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Lipoxen PLC (XEN)

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Friday 28 September, 2007

Lipoxen PLC

Interim Results

Lipoxen PLC
28 September 2007


                                   Lipoxen PLC

                          ('Lipoxen' or 'the Company')


           Interim Results for the six months ended 30 June 2007


London, UK, 28 September, 2007 - Lipoxen PLC (AIM:LPX) a bio-pharmaceutical
company specialising in the development of high value differentiated
biologicals, vaccines and oncology drugs, today announces its unaudited
consolidated financial results for the six months ended 30 June 2007.


Operational Highlights
     
•    License agreement with Baxter International Inc ('Baxter') to develop blood 
     clotting factors is progressing well. This deal is potentially worth up to
     a total of US$75 million in milestone payments for Lipoxen, plus royalties 
     on future product sales.

•    Long-acting EPO (Erythropoietin) candidate is due to complete pre-clinical 
     trials in 2007 and complete  Phase I clinical trials in early 2008.

•    Lipoxen's collaboration partner the Serum Institute of India Limited 
     ('SIIL'),  one of the world's leading vaccine companies, India's largest 
     biotech company and a major shareholder in Lipoxen, is on track to complete 
     the production set-up of commercial-scale GMP (Good Manufacturing Practice)
     manufacture of polysialic acid ('PSA'), a key component of Lipoxen's 
     PolyXen(R) drug delivery system, by the end of 2007.

•    Approval received to commence exploratory clinical trials for SuliXen(R), a 
     long-acting insulin for both Types 1 and 2 diabetes.


Financial Highlights
     
•    Consolidated financial statement prepared in accordance with International 
     Financial Reporting Standards ('IFRS') for the half year ended 30 June 
     2007.

•    Revenues for the half year ended 30 June 2007, increased by 73% to
     £517,000 (2006: £299,000)

•    Pre-tax losses for the period of £1,513,224 (2006: £855,429).

•    Net cash and liquid resources as at 30 June 2007 of £3,110,503  (2006:
     £2,006,815).


Post Period Highlights
     
•    License agreement announced with Intervet, a leading animal health
     company, to develop long-acting insulin.


M. Scott Maguire, CEO of Lipoxen, said:

'Lipoxen is continuing to deliver on its two-tiered strategy of proprietary
product development and outlicensing. The Company has progressed its two major
license agreements with Baxter and Serum Institute. These deals not only
validate the potential of our drug delivery technologies but also contribute to
the cash resources that we have to invest in the development of our own product
pipeline. Lipoxen has established a platform for sustained future growth, based
on its exciting drug and vaccine delivery technologies, and expects its focused
business development activities to result in the announcement of several
additional license agreements during the course of the next twelve months.  The
Company also remains focused on building its clinical drug pipeline and is on
track to deliver the long-acting EPO candidate through Phase I clinical trials
in early 2008.'

                                    - Ends -

Enquiries

 Lipoxen PLC
 M. Scott Maguire, Chief Executive Officer             +44 (0)20 7691 3583

 Grant Thornton Corporate Finance (nominated adviser)
 Philip J Secrett/Maureen Tai                          +44 (0)20 7383 5100

 Citigate Dewe Rogerson                                +44 (0)20 7638 9571
 David Dible / Yvonne Alexander


Notes to Editors

Lipoxen PLC (AIM:LPX) is a biopharmaceutical company specializing in the
development of high value differentiated biologicals, vaccines and oncology
drugs. Products currently under development include improved formulations of
important biologicals such as EPO, G-CSF, insulin and Interferon-alpha. These
novel products which are based on Lipoxen's proprietary PolyXen(R) technology
address markets in excess of US$1 billion. This technology is designed to
improve the stability, biological half-life and immunologic characteristics of
therapeutic proteins naturally. Lipoxen has two further naturally-derived
proprietary delivery technologies, ImuXen(R) and a related liposomal technology
for the formulation of cytotoxic oncology drugs, which are being developed to
enhance the efficacy and safety of various vaccines such as a multivalent
Hepatitis B-E and pneumococcal vaccines, as well as a number of anti-cancer
agents like paclitaxel. The Company's proprietary delivery technologies are
attracting significant interest and Lipoxen is currently co-developing products
with the Serum Institute of India Limited (one of the world's leading vaccine
companies, India's largest biotech company and a major shareholder in Lipoxen)
and has license agreements in place with Baxter International and InterVet, a
leading animal health company.


Lipoxen was admitted to trading on the AIM Market of the London Stock Exchange
in January 2006.

This announcement includes 'forward-looking statements' which include all
statements other than statements of historical facts, including, without
limitation, those regarding the Company's financial position, business strategy,
plans and objectives of management for future operations (including development
plans and objectives relating to the Company's products and services), and any
statements preceded by, followed by or that include forward-looking terminology
such as the words 'targets', 'believes', 'estimates', 'expects', 'aims',
'intends', 'will', 'can', 'may', 'anticipates', 'would', 'should', 'could' or
similar expressions or the negative thereof. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors
beyond the Company's control that could cause the actual results, performance or
achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous assumptions
regarding the Company's present and future business strategies and the
environment in which the Company will operate in the future. Among the important
factors that could cause the Company's actual results, performance or
achievements to differ materially from those in forward-looking statements
include those relating to The Company's funding requirements, regulatory
approvals, clinical trials, reliance on third parties, intellectual property,
key personnel and other factors. These forward-looking statements speak only as
at the date of this announcement. The Company expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any forward-looking
statements contained in this announcement  to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statements are based. As a result of these
factors, readers are cautioned not to rely on any forward-looking statement.


Chairman's Statement

I am pleased once more to have the opportunity of reporting upon the continuing
progress of your Company. In particular, I must to draw your attention to the
consolidated financial statements attached hereto which have been produced under
International Financial Reporting Standards ('IFRS'), and, while unaudited,
these have been reviewed by our auditors; the consequences of some of the
resulting reporting changes for the Company are fully explained later in this
statement.

Lipoxen is a biopharmaceutical company specialising in the development of high
value differentiated biologicals, vaccines and oncology drugs.  The Company's
approach is based on its novel drug delivery technologies, which have the
potential to greatly improve new and marketed biologicals across a broad
spectrum of proteins and peptides, vaccines and oncology drugs by optimising
their clinical performance and extending their patent-life.  Lipoxen has made
significant progress in the period by continuing to deliver on its two-pronged
strategy, which leverages its technologies' potential in the short term through
market leading collaboration partners, and in the medium term, by establishing a
proprietary clinical pipeline.

The Company's technology is comprised of:

PolyXen(R). This protein drug delivery technology links therapeutic proteins or
peptides to the naturally occurring polymer polysialic acid ('PSA') to prolong
their stability, biological half-life, solubility and immunologic
characteristics while maintaining their biological activity and minimising
toxicity. The Company believes PolyXen(R) offers many advantages over
PEGylation, which is currently widely used to formulate biologicals in the
pharmaceutical and biotechnology industries. These advantages include reduced
toxicity, better biologic activity and new patent protected product candidates.

ImuXen(R).  This technology is based on using liposomes to administer vaccines.
The vaccine components (antigens and adjuvants) are protected by the liposomal
vesicle enhancing their delivery to the immune system. This leads to protective
immune responses which are much stronger and more rapid than those observed with
vaccines delivered by conventional means. Moreover, liposomal formulations are
well known to minimize the side effects of vaccination as a result of the
containment and slow release of the active materials.

VesicAll(R). This is a related liposomal technology, which is being developed
for the formulation of cytotoxic oncology drugs, and a number of other
anti-cancer agents, such as paclitaxel. VesicAll(R) is a drug vehicle for
solubilisation of hydrophobic drugs designed to avoid the known toxicity of
established vehicles such as Cremaphor(R) which gives rise to anaphylactic
reactions.


Collaborations Progress

During the period, Lipoxen has focused on delivering the milestones associated
with its current, validating collaborations with Baxter International Inc ('
Baxter') and Serum Institute of India Limited ('SIIL'), India's largest
biotechnology company.

The license agreement with Baxter is focused on developing improved,
longer-acting forms of blood-clotting factors such as Factor VIII, and is based
on Lipoxen's PolyXen(R) technology.  The activities relating to this
collaboration are progressing well and Lipoxen will continue to receive
milestone payments as it delivers the developmental and clinical endpoints that
form part of this agreement.

Lipoxen's collaboration with SIIL is a strategic partnership that covers the
development of drug candidates as well as a manufacturing agreement.  Currently
there are eight drug candidates under development, which includes biologics,
vaccines and oncology candidates.  The most advanced candidate is ErepoXen(R),
an improved, long-acting version of a currently marketed EPO (Erythropoietin)
drug for anaemia. Toxicology studies are progressing well and this candidate is
due to complete Phase I clinical trials in Canada in early 2008.

As part of its development and manufacturing agreement, SIIL has been investing
in the infrastructure necessary to scale up the production of PSA so that it can
supply Lipoxen with commercial grade PSA, a key component of its PolyXen(R)
protein drug delivery technology.   The PSA will be manufactured in accordance
with Good Manufacturing Practice ('GMP') standards and SIIL is on track to
deliver this important milestone by the end of the year.

The establishment of collaborations is seen as a key element of Lipoxen's
short-term growth strategy as it ensures the broader adoption of its drug and
vaccine delivery technologies, whilst creating a growing solid revenue base for
the Company.  In the period under review, Lipoxen has been progressing its
business development discussions in order to facilitate the establishment of
more collaborations with new pharmaceutical partners and is confident that it
will announce several new license agreements within the next 12 months.


Drug Pipeline

The Company's current R&D portfolio includes 10 pre-clinical programs across a
range of therapeutics and vaccines, eight of which are being co-developed with
SIIL.  The lead product candidate, ErepoXen(R) is designed as a long-acting EPO
product used for anaemia, is currently completing toxicology studies and is set
to complete Phase I clinical trials in early 2008.  A long-acting
Interferon-alpha is due to commence preclinical trials during 2008 with
commencement of Phase I clinical trials due later next year. Lipoxen and SIIL
have also been developing a pneumococcal vaccine candidate with optimisation
work continuing to progress and a multivalent Hep B-E vaccine. Hep E in
isolation has already shown promising toxicology results; however, due to the
market size, SIIL and Lipoxen have expanded the indications to include Hepatitis
B.

Lipoxen's proprietary pipeline is composed of SuliXen(R), a long-acting insulin
for Types 1 and 2 diabetes. SuliXen(R) has now completed toxicology studies.
Clinical trial preparations are now in progress and the Company is on target to
commence exploratory clinical proof of concept trials early next year.


Board Appointments

Colin Hill, who became a non-executive Director of Lipoxen at the time of the
Company's admission to AIM, was appointed Finance Director in June 2007.  Mr
Hill has taken on this executive appointment in order to provide the Company
with the financial expertise and resource needed to help support Lipoxen's goal
of becoming a leading bio-pharmaceutical company based on its unique delivery
technologies.

As noted in the Company's regulatory announcement made on 11 June 2007, Mr
Firdaus Dastoor has been appointed as a non-executive director of the Company.
Mr Dastoor is a Group Director of the Poonawalla Group of companies of which
SIIL is a member.


Post Balance Sheet Event

On 24th September 2007 the Company announced that it had entered into an
exclusive worldwide development and license agreement with Intervet, a leading
animal health company, to develop a long-acting insulin for the veterinary
health market.

The signing of this agreement by Intervet triggers an upfront payment to
Lipoxen. The agreement also provides for further clinical, regulatory and sales
milestone payments to Lipoxen. In addition, Lipoxen will receive royalties on
future product sales.

Intervet has signed this agreement in order to access Lipoxen's unique PolyXen
(R) drug delivery technology. This technology has been developed to improve the
pharmacokinetic profile of protein drugs including extending their therapeutic
half life, thereby reducing the frequency of administration. PolyXen(R) is based
on linking the therapeutic proteins, or peptides, of interest to the naturally
occurring polymer polysialic acid.  It improves the stability and the
therapeutic half-life of protein drugs and improves their solubility and
immunological characteristics, while maintaining biological activity and
minimizing toxicity.


Outlook

Lipoxen is continuing to deliver on its two-tiered strategy of proprietary
product development and outlicensing. The Company has progressed its two major
license agreements with Baxter and Serum Institute. These deals not only
validate the potential of our drug delivery technologies but also contribute to
the cash resources that we have to invest in the development of our own product
pipeline. Lipoxen has established a platform for sustained future growth, based
on its exciting drug and vaccine delivery technologies, and expects its focused
business development activities to result in the announcement of several
additional license agreements during the course of the next twelve months.  The
Company also remains focused on building its clinical drug pipeline and is on
track to deliver the long-acting EPO candidate through Phase I clinical trials
in early 2008.

Once again I and my fellow directors would like to thank all of our loyal and
dedicated staff for their efforts over the last six months which have
contributed so much to the continuing successful development of the Company's
technologies, and I am looking forward to my next Chairman's Statement when I am
confident that I will be able to report on further successes.


Sir Brian Richards
Non Executive Chairman

London: 28 September 2007


Financial Review

Shareholders should note that the financial statements for the period have been
prepared under International Financial reporting Standards ('IFRS') rather than,
as before, under UK Generally Accepted Accounting Practice ('UK GAAP').  This
change to the basis of financial reporting has been adopted as a result of the
implementation of the Rules of the AIM Market of the London Stock Exchange
('AIM') which require that all AIM companies make the transition to IFRS for
accounting reporting periods ending after 1 January 2007. Accordingly, the
financial statements are more detailed than usual and your attention is drawn in
particular to:
     
(a)  Note 6, which provides a reconciliation between the results of prior 
     periods as reported under UK GAAP and now restated under IFRS, and,

(b)  Note 7 which states the Goodwill on Acquisition by Lipoxen Technologies 
     Limited of its now parent company under the reverse acquisition method of 
     accounting set out in IFRS3

While the unaudited consolidated loss for the period end varies relatively
little between IFRS and UK GAAP, the net assets position would, at first glance,
appear to be dramatically different from that reported under UK GAAP as at 31
December 2006.  The reason for this is that, under IFRS, the overreaching
concept is the computation of the fair value of actual transactions, which means
that, in our case, as the underlying deal was a reverse takeover ('RTO'), the
legal subsidiary (namely, Lipoxen Technologies Limited) is deemed to have been
the acquiring entity. The effect of restating the figures under this concept is
that the goodwill arising on acquisition is much reduced (by around £5.3m)
thereby apparently reducing shareholders funds by a similar amount. That said,
shareholders can be assured that the real value of your company has not changed
in any such material way; the effect of the change of the accounting standards
under which the Company is now compelled to report is the driver of the numbers
and the biggest change to these is that of goodwill on acquisition, an
intangible asset number generated solely as a result of the preparation of
consolidated accounts for the Group.

The financial results for the Group in the period under review as reported under
IFRS are summarised below:

                                                   6 months to 30  6 months to 30  Year to 31 December 2006
                                                        June 2007       June 2006

                                                               Unaudited (IFRS)                   Audited
                                                                                                 (UK GAAP)
                                                          £'000             £'000       £'000           £'000

Turnover                                                    517               299       1,219           1,219
R&D expenditure                                         (1,096)             (546)     (1,636)         (1,715)
Administrative expenses                                 (1,010)             (639)     (1,505)         (1,744)
TOTAL OPERATING COSTS                                   (2,106)           (1,185)     (3,141)         (3,459)
OPERATING LOSS                                          (1,588)             (886)     (1,922)         (2,240)
Interest receivable                                          75                40         108             108
Interest payable                                              -               (9)         (9)               -
Total pre-tax losses for period                         (1,513)             (855)     (1,824)         (2,132)

Net cash at period end                                    3,111             2,007       2,690           2,690
Net asset value at period end                             7,791             6,025       7,883          13,160

Basic loss per share (p)                                 (1.30)            (0.83)      (1.76)          (2.05)
Fully diluted loss per share (p)                         (1.30)            (0.83)      (1.76)          (2.05)
Net asset value per share  (p) - basic                     6.51              5.79        6.83           11.40
Net asset value per share (p) - fully diluted              6.14              5.36        6.40           10.65


Shareholders should note that the financial statements for the period 
reflect a significant level of non-cash costs by way of:
Amortisation charges                                          -                 -           -             318
Depreciation of owned assets                                122                17          57              57
R&D costs - equity settled                                  230                 -         395             395
Share option expense - equity settled                       349               231         507             507
                                                 --------------     -------------   ----------   -------------
Total principal non-cash items                              701               248         959           1,277
                                                      =========         =========    =========       =========

Cash settled expenditures are summarised as follows:
Research and development                                    866               546       1,241           1,320
Other expenses                                              539               391         941             862
                                                 --------------    --------------  -----------  --------------
Total expenses - cash settled                             1,405               937       2,182           2,182
Total non-cash items                                        701               248         959           1,277
                                                   ------------    --------------  -----------  --------------
Total operating expenses                                  2,106             1,185       3,141           3,459
                                                         ======           =======       ======          ======

% analysis - cash settled expenses
R&D                                                        61.7              58.3        56.9            60.5
Other                                                      38.3              41.7        43.1            39.5
                                                 --------------    --------------  -----------  --------------
                                                          100.0             100.0       100.0           100.0
                                                      =========         =========    =========       =========


As can be seen from the above analysis, the Group's investment in an increasing
level of R&D expenditure has continued in the period, concomitant with meeting
the Board's obligation of prudent stewardship of the Group's cash resources.

While the aggregate level of cash-based expenses has risen from a mean of circa
£182k pcm in calendar 2006 to £234k pcm in the first 6 months of the current
financial year, the proportion devoted to R&D has increased in the current
period, rising from 56.9% to 61.7% of cash-based expenditures.



INDEPENDENT REVIEW REPORT TO LIPOXEN PLC


Introduction

We have been instructed by the company to review the financial information for
the six months ended 30 June 2007 which comprises the consolidated income
statement, the consolidated balance sheet, the consolidated cash flow statement,
the consolidated statement of changes in equity and the related notes. We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.

This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.


Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the AIM
rules of the London Stock Exchange, which require that it must be prepared in a
form consistent with that which will be adopted in the next annual accounts,
having regard to the accounting standards applicable to such annual accounts.


Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom.  A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed.  A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions.  It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.


Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.


PKF (UK) LLP
London, UK
28th September 2007


CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30TH JUNE 2007


 
                                              Six months to   Six months to  Year to 31/12/ 
                                                30/06/07        30/06/06      06 Unaudited  
                                                Unaudited       Unaudited                   
                                                         £               £               £  
                                                                                            
Revenue                                            517,086         298,880       1,218,839  
                                             -------------   -------------   -------------  
                                                                                            
Research and development expenditure             1,095,823         546,346       1,636,675  
Administrative expenses                          1,009,706         638,869       1,504,696  
                                             -------------   -------------   -------------  
                                                                                            
Total operating expenses                         2,105,529       1,185,215       3,141,371  
                                             -------------   -------------   -------------  
                                                                                            
OPERATING LOSS                                  (1,588,443)       (886,335)     (1,922,532) 
                                                                                            
Interest receivable                                 75,219          40,274         108,479  
Interest payable                                         -          (9,368)         (9,719) 
                                             -------------   -------------   -------------  
                                                                                            
LOSS ON ORDINARY ACTIVITIES                                                                 
BEFORE TAXATION                                 (1,513,224)       (855,429)     (1,823,772)                             
                                                                                            
Taxation                                                 -          20,000         (49,096) 
                                             -------------   -------------   -------------  
                                                                                            
LOSS ON ORDINARY ACTIVITIES 
AFTER TAXATION                                  (1,513,224)       (835,429)     (1,872,868) 
                                               =============   =============   =============
                                                                                            
Loss per ordinary share                                                                              
- basic and fully diluted                            (1.30)p         (0.83)p         (1.76)p
                                               =============   =============   =============



CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE 2007

 
                                             As at 30/06/07  As at 30/06/06  As at 31/12/06 
                                                Unaudited       Unaudited       Unaudited   
                                                         £               £               £  
                                                                                            
NON-CURRENT ASSETS                                                                          
Property, plant and equipment                      960,519         115,484         970,665  
Goodwill                                         1,061,476       1,061,476       1,061,476  
Other receivables                                        -       2,385,374       1,370,000  
                                             -------------   -------------   -------------  
                                                 2,021,995       3,562,334       3,402,141  
                                             -------------   -------------   -------------  
CURRENT ASSETS                                                                              
Trade and other receivables                      3,200,571         801,755       2,058,584  
Cash and cash equivalents                        3,110,503       2,006,815       2,690,222  
                                             -------------   -------------   -------------  
                                                 6,311,074       2,808,570       4,748,806  
CURRENT LIABILITIES                                                                         
Trade and other payables                         (542,558)       (345,930)       (268,120) 
                                             -------------   -------------   -------------  
                                                                                            
NET CURRENT ASSETS                               5,768,516       2,462,640       4,480,686  
                                             -------------   -------------   -------------  
                                                                                            
NET ASSETS                                       7,790,511       6,024,974       7,882,827  
                                             =============   =============   =============  
                                                                                            
CAPITAL AND RESERVES ATTRIBUTABLE                                                           
TO THE COMPANY'S EQUITY HOLDERS                                                             
Share capital                                    2,231,468       2,154,233       2,210,718  
Share premium                                   22,508,165      18,893,840      21,456,915  
Reverse acquisition reserve                    (8,252,127)     (8,252,127)     (8,252,127) 
Retained earnings                              (8,696,995)     (6,770,972)     (7,532,679) 
                                             -------------   -------------   -------------  
                                                                                            
TOTAL EQUITY                                     7,790,511       6,024,974       7,882,827  
                                               =============   =============   =============
Net assets per share - basic                          6.51p           5.79p           6.83p 
                                               =============   =============   =============
- fully diluted                                       6.14p           5.36p           6.40p 
                                               =============   =============   =============


CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS TO 30TH JUNE 2007
                                              Six months to   Six months to  Year to 31/12/ 
                                                30/06/07        30/06/06      06 Unaudited  
                                                Unaudited       Unaudited                   
                                                         £               £               £  
                                                                                            
Cash flows from operating activities              (614,649)     (1,202,138)     (2,310,348) 
Interest paid                                            -          (9,368)         (9,719) 
Interest received                                   75,219          40,274         108,479  
Taxation received                                        -          47,029          47,029  
                                             -------------   -------------   -------------  
                                                                                            
Net cash used in operating activities             (539,430)     (1,124,203)     (2,164,559) 
                                             -------------   -------------   -------------  
                                                                                            
Cash flows from investing activities                                                        
Acquisition of parent company, net                                                                                
of cash acquired                                         -         142,613         142,613  
Purchase of property, plant and equipment         (112,289)       (106,955)     (1,002,752) 
                                             -------------   -------------   -------------  
                                                                                            
Net cash (used in)/from investing activities      (112,289)         35,658        (860,139) 
                                             -------------   -------------   -------------  
                                                                                            
Cash flows from financing activities                                                        
Issue of equity share capital                    1,072,000       3,061,908       5,681,468  
                                             -------------   -------------   -------------  
                                                                                            
Net increase in cash and cash equivalents          420,281       1,973,363       2,656,770  
                                                                                            
Cash and cash equivalents at beginning of                                                                               
period                                           2,690,222          33,452          33,452  
                                             -------------   -------------   -------------  
                                                                                            
Cash and cash equivalents at end of period       3,110,503       2,006,815       2,690,222  
                                             =============   =============   =============  


CONSOLIDATED STATEMENT OF CHANGES IN NET EQUITY
FOR THE SIX MONTHS TO 30TH JUNE 2007


                                  Share    Share       Capital     Reverse      Retained     Total  
                                capital   premium      reserve   acquisition    earnings            
                                                                   reserve                          
                                    £            £           £           £           £           £  
                                                                                                    
At 1st January 2006           491,432    6,247,402   1,874,704           -   (6,166,349) 2,447,189  
                                                                                                    
Loss for six months ended                                                                                        
30th June 2006                      -            -           -           -    (835,429)   (835,429) 
Cost of acquisition of                                                                                      
parent company                 61,183    1,059,317           -           -           -   1,120,500  
Reverse acquisition                                                                                         
reserve                     1,455,718    8,671,113   (1,874,704) (8,252,127)         -           -  
                                                                                                    
Shares issued for cash        145,900    3,793,399           -           -           -   3,939,299  
Share issue expenses                -     (877,391)          -           -           -    (877,391) 
Share-based payments                -            -           -           -     230,806     230,806  
                              ________    _________   _________  __________  __________   _________
At 30th June 2006           2,154,233   18,893,840           -   (8,252,127) (6,770,972) 6,024,974  
                                                                                                    
Loss for six months ended                                                                                        
31st December 2006                  -            -           -           -   (1,037,439) (1,037,439)
                                                                                                    
Shares issued for cash         56,485    2,553,075           -           -           -   2,609,560  
Adjustment to share issue                                                                                         
expenses                            -       10,000           -           -           -      10,000  
Share-based payments                -            -           -           -     275,732     275,732  
                              ________    _________   _________  __________  __________   _________
At 31st December 2006       2,210,718   21,456,915           -   (8,252,127) (7,532,679) 7,882,827  
                                                                                                    
Loss for six months ended                                                                                        
30th June 2007                      -            -           -           -   (1,513,224) (1,513,224)
                                                                                                    
Shares issued for cash         20,750    1,051,250           -           -           -   1,072,000  
Share-based payments                -            -           -           -     348,908     348,908  
                               ________    _________   _________   _________  __________   _________
At 30th June 2007            2,231,468   22,508,165           -   (8,252,127) (8,696,995) 7,790,511  
                                =======     ========    ========   =========   =========    ========


NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS TO 30TH JUNE 2007

     
1.   The interim financial statements comprise the unaudited results for the six
months to 30th June 2007 and 30th June 2006, together with the unaudited results
for the year ended 31st December 2006. Prior to 1st January 2007, the Group
prepared its audited annual financial statements and unaudited interim results
under UK Generally Accepted Accounting Practice (UK GAAP). The audited UK GAAP
annual financial statements for 2006, which represent the statutory accounts for
that year, and on which the auditors gave an unqualified opinion, have been
filed with the Registrar of Companies.

From 1st January 2007, the Group is required to prepare its annual consolidated
financial statements in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and implemented in the UK. As
the annual 2007 financial statements will include comparative figures for 2006,
the Group's date of transition to IFRS under IFRS 1 'First time adoption of
IFRS' is 1st January 2006 and the 2006 comparatives have been restated to IFRS.
The disclosures required by IFRS 1 concerning the transition from UK GAAP to
IFRS are given in Note 6.

The interim financial statements are prepared in a form consistent with that
which will be adopted in the next annual accounts having regard to the
accounting standards applicable to such accounts.


2.   ACCOUNTING POLICIES

The principal accounting policies of the Group are set out below.


Basis of consolidation

The group financial statements incorporate the financial statements of the
parent company and all of its subsidiary undertakings. The results of subsidiary
undertakings acquired or disposed of during the year are included in the group
financial statements from, or up to, the date of acquisition or disposal.

On 16th January 2006, the Company acquired Lipoxen Technologies Limited ('LTL')
for a consideration satisfied by the issue of 66,666,662 shares to the vendors.
Under the AIM rules and IFRS this transaction meets the criteria of a Reverse
Takeover. The consolidated financial statements have therefore been prepared
under the reverse acquisition accounting method set out in IFRS 3 'Business
Combinations' with LTL treated as the accounting acquirer of the Company. As a
consequence of this, the results for the periods ended 30th June 2006 and 31st
December 2006 comprise the results of LTL from 1st January 2006 to the period
end plus those of Lipoxen Plc from the date of the reverse acquisition.

Under reverse acquisition accounting, the cost of the business combination is
deemed to have been incurred by LTL in the form of equity instruments issued to
the owners of Lipoxen Plc. LTL shares were not listed prior to the acquisition
and consequently the acquisition price has been based on the entire value of the
Lipoxen Plc shares in issue immediately before the reverse acquisition.

The assets and liabilities of LTL are recognized and measured in the
consolidated financial statements at their pre-combination carrying amounts. The
retained earnings and other equity balances recognized in the consolidated
financial statements are those of LTL immediately before the business
combination. The amount recognized as issued equity instruments is determined by
adding the cost of the business combination to the issued equity of LTL
immediately before the business combination.


Goodwill

Goodwill arising on consolidation represents the excess of the cost of the
reverse acquisition over the net assets of Lipoxen Plc at the date of the
business combination. Goodwill is recognized as an asset and is reviewed for
impairment at least annually. Any impairment is recognized immediately through
the income statement and is not reversed.


NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS TO 30TH JUNE 2007 (continued)


Revenue

Revenue shown in the income statement represents the value of services provided
during the year, exclusive of Value Added Tax. For contracts in progress at the
balance sheet date, revenue is recognized based on the degree of completion of
the project and the agreed fee for the total project.


Intangible fixed assets

Intangible fixed assets acquired are capitalised at cost. Intangible assets
(excluding development costs) created within the business are not capitalised
and such expenditure is charged in the income statement in the year in which it
is incurred.


Property, plant and equipment

Depreciation is provided to write off the cost less the estimated residual value
of tangible fixed assets on a straight line basis over their estimated useful
economic lives as follows:

Laboratory equipment                       -         4 years
Plant and machinery                        -         4 years
Computer equipment                         -         4 years
Manufacturing plant                        -         5 years


Operating lease agreements

Operating lease rentals are charged in the income statement on a straight line
basis over the lease term.


Research and development costs

Research and development costs are written off to the income statement as
incurred, except that development expenditure incurred on an individual project
is carried forward when its future recoverability can be reasonably regarded as
assured. Any expenditure carried forward is amortised in line with the expected
future sales from the related project.


Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the
rate ruling at the balance sheet date. Transactions in foreign currencies are
translated into sterling at the rate of exchange ruling at the date of the
transaction. Exchange differences are taken into account in arriving at the
operating profit.


Pension costs

Company contributions to personal pension schemes are written off to the income
statement as incurred.


Share based payments

Share options granted to employees are valued at the date of grant using the
Black-Scholes option pricing model and are charged to the income statement over
the vesting period of the option. A corresponding credit is recognized in the
retained earnings reserve.



NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS TO 30TH JUNE 2007 (continued)


3.   RECONCILIATION OF LOSS BEFORE TAXATION TO
        CASH OUTFLOWS FROM OPERATING ACTIVITIES

 
                                            Six months to   Six months to      Year to 
                                                 30/06/07        30/06/06     31/12/06 
                                                Unaudited       Unaudited     Unaudited         
                                                      £               £               £  
                                                                                         
Loss before taxation                         (1,513,224)       (855,429)     (1,823,772) 
Adjustments for:                                                                         
Equity-settled share options                    348,908         230,806         506,538  
Equity-settled research and development         229,514               -         395,112  
Depreciation                                    122,435          16,667          57,283  
Investment income                               (75,219)        (40,274)       (108,479) 
Interest expense                                      -           9,368           9,719  
                                          -------------   -------------   -------------  
                                               (887,586)       (638,862)       (963,599) 
                                                                                         
(Increase)/decrease in receivables              (1,501)        112,968        (592,695) 
Increase/(decrease) in payables                274,438        (676,244)       (754,054) 
                                          -------------   -------------   -------------  
                                                                                         
Cash flows from operating activities          (614,649)     (1,202,138)     (2,310,348) 
                                          =============   =============   =============  
 

4. EARNINGS PER SHARE
 
                                            Six months to   Six months to       Year to 
                                                 30/06/07        30/06/06      31/12/06 
                                                Unaudited       Unaudited      Unaudited         
                                                      £               £               £  
                                                                                         
Weighted average number of ordinary         
shares in issue                             116,483,112     100,370,643     106,479,398
                                          -------------   -------------   -------------  
Loss after taxation                          (1,513,224)       (835,429)     (1,872,868) 
                                          -------------   -------------   -------------  
                                                                                         
Basic loss per share - pence                     (1.30)p         (0.83)p         (1.76)p
                                           =============   =============   =============


      There is no dilutive effect of share options on the basic loss per share.

     
5.   NET ASSET VALUE PER SHARE

     The 'basic' net asset value per share figures are calculated on the
basis of the net assets attributable to equity shareholders divided by the
number of ordinary shares in issue at the relevant dates.

     The 'fully diluted' net assets per share figures are calculated by
adjusting the number of ordinary shares on the assumption of the exercise in
full of all options and warrant instruments extant as at the relevant dates
where the exercise price of any such instrument is less than the 'basic' net
asset value per share.


NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS TO 30TH JUNE 2007 (continued)



6.   RECONCILIATION OF COMPARATIVE EQUITY AND PROFIT FIGURES UNDER IFRS
     AND PREVIOUSLY PUBLISHED DATA (UK GAAP)


     As stated in Note 1, these are the Group's first consolidated interim
financial statements prepared in accordance with the Group's IFRS accounting
policies. The comparative information for the six months to 30th June 2006 and
for the year ended 31st December 2006, previously prepared under UK GAAP, have
been restated under IFRS. An explanation of how the transition from previous
GAAP to IFRS has affected the Group's financial performance is shown below.


                                               As at           As at           As at     
                                             31/12/06        30/06/06        01/01/06    
                                                      £               £               £  
                                                                                         
Equity previously reported under UK GAAP     13,160,229      11,397,198         104,054  
                                                                                         
Adjustments required to implement the                                                    
reverse acquisition accounting provisions 
of IFRS 3:                                                                                       
                                                                                         
Restatement of opening equity balances to                                                
be those of LTL rather than Lipoxen Plc                                                     
Equity balances of Lipoxen Plc                 (104,054)       (104,054)       (104,054) 
Equity balances of LTL                        2,447,189       2,447,189       2,447,189  
                                                                                         
Restatement of cost of acquisition                                                       
Fair value of Lipoxen Plc shares issued
on acquisition of LTL                        (9,000,000)     (9,000,000)              -                                 
Fair value of LTL shares deemed to be         
issued to acquire Lipoxen Plc                 1,120,500       1,120,500               -                    
LTL loss for the period prior to the 
acquisition as recognised in previously                                                                                 
reported information                            (58,815)              -               -                                 
                                                                                         
Other adjustments:                                                                       
                                                                                         
Reversal of amortisation of goodwill            317,778         164,141               -  
                                          -------------   -------------   -------------  
Equity as reported under IFRS                 7,882,827       6,024,974       2,447,189  
                                          =============   =============   =============  

 
                                            Year ended         Six months
                                             31/12/06         To 30/06/06
                                                      £               £  
                                                                         
Loss previously reported under UK                                        
GAAP                                         (2,131,831)       (999,570) 
                                                                         
LTL loss for the period prior to                                         
the acquisition as recognised in
previously reported information                 (58,815)              -                           
                                                                         
Reversal of amortisation of goodwill            317,778         164,141  
                                          -------------   -------------  
                                                                         
Loss as reported under IFRS                  (1,872,868)       (835,429) 
                                            =============   =============


NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS TO 30TH JUNE 2007 (continued)
 

7. ACQUISITION OF PARENT COMPANY
                                                             £  
                                                      
Fair value of Lipoxen Technologies Limited            
shares deemed to have been issued on acquisition      1,120,500        
Incidental costs of the business combination             45,030
                                                       _________
                                                      1,165,530  
Net assets of parent company acquired                   104,054  
                                                       _________
Goodwill acquired                                     1,061,476  
                                                        ========
           

8.    Copies of the interim report and unaudited accounts  will be sent to
shareholders shortly and will be available free of charge from the secretary at
the Company's registered office at 22 Melton Street, London and at London
Bioscience Innovation Centre, 2 Royal College Street, London, NW1 0NH during
normal office hours, Saturdays and Sundays excepted, for 14 days from today. The
report is also accessible from the Company's website at www.lipoxen.com




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