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Xenova Group plc (XEN)

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Monday 23 May, 2005

Xenova Group plc

1st Quarter Results, 2005

Slough, UK, 23 May 2005 - Xenova Group plc (NASDAQ: XNVA; London
Stock Exchange: XEN) today announced its results for the quarter
ended 31 March 2005.

Year to Date Highlights

  * TransMID(TM): obtains orphan drug designation in Japan

  * TransMID(TM): licensed to PharmaEngine Inc for distribution,
    marketing and sales in the People's Republic of China and the
    Republic of South Korea

  * DISC-HSV Vector and DISC-GM-CSF: licensed to Oxxon Therapeutics
    Ltd for up to £44m ($83m)

  * TA-CIN: licensed to Cancer Research Technology

  * TA-NIC: further promising findings from second clinical study

  * XR303: Ph I/II pancreatic study to enrol additional patients

  * Revenue recognised for the first quarter of £1.1m ($2.0m) (Q1
    2004: £0.9m ($1.6m))

  * Cash, short term deposits and investments at 31 March 2005 of
    £9.4m ($17.6m) (Q1 2004: £22.0m ($41.3m))

David Oxlade, Chief Executive Officer of Xenova said: "We continue to
demonstrate value within our pipeline, as evidenced by the three
license deals announced so far this year.  With the global rights to
our addiction vaccines and the North American rights to TransMID(TM)
as yet unpartnered, Xenova retains considerable value in its

Below is a summary of the current status of our programmes:

TransMID(TM) - Phase III
TransMID(TM) is the most advanced product candidate in Xenova's
pipeline, currently in Phase III clinical trials. TransMID(TM) is a
potential treatment for glioblastoma multiforme (GBM), the most
common form of high grade glioma (brain cancer).

A Phase III clinical programme in patients with non-resectable,
progressive and/or recurrent GBM is underway.  Up to 323 patients are
being enrolled in the first randomised, open-label, multi-centre
trial.  Patients will be randomised in a 2:1 ratio of TransMID(TM) to
best standard of care across approximately 65 centres in the EU,
Israel and North America.  The primary end point is overall survival
time with a planned interim analysis to be conducted after 50% of
required events have been observed.  This interim analysis is
expected in 2006.  Patient dosing began in July 2004 and recruitment
is ongoing.

In February 2005, Sosei Co Ltd (Sosei), Xenova's licensee for the
Japanese market, was granted orphan drug status for the use of
TransMID(TM) in the treatment of GBM by the Ministry of Health,
Labour and Welfare (MHLW) in Japan.  The achievement of this
designation triggered a milestone payment from Sosei to Xenova.
Orphan drug designation will facilitate the initiation of clinical
trials by Sosei and provide a fast track approval process by the
MHLW, once trials have been completed and a dossier seeking marketing
approval has been filed.  TransMID(TM) already has orphan drug
designation in the US and Europe as well as fast track status in the

In April, Xenova entered into a licensing agreement with PharmaEngine
Inc (PharmaEngine) of Taiwan for the exclusive rights to develop,
market and sell TransMID(TM) in both the People's Republic of China
and the Republic of South Korea.  PharmaEngine will also be
undertaking self-funded registration trials in these territories.
Xenova received an up-front payment and will receive milestone
payments as well as significant royalties on potential future sales.

TransMID(TM) is licensed to Sosei in Japan, Nycomed in Europe,
Medison in Israel, Ranbaxy in India and PharmaEngine in China and
South Korea. The rights to TransMID(TM) in North America have been

TA-CD - Phase II
TA-CD, Xenova's therapeutic vaccine for the treatment of cocaine
addiction, is undergoing two separate Phase II clinical trials.  The
first, a 10 patient open labelled Phase IIa cocaine administration
trial, is designed to evaluate the effect of TA-CD on behavioural
changes associated with cocaine administration.  This trial is
expected to report in 2005.

The second is a randomised, placebo controlled Phase IIb trial.  The
primary objective of this study is to determine the efficacy of TA-CD
in addicts seeking treatment for cocaine abuse, and to determine
appropriate end-points for a Phase III study.  Up to 132 subjects,
all of whom are methadone-dependent cocaine addicts being treated for
drug dependency, are being recruited into this clinical study.  Half
the subjects will be treated with active TA-CD and half will be given
a placebo.  Subjects will be monitored three times a week to assess
cocaine usage, including testing for cocaine metabolites in urine,
for a period of 20 weeks.  Patients will also undergo medical
examinations and blood tests for anti-cocaine antibodies to assess
the immunogenicity of the dosing schedule.  The trial is expected to
report in 2006 and will allow an objective assessment of the efficacy
of the TA-CD vaccine against placebo.

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

Tariquidar - Phase II
Discovered by Xenova, tariquidar is a potent small-molecule inhibitor
of the P-glycoprotein pump, which is being developed for the
treatment of multi-drug resistance (MDR) in cancer.

The National Cancer Institute in the US (NCI) commenced exploratory
Phase I/II and Phase II studies with tariquidar in combination with
various cytotoxic drugs in 2003.  The studies include one in
adrenocortical cancer, one in lung, ovarian or cervical cancer and a
paediatric study in solid tumours.  These studies are currently
on-going and further information can be accessed through the NCI
website at

Xenova is in discussions with QLT regarding the return of their
rights, arising from the license agreement entered into between QLT
and Xenova in August 2001.

TA-NIC - Phase I
A second Phase I study, building upon the findings of the first Phase
I trial, recruited 60 smokers, divided into three cohorts of 20
subjects (16 receiving the active TA-NIC, 4 receiving the placebo).
The objectives of this double-blind, randomized, placebo controlled
Phase I clinical study were to explore the safety, tolerability and
level of anti-nicotine antibody response to increasing doses of the
vaccine (50 mg, 250 mg, 1000 mg), and to select a dose for Phase II
and Phase III evaluation. Interim data were announced in July 2004
and preliminary final data were announced in March 2005.

These findings showed that the 12 month self-reported quit rates were
substantially greater among those receiving TA-NIC than those
receiving placebo. Only one out of 12 participants (8%) in the
placebo group reported being abstinent at their last visit or at 12
months, compared to 3 out of 16 (19%) and 6 out of 16 (38%) in the
groups receiving the 250 mg and 1000 mg doses of TA-NIC respectively.

Immunogenicity data after 12 months follow-up and the safety and
tolerability profile support the 20-week findings and confirm the
selection of the 250 mg dose for use in the Phase II and Phase III
clinical trials.  The Phase II trial is expected to commence during
2005 and interim results are expected in 2006.

Xenova retains global rights to the TA-NIC vaccine.

XR303 - Phase I/II
XR303 (131I-labelled anti-CEA monoclonal antibody) is currently in a
Phase I/II trial in patients with unresectable pancreatic cancer.
This is a dose escalation trial comparing the intravenous and
intra-arterial routes of administration. Preliminary experience
suggests that tumour targeting is improved via the intra-arterial
route of administration. It has been decided to enrol a further 6
patients, with recruitment expected to be complete by July 2005.

The product comprises a super high affinity antibody, labelled with a
radionuclide, 131Iodine.  The antibody binds to carcino-embryonic
antigen (CEA), a marker which is widely expressed on solid tumours.
The antibody can thus deliver a dose of radiation to the tumour that
is sufficient to kill tumour cells whilst limiting damage to normal

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

Novel DNA Targeting Agents - XR11576/XR5944/XR11612 - Phase I
This programme is being developed for the treatment of solid
tumours.  Results of the Phase I trial for XR11576 and preliminary
results of the Phase I trial for XR5944 were announced in March 2005.

The Phase I clinical trial of XR11576 in solid tumours has been
completed with the recruitment of 38 patients divided between two
oral dosing schedules.  No objective responses (complete responses or
partial responses) were reported, however, stable disease was
reported in nine out of the 38 patients.  No Phase II dose has been

The Phase I trial of XR5944 from 27 patients with solid tumours using
a single intravenous dosing schedule of a 30 minute infusion once
every three weeks is currently being finalised.  No objective
responses (complete responses or partials responses) were reported,
however four out of the 27 patients had stable disease.

Xenova and Millennium are in discussions regarding the return of the
North America rights arising from the license agreement entered into
between Millennium and Xenova in December 2001.

OX40 - Pre-clinical
OX40/OX40L is a platform for the creation of multiple product
candidates targeting cancer inflammatory and autoimmune disease.
Xenova has produced by recombinant DNA technology a modified form of
the OX40 molecule which can be used to block the interaction between
the OX40 receptor and its ligand (OX40L) and hence inhibit T-cell
activation.  This product candidate has been shown to be effective in
pre-clinical models of inflammatory and autoimmune disease.  Other
molecules have been produced from this platform that augment T cell
activation and have proven effective at protecting against tumour
growth and infectious disease in pre-clinical models.

Xenova retains all rights for the use of OX40 in the up-regulation of
the immune system, whilst Genentech and UCB (previously Celltech)
have the rights for the down-regulation of the immune system.

Collaborations relating to De-Prioritised Programmes
In January 2005 Xenova announced a licensing agreement with Cancer
Research Technology Limited (CRT) in respect of the Company's
intellectual property relating to TA-CIN.  TA-CIN is a vaccine
developed by Xenova as a treatment for women with cervical dysplasia,
and has proved safe and immunogenic in Phase I and Phase II clinical

CRT has licensed TA-CIN patents, know-how and materials from Xenova
and will undertake marketing of TA-CIN to potential commercial
partners with a view to sub-licensing the development and
commercialisation of the product.  Net receipts from the
sub-licensing of TA-CIN will be shared between Xenova and CRT after
certain direct costs have been recouped.  In addition, CRT will
facilitate a further Phase II clinical trial to be undertaken at St
Mary's Hospital in Manchester.

In January 2005 Xenova also announced the signing of an exclusive
licensing agreement with Oxxon Therapeutics Ltd (Oxxon) potentially
worth up to £44 million ($83 million) in up-front and milestone
payments, in the event four products complete commercialisation.
Royalties will be paid on future sales of any products which might be
derived from the DISC-HSV Vector platform.

The agreement provides Oxxon with the right to use the DISC-HSV
Vector in a number of specified indications in the areas of oncology
and infectious diseases.  Oxxon also has the option to further, as
yet unspecified, indications subject to payment of additional fees.
The agreement includes global development, manufacturing and
marketing rights to DISC-GM-CSF, an oncology product developed using
the DISC-HSV Vector platform, which has successfully completed a
Phase I dose escalating safety study.

Clinical Trials Manufacturing Facility
In line with our continuing strategy of generating revenues through
the utilization of excess capacity at our clinical trials
manufacturing facility, we entered into a manufacturing contract with
a Danish biotechnology company in early 2005.

Financial Summary
The financial results for the quarter represent Xenova's first
financial statements presented following the adoption of IFRS on 1
January 2005. Comparatives for the prior year have also been restated
using IFRS and a reconciliation of the adjustments is included in the
notes. All numbers are unaudited.

Operating Performance
In the three months to 31 March 2005, revenues from licensing
agreements, strategic partnerships and manufacturing outsourcing were
£1.1m ($2.0m), (2004: £0.9m ($1.6m)).  Revenue included license fees
and milestones of £0.7m ($1.2m) and manufacturing revenue of £0.4m

Cost of sales fell to £0.4m ($0.8m) from £0.8m ($1.5m) in 2004 as
manufacturing activities focused more on internal projects in the
quarter, compared to the same period last year.

Research and development expenditure of £3.2m ($5.9m) (2004: £3.2m
($6.1m)) was in line with the prior year.  Costs were mainly incurred
in respect of the TransMID(TM) Phase III trial as well as the TA-NIC
Phase I trial.

Administrative expenses of £1.5m ($2.9m) (2004: £1.0m ($1.9m))
increased by £0.5m from 2004 as a result of increased professional
fees incurred in corporate activities.

Other income generated from sub-letting space in Cambridge and Slough
increased to £0.2m ($0.5m) in 2005 from £0.1m ($0.2m) last year
reflecting the impact of the Genzyme lease at Cambridge which
commenced in Q2 2004.

The net loss per share in Q1 was 0.8p (1.5c) (2004: 0.9p (1.7c)).

Cash, short-term deposits and investments
Cash, short-term deposits and investments at 31 March 2005 totalled
£9.4m ($17.6m) (2004: £22.0m ($41.3m)).  The Group held cash of £0.5m
($0.9m) and short-term deposits and investments of £8.9m ($16.7m) at
31 March 2005 (2004: cash £1.1m ($2.1m), short-term deposits and
investments £20.9m ($39.3m)).

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

Consolidated Profit and Loss Account (unaudited)

|                           |   |        Three months ended         |
|                           |   | Unaudited | Unaudited | Unaudited |
|                           |   |  31 March |  31 March |  31 March |
|                           |   |      2005 |      2005 |     2004* |
|                           |   |      $000 |      £000 |      £000 |
| Revenue                   |   |     1,993 |     1,060 |       855 |
|                           |   |           |           |           |
| Cost of sales             |   |     (803) |     (427) |     (804) |
| Gross profit              |   |     1,190 |       633 |        51 |
|                           |   |           |           |           |
| Operating expenses        |   |           |           |           |
| Research and development  |   |   (5,944) |   (3,162) |   (3,222) |
| costs                     |   |           |           |           |
| Administrative expenses   |   |   (2,940) |   (1,564) |   (1,001) |
| Other income              |   |       453 |       241 |        99 |
|                           |   |           |           |           |
| Operating loss            |   |   (7,241) |   (3,852) |   (4,073) |
|                           |   |           |           |           |
| Interest receivable       |   |       241 |       128 |       236 |
| Amounts written off       |   |      (62) |      (33) |     (102) |
| investments               |   |           |           |           |
| Share of post tax         |   |         2 |         1 |       (8) |
| profit/(loss) of joint    |   |           |           |           |
| ventures                  |   |           |           |           |
|                           |   |           |           |           |
| Loss on ordinary          |   |   (7,060) |   (3,756) |   (3,947) |
| activities before         |   |           |           |           |
| taxation                  |   |           |           |           |
|                           |   |           |           |           |
| Taxation                  |   |       564 |       300 |       150 |
|                           |   |           |           |           |
| Loss for the period       |   |   (6,496) |   (3,456) |   (3,797) |
|                           |   |           |           |           |
|                           |   |           |           |           |
| Loss per share (basic and |   |    (1.5c) |    (0.8p) |    (0.9p) |
| diluted)                  |   |           |           |           |
|                           |   |           |           |           |
| Shares used in computing  |   |   431,544 |   431,544 |   431,516 |
| net loss per share        |   |           |           |           |
| (thousands)               |   |           |           |           |

* Restated following the adoption of IFRS, see below.

US Dollar amounts have been translated at the closing rate on 31
March 2005 (£1.00:$1.88) solely for information

Condensed Consolidated Balance Sheet (unaudited)

|                          |   | Unaudited | Unaudited |  Unaudited |
|                          |   |     As at |     As at |      As at |
|                          |   |  31 March |  31 March |  31 March* |
|                          |   |      2005 |      2005 |       2004 |
|                          |   |      $000 |      £000 |       £000 |
|                          |   |           |           |            |
| Cash, short-term         |   |    17,604 |     9,364 |     21,970 |
| deposits and investments |   |           |           |            |
|                          |   |           |           |            |
| Other current assets     |   |     7,994 |     4,252 |      4,668 |
|                          |   |           |           |            |
| Fixed assets (including  |   |    45,135 |    24,008 |     26,999 |
| goodwill)                |   |           |           |            |
|                          |   |           |           |            |
|                          |   |           |           |            |
| Total assets             |   |    70,733 |    37,624 |     53,637 |
|                          |   |           |           |            |
|                          |   |           |           |            |
| Current liabilities      |   |  (12,382) |   (6,586) |    (9,193) |
| (including provisions &  |   |           |           |            |
| deferred income)         |   |           |           |            |
|                          |   |           |           |            |
| Shareholders' equity     |   |  (58,351) |  (31,038) |   (44,444) |
|                          |   |           |           |            |
|                          |   |           |           |            |
| Total liabilities and    |   |  (70,733) |  (37,624) |   (53,637) |
| shareholders' equity     |   |           |           |            |
|                          |   |           |           |            |

* Restated following the adoption of IFRS, see below.

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 International Financial Reporting Standards
which differ from those set out in the Group's 2004 Annual Report and
Accounts, but which will be adopted in the Group's 2005 Annual Report
and Accounts.  The key differences are summarised below.  The 2004
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 Group does not
have sufficient cash resources to fund its current level of
activities for at least the next 12 months, but the Directors have
reasonable expectation that the Group can secure additional cash
resources during 2005 for this purpose, and have therefore prepared
these financial statements on a going concern basis.  In the event
that additional funds are not secured, the Group would seek to reduce
its overheads and might delay, reduce or eliminate the development of
product candidates which are not externally funded by partners.  In
addition, the Group might also be forced to license the rights to
some of its drug candidates and technologies at an earlier stage than
would otherwise be intended, which would be likely to be on less
favourable terms.  The financial statements do not contain any
adjustments that would arise if the financial information was not
drawn up on a going concern basis.

International Financial Reporting Standards (IFRS)

Reconciliation of net income (unaudited)

|                            |   |   |    Unaudited |     Unaudited |
|                            |   |   |   Year ended | Quarter ended |
|                            |   |   |  31 December |      31 March |
|                            |   |   |         2004 |          2004 |
|                            |   |   |         £000 |          £000 |
|                            |   |   |              |               |
| Loss for the period        |   |   |     (12,523) |       (4,433) |
| reported under UK GAAP     |   |   |              |               |
|                            |   |   |              |               |
| Goodwill amortisation      |   |   |        2,229 |           562 |
| Other intangible asset     |   |   |          104 |            26 |
| amortisation               |   |   |              |               |
| Share based payments       |   |   |         (99) |            48 |
| Loss on disposal of        |   |   |        (141) |             - |
| manufacturing facility     |   |   |              |               |
|                            |   |   |              |               |
| Loss for the period under  |   |   |     (10,430) |       (3,797) |
| IFRS                       |   |   |              |               |
|                            |   |   |              |               |

Reconciliation of equity (unaudited)

|                        |   |    Unaudited | Unaudited | Unaudited |
|                        |   |        As at |     As at |     As at |
|                        |   |  31 December |  31 March | 1 January |
|                        |   |         2004 |      2004 |      2004 |
|                        |   |         £000 |      £000 |      £000 |
|                        |   |              |           |           |
| Equity reported under  |   |       35,949 |    43,856 |    48,334 |
| UK GAAP                |   |              |           |           |
|                        |   |              |           |           |
| Goodwill amortisation  |   |        2,229 |       562 |         - |
| Other intangible asset |   |          104 |        26 |         - |
| amortisation           |   |              |           |           |
| Financial instruments  |   |         (51) |         - |         - |
|                        |   |              |           |           |
| Equity under IFRS      |   |       38,231 |    44,444 |    48,334 |
|                        |   |              |           |           |

A summary of the principal differences between UK GAAP and IFRS as
they apply to Xenova are as follows:

Goodwill amortisation
UK GAAP requires goodwill to be amortised over its estimated useful
economic life, which Xenova has determined to be 10 years in respect
of the Cantab and KS Biomedix acquisitions.  Under IFRS, however,
goodwill is considered to have an indefinite life and so is not
amortised, but subject to annual impairment testing.

Other intangible asset amortisation
Under UK GAAP, Xenova amortises intangible assets (acquired
intellectual property) over their estimated useful economic life,
which is based on the remaining life of the underlying patents.  IFRS
only permits amortisation to commence when the asset becomes
available for use, with annual impairment testing required before
this point.  Xenova, in line with guidance provided for companies in
the sector, has determined that the point at which amortisation of
these assets commences should be regulatory approval as this is the
point at which the asset is available for use. Until that time the
asset will be tested annually for impairment.

Share-based payments
The current UK GAAP approach to share-based payments is to record any
intrinsic expense on grant incurred by the company. In practise this
means that for share options granted at market price, there is no
charge to the income statement. Where shares or options are granted
at below market price or no cost to the employee (for example under
long term incentive plans) the income statement is charged with an
amount equal to the difference between market price and the grant
price on the date of the award, with this charge spread over the
performance period (usually three years).

IFRS 2, Share-based Payment, requires the fair value of all share or
options issued to be charged to the income statement over the vesting
period. The major difference arises in respect of options issued to
employees at market value where no charge was recorded under UK GAAP.

Loss on disposal of manufacturing facility
Under UK GAAP, some foreign exchange differences on loan accounts
with overseas subsidiaries can be taken directly to reserves and not
through the profit and loss account. Under IFRS these foreign
exchange differences are recycled through the profit and loss account
on disposal of the subsidiary. In addition, IFRS requires financial
instruments to be recognised at their fair value. The deferred
consideration for the sale of the manufacturing facility is
classified as a financial instrument and has therefore been
recognised at its fair value under IFRS. In accordance with UK GAAP
the deferred consideration was recorded at nominal value.

This adjustment is a combination of the cumulative foreign exchange
differences charged to reserves in relation to the manufacturing
facility which was sold in September 2004, and the impact of
discounting the deferred consideration to its fair value.

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 product candidates in clinical development, including three cancer
programmes:  its lead product candidate TransMID(TM), for the
treatment of high-grade glioma, is in 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 has approximately 75 full time employees 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 and

This press release contains "forward-looking statements," including
statements about the revenues which we could earn from milestone
payments for product candidates under development 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:
adverse results and delays in our drug discovery and clinical
development programs; failure to achieve product development or
commercialization milestones on a timely basis or at all; failure to
obtain effective 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 on-going 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 our reports on file 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.

US dollar amounts provided in the text have been translated at the
closing rate on 31 March 2004 (£1.00:$1.88) solely for information.


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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