Xenova Group plc Third Quarter Results SLOUGH, England, Nov. 6
/PRNewswire-FirstCall/ -- Quarterly Highlights -- Acquisition of KS
Biomedix Holdings plc -- XR5944: start of Phase I clinical trial of
novel DNA targeting agent -- Cash, short-term deposits and
investments 10.6m pounds sterling ($17.5m) at 30 September 2003 (30
September 2002: 10.0m pounds ($16.6m)) Subsequent Events -- TA-NIC:
start of second Phase I clinical trial for anti-smoking vaccine --
TA-CD: start of Phase IIb clinical trial for anti-cocaine vaccine
-- Publication of novel findings relating to use of Xenova's OX-40
technology and its potential for the treatment of influenza David
Oxlade, Chief Executive Officer, said: "We have now completed the
acquisition of KS Biomedix and made good progress with the
integration of the business. The acquisition has strengthened our
clinical portfolio and helped to lay the foundations for Xenova to
become a broader-based oncology business. In addition, it has
created substantial opportunities for synergies and cost savings
across the enlarged Group which we have already started to
exploit." "By focusing on our key clinical development programmes
we believe we will be able to deliver greater shareholder value and
significantly improve the long-term prospects of the Group." 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 Celltech,
Genentech, Lilly, Millennium Pharmaceuticals, Nycomed, Pfizer and
QLT. For further information about Xenova and its products please
visit the Xenova website at http://www.xenova.co.uk/ For Xenova:
Disclaimer to take advantage of the "Safe Harbor" provisions of the
US Private Securities Litigation Reform Act of 1995. This press
release contains "forward-looking statements," including statements
about our ability to integrate acquired businesses and realize cost
savings from integration, and the discovery, development and
commercialization of products. Various risks may cause Xenova's
actual results to differ materially from those expressed or implied
by the forward looking statements, including: unexpected costs and
delays in integrating acquired businesses into our group, adverse
results in our drug discovery and clinical development programs;
failure to obtain patent protection for our discoveries; commercial
limitations imposed by patents owned or controlled by third
parties; our dependence upon strategic alliance partners to develop
and commercialize products and services; difficulties or delays in
obtaining regulatory approvals to market products and services
resulting from our development efforts; the requirement for
substantial funding to conduct research and development and to
expand commercialization activities; and product initiatives by
competitors. For a further list and description of the risks and
uncertainties we face, see the reports we have filed with the
Securities and Exchange Commission. We disclaim any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Acquisition of KS Biomedix Holdings plc On 14 August 2003 Xenova
announced a recommended offer to acquire 100% of the share capital
of KS Biomedix Holdings plc, a UK listed drug research and
development group. This transaction became unconditional in all
respects on 12 September 2003. The planned integration and
rationalisation across the two businesses is well advanced. The
Directors estimate that annualised cost- savings of approximately
10m pounds will be achieved across both businesses, based on
reductions in headcount, facilities and R&D costs (including
Xenova's restructuring activities commencing in May 2003). The
one-off reorganisation and post acquisition integration cost of
achieving these savings is expected to be approximately 3.3m
pounds. Like Xenova, KS Biomedix was focused on the development of
products for the treatment of cancer, particularly clinical
indications where survival prognosis is poor and there are few, if
any, approved products. As a result of this acquisition, the
enlarged Xenova Group now has a broader clinical pipeline with a
total of 12 products in clinical stage development including eight
products in oncology (three in Phase II or Phase III) and four in
addiction and immunology. The table below summarises the Xenova's
drug candidates and early development programmes. Programmes
highlighted in bold text have been prioritised for development. The
Xenova Directors believe that greater shareholder value will be
achieved by focusing on six key clinical development programmes. Of
these six, four (TransMID(TM), tariquidar, TA-CD, XR11576/XR5944)
benefit from external funding or support, substantially reducing
the costs of clinical development to Xenova. Xenova has
deprioritised the majority of its preclinical programmes except
where externally funded, as is the case for the Genentech
collaboration on OX-40. Drug Therapeutic Stage of Partner
Candidates/Programmes area Development Clinical programmes
TransMID(TM) (XR311) Glioma Phase III Sosei, Nycomed, Medison,
Ranbaxy Tariquidar (XR9576) Cancer Phase II QLT (North America
only) TA-HPV / TA-CIN Cervical cancer Phase II TA-CD Cocaine Phase
II NIDA* addiction XR303 Cancer Phase I HumaRAD Cancer Phase I
XR11576/XR5944 Solid tumours Phase I Millennium (North America
only) DISC-PRO Genital and oro- Phase I labial herpes prophylaxis
TA-NIC Nicotine Phase I addiction DISC-GMCSF Cancer Phase I
DISC-VET Bovine Herpes Phase I Pfizer Virus equivalent Preclinical
programmes Triomics Solid tumours Preclinical Option to acquire
XR11612 Solid tumours Preclinical As XR11576 OX-40 Autoimmune
Preclinical Celltech, disorders Genentech OX-40L Infectious
Preclinical diseases, anti- cancer PAI-1 Cardiovascular Preclinical
Lilly PAI-1 Cancer Preclinical Lilly (Option)** MRP Cancer and
Preclinical asthma VP22 (Phogen joint Intra-cellular Preclinical
Genencor venture) delivery system HIF-1 alpha Cancer Preclinical
MEN-B Meningitis Preclinical XR304 Ulcerative Preclinical colitis
XR113 Cancer Preclinical Ribosome display Cancer targets
Preclinical Babraham (Discerna) * NIDA provides funding to
independent investigators to conduct certain trials of TA-CD, but
has no rights for its commercialisation, nor is funding required to
be repaid by Xenova. ** Lilly has an option to acquire development
and commercialization rights relating to PAI-1 inhibitors in the
cancer field. Product Pipeline Year to Date Update Clinical Trials
Cancer -- TransMID(TM) treatment for high-grade glioma Following
the acquisition of KS Biomedix, TransMID(TM) is now the most
advanced product in Xenova's pipeline, having already commenced
Phase III development and shortly to enter Phase III clinical
trials. TransMID(TM) is a treatment for high-grade glioma (brain
cancer) a disease for which no efficacious alternatives are
currently available and which has a very poor prognosis.
TransMID(TM) is a modified diphtheria toxin conjugated to
transferrin. The diphtheria toxin gains entry to the tumour cell
when the transferrin to which it is attached binds to transferrin
receptors on the surface of the cells. Transferrin receptors are
particularly prevalent on rapidly dividing cells, and the high
level of transferrin receptor expression on glioma cells makes
transferrin an ideal targeting mechanism for the diseased cells.
Once inside a cell the diphtheria toxin interferes with protein
synthesis and ultimately kills the cell. TransMID(TM) is pumped
directly into the brain tumour via two catheters using CED
(Convection Enhanced Delivery -- licensed from the National
Institute of Health, US). CED greatly enhances the distribution of
drug through the tumour mass and produces high local concentrations
of drug. Since TransMID(TM) is directly infused into the tumour, it
circumvents the usual obstacles presented to drug delivery to the
brain by the blood-brain barrier and reduces systemic side effects.
Plans to progress TransMID(TM) into Phase III trials in adults with
recurrent and/or progressive non resectable glioblastoma have
already been submitted by KS Biomedix and have been agreed with the
FDA. However, following its acquisition of KS Biomedix Xenova
intends to seek FDA approval to change the current Phase III
programme design from one large Phase III trial to two smaller
Phase III trials. Cancer -- tariquidar multi-drug resistance (MDR)
programme In June 2002, tariquidar entered two pivotal Phase III
clinical trials as an adjunctive treatment in combination with
first-line chemotherapy for non- small cell lung cancer (NSCLC)
patients. On 12 May 2003, QLT announced that the Phase III trials
would be stopped following a recommendation from the independent
Data and Safety Monitoring Committee (DSMC) which had just
completed the unblinded interim review of the data for the two
ongoing trials. A detailed review of the unblinded clinical data on
the patients in the Phase III trials is continuing. On 23 July
2003, QLT announced that enrolment in the Phase IIb trial for
patients with chemo-refractory breast cancer, which is being
carried out at the MD Anderson Centre, Texas, had been sufficiently
completed at 17 patients. QLT will not be enrolling new patients in
this trial. Cancer -- Therapeutic Vaccines 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 vaccines. 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. Cancer -- Novel DNA Targeting Agents On 3 July 2003, Xenova
announced the start of a Phase I clinical trial of XR5944, the
second of three novel DNA targeting agents that are the subject of
a licence agreement with Millennium Pharmaceuticals Inc. The first
of these compounds XR11576, entered Phase I clinical trials in
February 2002. The third, XR11612 is in preclinical development.
The XR5944 Phase I clinical trial is being conducted at three
centres in the United Kingdom and will include approximately 40
patients. In preclinical studies, XR5944 has demonstrated a high
level of anti-tumour activity against a number of human tumour
models, causing both partial and complete regression of large
established tumours. Recent data published in the Proceedings for
the 2003 Annual Meeting of the American Association for Cancer
Research, suggest that XR5944 acts through a novel mechanism of
action distinct from other current cytotoxic agents. Further
exploration into the mechanism of action of XR5944 is ongoing.
Vaccines of Addiction On 15 January 2003, Xenova announced that it
had reached an agreement with ImmuLogic Pharmaceutical Corporation
Liquidating Trust ("ImmuLogic") to buy out all ImmuLogic's
remaining rights to future milestone and royalty payments relating
to two of Xenova's therapeutic vaccines; TA-CD for the treatment of
cocaine addiction and TA-NIC for nicotine addiction. TA-CD The
start of a Phase IIa cocaine administration trial was announced on
14 April 2003. The ten-patient open label trial is being conducted
in the United States and is designed to evaluate the effect of
TA-CD on behavioural changes associated with cocaine
administration. The results of a second Phase IIa dose escalation
trial were reported on 17 June 2003. This study, which started in
April 2002, was designed to evaluate the safety and immunogenicity
of TA-CD using 4 or 5 dose vaccination schedules. The trial
involved the enrolment of 13 subjects, all of whom were cocaine
abusers seeking help with their addiction at the start of the
trial. Patients were treated with up to five injections of the
vaccine over a twelve week period using doses up to 360 �g each. Of
the thirteen enrolled, twelve subjects completed the 12 month
evaluation period to assess safety, immune response and cocaine
usage. As for the previous study, the results showed the vaccine to
be safe and well tolerated with a dose-related immune response. Of
those 16 patients in the two Phase IIa studies who used cocaine at
any time following vaccination, 14 reported a reduction of the
usual euphoric effect normally associated with cocaine use,
providing further anecdotal evidence of the vaccine's proposed mode
of action. On 24 October 2003, Xenova announced the start of the
first randomised, placebo controlled Phase IIb clinical trial for
TA-CD. The primary objective of this new study is to determine the
efficacy of TA-CD in addicts seeking treatment for cocaine abuse,
and to determine appropriate end-points for a Phase III study. Up
to 132 subjects, all of whom are methadone-dependent cocaine
addicts being treated for drug dependency 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 last up to two years (depending
upon the rate of recruitment) and will allow an objective
assessment of the efficacy of the TA-CD vaccine against placebo.
The TA-CD investigations are being supported by the National
Institute on Drug Abuse (NIDA) which recognises cocaine abuse to be
a major problem in the U.S. NIDA has also supported earlier
clinical work as part of this programme. TA-NIC Xenova announced
the start of a second clinical trial for TA-NIC on 8 October 2003.
This second Phase I study builds upon the findings of a previous
Phase I trial which were announced in June 2002. The results of
this first study, which was the first evaluation of an
anti-nicotine vaccine in man, showed that the vaccine generated a
specific anti-nicotine response and that it was safe and well
tolerated both systemically and locally. In the new Phase I study
approximately 60 smokers are being recruited into a double-blind,
randomised, placebo-controlled trial which is being run at a
European clinical centre experienced in testing smoking related
therapies. The objective of the trial is to further establish
safety and tolerability, and to determine the vaccination dose and
schedule required to induce the optimal anti-nicotine antibody
response. Three different doses of the vaccine will be evaluated.
The impact of vaccination on nicotine-induced changes in heart rate
and skin temperature will also be monitored. Preclinical Programmes
OX-40 On 20 October 2003 novel findings relating to a research
collaboration, involving Xenova's OX40 technology and its potential
for the treatment of influenza, were published by Imperial College,
London. Pre-clinical studies conducted by Imperial College
demonstrated that down-regulation of the immune response, through
blocking the OX40-OX40 ligand interaction, could alleviate the
symptoms of influenza, without affecting the ability to clear the
virus. This new research suggests that the down- regulation of OX40
signaling may play an important role in the fight against the
symptoms of influenza and perhaps other diseases similarly
characterised by excessive immune response. OX40 is a platform
technology capable of producing multiple drug candidates targeting
cancer, autoimmune and other diseases where the immune system is
involved. Xenova's rights to the OX40 technology include rights
relating to the up-regulation of the immune system which may be
used for the development of novel treatments for cancer and
infectious disease. Xenova's rights to down-regulate the immune
system have been the subject of development and licence agreements
entered into with Celltech and Genentech. Contract Manufacture On 5
June 2003, Xenova announced the signing of a two-year
Manufacturing, Development and Clinical Supply Agreement with
Pharmexa A/S (CSE:PHARMX) for the contract manufacture of clinical
supplies of a vaccine targeting the human HER-2 protein.
Manufacture will take place at Xenova's Clinical Trial
Manufacturing Facility in Cambridge. On 8 September 2003 Xenova
received notification that its Clinical Trials Manufacturing
Facility (CTMF) in Cambridge has been successfully inspected by the
Medicines and Healthcare products Regulatory Agency (MHRA). The
inspection took place under the Voluntary Scheme for Inspection of
Manufacturers. Xenova has received a letter from the MHRA
confirming that its operations are in compliance with EU Good
Manufacturing Practices. Xenova's CTMF has been manufacturing
clinical trial supplies since 1995 and recently announced that it
is offering the facility and its supporting Development
organisation for contract manufacturing. Accreditation by the MHRA
will enable Xenova to continue to provide contract manufacturing
services in full compliance with the forthcoming Clinical Trials
Directive into 2004 and beyond. As well as its own CTMF facility in
Cambridge, Xenova acquired additional manufacturing facilities in
Edmonton, Canada though the acquisition of KS Avicenna a
wholly-owned subsidiary of KS Biomedix. KS Avicenna manufactures KS
Biomedix products for clinical trials. Changes to the Xenova Board
On 13 August 2003, Research Director and Chief Scientific Officer
Michael Moore, and Medical Director, John St Clair Roberts resigned
from the Company and the Xenova Board. Further changes to the
Xenova Board were announced, as planned, following the acquisition
of KS Biomedix: on 12 October 2003 John Rennocks and Dr Michael
Young, non executive directors of KS Biomedix, joined the Board of
Xenova as non executive directors. Howard Wachtler and Gerard
Fairtlough resigned their positions as non executive directors of
Xenova on 17 October 2003. Financial Summary Operating Performance
In the nine months to 30 September 2003, Xenova's continuing
revenues from licensing agreements, strategic partnerships and
manufacturing outsourcing were 6.9m pounds ($11.4m) (2002: 10.7m
pounds ($17.7m)). In accordance with Xenova's revenue recognition
policy, of the 6.9m pounds ($11.5m) received from QLT in 2001 as
part of the tariquidar licensing agreement, 2.1m pounds ($3.5m) was
included in the nine months to 30 September 2003, with a further
1.7m pounds ($2.9m) being deferred to future periods. Following the
payment of the first milestone of 0.7m pounds ($1.2m) in the
period, in respect of the OX40 programme with Genentech, 1.3m
pounds ($2.2m) (2002: 0.6m pounds ($1.0m)) of the total upfront
licence fee and milestone of 3.5m pounds ($5.8m) have been
recognised in the first nine months, with a further 1.3m pounds
($2.1m) being deferred to future periods. Contract development
revenue of 2.6m pounds ($4.3m) (2002: nil pounds) was recognised in
the first nine months in respect of the ongoing Millennium
collaboration on the novel DNA targeting agents. Other revenue
included 0.8m pounds ($1.4m) (2002: 0.4m pounds ($0.7m)) in respect
of ongoing contract manufacturing. Net operating expenses from
continuing operations in the period to 30 September 2003 were 17.2m
pounds ($28.6m). Excluding the exceptional reorganisation costs of
2.3m pounds ($3.9m), the net operating expenses in the period to 30
September 2003 of 14.9m pounds ($24.7m) declined 13.4% compared to
the same period in 2002 (17.2m pounds ($28.5m)). This was as a
result of the initial cost savings from the reorganisations
implemented in the first half of 2003. Continuing operations
research and development expenditure for the nine months to 30
September 2003 was 11.5m pounds ($19.1m), lower than the same
period in 2002 (13.3m pounds ($22.1m)). The development costs under
the Millennium licence agreement of 2.6m pounds ($4.3m) have been
recovered. Other expenditure was incurred in respect of the
Vaccines of Addiction programme; including the completion of a
Phase II dose escalation study with TA-CD, the start of a Phase IIa
cocaine administration trial with TA-CD, and completion of a Phase
I study in TA-NIC. Total continuing operations administrative
expenditure for the nine months to 30 September 2003 of 6.1m pounds
($10.1m) (2002: 4.2m pounds ($7.0)) included 2.3m pounds ($3.8m) in
respect of exceptional reorganisation costs and 0.9m pounds ($1.5m)
in respect of goodwill amortisation arising on the acquisition of
Cantab Pharmaceuticals plc in 2001. Administrative expenses,
excluding both exceptional reorganisation expenses and the
amortisation of goodwill, were 2.9m pounds ($4.7m) which reflected
cost savings made since 2002 (2002: 3.4m pounds ($5.6m)). The
subletting of excess facility space further reduced net expenses in
the period by 0.3m pounds ($0.4m) (2002: 0.4m pounds ($0.7m)).
Following the announcement of the cessation of Phase III trials of
tariquidar, the Group has undertaken a further cost saving
reorganisation, which included a headcount reduction and project
prioritisation. Included in administrative expenses, within
exceptional reorganisation costs, is 2.3m pounds ($3.8m) (2002: nil
pounds) in respect of severance payments and a vacant leasehold
provision. Total exceptional reorganisation costs are 3.3m pounds
($5.5m), including 1.0m pounds ($1.7m) in respect of the acquired
KS Biomedix business. As a result of the above reorganisation,
surplus facilities have become available at the main Cambridge
site. The Group is currently in negotiations to sublet or surrender
the remaining 20 year lease on this property. The charge made
reflects a vacant leasehold provision which has been calculated
based upon management's expectations of future subletting
opportunities and surrender payments, discounted at a rate of 4%
per annum. The company continues to explore licensing opportunities
for its pipeline products to maximise value for shareholders and
reduce cash outflow. The net loss per share from continuing
operations in the nine months to 30 September 2003 was 5.2p (2002:
4.7p). Treasury Cash, short-term deposits and investments at 30
September 2003 totalled 10.6m pounds ($17.5m) (31 December 2002:
19.2m pounds ($31.9m)). Of this balance, cash was 3.9m pounds
($6.5m) and short-term deposits and investments were 6.7m pounds
($11.1m) at 30 September 2003 (31 December 2002: cash 2.6m pounds
($4.4m), short-term deposits and investments 16.6m pounds
($27.6m)). Included in short-term deposits and investments is an
investment in Cubist Pharmaceuticals Inc., which at 30 September
2003 is valued at 0.4m pounds ($0.7m) (31 December 2002: 0.3m
pounds ($0.6m)). On 16 September 2003, 23,500 of the 88,668 Cubist
Pharmaceutical Inc. shares were sold for 0.2m pounds. During the
quarter 0.2m pounds ($0.3m) of surplus fixed assets were sold at
net book value. Share capital The number of shares in issue stood
at 243.7 million as at 30 September 2003 (31 December 2002: 139.1
million). The Directors do not propose an interim dividend for 2003
(2002: nil). Acquisition of KS Biomedix Holdings Plc On 12
September the Group announced the successful acquisition of KS
Biomedix Holdings plc. Under the terms of the offer made to KS
Biomedix shareholders, 1.0714 shares in Xenova Group plc have been
issued in exchange for each share held in KS Biomedix. An
additional contingent deferred consideration of 10p per KS Biomedix
share held will be paid in Xenova Group plc shares upon the
commercial sale of the KS Biomedix TransMID(TM) product in either
the US or European markets before 14 August 2011. Based upon a
Xenova Group plc closing share price of 15.25 pence on 11 September
this values KS Biomedix at 17.0m pounds ($28.3m) including the
contingent deferred consideration payable in respect of
TransMID(TM) of 6.5m pounds ($10.7m). In the provisional
calculation of the fair values of the assets and liabilities
acquired, there have been no accounting policy adjustments made to
the balance sheet values stated at 11 September. Intangible fixed
assets acquired of 5.6m pounds ($9.3m) comprised goodwill in
respect of the acquisition by KS Biomedix of KS Avicenna Inc in
2001, which has not been capitalised separately from the goodwill
arising on the acquisition of KS Biomedix by Xenova. The
provisional fair value of the assets and liabilities acquired is
7.2m pounds ($11.9m). The consideration totalling 17.6m pounds
($29.2m) (including 0.6m pounds ($0.9m) of acquisition expenses)
generates goodwill upon acquisition of 10.4m pounds ($17.2m).The
goodwill arising has been capitalised and amortised over the 10
year estimated useful life of the acquired business. In addition to
the 0.6m pounds ($0.9m) of acquisition expenses, share issue costs
of 0.6m pounds ($1.1m) were incurred. In addition to acquiring 100%
of KS Biomedix Holdings plc, Xenova acquired 100% of KS Canada
Holdings Inc, KS Canada Inc and KS Avicenna Inc, as well as a 50%
share in Discerna Ltd, a joint venture with Babraham Biosciences
Technology Limited. As part of the restructuring activities
following completion of the acquisition approximately 26 positions
have been lost across both head office and the research and
development functions. Included within administration expenses for
the period to 30 September 2003 is 0.7m pounds in respect of
severance payments regarding the acquired business. The net
operating loss included in the financial statement in respect of KS
Biomedix for the period from acquisition to the 30 September 2003
is 1.5m pounds ($2.4m). Consolidated Profit and Loss Account
(unaudited) for the periods ended 30 September 2003 Three months
ended Nine months ended 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30
Sept 2003 2003 2002 2003 2003 2002 $000 000 000 $000 000 000 pounds
pounds pounds pounds Turnover (including share of joint venture)
Continuing operations 4,527 2,725 4,025 11,435 6,883 10,939 Less:
share of joint venture revenue (5) (3) (123) (13) (8) (274)
Acquisitions 17 10 -- 17 10 -- Turnover 4,539 2,732 3,902 11,439
6,885 10,665 Operating expenses Research and development costs
Continuing operations (5,604) (3,373) (4,902) (19,068) (11,477)
(13,326) Acquisitions (419) (252) -- (419) (252) -- (6,023) (3,625)
(4,902) (19,487) (11,729) (13,326) Administrative expenses
Continuing operations (1,359) (818) (1,096) (4,738) (2,852) (3,351)
Continuing operations: exceptional reorganisation costs (482) (290)
-- (3,865) (2,326) -- Continuing operations expenses: amortisation
of goodwill (485) (292) (293) (1,455) (876) (879) (2,326) (1,400)
(1,389) (10,058) (6,054) (4,230) Acquisitions (415) (250) -- (415)
(250) -- Acquisitions: exceptional reorganisation costs (1,710)
(1,029) -- (1,710) (1,029) -- Acquisitions amortisation of goodwill
(71) (43) -- (71) (43) -- Total administrative expenses (4,522)
(2,722) (1,389) (12,254) (7,376) (4,230) Other operating income
Continuing operations 219 132 107 548 330 380 Total net operating
expenses (10,326) (6,215) (6,184) (31,193) (18,775) (17,176) Group
operating loss Continuing operations (3,188) (1,919) (2,282)
(17,155) (10,326) (6,511) Acquisitions (2,599) (1,564) -- (2,599)
(1,564) -- (5,787) (3,483) (2,282) (19,754) (11,890) (6,511)
Continuing operations: share of operating (loss)/profit of joint
venture (128) (77) 28 (317) (191) 63 Total operating loss: Group
and share of joint venture (5,915) (3,560) (2,254) (20,071)
(12,081) (6,448) Interest (net) 110 66 130 545 328 464 Share of
interest of joint venture -- -- 2 5 3 5 Amounts written back
on/(off) investments 60 36 (256) 269 162 (1,893) Loss on ordinary
activities before taxation (5,745) (3,458) (2,378) (19,252)
(11,588) (7,872) Tax on loss on ordinary activities 402 242 420 912
549 1,291 Loss on ordinary activities after taxation (5,343)
(3,216) (1,958) (18,340) (11,039) (6,581) Loss per share continuing
operations (basic and diluted) (1.4c) (0.9p) (1.4p) (8.7c) (5.2p)
(4.7p) Loss per share (basic and diluted) (2.7c) (1.6p) (1.4p)
(10.1c) (6.1p) (4.7p) Shares used in computing net loss per share
(thousands) 197,596 197,596 139,057 182,221 182,221 139,057 US
Dollar amounts have been translated at the closing rate on 30
September 2003 (1.00 pound: $1.6614) solely for information.
Condensed Consolidated Balance Sheet (unaudited) as at 30 September
2003 Unaudited Unaudited Audited As at As at As at 30 September 30
September 31 December 2003 2003 2002 $000 000 000 pounds pounds
Cash, short-term deposits and investments 17,546 10,561 19,217
Other current assets 8,566 5,156 3,164 Fixed assets (including
goodwill) 46,335 27,889 15,249 Total assets 72,447 43,606 37,630
Current liabilities (including provisions & deferred income)
18,088 10,887 11,120 Shareholders' equity 54,359 32,719 26,510
Total liabilities and shareholders' equity 72,447 43,606 37,630 US
Dollar amounts have been translated at the closing rate on 30
September 2003 (1.00 pound: $1.6614) solely for information. Notes
to the Financial Statements 1 Basis of preparation These unaudited
statements, which do not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985, have been
prepared using the accounting policies set out in the Group's 2002
Annual Report and Accounts. The 2002 Annual Report and Accounts
received an unqualified auditor's report and have been delivered to
the Registrar of Companies. There have been no changes to the
Group's accounting policies in 2003. The financial information has
been prepared on a going concern basis. This assumes that
additional funds are raised through either equity financing or
licencing of our development programmes. In the event that
additional funds are not secured, the company would immediately
seek to further reduce its overheads and development expenditure on
its drug candidates and would seek to licence rights to some of its
drug candidates and technologies at an earlier stage than currently
intended. Notes to the Financial Statements 2 Acquisition of KS
Biomedix Holdings Plc On 12 September the Group announced the
successful acquisition of KS Biomedix Holding plc. Under the terms
of the offer made to KS Biomedix shareholders, 1.0714 shares in
Xenova Group plc have been issued in exchange for each share held
in KS Biomedix. An additional contingent deferred consideration of
10p per KS Biomedix share held will be paid in Xenova Group plc
shares upon the commercial sale of the KS Biomedix TransMID(TM)
product in either the US or European markets before 14 August 2011.
Based upon a Xenova Group plc closing share price of 15.25 pence on
11 September this values KS Biomedix at 17.0m pounds including the
contingent deferred consideration payable in respect of
TransMID(TM) of 6.5m pounds. Details of the book value and
provisional fair value of the assets and liabilities of KS Biomedix
as at 11 September are set out below: Provisional Book values
Adjustments Fair values 000 000 000 pounds pounds pounds Fixed
assets Tangible 3,296 -- 3,296 Intangible 5,569 (5,569) --
Investment in joint venture - net assets 99 -- 99 Stock 9 -- 9
Debtors 1,991 -- 1,991 Cash and liquid investments 4,082 -- 4,082
Creditors falling due within one year (2,249) -- (2,249) Creditors
falling due after more than one year (61) -- (61) Net assets
acquired 12,736 (5,569) 7,167 Satisfied by: Shares issued and to be
issued 10,551 Contingent deferred consideration to be settled by in
shares 6,458 Expenses of acquisition 553 Total consideration 17,562
Goodwill arising on acquisition 10,395 In this provisional fair
value table there have been no accounting policy adjustments made
to the balance sheet values stated at 11 September. Intangible
fixed assets acquired comprised goodwill in respect of the
acquisition by KS Biomedix of KS Avicenna Inc in 2001, which has
not been capitalised separately from the goodwill arising on the
acquisition of KS Biomedix by Xenova. In addition to the 553,000
pounds of acquisition expenses, share issue costs of 633,000 pounds
were incurred. The goodwill arising on the acquisition of the KS
Biomedix business has been capitalised and amortised over the 10
year estimated useful life of the acquired business. In addition to
acquiring 100% of KS Biomedix Holdings plc, Xenova acquired 100% of
KS Canada Holdings Inc, KS Canada Inc and KS Avicenna Inc, as well
as a 50% share in Discerna Ltd, a joint venture with Babraham
Biosciences Technology Limited. As part of the restructuring
activities following completion of the acquisition approximately 26
positions have been lost across both head office and the research
and development functions. Included within administration expenses
for the period to 30 September 2003 is 0.7m pounds in respect of
severance payments regarding the acquired business. DATASOURCE:
Xenova Group plc CONTACT: UK: David A Oxlade, Chief Executive
Officer, or Daniel Abrams, Group Finance Director, or Jon Davies,
Corporate Communications, all of Xenova Group plc, +44-1753-706600;
or US: Press - Brad Miles, ext. 17, or Daniel Budwick, ext. 14, or
Investors - Jonathan Fassberg, ext. 16, or Lee Stern, ext. 22, all
of Trout Group/BMC Communications, +1-212-477-9007; or David Yates,
or Ben Atwell, both of Financial Dynamics, +44-207-831-3113 Web
site: http://www.xenova.co.uk/
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