA-CD, and completion of a Phase I study in TA-NIC.  R&D
expenditure in the acquired KS Biomedix businesses amounted to £1.4m
($2.5m) in the period from 12 September 2003. The majority of this
expenditure related to TransMIDTM Phase III development.

Administrative expenses of £9.4m ($16.8m) comprised £7.1m ($12.6m) in
respect of continuing operations and £2.3m ($4.2m) from the acquired
KS Biomedix business.  Administrative expenses for continuing
operations of £7.1m ($12.6m) have been reduced by 24% or £2.3m
($4.1m) from the prior year (2002: £9.3m ($16.7m)).  These include
£2.0m ($3.6m) exceptional reorganisation costs arising from the cost
saving reorganisation announced in May 2003 (2002: £3.8m ($6.8m)) and
£1.2m ($2.1m) of goodwill amortisation (2002: £1.2m ($2.1m)) relating
to the goodwill arising on the acquisition of Cantab Pharmaceuticals
Plc in 2001.  Administrative expenses excluding both exceptional
reorganisation costs and goodwill amortisation were £3.9m ($6.9),
reduced by 11% from £4.3m ($7.8m) in 2002. Other operating income
received from the subletting of excess facility space further reduced
net expenses in the year by £0.4m ($0.8m) (2002: £0.5m ($0.8m)).

Following the announcement of the cessation of Phase III trials of
tariquidar, the Group undertook a cost saving reorganisation, which
included headcount reductions and project prioritisation. Included in
continuing operations administrative expenses under exceptional
reorganisation costs is £2.0m net ($3.6m) in respect of severance
payments, a vacant leasehold provision and an impairment provision.
Total exceptional reorganisation costs for the year were £3.2m
($5.7m) (2002: £3.8m ($6.8m)) and include £1.1m ($2.0m) in respect of
the KS Biomedix business.  As a result of the above reorganisation,
surplus facilities have become available at the main Cambridge site.
 The Group is currently in confidential negotiations to sublet or
surrender the remaining 20 year lease on this property.  The charge
made reflects a vacant leasehold provision which has been calculated
based upon management's expectations of future subletting
opportunities and estimated surrender payments.

Total net operating expenses for continuing operations for the second
half of the year fell to £7.7m ($13.9m) from £12.6m ($22.5m) in the
first half of the year principally as a result of the reduced
research activity and lower exceptional reorganisation costs.

The reduced investment income reflects the lower average cash and
liquid resources balance held throughout the year.  R&D tax credits
recoverable for the year have been reduced in line with the headcount
reduction achieved during the year.

Acquisition of KS Biomedix
On 12 September Xenova Group plc announced that the offer to acquire
KS Biomedix had become unconditional (save for admission).  Under the
terms of the offer made to KS Biomedix shareholders, 1.0714 shares in
Xenova Group plc were issued in exchange for one share held in KS
Biomedix.  An additional contingent deferred consideration of 10p per
KS Biomedix share held will be paid in Xenova Group plc shares upon
the commercial sale of TransMIDTM in either the US or European
markets before 14 August 2011.  Based upon a Xenova Group plc closing
share price of 15.25 pence on 11 September this valued KS Biomedix at
£17.1m ($30.5m) including the contingent deferred consideration
payable in respect of TransMIDTM of £6.5m ($11.6m).
In calculating the provisional fair values of the assets and
liabilities acquired, two adjustments have been made to the book
values stated at 12 September in order to reflect Xenova's accounting
policies.  The book value of tangible fixed assets acquired has been
reduced by £0.1m ($0.1m) in adopting Xenova's depreciation policy,
and adopting Xenova's revenue recognition policy to the licence fees
received by KS Biomedix from Nycomed and Sosei in 2002 has resulted
in £0.2m ($0.4m) of revenue previously recognised by KS Biomedix to
be deferred as at 12 September 2003.   The fair value of the assets
and liabilities acquired is £6.9m ($12.3m).  The consideration
totalling £17.7m ($31.6m) (including £0.6m ($1.1 m) of acquisition
expenses) generated goodwill upon acquisition of £10.8m ($19.3m).
The goodwill arising has been capitalised and is being amortised over
the 10 year estimated useful life of the acquired business.  In
addition to the £0.6m ($1.1m) of acquisition expenses, share issue
costs of £0.5m ($1.0m) were incurred and offset against the share
premium account.

With the acquisition of 100% of KS Biomedix, Xenova has acquired KS
Biomedix' wholly-owned subsidiary KS Avicenna Inc, as well as its 50%
share in Discerna Ltd, a joint venture with Babraham Bioscience
Technologies Limited.

As part of the restructuring activities completed as part of the
acquisition, 18 positions have been lost across both the head office
and research and development functions.  Included within
administration expenses is an exceptional charge of £1.1m ($2.0m) in
respect of severance payments and a vacant leasehold provision in
respect of the acquired business.  The net operating loss included in
the financial statements in respect of KS Biomedix for the period
from acquisition to 31 December 2003 was £3.7m ($6.6m).

On 6 January 2004, Xenova announced the sale of certain premises at
KS Biomedix's Farnham research facility together with related assets
to Bioventix Limited for £0.8m ($1.4m).  This disposal resulted in a
disposal of part of the goodwill arising on the acquisition of KS
Biomedix, amounting to £0.2m ($0.4m).  The disposal also resulted in
a further seven former KS Biomedix employees transferring from Xenova
to Bioventix.

UK Placing, US Private Placement and Open Offer

On 26 November 2003, Xenova Group plc announced a UK placing (fully
underwritten), US private placement and open offer of 187,601,690
Offer Shares and 56,280,507 Warrants to raise approximately £21.1m
($37.8m) gross or £19.4m ($34.7m) net of expenses.  The total number
of ordinary shares in issue following the UK placing, US private
placement and open offer was approximately 431.5 million.

Cash, short-term deposits and investments

Cash, short-term deposits and investments at 31 December 2003
totalled £27.5m ($49.2m) (2002: £19.2m ($34.4m)).  The Group had cash
of £12.1m ($21.6m) and liquid resources of £15.4m ($27.6m) at 31
December 2003 (2002: cash £2.6m ($4.7m), liquid resources £16.6m
($29.7m)).

Included in liquid resources is an investment in Cubist
Pharmaceuticals Inc of £0.4m ($0.8m), (2002: £0.4m ($0.8m)).

Share capital reorganisation

Prior to the UK placing, US private placement and open offer Xenova
Group plc received approval from shareholders at an EGM on 22
December 2003 to reorganise its share capital such that each issued
existing 10p ordinary share was sub-divided into ten new ordinary
shares of 1p each, of which nine such new ordinary shares were
converted and redesignated as nine deferred shares of 1p each, and
each unissued, but authorised, 10p ordinary share was subdivided into
ten new ordinary shares of 1p each. Shareholders also approved a
capital reduction which will result in the deferred shares being
cancelled if approval is obtained from the High Court. Xenova Group
plc is in the process of making an application to the court and
anticipates that the capital reduction will become effective in the
first half of 2004.  Following the capital reduction the number of
ordinary shares in issue will remain the same.

The number of shares in issue rose to approximately 431.5 million as
at 31 December 2003 from 172.8 million at 31 December 2002, due
principally to the 69.4 million shares issued to acquire KS Biomedix
and the 187.6 million shares issued as a result of the UK placing, US
private placement and open offer.

The Directors do not propose a dividend for 2003 (2002: nil).


Consolidated Profit and Loss Account (unaudited)


+-------------------------------------------------------------------+
|                     |     |Unaudited|Unaudited| Unaudited| Audited|
|---------------------+-----+---------+---------+----------+--------|
|                     |     |     Year|     Year|Six months|    Year|
|---------------------+-----+---------+---------+----------+--------|
|                     |     |    Ended|    Ended|     Ended|   Ended|
|---------------------+-----+---------+---------+----------+--------|
|                     |     |       31|       31|   30 June|      31|
|                     |     | December| December|          |December|
|---------------------+-----+---------+---------+----------+--------|
|                     |     |     2003|     2003|      2003|    2002|
|---------------------+-----+---------+---------+----------+--------|
|                     |Notes|     $000|     £000|      £000|    £000|
|---------------------+-----+---------+---------+----------+--------|
|Turnover (including  |     |         |         |          |        |
|share of joint       |     |         |         |          |        |
|ventures)            |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|     Continuing      |     |   13,724|    7,667|     4,158|  12,701|
|operations           |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|     Acquisitions    |     |       77|       43|         -|       -|
|---------------------+-----+---------+---------+----------+--------|
|     Less: share of  |     |     (20)|     (11)|       (5)|   (457)|
|joint ventures       |     |         |         |          |        |
|turnover             |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Group turnover       |     |   13,781|    7,699|     4,153|  12,244|
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Operating expenses   |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Research and         |     |         |         |          |        |
|development costs    |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|     Continuing      |     | (24,512)| (13,694)|   (8,104)|(17,657)|
|operations           |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|     Acquisitions    |     |  (2,467)|  (1,378)|         -|       -|
|---------------------+-----+---------+---------+----------+--------|
|                     |     | (26,979)| (15,072)|   (8,104)|(17,657)|
|---------------------+-----+---------+---------+----------+--------|
|Administrative       |     |         |         |          |        |
|expenses             |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|    Continuing       |     |  (6,898)|  (3,854)|   (2,034)| (4,339)|
|operations           |     |         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|    Continuing operations: |  (3,639)|  (2,033)|   (2,036)| (3,821)|
|exceptional reorganisation |         |         |          |        |
|costs    2                 |         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|    Continuing operations: |  (2,091)|  (1,168)|     (584)| (1,168)|
|amortisation of goodwill   |         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|                     |     | (12,628)|  (7,055)|   (4,654)| (9,328)|
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|    Acquisitions     |     |  (1,600)|    (894)|         -|       -|
|---------------------+-----+---------+---------+----------+--------|
|    Acquisitions:    |    2|  (2,019)|  (1,128)|         -|       -|
|exceptional          |     |         |         |          |        |
|reorganisation costs |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|    Acquisitions:    |     |    (569)|    (318)|         -|       -|
|amortisation of      |     |         |         |          |        |
|goodwill             |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |  (4,188)|  (2,340)|         -|       -|
|---------------------+-----+---------+---------+----------+--------|
|Total administrative |     | (16,816)|  (9,395)|   (4,654)| (9,328)|
|expenses             |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Other operating      |     |         |         |          |        |
|income               |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|   Continuing        |     |      803|      449|       198|     463|
|operations           |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Total net operating  |     | (42,992)| (24,018)|  (12,560)|(26,522)|
|expenses             |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Group operating loss |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|     Continuing      |     | (22,629)| (12,642)|   (8,407)|(14,278)|
|operations           |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|     Acquisitions    |     |  (6,582)|  (3,677)|         -|       -|
|---------------------+-----+---------+---------+----------+--------|
|                     |     | (29,211)| (16,319)|   (8,407)|(14,278)|
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Share of operating   |     |         |         |          |        |
|(loss)/profit of     |     |         |         |          |        |
|joint venture        |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|    Continuing       |     |    (245)|    (137)|     (114)|     169|
|operations           |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|    Acquisitions     |     |    (136)|     (76)|         -|       -|
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|Total operating loss: Group| (29,592)| (16,532)|   (8,521)|(14,109)|
|and share of joint ventures|         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Investment income    |     |      689|      385|       265|     626|
|---------------------+-----+---------+---------+----------+--------|
|Amounts written back |    3|      338|      189|       126| (1,730)|
|to/(off) investments |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Loss on ordinary     |     | (28,565)| (15,958)|   (8,130)|(15,213)|
|activities before    |     |         |         |          |        |
|taxation             |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Tax on loss on       |    4|    1,708|      954|       307|   2,011|
|ordinary activities  |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|Loss on ordinary     |     | (26,857)| (15,004)|   (7,823)|(13,202)|
|activities after     |     |         |         |          |        |
|taxation             |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------+-----+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|                           |         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|Loss per share (basic and  |  (12.6c)|   (7.1p)|    (4.5p)|  (9.0p)|
|diluted)                   |         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|                     |     |         |         |          |        |
|---------------------------+---------+---------+----------+--------|
|Shares used in computing   |  212,437|  212,437|   174,534| 147,484|
|net loss per share         |         |         |          |        |
|(thousands)                |         |         |          |        |
+-------------------------------------------------------------------+


US Dollar amounts have been translated at the closing rate on 31
December 2003 (£1.00: $1.79) 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    30 June 31 December
                              2003        2003       2003        2002
                              $000        £000       £000        £000

Loss attributable to      (26,524)    (14,818)    (7,719)    (13,361)
Xenova Group plc
Profit/(loss)                (333)       (186)      (104)         159
attributable to
joint ventures
Total loss
attributable to
members of Xenova
Group plc                 (26,857)    (15,004)    (7,823)    (13,202)

Translation                    408         228        (2)         (1)
difference
Total recognised
gains and losses in
the
period attributable
to members of Xenova
Group plc                 (26,449)    (14,776)    (7,825)    (13,203)


US Dollar amounts have been translated at the closing rate on 31
December 2003 (£1.00: $1.79) solely for information.
     Consolidated Balance Sheet (unaudited)


+-------------------------------------------------------------------+
|                   |     |  Unaudited|Unaudited|Unaudited|  Audited|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |      As at|   As at |As at    |    As at|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |31 December|       31|  30 June|       31|
|                   |     |           | December|         | December|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |       2003|     2003|     2003|     2002|
|-------------------+-----+-----------+---------+---------+---------|
|                   |Notes|       $000|     £000|     £000|     £000|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Fixed Assets       |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|   Intangible      |     |     34,497|   19,272|    9,642|    9,630|
|assets             |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|   Tangible assets |     |     14,066|    7,858|    5,131|    5,492|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|   Investment in   |     |           |         |         |         |
|joint ventures:    |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|    Share of gross |     |        245|      137|      138|      194|
|assets             |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|    Share of gross |     |      (175)|     (98)|    (116)|     (67)|
|liabilities        |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |         70|       39|       22|      127|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |     48,633|   27,169|   14,795|   15,249|
|-------------------+-----+-----------+---------+---------+---------|
|Current Assets     |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|   Work in progress|     |      1,185|      662|         |         |
|-------------------+-----+-----------+---------+---------+---------|
|   Debtors         |     |      6,568|    3,669|    3,620|    3,164|
|-------------------+-----+-----------+---------+---------+---------|
|   Short-term      |     |     27,632|   15,437|    9,650|   16,585|
|deposits and       |     |           |         |         |         |
|investments        |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|   Cash at bank and|     |     21,605|   12,070|      429|    2,632|
|in hand            |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |     56,990|   31,838|   13,699|   22,381|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Creditors: amounts |  8  |   (12,786)|  (7,143)|  (8,170)| (11,108)|
|falling due within |     |           |         |         |         |
|one year           |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Net current assets |     |     44,204|   24,695|    5,529|   11,273|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Total assets less  |     |     92,837|   51,864|   20,324|   26,522|
|current liabilities|     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Creditors: amounts |     |           |         |         |         |
|falling due after  |     |           |         |         |         |
|more than          |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|one year           |  8  |    (3,161)|  (1,766)|        -|        -|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Provisions for     |     |    (3,158)|  (1,764)|    (918)|     (12)|
|liabilities and    |     |           |         |         |         |
|charges            |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Total net assets   |     |     86,518|   48,334|   19,406|   26,510|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Capital and        |     |           |         |         |         |
|reserves           |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Called up share    |     |     47,013|   26,264|   17,454|   17,277|
|capital            |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Shares to be issued|     |     11,605|    6,483|        -|        -|
|-------------------+-----+-----------+---------+---------+---------|
|Share premium      |     |    175,110|   97,827|   80,831|   80,338|
|account            |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Merger reserve     |     |     55,237|   30,859|   27,218|   27,218|
|-------------------+-----+-----------+---------+---------+---------|
|Other reserves     |     |     31,017|   17,328|   17,902|   17,902|
|-------------------+-----+-----------+---------+---------+---------|
|Profit and loss    |     |  (233,464)|(130,427)|(123,999)|(116,225)|
|account            |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
|-------------------+-----+-----------+---------+---------+---------|
|Shareholders' funds|  6  |     86,518|   48,334|   19,406|   26,510|
|-------------------+-----+-----------+---------+---------+---------|
|                   |     |           |         |         |         |
+-------------------------------------------------------------------+


US Dollar amounts have been translated at the closing rate on 31
December 2003 (£1.00: $1.79) solely for information.

        Consolidated Cash Flow Statement (unaudited)


                              Unaudited Unaudited  Unaudited  Audited
                              Year           Year Six months     Year
                              Ended         Ended      Ended    Ended
                              31               31    30 June       31
                              December   December            December
                              2003           2003       2003     2002
                        Notes      $000      £000       £000     £000

Net cash outflow from     7    (31,928)  (17,837)    (9,294) (15,141)
operating activities


Returns on investments and
servicing of finance
Interest received                   619       346        263      619
Interest element of finance         (7)       (4)        (2)      (4)
lease rental payments
Net cash inflow from
returns on
investments and                     612       342        261      615
servicing of finance

Taxation                  4       4,668     2,608          -    2,292

Capital expenditure and
financial investment
Purchase of tangible            (1,253)     (700)      (898)    (649)
fixed assets
Purchase of intangible          (1,113)     (622)          -       
fixed assets
Sale of Farnham site
tangible and intangible           1,432       800          -       
assets
Sale of other tangible              474       265          -       
fixed assets
Net cash outflow from
capital expenditure
and financial                     (460)     (257)      (898)    (649)
investment

Acquisitions and
disposals
Purchase of subsidiary          (1,083)     (605)          -       
undertakings
Cash at bank and in
hand acquired with
subsidiary                        7,162     4,001          -       
Net cash inflow from      5       6,079     3,396          -       
acquisitions

Management of Liquid
Resources
Decrease/(increase) in            2,039     1,139      7,061  (3,288)
short-term deposits
Proceeds on sale of       3         338       189          -       
current asset
investments
Net cash
inflow/(outflow) from             2,377     1,328      7,061  (3,288)
management of liquid
resources

Net cash outflow before        (18,652)  (10,420)    (2,870) (16,171)
financing

Financing
Issue of ordinary share          38,995    21,785        680   10,958
capital
Expenses on issue of            (3,390)   (1,894)       (10)  (1,117)
shares
Repayment of secured                (7)       (4)          -       
loans
Capital element of
finance lease rental               (52)      (29)        (3)     (11)
payments
Net cash inflow from             35,546    19,858        667    9,830
financing


Increase/(decrease) in
cash during the period           16,894     9,438    (2,203)  (6,341)


US Dollar amounts have been translated at the closing rate on 31
December 2003 (£1.00: $1.79) 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|       31|                      30|      31|
|                   | December| December|June                    |December|
|-------------------+---------+---------+------------------------+--------|
|                   |     2003|     2003|                    2003|    2002|
|-------------------+---------+---------+------------------------+--------|
|                   |     $000|     £000|                    £000|    £000|
|-------------------+---------+---------+------------------------+--------|
|                   |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Increase/(decrease)|   16,894|    9,438|                 (2,203)| (6,341)|
|in cash during the |         |         |                        |        |
|period             |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|                   |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Repayment of       |        7|        4|                       -|       -|
|secured loans      |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Capital element of |       52|       29|                       3|      11|
|finance lease      |         |         |                        |        |
|payments           |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Cash flow from     |  (2,377)|  (1,328)|                 (7,061)|   3,288|
|movement in liquid |         |         |                        |        |
|resources          |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Change in net funds|   14,576|    8,143|                 (9,261)| (3,042)|
|resulting from cash|         |         |                        |        |
|flows              |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|                   |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Secured loans      |    (351)|    (196)|                       -|       -|
|acquired with      |         |         |                        |        |
|subsidiary         |         |         |                        |        |
|operations         |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Finance leases     |    (113)|     (63)|                       -|       -|
|acquired with      |         |         |                        |        |
|subsidiary         |         |         |                        |        |
|operations         |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Movement in value  |      322|      180|                     126| (1,730)|
|of liquid          |         |         |                        |        |
|investments        |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Translation        |       27|       15|                       -|       -|
|difference         |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Change in net funds|   14,461|    8,079|                 (9,135)| (4,772)|
|-------------------+---------+---------+------------------------+--------|
|                   |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Net funds at 1     |   34,393|   19,214|                  19,214|  23,986|
|January / 1 July   |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|                   |         |         |                        |        |
|-------------------+---------+---------+------------------------+--------|
|Net funds at 31    |   48,854|   27,293|                  10,079|  19,214|
|December / 30 June |         |         |                        |        |
+-------------------------------------------------------------------------+


US Dollar amounts have been translated at the closing rate on 31
December 2003 (£1.00: $1.79) solely for information.
Notes to the Unaudited 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 2002 Annual Report and Accounts except as set out below.  The
2002 Annual Report and Accounts received an unqualified auditor's
report and have been delivered to the Registrar of Companies.

Revenue recognition
Revenue from development agreements, where under the terms of the
agreement, the Group is reimbursed for development expenditure
incurred, is recognised to match the underlying expenditure that it
relates to. Contributions received in advance are included within
deferred revenue.

Revenues from contract manufacturing are recognised in turnover in
the period in which the products and services are delivered to and
accepted by the customer.

Work in progress
Work in progress in relation to contract manufacturing is valued at
the lower of cost or net realisable value.

2          Exceptional reorganisation costs

Following the announcement of the cessation of Phase III trials of
tariquidar, the Group has undertaken a cost saving reorganisation,
which included a headcount reduction and programme prioritisation.
Included in administrative expenses for continuing operations under
exceptional reorganisation costs is £2.0m net (2002: £3.8m) in
respect of severance payments, a vacant leasehold provision and an
impairment provision.

Following the KS Biomedix acquisition further exceptional
reorganisation costs arose in the acquired business as a result of
the integration of the two businesses. Included in administrative
expenses for acquisitions is an exceptional reorganisation cost of
£1.1m also in respect of severance payments and vacant leasehold
provision.

3          Cubist investment

Following an increase in the share price during the year the Group's
investment in Cubist Pharmaceuticals Inc has increased in value by
£0.2m, compared to a decrease of £1.7m in 2002.

During the year the Group sold 23,500 shares realising proceeds of
£0.2m.

4          Taxation

Xenova Group plc has recognised an R&D tax credit of £1.0m in respect
of the year that will be received in 2004 (2002: £2.0m), including
£0.2m in respect of the acquired KS Biomedix business.

Of the £2.6m cash received for R&D tax credits in the year, £0.7m was
in respect of the KS Biomedix claim for the year ended 31 May 2003.
Notes to the Unaudited Preliminary Announcement (continued)

5          Acquisition of KS Biomedix

On 12 September Xenova Group plc announced that the offer to acquire
KS Biomedix had become unconditional (save for admission). Under the
terms of the offer made to KS Biomedix shareholders, 1.0714 shares in
Xenova Group Plc have been issued in exchange for one share held in
KS Biomedix. An additional contingent deferred consideration of 10p
per KS Biomedix share held will be paid in Xenova Group plc shares
upon the commercial sale of the TransMIDTM in either the US or
European markets before 14 August 2011. Based upon a Xenova Group plc
closing share price of 15.25 pence on the 11 September this values KS
Biomedix at £17.0m including the contingent deferred consideration
payable in respect of TransMIDTM of £6.5m.

Details of the book value and provisional fair value of the assets
and liabilities of KS Biomedix as at 12 September are set out below:


+-------------------------------------------------------------------+
|                             |   |                                 |
|-----------------------------+---+---------------------------------|
|                             |   | Book    | Adjustments |    Fair |
|                             |   | values  |        £000 |  values |
|                             |   |    £000 |             |    £000 |
|-----------------------------+---+---------+-------------+---------|
|                             |   |         |             |         |
|-----------------------------+---+---------+-------------+---------|
| Tangible fixed assets       |   |   3,296 |        (70) |   3,226 |
|-----------------------------+---+---------+-------------+---------|
| Investment in joint venture |   |      99 |           - |      99 |
| - net assets                |   |         |             |         |
|-----------------------------+---+---------+-------------+---------|
| Stock                       |   |       9 |           - |       9 |
|-----------------------------+---+---------+-------------+---------|
| Debtors                     |   |   1,991 |           - |   1,991 |
|-----------------------------+---+---------+-------------+---------|
| Cash and liquid investments |   |   4,001 |           - |   4,001 |
|-----------------------------+---+---------+-------------+---------|
| Creditors falling due       |   | (1,999) |           - | (1,999) |
| within one year             |   |         |             |         |
|-----------------------------+---+---------+-------------+---------|
| Creditors falling due after |   |   (230) |       (242) |   (472) |
| more than one year          |   |         |             |         |
|-----------------------------+---+---------+-------------+---------|
| Net assets acquired         |   |   7,167 |       (312) |   6,855 |
|-----------------------------+---+---------+-------------+---------|
|                             |   |         |             |         |
|-----------------------------+---+---------+-------------+---------|
| Satisfied by:               |   |         |             |         |
|-----------------------------+---+---------+-------------+---------|
| Shares issued and to be     |   |         |             |  10,582 |
| issued                      |   |         |             |         |
|-------------------------------------------+-------------+---------|
| Contingent deferred consideration to be   |             |   6,477 |
| settled in shares                         |             |         |
|-------------------------------------------+-------------+---------|
| Expenses of acquisition     |   |         |             |     605 |
|-----------------------------+---+---------+-------------+---------|
| Total consideration         |   |         |             |  17,664 |
|-----------------------------+---+---------+-------------+---------|
|                             |   |         |             |         |
|-----------------------------+---+---------+-------------+---------|
| Goodwill arising on         |   |         |             |  10,809 |
| acquisition                 |   |         |             |         |
+-------------------------------------------------------------------+



In this provisional fair value table two adjustments have been made
to the book values stated at 12 September in order to reflect
Xenova's accounting policies.  The book value of tangible fixed
assets acquired has been reduced by £0.1m ($0.1m) in adopting
Xenova's depreciation policy, and adopting Xenova's revenue
recognition policy in respect of the licence fees received by KS
Biomedix in 2002 has caused £0.2m of revenue previously recognised by
KS Biomedix to be deferred as at 12 September 2003. In addition to
the £0.6m of acquisition expenses, share issue costs of £0.5m were
incurred and offset against the share premium account.

The goodwill arising on the acquisition of the KS Biomedix business
has been capitalised and amortised over the 10 year estimated useful
life of the acquired business.

With the acquisition of 100% of KS Biomedix , Xenova has acquired KS
Biomedix' wholly-owned subsidiary, KS Avicenna Inc, as well as its
50% share in Discerna Ltd, a joint venture with Babraham Biosciences
Technologies Limited.
Notes to the Unaudited Preliminary Announcement (continued)


As part of the restructuring activities completed as part of the
acquisition 18 positions have been lost across both head office and
the research and development functions. Included within
administration expenses for the period to 31 December 2003 is £1.1m
in respect of severance payments and a vacant property provision in
respect of the acquired business.

6                     Reconciliation of movements in shareholders'
funds


                                     Unaudited  Unaudited     Audited
                                          Year Six Months        Year
                                         Ended Ended            Ended
                                   31 December    30 June 31 December
                                          2003       2003        2002
                                          £000       £000        £000

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

Shares issued in the period             21,785        680      10,958

Shares issued and to be issued in       17,059          -          
respect of acquisition

Expenses on issue of shares            (2,244)       (10)     (1,117)

Shares to be issued under long
term incentive
scheme                                       -         51          36

Retained loss for the period          (15,004)    (7,823)    (13,202)

Exchange movement                          228        (2)         (1)

At end of period                        48,334     19,406      26,510



Shares issued in the period comprises £21.1m in respect of the UK
placing, US private placement and open offer in November 2003 and
£0.6m from the January 2003 placing to fund the buyout of certain
rights from ImmuLogic.
Notes to the Unaudited Preliminary Announcement (continued)

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


                                     Unaudited  Unaudited     Audited
                                          Year Six Months        Year
                                         Ended      Ended       Ended
                                   31 December    30 June 31 December
                                          2003       2003        2002
                             Notes        £000       £000        £000

Group operating loss                  (16,319)    (8,407)    (14,278)

Depreciation                             1,211        638       1,478

Amortisation                             1,589        609       1,168

(Decrease)/increase in                   (520)          -       3,265
impairment provision

Profit on disposal of                    (118)          -          
tangible fixed assets

Increase in work in progress             (662)          -           
(Increase)/decrease in                   (143)      (156)         711
debtors

(Decrease)/increase in
creditors (excluding                   (1,541)    (2,122)         975
deferred license fees)

Decrease in deferred licence           (3,086)      (804)     (8,498)
fees

Increase in provision for                1,752        906           2
liabilities and charges

Charge for long term                         -         42          36
incentive scheme


Net cash outflow from                 (17,837)    (9,294)    (15,141)
operating activities



Cash outflow in respect of exceptional reorganisation costs was £2.4m
(2002: £nil).


8          Deferred licence fees

Included within creditors is £3.0m (2002: £5.7m) in respect of
deferred licence fees of which £1.6m is included within creditors:
amounts falling due after more than one year.


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.


Xenova Group plc
Tel: +44 (0)1753 706 600
David A Oxlade, Chief Executive Officer
Daniel Abrams, Group Finance Director
Veronica Cefis Sellar, Corporate Communications

UK
Financial Dynamics
Tel: +44 (0)20 7831 3113
David Yates/Ben Atwell

US:
Trout Group/BMC Communications
Tel: 001 212 477 9007
Press: Brad Miles (Ext 17) Daniel Budwick (Ext 14)
Investors: Jonathan Fassberg (Ext 16) Lee Stern (Ext 22)


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