Proteome Regulatory News (PRM)

29 Jun 2006 14:00

Proteome Sciences Plc ("the Company")29 June 2006RESULTS FOR THE YEAR ENDED 31st DECEMBER 2005HIGHLIGHTS * Financial * Headline loss (excluding non-cash items and associates) ‚£4.17m (2004 : ‚£ 4.02m) * Loss after tax ‚£6.17m (2004 : ‚£5.20m) * Cash balance ‚£2.59m (2004 : ‚£2.43m) * Additional ‚£2m working capital provided by loan facility from CEO * Consistent and predictable cash burn expected * Biomarkers + Stroke - Licence agreements for high throughput stroke (HTS) with two global leaders in clinical diagnostics + Discussions actively underway with other leading HTS stroke companies + Brain - New research programme discovered 195 proteins differentially expressed in CSF across a broad range of diseases. Patent applications have been filed + Rejection - from a 240 patent sample set, 17 potentially novel biomarkers of kidney transplant rejection identified + Cancer - New ProteoSHOP‚® project in colorectal cancer discovers 11 novel biomarkers + Validation underway in lung and small cell lung cancers for Annexins + Possible use of Annexins as vaccines for lung and oesophagus cancers + vCJD - Novel test designed for disease specific peptide fragmentation + Huntington's - Plasma biomarkers showing correlation with disease progression found. Six proteins of importance and IP filed + BSE - Additional validation and endorsement of existing biomarkers, facilitating the discovery of new proteins for live detection of BSE + Alzheimer's - Study completed using three different approaches (qPST¢â€ž¢, 2DE, SELDI) in blood with 36 differentially expressed proteins revealed + Good start made in AD for validating new targets and designing a virtual library of small molecule `hits' * ProteoSHOP‚® + qPST - in combination with 2DE provides 50% increase in protein coverage + High confidence in data and results from ProteoSHOP‚® through cross-platform protein validation + Co-marketing agreement with Medical Solutions plc + Extensive marketing campaign launched with new contracts under negotiation * Reagents + Fully functioning six plex set of TMT‚® mass tags developed + Two streams of revenue expected from TMT licences: 1. the reagent product 2. licence for the IP covering the field of isobaric mass labelling + TMT‚® licences at advanced stage of negotiation + Development of isobaric mass labelling largely complete + Focus of efforts in chemistry switched to discovery and validation of disease biomarkers * Veri-Q Inc. + Presence of impurities has a significant adverse affect on gene expression analysis using microarrays + Two high profile scientific papers in press awaiting publication + Pilot projects undertaken and in process for commercial licences + Shareholding in Veri-Q increased to 76.9% * Intronn Inc. + In-vivo proof of principle of SMaRT‚® in dyslipidemia + Replicated high levels of improvement in the protein component of HDL - `Good Cholesterol' + In-vivo proof of principle for AAT and most recently haemophilia 12 months ahead of schedule + Design of clinical trails now underway for two lead programmes + Advanced discussions to secure further funding to move SMaRT‚® RNA therapy into clinical trials for dyslipidemia and haemophilia * Current Outlook + Increased need to use protein biomarkers to improve clinical trial data, accelerate drug development, reduce costs and expand the process of personalised medicine + Following the two high throughput stroke licences, prospects for commercialisation of the research programme remain strong + Highest priority is the completion of further external licences + Board looks to the future prospects with increasing confidence Commenting on these results, Christopher Pearce, Chief Executive of ProteomeSciences, said:"The significant increase in the number of pharmaceutical companies approachingus during 2006 in relation to our biomarker portfolio and ProteoSHOP‚® toolboxis highly encouraging and reflects the recognition being placed on proteomicsfor the discovery and validation of biomarkers for application in thediagnosis, prognosis and therapy for diseases.Over the last year, considerable progress has been made with the expansion ofapplications across our research activities and through the discovery of novelbiomarkers in new disease areas including brain diseases, Huntington's,colorectal cancer and kidney transplant rejection and the development of anovel test designed for vCJD. We expect this process to continue in the future.Our licensing programme is moving ahead with two deals signed in highthroughput screening for stroke in recent weeks, with us being at an advancedstage of negotiations for TMT‚® licences and in active negotiations for a numberof new contracts using our ProteoSHOP‚® toolbox and for many of our diseasebiomarkers.As a result of the range of scientific and commercial developments from acrossour activities, the Board looks to the future with increasing confidence withour main priority being the further licensing and commercialisation of theCompany's portfolio of biomarkers and technologies." ENDS Attached: Full text of Chairman's statement, consolidated profit and lossaccount, consolidated balance sheet, consolidated cashflow statement and notesto the financial information.For further information please contact:Proteome Sciences plcwww.proteomics.comChristopher Pearce, Chief Executive Tel: +44 (0)1932 865065Email: christopher.pearce@proteomics.comPublic Relations for Proteome SciencesIKON AssociatesAdrian Shaw Tel: +44 (0)1483 535102Mobile: +44 (0)797 9900733Email: adrian@ikonassociates.comNotes to Editors:Proteome Sciences plc applies high sensitivity proteomics to identify andcharacterise differential protein expression in diseases for diagnostic,prognostic and therapeutic applications. It has to date developed sensitiveblood assays for stroke, vCJD, BSE, solid organ transplant rejection andAlzheimer's disease. The main focus of its research currently addressesneurological, neurodegenerative, diabetes/obesity, oncology and cardiovascularconditions.In addition to its own proprietary biomarkers, Proteome Sciences has developedProteoSHOP‚® (Proteome Sciences High Output Proteomics), a toolbox that offershigh sensitivity and high throughput gel and gel-free proprietary technologiesfor the identification of potential biomarkers and drug targets. These includespecialisation in membrane proteins and protein phosphorylation.The Company has developed a range of specialist reagents to improve theperformance and quantitation of protein separation and characterisation withmass spectrometry, bioinformatics, statistics and pattern recognition. Theseinclude Sensitizer‚®, PST‚®, qPST¢â€ž¢ and TMT‚®.Commercialisation is actively pursued across the portfolio of the Company'sprogrammes and technologies with licensing deals signed in biomarkers forStroke and TSEs and for ProteoSHOP‚®.Proteome Sciences is headquartered in Cobham, Surrey in the UK and haslaboratories at Kings College Hospital, London and Frankfurt InnovationsZentrum (FIZ), Frankfurt. It employs 34 full time scientists in addition to itscorporate and business development staff, and has collaborative researchagreements with leading academic institutes. The Company is listed on theAlternative Investment Market.CHAIRMAN'S STATEMENT for the year ended 31st December 2005Dear Shareholder,I am pleased to report on the progress made for the year ended 31st December2005.The Company has enjoyed considerable success from its research with strongadvances achieved in biomarker discoveries, methodologies and chemical tagging.Against this, the pace of acceptance of protein related technology by the lifesciences industry, which has historically been dominated by genomics, wasslower than anticipated and this was reflected by the delayed timing ofcommercial deals which were expected to conclude in the period.The first half of 2006 has seen a significant increase in the number ofpharmaceutical companies approaching the company in connection with ourexisting biomarker portfolio and the ProteoSHOP‚® toolbox. Other than fordiagnostic purposes, intended uses include measurement of our biomarkers onmodel systems during pre-clinical development and testing of patients duringclinical trials. This reflects the pharmaceutical industry's increasingawareness of the value of biomarkers in improving clinical development and is aclear signal that they are responding positively to the challenges set out inthe U.S. FDA's Critical Path Initiative. This has resulted in an increased needto use biomarkers, largely discovered through proteomics, to improve clinicaltrial data, accelerate drug development, reduce costs and expand the process ofpersonalised medicine.Against this background, the Board therefore believes that prospects for thecommercialisation of the company's research programmes remain strong.Commercialisation of the company's research programmes will generateconsiderable confidence in the company's technology and its applicability inthe use of biomarkers for diagnostic and therapeutic applications and in itschemical mass tags as a key methodology for quantitative measurement ofdifferential protein expression in disease.This has been reflected by the recent announcements of two non-exclusivelicences to test our biomarkers in blood for the high-throughput diagnosticplatforms with two of the global leaders in clinical diagnostics for thedetection, diagnosis and monitoring of stroke. Discussions are taking placewith a number of other players in stroke and further licences are expected.Over the course of 2005, the problem of access to samples for validation ofpreviously discovered protein biomarkers improved considerably and strongprogress has been made which we are confident will result in the conclusion offurther licences with diagnostics and pharmaceutical companies, in particularin the areas of Alzheimer's, cancer and TSEs.The interim statement reflected the company's disappointment at the pace of TMT‚® negotiations. With the termination of exclusivity, the field was re-opened toother shortlisted parties in the last quarter of 2005, all of which aresuitable to undertake global commercialisation of the company's isobarictagging reagents and the Board is encouraged by the progress of discussionswhich are at an advanced stage of negotiation.There are initially two streams of revenue expected from licensing TMT‚®, onefrom the direct reagent product itself and the second from the intellectualproperty ("IP") relating to the field of isobaric mass labelling where theBoard believes that the company's patent filings are comfortably ahead ofcompetitors.The market for the TMT‚® product is considerably larger than was initiallycontemplated and the rapid acceptance of new tools for biomarker discovery andvalidation was clearly signposted as a key requisite in the FDA Critical Pathguidelines. The second stream of revenue, the licence to the chemistry behindthe isobaric mass labels should cover third party reagents/products in themarket which would sit under the IP umbrella. Both activities should providestrong cash flow for the company when commercial licences are completed. TheBoard remains determined to conclude the TMT‚® licensing process as soon aspossible.Over 2005, eleven patents have been granted including lung and oesophaguscancer, chronic rejection, TSE, oligonucleotides and protein sequence tags andnew patent applications have been filed for discoveries made in Alzheimer's,Huntington's, colorectal cancer and Sensitizer‚® mass tags.BiomarkersFrom its research and through its collaborative partners, Proteome Sciences hasestablished a large portfolio of biomarkers that can be used for the earlydetection and monitoring of disease, the evaluation of new compounds andmeasuring the efficiency of treatment.Considerable progress has been made during the year and into 2006 from theportfolio of biomarkers that have been discovered through our researchprogrammes.* NeurologicalIn stroke, additional stroke and stroke mimic samples were sourced during thesummer which has both expanded and provided robust validation of the datasupporting the sensitivity, specificity and performance of our existing strokebiomarkers and their application in high throughput screening (HTS). This hasbeen reflected by the licenses announced in stroke with bioMerieux and, mostrecently, with a second licencee in the top 10 in global clinical diagnostics.Discussions are actively underway with other leading HTS diagnostics companiesin stroke.Major new research has been underway at the Geneva University Hospital todiscover novel biomarkers uniquely present in brain disease in deceasedpatients' cerebrospinal fluid (CSF) to further extend the leading positionProteome Sciences has established in neurological disorders. This has beenhighly successful and has resulted in the discovery of 195 proteins showingdifferential expression in CSF with potential application across a broad rangeof diseases. Patent applications have been filed and the process toprogressively start the exploitation of these biomarkers in a targeted way hascommenced.\* Transplant RejectionIn the middle of 2005, we received a large retrospective plasma sample set from40 patients spanning 5 years post kidney transplantation from the OxfordTransplant Centre. This takes Proteome Sciences into a new area of transplantrejection alongside its existing research into acute and chronic rejection inheart disease following transplantation. With ProteoSHOP‚®, we undertook adepletion process to remove some of the highly-abundant proteins in serum whichmake up around 90 per cent of the content of serum, in order to concentrate onthe differential protein expressions after transplant rejection. Across a 240patient sample set, we identified 29 proteins differentially expressed of whichwe consider 17 may be novel biomarkers of kidney transplant rejection. Thesefindings have subsequently been confirmed from the results of a recent secondvalidation study.There is a serious unmet need for a diagnostic test in kidney transplantationand the introduction of such a test should generate considerable medicalapplication and commercial value.*CancerIn the middle of 2005 we also entered into a collaborative agreement with aFrench company, RNTech, who have provided a set of high quality colon cancersamples, a disease Proteome Sciences had not previously addressed directlyitself. Again, using ProteoSHOP‚®, outstanding results have been forthcomingwith the discovery of 22 differentially expressed proteins, half of which wouldappear to be novel biomarkers for colorectal cancer. Further validation isunderway to extend these results.Similarly, Proteome Sciences has, for the first time, become directly involvedin supporting and further developing the granted patents in lung andoesophageal cancer from its IP portfolio through an immunohistochemistryvalidation study of Annexin 1 and 2 expression in a larger patient population.The primary purpose of this new work was to extend the preliminary data in lungcancer to all non-small cell lung cancers.Most interestingly, recent data published in several scientific journals hasconfirmed the central role that Annexins 1 and 2 play in tumour development,particularly in lung cancers and other solid tumours. As a consequence, anumber of research groups propose using Annexins as vaccines for treatment.Proteome Sciences has exclusively licensed granted patents for the use ofAnnexins 1 and 2 for purposes of vaccination in lung and oesophagus cancer.Not only does this validation of Annexins in histopathology significantlyincrease the diagnostic value of our biomarkers as immunohistochemical markersof non-small cell lung cancer (which accounts for over 70% of all lungcancers), but it should also considerably enhance their therapeutic value andutility.This is enabling Proteome Sciences to expand and exploit some of the strongintellectual property positions it had previously established in cancer, bothfrom differential protein expressions and also from the use of auto-antibodiesand secreted proteins in serum.*Neurodegeneration / TSEAs stated in the Interim Report, encouraging results have been obtained in thevCJD research programme with the MRC resulting in patents being filed forplasma protein markers in vCJD and Huntington's. This work has continued toprogress well and the validation of previous experiments has enabled us todesign a novel test based on the disease specific fragmentation of peptides. Anadditional patent application relating to this novel assay method and formatwas filed earlier this year and we are progressing its development andevaluation.The success achieved in Huntington's by the discovery of certain plasmabiomarkers showing a strong correlation with disease progression acceleratedour efforts to discover other new biomarkers and to further validate theresults already achieved by expanding the number of Huntington's samplesanalysed. From this, six proteins of particular importance have been identifiedand the behaviour and performance of these proteins is being further assessedand validated. Patent applications have been filed to protect thesediscoveries.Considerable commercial opportunities are available for Huntington's biomarkersfor the early detection of neurodegeneration in this disease, monitoring itsprogression in clinical trials of new compounds and for monitoring diseaseprogress and severity in patients undergoing treatment.In the past, the lack of availability of samples in BSE has severely hamperedthe development of the research programmes. This has now been resolved allowingadditional validation and endorsement of existing biomarkers and facilitatingthe discovery of new differentially expressed proteins for the detection of BSEin live cattle.To expand and identify further potential diagnostic markers in Alzheimer'sdisease, a ProteoSHOP‚® study comparing 50 disease versus 50 control patients inblood has recently been completed using a combination of three complementaryapproaches (2DE, SELDI and qPST). This has revealed 36 proteins withdifferential protein expression of significance, ten of which were confirmed bymore than one method.We have previously reported the discovery and patenting of novel tau kinaseactivity in Alzheimer's and a good start has been made in validating these newtargets and designing a virtual library of small molecule `hits' against thetargets in order to file IP on novel inhibitors of the targets and tostrengthen further the patent position around tau. The first part of thisprogramme has delivered a selection of compounds possessing drug-likeproperties and the second part will involve testing the compounds in activityassays. Prospective partners have expressed interest in this research, andparticularly in the demonstration of drugability of the validated targets todelay and/or prevent the progression of Alzheimer's, and this will addsignificant value to the project.Data and results from all the biomarker programmes at Proteome Sciences arebeing actively presented to commercial partners by our scientists and businessdevelopment team to accelerate future revenue generation through outlicencing.*ProteoSHOP‚®ProteoSHOP‚® provides an integrated proteomics toolbox to enhance biomarkerdiscovery. Based on multiple technology platforms, ProteoSHOP‚® offers highlycost- and time-effective means of increasing the output of biomarker discoveryprogrammes.Development of new in vitro diagnostics for clinically difficult diseases suchas cancer and neurodegeneration, target validation, evaluation of safetyprofiles early in drug development and surrogate markers of efficacy inclinical trials, all require integration of biomarker measurements to expeditethe regulatory process. Critical insights in all of these areas are generatedusing ProteoSHOP‚® to identify differential protein expression across a varietyof body fluids and tissue from diseased and/or treated individuals compared torelevant controls.The ProteoSHOP‚® toolbox of gel-based and gel-free proteomics technologies hasbeen developed to address differential protein expression for diagnostic andpharmaceutical research and development. Built on our considerable expertiseacross generic proteomic technologies in combination with proprietarytechniques (PST‚®, qPST¢â€ž¢ and TMT‚®) for gel-free identification and relativequantitation of proteins in cells, body fluids and tissues, ProteoSHOP‚®provides customers with simple, cost-effective and timely access to proteinexpression profiling across a broad range of human diseases and model systems.ProteoSHOP‚® incorporates leading edge proprietary technology spanning samplecollection, storage, protein separation, identification and characterisationwith bioinformatics and data mining. The high sensitivity and high throughputcharacteristics from ProteoSHOP‚® combine to deliver high output proteomic datafor biomarker discovery and validation.Impressive progress has been made during the last year with the quantitativeprotein sequence tags (qPST‚®). One of the key advantages offered by ProteoSHOP‚®is the 50% increase in coverage of proteins identified using qPST‚® incombination with two dimensional gel electrophoresis (2DE). It also provides avery high level of confidence in the data and results, demonstratingreproducibility and independent secondary validation of 50% of the total numberof proteins identified using separate and different approaches.With qPST‚® now available for routine use, Proteome Sciences has a highlycompetitive proprietary technology in its ProteoSHOP‚® toolbox which is beingactively marketed to the global pharmaceutical industry for discoveringbiomarkers of efficacy, safety and toxicity in clinical trials, one of the mainareas highlighted in the FDA Critical Path guidelines in March 2006.An extensive marketing campaign to raise the profile of ProteoSHOP‚® withcustomers was started earlier this year and this has been extended by theco-marketing agreement announced in March with Medical Solutions plc. Bycombining the two companies' highly complementary technologies (MedicalSolutions concentrates on immunohistochemistry with automated image analysisand histopathology), customers are provided with a one-stop-shop from biomarkerdiscovery through to implementation in diagnostics and drug development.With these capabilities, Proteome Sciences is well positioned to secure furtherrevenue and deals for ProteoSHOP‚® accelerating the discovery of proteinbiomarkers and targets relevant to major human diseases. A number of newcontracts are currently under negotiation.*ReagentsThe purpose behind the development and validation of reagents within ProteomeSciences has been to establish and apply proprietary next generation proteomicstechnologies to improve the discovery of protein biomarkers and targetsrelevant to major human diseases and to capitalise on their value.The Sensitizer‚® family of reagents developed in Frankfurt (including TMT‚®, qPST¢â€ž¢ and Combi SMT¢â€ž¢) have unique applications and utility but inherent in each isa common feature which enables an increase in the number of peptides andproteins that can be identified and quantified from complex protein mixtures.Considerable progress has been made over the period and into 2006 with our TMT‚®isobaric mass labelling technology. Over this time, a fully functioning sixplex set of mass tags has been developed which provide strong accuracy andconsistency to quantify simultaneously differential protein expression in sixsamples. The elegance and simplicity of the chemical structure and designallows the format to be readily expanded to a ten plex which will fully addressthe needs of the marketplace.There are initially two streams of revenue expected from licensing TMT‚®, onefrom the reagent product itself and the second from the intellectual propertyrelating to the field of isobaric mass labelling where, having the earliestpriority date, the Board believes that the company's patent filings arecomfortably ahead of competitors.The market for the TMT‚® product is considered to be larger than was initiallycontemplated and the rapid acceptance of new tools for biomarker discovery andvalidation was clearly signposted as a key requisite in the March 2006 FDACritical Path Guidelines. The second stream of revenue, the licence to thechemistry controlling isobaric mass labels, will potentially cover third partyreagents/products in the market which come within the scope of the IP umbrella.Both activities should provide strong cashflow for the Group.The development of isobaric mass labelling is now largely completed and themain focus of our efforts in chemistry has switched to applications in biologyto accelerate the discovery and validation of biomarkers in human diseases.*Veri-Q Inc.Synthetic oligonucleotides are widely used in biomedical research, in-vitrodiagnostics (microarrays) and more recently as therapeutic agents in antisensedrugs. These applications require exacting levels of product purity andquality. Quality control is essential to ensure the effective and reproducibleperformance of oligonucleotides and the FDA in the US has expressed concernabout quality control of oligonucleotides. Oligonucleotide quality is oftencompromised by incomplete removal (de-protection) of chemical groups(protecting groups) which are required for the proper chemical synthesis ofthese polymers. The quality of oligonucleotides can also be decreased by thepresence of incomplete products.Veri-Q has developed a toolbox of antibodies against oligonucleotide protectinggroups that can be used both for monitoring oligonucleotide quality and for theselective removal of impurities. Using this technology, Veri-Q has demonstratedthat many commercially manufactured oligonucleotides are not fully deprotectedand this creates inaccurate and misleading results. In the last 12 months,Veri-Q has shown that the presence of these impurities has a significant affecton the performance of gene expression analysis using microarrays. Two highprofile scientific papers are in press awaiting publication.Commercial discussions with prospective licencees started in 2005 and certainpilot projects have been undertaken and are in process. The prospects for thesereagents look attractive and Veri-Q intends to outlicence the technologyprincipally as QC reagents in RNAi and for DNA microarrays as soon aspracticable.In May 2005, Proteome Sciences converted its loan into further stock in Veri-Q,increasing its shareholding to 76.9 per cent.*Intronn Inc.Following the development of the high capacity screen, the main objective wasto apply SMaRT‚® successfully in RNA therapeutics in liver disease bydemonstrating in-vivo proof of principle for one of its three primaryprogrammes in haemophilia, dyslipidemia (hypercholesterolemia) or AATdeficiency.Considerable progress was made in 2005, initially in March by confirmingin-vivo proof of principle in dyslipidemia, followed in June by the successfulstimulation of the production of the protein component of good cholesterol(HDL) which confirmed SMaRT‚® transplicing at the RNA level. To put this intocontext, there are two types of cholesterol, good cholesterol (HDL) and badcholesterol (LDL). For a healthy population, the goal is to raise the HDLlevels and to lower the LDL levels, and whilst statins (a high value class ofdrugs) are able to lower levels of LDL, they do not moderate HDL levels. Thedevelopment of SMaRT‚® HDL may therefore provide a very positive improvement inincreasing HDL levels, which may be further enhanced with the use of statins.Having achieved significant increase in the level of HDL, further studies havebeen undertaken over the course of the year which have continued to reproducethe same high levels of improvement in the protein component of HDL. Theseresults have provided the backcloth for Intronn to start to prepare the designfor a human clinical trial to assess the ability to raise HDL levels, thetiming of which will become more defined in the second half of 2006.In the interim report, it was announced that the AAT programme had successfullycompleted in-vivo proof of principle with SMaRT‚® for the first time. Goodprogress has continued to be made with AAT and we are pleased to announce thatexciting in-vivo proof of principle results have now also been generated in thehaemophilia programme (Factor VIII) where the levels of Factor VIII have beensignificantly increased using SMaRT‚® transplicing. These results havesubsequently been repeated with similar outcomes and have been achieved nearlytwelve months ahead of schedule. Development of the pre-transplicing molecules(PTM) for human studies in haemophilia is straightforward, and with the benefitof the results and data from other programmes using SMaRT‚®, it suggests thatPhase 1 studies for haemophilia could be significantly earlier that previouslyconsidered.As expected, the funding provided in 2004 has taken Intronn through into 2006and up to the position where it can now prepare for clinical trials. Intronnhas been in active discussions with a broad range of commercial parties toestablish strategic partners/alliances for the clinical and commercialdevelopment of SMaRT‚® across its main programmes and in advanced negotiationsto secure further funding to move SMaRT‚® RNA therapy into clinical trials fordyslipidemia and haemophilia. That process has not as yet been completed and,in order to protect the valuable SMaRT‚® technology/intellectual property, theUS Board for the time being has downsized and focussed the scale of itsresearch activities until the process is completed.In conclusion, the science has moved on strongly last year and into 2006 within-vivo proof of principle achieved in the three lead programmes, and with thedesign of clinical trials now underway for dyslipidemia and haemophilia.*ResultsThe financial results for the twelve month period ended 31st December 2005 showa headline loss (being the loss for the financial year excluding non-cash costsand share of associate company's losses) of ‚£4,166,673 compared with ‚£4,016,637in 2004. Non cash costs (amortisation of goodwill, amounts written off fixedasset investment, depreciation and National Insurance on notional share optiongains, as extracted from the profit and loss account) were ‚£1,262,689 against ‚£589,198 in 2004. The period to 31st December 2005 also contains a share ofassociate's losses at Intronn Inc. of ‚£735,684 (2004 : ‚£593,366).The loss on ordinary activities after taxation for the twelve month periodended 31st December 2005 was ‚£6,165,046 (2004: ‚£5,199,201). The net cashoutflow from operating activities for the year was ‚£4,908,985 (2004 : ‚£4,542,774).At the year end, cash held on deposit stood at ‚£2,587,155 (2004: ‚£2,425,943).The cash spend in 2005 was consistent with previous years and this pattern isexpected to continue in 2006. The licences announced this year to date and thecommercialisation anticipated, combined with grant income and the R&D taxcredit, should provide significant cash inflows and have a positive effect onthe financial requirements of the Company. In addition, in order to providefurther working capital, a loan facility of up to ‚£2 million has been madeavailable to the Company from C.D.J. Pearce, the Chief Executive, details ofwhich are disclosed in Note 6 to the Financial Information which accompaniesthis statement.The directors have assumed that the timing of the cash inflows from theanticipated commercial income will be appropriate to meet the cash requirementsof the business; however, the margin of cash available over the cashrequirements is not large and, inherently, there can be no certainty inrelation to these matters.Having regard to the assumptions made in respect of the timing of receipt ofthe anticipated commercial income, combined with grant income, the R&D taxcredit and other cash inflows including the loan facility of up to ‚£2 millionmade available by C.D.J. Pearce, the directors continue to adopt the goingconcern basis in preparing the accounts, and accordingly the financialstatements do not contain any adjustments that would result if sufficientcommercial income were not to be received on a timely basis.In relation to the loan facility from C.D.J. Pearce, the Directors of theCompany, (with the exception of C.D.J. Pearce who, in view of his interest inthe transaction, has taken no part in the consideration thereof), havingconsulted with its nominated adviser, consider that the terms of thistransaction are fair and reasonable insofar as shareholders are concerned.On 29th December 2005, the company filed a claim in the District Court ofFrankfurt am Main ("the Court") against Sanofi-Aventis Deutschland GmbH("Sanofi-Aventis") under which it is seeking damages, amongst other things, forthe breach of certain warranties provided by Sanofi-Aventis at the time of theacquisition of Xzillion Proteomics GmbH & Co. KG (now Proteome Sciences R&DGmbH & Co. KG) on 4th July 2002. On 7th June 2006 Sanofi-Aventis filed a noticewith the Court of its intention to defend the claim.Full provision for all costs arising in 2005 in connection with the claim hasbeen made in the 2005 financial statements. Whilst it is not possible topredict the outcome of this matter, the Directors intend to pursue this actionvigorously and will keep shareholders informed of material developments.*Current OutlookThe recent text of the U.S. FDA's Critical Path Initiative has considerablyraised the profile and potential to use biomarkers and biomarker data toaccelerate and improve drug development and to expand the advancement ofpersonalised medicine which has been reflected by the pharmaceutical industry'sincreasing awareness of the value and importance of biomarkers in improvingclinical development.At the same time, the FDA has clearly signalled its willingness to widen thescope of biomarker data that it will consider in voluntary submissions for newdrug approval applications, specifically stating it is "open minded" toreviewing proteomic biomarkers. This is a significant and positive result whichaugurs well for the position and results that the company has established fromits research.The Board is encouraged by the recent progress that has been achieved inadvancing and concluding licences and remains convinced that it willsuccessfully commercialise the three main areas of the company's research:biomarkers, ProteoSHOP‚® and TMT‚®. It would also like to re-affirm toshareholders that it attaches the highest priority to the completion of furtherexternal licences and looks to the future prospects with increasing confidence.Steve HarrisChairman 29 June 2006UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31st December2005 2005 2004 ‚£ ‚£ Turnover - continuing operations 16,200 72,971 Cost of sales (11,340) (40,801) __________ __________ Gross profit 4,860 32,170 Administrative expenses excluding (4,764,026) (4,655,426) non-cash items Amortisation of goodwill (648,960) (648,960) Depreciation (425,843) (529,313) National Insurance on notional share (75,008) (701,953) option gains Administrative expenses (5,913,837) (5,131,746) __________ __________ Operating loss - continuing operations (5,908,977) (5,099,576) Share of associate's operating loss (735,684) (593,366) __________ __________ Group operating loss - continuing (6,644,661) (5,692,942) operations Interest receivable and similar income 140,628 151,969 Interest payable and similar charges (882) (1,942) Amounts written off fixed asset (112,878) (112,878) investment __________ __________ Loss on ordinary activities before (6,617,793) (5,655,793) taxation Tax credit on loss on ordinary 452,747 456,592 activities __________ __________ Loss for the financial year (6,165,046) (5,199,201) __________ __________ Headline loss (4,166,673) (4,016,637) __________ __________ Loss per share Basic and diluted loss per share (4.77p) (4.27p) Headline loss per share (3.22p) (3.30p) __________ __________ Unaudited reconciliation of loss per share to headline loss per shareThe headline loss and headline loss per share is presented by the Directors asan additional measurement of financial performance. The calculations ofheadline loss per ordinary share are based on the following losses and on thenumbers of shares shown above. 2005 2005 2004 2004 Loss per Loss per share share ‚£ pence ‚£ pence Loss for the financial year (6,165,046) (4.77) (5,199,201) (4.27) Add back/(deduct): Amortisation of goodwill 648,960 0.50 648,960 0.53 Amounts written off fixed asset 112,878 0.09 112,878 0.09 investment Depreciation 425,843 0.33 529,313 0.44 National Insurance on notional 75,008 0.06 (701,953) (0.58) share option gains Share of associate's operating loss 735,684 0.57 593,366 0.49 __________ _____ _________ _____ Headline loss (4,166,673) (3.22) (4,016,637) (3.30) __________ _____ _________ ____ UNAUDITED CONSOLIDATED BALANCE SHEET as at 31st December 2005 2005 2004 ‚£ ‚£ Fixed assets Intangible assets 4,218,241 4,867,201 Tangible assets 489,058 740,662 Investments in associates 954,837 1,514,792 Other investments - 112,878 __________ __________ 5,662,136 7,235,533 __________ __________ Current assets Debtors 1,326,592 680,924 Cash held on deposit as short term investment 1,900,000 1,800,000 Cash at bank and in hand 687,155 625,943 __________ __________ 3,913,747 3,106,867 __________ __________ Creditors: Amounts falling due within one (1,433,260) (1,387,097) year __________ __________ Net current assets 2,480,487 1,719,770 __________ __________ Total assets less current liabilities 8,142,623 8,955,303 Creditors: Amounts falling due after more (188,043) (123,000) than one year Provisions for liabilities and charges (103,937) (28,929) __________ __________ Net assets 7,850,643 8,803,374 __________ __________ Capital and reserves Called-up share capital 1,314,512 1,225,418 Share premium account 29,145,773 24,207,928 Other reserve 10,755,000 10,755,000 Profit and loss account (33,364,642) (27,384,972) ___________ ___________ Equity shareholders' funds 7,850,643 8,803,374 __________ __________ Unaudited consolidated statement of total recognised gains and losses For the year ended 31st December, 2005 2005 2004 ‚£ ‚£ Loss for the financial year (6,165,046) (5,199,201) Gain/(loss) on foreign currency translation 73,840 (19,850) Gain on deemed part disposal of associate 111,536 - __________ __________ Total recognised losses relating to the year (5,979,670) (5,219,051) __________ _________UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the year ended 31st December2005 2005 2004 ‚£ ‚£ Net cash outflow from operating (4,908,985) (4,542,774) activities Returns on investments and servicing of 139,746 150,027 finance Taxation - 622,337 Capital expenditure and financial (181,334) (2,122,149) investment __________ __________ Cash outflow before use of liquid (4,950,573) (5,892,559)resources and financing Management of liquid resources (100,000) 2,995,161 Financing 5,111,785 2,158,118 __________ __________ Increase/(decrease) in cash in the year 61,212 (739,280) ___ ___Reconciliation of operating loss to operating cash flows 2005 2004 ‚£ ‚£ Operating loss (5,908,977) (5,099,576) Depreciation charges 425,843 529,313 Amortisation charges 648,960 648,960 Increase/(decrease) in provisions 75,008 (701,953) (Profit)/loss on sale of tangible fixed (5,805) 2,986 assets (Increase)/decrease in debtors (139,862) 271,813 Decrease in creditors (4,152) (194,317) __________ __________ Net cash outflow from operating (4,908,985) (4,542,774) activities ___ ___ NOTES TO THE FINANCIAL INFORMATION1. There has been no change to any of the accounting policies set out in the2004 statutory accounts.2. Following the loss for the financial year of ‚£6,165,046, the Directors donot recommend the payment of a dividend.3. a. The calculation of the loss per share for the year ended 31st December2005 is based on the loss for the financial period of ‚£6,165,046 and on129,243,696 Ordinary Shares, being the weighted average number of shares inissue and ranking for dividend during the period (year ended 31st December 2004- loss ‚£5,199,201, weighted average number of Ordinary Shares in issue andranking for dividend, 121,648,577). b. The losses used to calculate the headline loss per share are as follows: 2005 2005 2004 2004 Loss per Loss per share share ‚£ pence ‚£ pence Loss for the financial year (6,165,046) 4.77 (5,199,201) (4.27) Add back/(deduct): Amortisation of goodwill 648,960 0.50 648,960 0.53 Amounts written off fixed asset 112,878 0.09 112,878 0.09 investment Depreciation 425,843 0.33 529,313 0.44 National Insurance on notional 75,008 0.06 (701,953) (0.58) share option gains Share of associate's operating 735,684 0.57 593,366 0.49 loss __________ _______ _________ _______ Headline loss (4,166,673) (3.22) (4,016,637) (3.30) _______ _______ _________ _______ The headline loss per share is presented by the Directors as an additionalmeasure of financial performance.4. The preceding financial information does not constitute statutory accountsas defined in Section 240 of the Companies Act 1985. The financialinformation for the year to 31st December 2004 is based on the statutoryaccounts for that year. These accounts, upon which the auditors issued anunqualified opinion, and which did not contain any statement under Section237(2) or (3) of the Companies Act 1985, have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31st December 2005 will be finalisedon the basis of the financial information presented by the Directors in thispreliminary announcement and will be posted to shareholders this month. Afterthat time, they will also be available at the Company's registered office:Coveham House, Downside Bridge Road, Cobham, Surrey KT11 3EP.5. Whilst it is anticipated that the company will receive an unqualified auditreport for the year ended 31st December, 2005, the audit report will containthe following additional paragraph:"Emphasis of matter - Going ConcernWithout qualifying our opinion, we draw attention to the disclosures made innote 2(b) of the financial statements concerning the Group's ability tocontinue as a going concern. The Group incurred a net loss of ‚£6,165,046 duringthe year ended 31st December 2005, with a headline loss of ‚£4,166,673 (beingthe loss for the financial year excluding non-cash costs and share of associatecompany losses) and a net outflow from operating activities of ‚£4,908,985.This, along with other matters as set forth in note 2(b), indicates theexistence of a material uncertainty which may cast significant doubt about thecompany's ability to continue as a going concern. The financial statements donot include the adjustments that would result if the company was unable tocontinue as a going concern."6. On 29th June, 2006 the company entered into an agreement with C.D.J. Pearce,the Chief Executive of the company, under which he agreed to provide anunsecured loan facility of up to ‚£2m to the company. The loan facility will beavailable from the 1st August, 2006 and carries interest at 2.5% above the baserate of Barclays Bank Plc.It is repayable on seven days notice, or immediately in the event of:(i) C.D.J. Pearce ceasing to be an executive director of the company.(ii) A general offer to the shareholders of the company being announced toacquire its issued share capital.(iii) The occurrence of any of the usual events of default attaching to thissort of agreement.ENDPROTEOME SCIENCES PLC