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Xenova Group PLC (XEN)

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Thursday 08 May, 2003

Xenova Group PLC

1st Quarter Results

Xenova Group PLC
08 May 2003

                                                           FOR IMMEDIATE RELEASE

                                Xenova Group plc
                           First Quarter Results 2003

Slough, UK, 8 May, 2003 - Xenova Group plc (Nasdaq NM: XNVA; London Stock
Exchange: XEN) today announced its results for the quarter ended 31 March 2003.

Year to Date Highlights

   •TA-CD: patient dosing begins in Phase IIa cocaine administration trial

   •TA-CIN/TA-HPV: clear clinical responses in a 'prime-boost' Phase IIa
    clinical trial targeting HPV associated AGIN

   •Tariquidar (XR9576): temporary suspension of new patient enrolment to
    Phase III clinical trials

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

   •Revenue recognised in quarter of £2.1m ($3.3m) (2002: £2.8m ($4.4m))

   •Cash, short term deposits and investments £12.9m ($20.4m) at 31 March
    2003 (2002: £17.1m ($27.0m))

Commenting, Chief Executive Officer, David Oxlade said:'We await with interest
the outcome of the DSMC's interim safety and efficacy analysis of our lead
product, tariquidar. In the meantime, the first quarter has seen good progress
throughout the rest of our broad pipeline which now has one Phase III, two Phase
II and four Phase I drug candidates in clinical development, supported by a
further eight programmes at various stages of research.'

UK:                                        US:
Xenova Group plc                           Trout Group/BMC Communications
Tel: +44 (0)1753 706600                    Tel: 001 212 477 9007
David A Oxlade, Chief Executive Officer    Press: Brad Miles (Ext 17) 
Daniel Abrams, Group Finance Director      Lauren Tortorete (Ext 20)
Jon Davies, Corporate Communications       Investors: Jonathan Fassberg (Ext 16)
                                           Lee Stern (Ext 22)
Financial Dynamics
Tel: +44 (0)207 831 3113
David Yates/Ben Atwell

Notes to Editors

Xenova Group plc's product pipeline focuses principally on the therapeutic areas
of cancer and immune system disorders. Xenova has a broad pipeline of programmes
in clinical development. The Group has a well-established track record in the
identification, development and partnering of innovative products and
technologies and has partnerships with significant pharmaceutical and
biopharmaceutical companies including Lilly, Pfizer, Celltech, Genentech, QLT
and Millennium Pharmaceuticals.

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

For Xenova: Disclaimer to take advantage of the 'Safe Harbor' provisions of the
US Private Securities Litigation Reform Act of 1995. This press release contains
'forward-looking statements,' including statements about the discovery,
development and 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: 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.

Quarterly Review- Product Pipeline Update

Cancer - Tariquidar Multi-drug resistance (MDR) programme
Tariquidar entered two pivotal Phase III clinical trials in June 2002. In each
trial it is being used as an adjunctive treatment in combination with first-line
chemotherapy for non-small cell lung cancer (NSCLC) patients. The temporary
suspension of new recruitment to these trials announced on 21 February 2003 was
made at the request of the Data Safety Monitoring Committee (DSMC) pending the
completion of the planned interim safety and efficacy analysis. The DSMC
recommended that further recruitment of new patients to the trials be halted
until all patients currently enrolled had been followed for a minimum of three
months. Importantly, the DSMC confirmed that there were no new toxicities seen
related to tariquidar and the toxicities that have been observed are the same as
those frequently seen with the same cytotoxic drugs when used without
tariquidar. The DSMC stated that the patients already enrolled in the trials
(circa 300) should continue to be treated and followed according to the
protocol. The DSMC also recommended that the data from these two pivotal Phase
III studies remain blinded to Xenova and QLT so that the data remains eligible
for submission to the regulatory authorities in due course.

During the intervening period, the DSMC will assess the level of clinical
benefit seen in the current patient pool and compare it against the increased
level of toxicities already noted. The DSMC is expected to report its findings
by mid-year, with recommendations as to how the trials should proceed. Xenova
will publish these recommendations immediately they become available. A Phase
IIb trial in chemo-refractory breast cancer underway at MD Anderson, Texas, is
continuing and was not affected by the DSMC recommendations.

Tariquidar was granted fast track status by the US Food and Drug Administration
(FDA) in October 2002. On successful completion of the Phase III programme, it
is anticipated that QLT will file for approval of tariquidar in North America
for use in combination with first-line chemotherapy in advanced NSCLC by the end
of 2005 and Xenova will file for marketing approval in Europe. Xenova retains
substantially all rights to commercialise tariquidar in Europe and the Rest of
the World, and we intend to establish further collaborations in order to
maximise the value of this potentially first-in-class drug.

Cancer - Therapeutic Vaccines
Xenova is making significant progress in its development of therapeutic vaccines
for cancer. On 14 April 2003, the Company announced the results of an open
label, physician-sponsored Phase II 'prime-boost' study, targeting the treatment
of human papillomavirus (HPV) associated ano-genital intraepithelial neoplasia
(AGIN) using a combination of Xenova's TA-CIN and TA-HPV candidate therapeutic

TA-HPV is an immunotherapeutic vaccine which is being developed for use
alongside surgery in the treatment of cervical cancer and for the treatment of
high-grade AGIN. TA-CIN is a recombinant fusion protein, designed as a treatment
for women with cervical dysplasia. Pre-clinical studies, conducted by Xenova in
conjunction with scientists at Leiden University Medical Centre, The
Netherlands, demonstrated that use of TA-CIN together with TA-HPV resulted in an
immune response that was significantly greater than that observed with either
product alone.

The Phase II 'prime-boost' study began in October 2001, and was carried out on
29 patients at three centres in the UK. The results of this study indicated that
a prime boost strategy, using a combination of Xenova's TA-CIN and TA-HPV
candidate therapeutic vaccines, was both safe and well tolerated and
demonstrated clear clinical responses, even in women with long-standing disease.
Of the 26 patients meeting the entry requirements of the study, 15 (58%) showed
evidence of symptomatic improvement, one (4%) had a complete response (confirmed
by histological examination and viral clearance) and in addition, five (19%)
showed a partial response (defined as a lesion area reduction of 50% or
greater), for an overall response rate in this study of 23%. Five patients (19%)
were HPV16 negative at the end of the study. Assessment of clinical and
immunological responses is ongoing and additional follow-up visits are planned
to see whether patients with a partial response go on to complete response. The
responses seen during the initial stages of the immunisation regimen were
particularly encouraging, and indicated that further development is warranted.

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 remaining ImmuLogic rights to future milestone and royalty payments relating
to two of Xenova's development stage vaccine programmes, TA-CD and TA-NIC. Under
the terms of the agreement, ImmuLogic waived the rights to all future payments
from Xenova relating to the two vaccine programmes in return for a payment of
US$1m. In order to fund the buyout of ImmuLogic's interests, Xenova raised
£680,000 (before expenses) through the placing for cash of 1,766,235 new
ordinary shares of 10 pence each.

TA-CD represents a completely new approach to the treatment of cocaine addiction
by way of immune intervention and it is intended for use alongside a behavioural
therapy programme in patients who are trying actively to overcome their cocaine

The objective of vaccination with TA-CD is to reduce the euphoria obtained by
the individual, thus diminishing the reinforcing effects of cocaine and
increasing the likelihood of a successful attempt to quit. Currently, there is
no effective pharmacotherapy available for the approximately 900,000 individuals
in the USA each year who seek medical help with respect to their cocaine

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. Cocaine-dependent volunteers,
specifically selected from those not seeking to quit, undergo psychological and
physiological assessments whilst cocaine is administered under laboratory
conditions. The effect of TA-CD is determined by comparing findings from before
and after a four-dose immunisation course.

This study is also being funded, in part, 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.

Other Programmes
Research and development continued throughout the first quarter for the Group's
other programmes, and includes a Phase I trial in melanoma for the vaccine
DISC-GMCSF and a Phase I trial for the anti-nicotine vaccine, TA-NIC. Xenova's
research pipeline includes programmes such as those for PAI-1 inhibition in the
treatment of cancer and cardiovascular disease, and multi-drug resistance
protein (MRP) inhibition in the treatment of cancer.

Quarterly Review - Publications Update

9th Annual Meeting of the Society on Nicotine and Tobacco, 19-22 February, New
Orleans, USA

In February, Xenova presented the results of the first clinical study of TA-NIC,
the Company's novel vaccine designed for the treatment of nicotine addiction.
The results (originally reported in June 2002) showed the vaccine to be safe and
well tolerated both systemically and locally in the 60 smokers and non-smokers
who took part in the trial, and that the vaccine generated a specific
anti-nicotine response. This is the first time such a vaccine has been tested in

94th Annual Meeting of the American Association of Cancer Research (AACR)
5-9th April, Toronto, Canada

Following the cancellation of the AACR, as a result of safety concerns over the
Severe Acute Respiratory Syndrome (SARS) outbreak, Xenova has announced details
of the eight poster presentations it had had accepted for presentation at the
meeting. Three of these related to Xenova's research into Multi-drug Resistance
(MDR) with two posters to be presented on tariquidar (XR9576) and one on
XR12890, which is a novel potent modulator of multi-drug resistance protein

The remaining five posters related to continuing research in Xenova's programme
focusing on the action of novel DNA targeting agents XR5944 and XR11576, both of
which are the subject of a North American licensing agreement with Millennium
Pharmaceuticals Inc. Three of the posters related to the research into the
mechanism of action of XR5944, and one on the role of topoisomerase I and II in
the mechanism of action of XR11576. The final poster related to the cellular
characterisation and differentiation of XR5944 and XR11576. The abstracts of all
eight posters are now available from the 'Proceedings of the 94th AACR: Vol 44,

Financial Summary

Operating Performance
In the three months to 31 March 2003, the Group's revenues recognised from
licensing agreements, strategic partnerships and manufacturing outsourcing were
£2.1m ($3.3m) (2002: £2.8m ($4.4m)).

In accordance with the Group's revenue recognition policy, of the £6.9m ($10.9m)
received from QLT in 2001 as part of the tariquidar licensing agreement, £0.8m
($1.3m) was included in the quarter to 31 March 2003, with a further £3.1m
($4.8m) being deferred to future periods. Contract development revenue of £0.9m
($1.4m) was recognised in Q1 2003 in respect of the ongoing Millennium
collaboration on the novel DNA targeting agents. Other revenue included £0.4m
($0.6m) in respect of ongoing contract vaccine manufacturing.

Total net operating expenses have reduced from £5.6m ($8.8m) in the first
quarter of 2002 to £4.8m ($7.5m) in the first quarter of 2003.

Research and development expenditure of £4.5m ($7.1m) is some £0.2m ($0.3m)
higher than the first quarter of 2002 (£4.3m ($6.8m)). Under the terms of the
licensing agreement with Millennium Pharmaceuticals Inc, contract development
costs of £0.9m ($1.4m) have been recovered in the first quarter. The
administrative expenses (excluding the amortisation of goodwill) declined to
£1.0m ($1.6m) (2002: £1.2m ($1.8m)). The subletting of excess facilities reduced
net operating expenses by £0.1m ($0.2m) in the first quarter (2002: £0.2m

Of the total administrative expenses for the three months to 31 March 2003 of
£1.3m ($2.1m), £0.3m ($0.5m) relates to the amortisation, over a 10-year period,
of the goodwill in respect of the acquisition of Cantab in 2001.

The lower net interest income reflects the reduced cash and short-term deposits
balance held throughout the three months to 31 March 2003.

The net loss per share in Q1 was 1.9p (2002: 2.3p).

Cash, short-term deposits and investments
Cash, short-term deposits and investments at 31 March 2003 totalled £12.9m
($20.4m) (2002: £17.1m ($27.0m)). The Group held cash of £1.0m ($1.6m) and
short-term deposits and investments of £11.9m ($18.8m) at 31 March 2003 (2002:
cash £3.3m ($5.2m), short-term deposits and investments £13.8m ($21.8)).

Included in short-term deposits and investments is an investment in Cubist
Pharmaceuticals Inc. As at 31 March 2003 the share price was $8.01 valuing the
investment held at £0.5m ($0.8m). This is in line with the valuation at 31
December 2002.

Share capital
On 15 January 2003, the Group announced that it had reached agreement with
ImmuLogic Pharmaceutical Corporation Liquidating Trust ('ImmuLogic') under which
Xenova has bought out the remaining ImmuLogic rights to future milestone and
royalty payments relating to two of Xenova's development stage vaccine
programmes, TA-CD and TA-NIC, for £621,000 (US$1.0m).

In order to fund the buyout of ImmuLogic's interests, Xenova raised £680,000,
before expenses, through the placing for cash of 1,766,235 new ordinary shares
of 10 pence each. The new shares, which represent approximately 1.02 per cent of
the Company's issued share capital prior to the placing, were placed by Nomura
International plc at a price of 38.5 pence per share.

The number of shares in issue stood at 174.5 million as at 31 March 2003.

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


Consolidated Profit and Loss Account (unaudited)

                                                   Three months ended
                                           Unaudited    Unaudited    Unaudited
                                            31 March     31 March     31 March
                                                2003         2003         2002
                                                $000         £000         £000
                                              ______       ______       ______
Turnover (including share of joint venture)    3,348        2,118        2,789

Less: share of joint venture revenue              (5)          (3)         (26)
                                              ______       ______       ______
Turnover                                       3,343        2,115        2,763

Operating expenses
Research and development costs                (7,089)      (4,485)      (4,290)

Administrative expenses                       (1,598)      (1,011)      (1,168)

Administrative expenses: amortisation of        
goodwill                                        (461)        (292)        (293)

                                              ______       ______       ______
Total administrative expenses                 (2,059)      (1,303)      (1,461)
                                              ______       ______       ______
Other operating income                           169          107          184
                                              ______       ______       ______
Total net operating expenses                  (8,979)      (5,681)      (5,567)
                                              ______       ______       ______
Group operating loss                          (5,636)      (3,566)      (2,804)

Share of operating loss of joint                 
venture                                          (51)         (32)         (32)
                                              ______       ______       ______
Total operating loss: Group and share of
joint venture                                 (5,687)      (3,598)      (2,836)

Interest (net)                                   251          159          173
Amounts written off investments                   (6)          (4)      (1,033)
                                              ______       ______       ______
Loss on ordinary activities before            
taxation                                      (5,442)      (3,443)      (3,696)

Tax on loss on ordinary activities               237          150          451
                                              ______       ______       ______
Loss on ordinary activities after             
taxation                                      (5,205)      (3,293)      (3,245)
                                              ______       ______       ______

Loss per share (basic and diluted)             (3.0c)        (1.9p)       (2.3p)

Shares used in computing net loss per        
share (thousands)                            174,534      174,534      139,057

US Dollar amounts have been translated at the closing rate on 31 March 2003
(£1.00: $1.5805) solely for information.

Condensed Consolidated Balance Sheet (unaudited)

                                           Unaudited    Unaudited    Unaudited
                                               As at        As at        As at
                                            31 March     31 March     31 March
                                                2003         2003         2002
                                                $000         £000         £000
                                              ______       ______       ______

Cash, short-term deposits and investments     20,426       12,924       17,082

Other current assets                           6,564        4,153        4,457

Fixed assets (including goodwill)             23,109       14,621       19,789
                                              ______       ______       ______

Total assets                                  50,099       31,698       41,328
                                              ______       ______       ______

Current liabilities (including provisions   
& deferred income)                           (12,309)      (7,788)     (14,713)

Shareholders' equity                         (37,790)     (23,910)     (26,615)
                                              ______       ______       ______

Total liabilities and shareholders' equity   (50,099)     (31,698)     (41,328)
                                              ______       ______       ______

US Dollar amounts have been translated at the closing rate on 31 March 2003
(£1.00: $1.5805) 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 2002 Annual Report and Accounts.
The 2002 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 company and expects to have an ongoing
funding requirement until products are commercialised. A substantial part of the
Group's cash requirements are of an investment nature and have a large
discretionary element. The Directors have a reasonable degree of confidence that
the Group can secure funding to enable it to continue in operational existence
for the foreseeable future and have therefore prepared the financial statements
on the going concern basis. Should the sources of funding not be available, the
Directors will take action to curtail discretionary expenditure to conserve cash

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            The company news service from the London Stock Exchange

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