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Xenova Group plc (XEN)

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Thursday 06 May, 2004

Xenova Group plc

Xenova Group plc 1st Quarter Results

Slough, UK, 6 May 2004 - Xenova Group plc (NASDAQ: XNVA; London Stock
Exchange: XEN) today announces its results for the quarter ended 31
March 2004.


Year to Date Highlights

*          Revenue recognised for the quarter of £0.9m ($1.6m) (2003:
  £2.1m($3.8m))
*          Cash, short term deposits and investments £22.0m ($40.0m)
  (2003: £12.9m ($23.5m))
*          10 year lease agreement signed with Genzyme for Cambridge
  Science Park site
*          Sale of Farnham Research facility to Bioventix raising
  £0.8m ($1.4m)

Commenting, Chief Executive Officer, David Oxlade said: "During the
first quarter we have made considerable progress towards commencing
Phase III studies of TransMIDTM in brain cancer, including the
engagement of the majority of the trial sites required throughout the
US, Europe and Israel.  The integration of KS Biomedix is now
complete and the £10m annual cost savings anticipated at the time of
the acquisition have been substantially achieved."

Development has continued throughout the quarter on the Group's
prioritised programmes and corporate objectives, with the current
status being:

Corporate
On 6 January 2004, as announced at the time of the preliminary
results, Xenova sold its excess research facilities in Farnham to
Bioventix Ltd. raising £0.8m ($1.4m).

On 7 April 2004, Xenova entered into a 10 year lease agreement with
Genzyme for vacant space within Xenova's facilities in the Cambridge
Science Park.  Xenova will continue to occupy part of the site
together with the adjacent Clinical Trials Manufacturing Facility.

TransMIDTM
TransMIDTM, the Group's most advanced product for the treatment of
Glioblastoma Multiforme, the most common form of high grade glioma
(brain cancer), is ready to enter Phase III clinical trials, subject
to reaching agreement with the FDA for the Special Protocol
Assessment (SPA) which Xenova filed with FDA following the
acquisition of KS Biomedix.

In an earlier Phase II study, a 50% or greater reduction in tumour
volume was noted in 35% of evaluable patients.  In this study, median
survival for patients receiving TransMIDTM was approximately 37
weeks, which compares with historical average life expectancy of
approximately 26 weeks for patients with this condition. TransMIDTM
is currently licensed to Nycomed Danmark ApS in Europe, Sosei Co Ltd
in Japan, Medison Pharma Ltd in Israel and Ranbaxy Laboratories
Limited in India.  Xenova retains all rights to countries outside
these territories including North America.

Novel DNA Targeting Agents
This programme, partnered with Millennium Pharmaceuticals Inc in
North America, involves three compounds being developed for the
treatment of solid tumours.  When the current Phase I trials with
XR11576 and XR5944 have been completed, a decision will be made with
regard to initiating Phase II studies which is expected before the
end of the year.   XR5944 is a potent cytotoxic with a novel
mechanism of action with activity against a number of human tumour
models.  The third compound, XR11612, is in pre-clinical development
as a back-up.  Millennium Pharmaceuticals Inc holds the rights to
these compounds in North America and Xenova retains the rights to the
rest of the world.

XR303
XR303 is a super high affinity chimaeric monoclonal antibody used to
deliver a radionuclide, 131Iodine, to a tumour.  Following
encouraging results from a Phase I imaging study in colorectal cancer
patients, XR303 is now undergoing a Phase I/II clinical trial in
patients with pancreatic cancer which is expected to complete in
2005.  Xenova retains all rights to XR303.

TA-CD
TA-CD, Xenova's therapeutic vaccine for cocaine addiction is
undergoing a Phase IIa administration study designed to evaluate the
effect of TA-CD on behavioural changes associated with cocaine
administration under laboratory controlled conditions.  Results of
this trial are expected in 2005.  In addition, TA-CD entered into a
Phase IIb clinical trial in October 2003 with a primary objective to
determine the efficacy of the vaccine in addicts seeking treatment
for cocaine abuse and to determine appropriate end-points for a Phase
III study.  Interim results of this Phase IIb study are expected in
the first half of 2006.  The National Institute on Drug Abuse (NIDA)
is supporting these studies but Xenova retains all rights to TA-CD.

TA-NIC
TA-NIC is Xenova's therapeutic vaccine for nicotine addiction and is
currently in a second Phase I study which is now fully recruited with
60 smokers.  The objective is to further establish safety and
tolerability and to determine the vaccination dose and schedule
required for an optimal anti-nicotine response.  The impact of the
vaccine on nicotine-induced changes in heart rate and skin
temperature will also be monitored.  Interim results of this study
are expected this year.  Xenova retains all rights to TA-NIC.

OX40
OX40 is a platform technology capable of producing multiple drug
candidates targeting cancer, autoimmune and other diseases where the
immune system is involved.  In 2003 Imperial College demonstrated
that by blocking the OX40-OX40 ligand (OX40L) interaction
(down-regulation), symptoms of influenza could be alleviated without
affecting the ability to clear the virus.  In contrast, the use of
agents such as OX40L-IgG that bind to OX40 and up-regulate the immune
response, have been shown to be effective at promoting anti-tumour
responses in a number of cancer models.  Xenova retains all rights
for the use of OX40 in up-regulation whilst Genentech Inc and
Celltech Group plc have the rights for down-regulation.

Tariquidar
Earlier this year, it was announced that the National Cancer
Institute in the US commenced further exploratory Phase I/II and
Phase II studies with tariquidar in combination with various
cytotoxic drugs.  Discussions are also ongoing concerning the
possibility of further Phase II studies being undertaken.  QLT Inc is
Xenova's partner for the development and North American marketing of
tariquidar; Xenova retains all other rights.

Financial Summary

Operating Performance
In the three months to 31 March 2004, the Group's revenues recognised
from licensing agreements, strategic partnerships and manufacturing
outsourcing were £0.9m ($1.6m), (2003: £2.1m ($3.8m)).

Revenue included £0.2m ($0.4m) recognised under the revenue
recognition policy in respect of the tariquidar licensing agreement
with QLT and the OX40 licensing agreement with Genentech.  Contract
development revenue of £0.2m ($0.4m) arose in respect of the
Millennium collaboration on the DNA targeting agents and
manufacturing revenue was £0.5m ($0.8m).

Total net operating expenses for the quarter of £5.6m ($10.1m) (2003:
£5.7m ($10.3m)) were flat as compared to the prior year.

Research and development expenditure of £4.0m ($7.3m) (2003 (£4.5m
($8.2m)) was 12.5% lower than the prior year.  This partly reflects
the reorganisation in the second half of 2003 when early stage
research programs were discontinued.

Administrative expenses were £1.6m ($3.0m) (2003: £1.3m ($2.4m)),
including amortisation of goodwill of £0.6m ($1.0m) reflecting the
acquisition of the KS Biomedix business.

The net loss per share in Q1 was 1.0p (2003: 1.9p).

Cash, short-term deposits and investments
Cash, short-term deposits and investments at 31 March 2004 totalled
£22.0m ($40.0m) (2003: £12.9m ($23.5m)).  The Group held cash of
£1.1m ($2.0m) and short-term deposits and investments of £20.9m
($38.0m) at 31 March 2004 (2003: cash £1.0m ($1.8m), short-term
deposits and investments £11.9m ($21.7m)).

Included in short-term deposits and investments is an investment in
Cubist Pharmaceuticals Inc. As at 31 March 2003 the share price was
$9.19 valuing the investment at £0.3m ($0.6m).

Share capital
The number of shares in issue stood at 431.5 million as at 31 March
2004.

The Directors do not currently propose a dividend for 2004 (2003:
nil).
Consolidated Profit and Loss Account (unaudited)

+-------------------------------------------------------------------+
|                           |   |        Three months ended         |
|---------------------------+---+-----------------------------------|
|                           |   | Unaudited | Unaudited | Unaudited |
|                           |   |  31 March |  31 March |  31 March |
|                           |   |      2004 |      2004 |      2003 |
|                           |   |      $000 |      £000 |      £000 |
|---------------------------+---+-----------+-----------+-----------|
|---------------------------+---+-----------+-----------+-----------|
| Turnover (including share |   |     1,652 |       908 |     2,118 |
| of joint ventures)        |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Less: share of joint      |   |      (96) |      (53) |       (3) |
| ventures turnover         |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Group turnover            |   |     1,556 |       855 |     2,115 |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Operating expenses        |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Research and development  |   |   (7,327) |   (4,026) |   (4,485) |
| costs                     |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Administrative expenses   |   |   (1,956) |   (1,075) |   (1,011) |
|---------------------------+---+-----------+-----------+-----------|
| Administrative expenses:  |   |   (1,023) |     (562) |     (292) |
| amortisation of goodwill  |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Total administrative      |   |   (2,979) |   (1,637) |   (1,303) |
| expenses                  |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Other operating income    |   |       180 |        99 |       107 |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Total net operating       |   |  (10,126) |   (5,564) |   (5,681) |
| expenses                  |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Group operating loss      |   |   (8,570) |   (4,709) |   (3,566) |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Share of operating loss   |   |      (15) |       (8) |      (32) |
| of joint ventures         |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Total operating loss:     |   |           |           |           |
| Group and share of joint  |   |   (8,585) |   (4,717) |   (3,598) |
| ventures                  |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Investment income         |   |       430 |       236 |       159 |
|---------------------------+---+-----------+-----------+-----------|
| Amounts written off       |   |     (186) |     (102) |       (4) |
| investments               |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Loss on ordinary          |   |   (8,341) |   (4,583) |   (3,443) |
| activities before         |   |           |           |           |
| taxation                  |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Tax on loss on ordinary   |   |       273 |       150 |       150 |
| activities                |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Loss on ordinary          |   |   (8,068) |   (4,433) |   (3,293) |
| activities after taxation |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Loss per share (basic and |   |    (1.9c) |    (1.0p) |    (1.9p) |
| diluted)                  |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Shares used in computing  |   |   431,516 |   431,516 |   174,534 |
| net loss per share        |   |           |           |           |
| (thousands)               |   |           |           |           |
+-------------------------------------------------------------------+


US Dollar amounts have been translated at the closing rate on 31
march 2004 (£1.00: $1.82) solely for information.


Condensed Consolidated Balance Sheet (unaudited)

+-------------------------------------------------------------------+
|                           |   | Unaudited | Unaudited | Unaudited |
|                           |   |     As at |     As at |     As at |
|                           |   |  31 March |  31 March |  31 March |
|                           |   |      2004 |      2004 |      2003 |
|                           |   |      $000 |      £000 |      £000 |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Cash, short-term deposits |   |    39,985 |    21,970 |    12,924 |
| and investments           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Other current assets      |   |     7,077 |     3,888 |     4,153 |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Fixed assets (including   |   |    48,068 |    26,411 |    14,621 |
| goodwill)                 |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Total assets              |   |    95,130 |    52,269 |    31,698 |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Current liabilities       |   |  (15,312) |   (8,413) |   (7,788) |
| (including provisions &   |   |           |           |           |
| deferred income)          |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Shareholders' equity      |   |  (79,818) |  (43,856) |  (23,910) |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
| Total liabilities and     |   |  (95,130) |  (52,269) |  (31,698) |
| shareholders' equity      |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
|---------------------------+---+-----------+-----------+-----------|
|                           |   |           |           |           |
+-------------------------------------------------------------------+

US Dollar amounts have been translated at the closing rate on 31
March 2004 (£1.00: $1.82) solely for information.

Notes to the Statement

Basis of preparation

These unaudited statements, which do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985,
have been prepared using the accounting policies set out in the
Group's 2003 Annual Report and Accounts.  The 2003 Annual Report and
Accounts received an unqualified auditor's report and will be
delivered to the Registrar of Companies.

Going concern

Xenova 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 is a UK-based biopharmaceutical company focused on
the development of novel drugs to treat cancer and addiction with a
secondary focus in immunotherapy.  The Company has a broad pipeline
of products in clinical development, including three cancer
programmes:  its lead product TransMIDTM, for the treatment of
high-grade glioma, is ready to enter Phase III trials, and its novel
DNA targeting agents and XR303 are both in Phase I for cancer
indications.  Xenova is also developing two therapeutic vaccines for
cocaine and nicotine addiction, which are in Phase II and Phase I
trials respectively.  Quoted on the London Stock Exchange (XEN) and
on NASDAQ (XNVA), Xenova employs approximately 112 people throughout
its sites in the UK and North America. (Reuters XEN.L; Bloomberg XEN
LN)
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 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.


Contacts:

Xenova Group plc
+44 (0)1753 706600
David A Oxlade, Chief Executive Officer
Daniel Abrams, Finance Director
Veronica Cefis Sellar, Head of Corporate Communications

UK - Financial Dynamics
+44 (0)20 7831 3113
David Yates
Ben Atwell

US - Trout Group/BMC Communications
+1 212 477 9007
Media: Brad Miles
Investors: Lee Stern


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