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Ark Therapeutics Group plc

Preliminary Announcement - Final results for the year ended 31 December 2012

London, UK, 30 April 2013- Ark Therapeutics Group plc (LSE: AKT) today announces its audited results for the year ended 31 December 2012.

Financial highlights

·; Total revenues and other income for the year ended 31 December 2012 of £1.9m (31 December 2011: £7.2m

·; Net Assets at 31 December 2012 of £2.8m (31 December 2011: £15.4m)

·; Cash and short-term deposits at 31 December 2012 of £2.1m (31 December 2011: £9.5m)

·; Loss for year of before tax was £13m (31 December 2011: £4.4m)

·; Post-period on 15 March 2013 the Group disposed of its operating subsidiaries

Iain Ross, Non-Executive Chairman of Ark, commented:

"The Board and management of the Company had hoped to build Ark as a profitable standalone contract development and manufacturing organisation. Unfortunately, despite having built a strong order book, we could not raise sufficient funds to get through to profitability and therefore in early 2013 we had no choice but to put the Company up for sale. In the absence of offers for the Company as a whole, and in view of our financial position, with the approval of UKLA, we made the Disposal of the operating subsidiaries as it ensured the best deal for our creditors, Shareholders and employees."

A full copy of the Company's Annual Report and Accounts for the year ended 31 December 2012 is available on its website at www.arktherapeutics.com within the Investor Relations section. The Annual Report and Accounts has also been submitted to, and will shortly be available from, the National Storage Mechanism.

This announcement should be read in conjunction with and is not a substitute for reading the full Annual Report and Accounts. Together these constitute the information required by DTR 6.3.5, which is required to be communicated in unedited full text through a Regulatory Information Service.

Annual General Meeting

The Notice convening the next Annual General Meeting, which is expected to take place in June 2013 at the offices of Ashurst, Broadwalk House, 5 Appold Street, London EC2A 4HA will be posted separately to shareholders nearer the time.

For further information please contact:

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

Chairman's Statement

Dear Shareholder

·; We finished the year with cash and short-term deposits of £2.1m compared to £9.5m at the end of December 2011.

·; Total revenues and other income for the year ended 31 December 2012 were £1.9m compared with £7.2m last year and included a milestone payment received from Crawford Woundcare Limited following the disposal of our woundcare business in 2011.

·; The loss for the year before tax was £13m (2011: £4.4m) as a result of lower revenue arising from licensing agreements (£6.5m in 2011), impairment charges totalling £3.1m and an increase in administration cost associated with fundraising activities and restructuring.

·; Net assets at 31 December 2012 amounted to £2.8m compared to £15.4m at 31 December 2011.

·; Post-period on 15 March 2013 the Group disposed of its operating subsidiaries.

Background and Rationale for the Disposal

Up until my appointment as Chairman in September 2010, the Company had historically followed a classical biotech business model to fund the development of new therapeutic products. Following the failure of its lead candidate, Cerepro®, to achieve European licence approval, the Company had limited funds remaining and under my chairmanship launched a strategic review. This resulted in selling off non-core assets and refocusing the Company on utilising its unique facilities and scientific capabilities for revenue-generating contract development and manufacturing services, thereby placing an increasing emphasis on the revenue-generating capability of the Company's manufacturing assets.

During 2011 we completed the disposal of the woundcare business and received a significant milestone from Boehringer Ingleheim in respect of an intellectual property licence. In addition, the cost structure of the business was refocused in both the UK and Finnish operations and the Company signed initial manufacturing services contracts with third party clients.

In April 2012 we announced the appointment of Dr David Venables to the Board as Director of Manufacturing Services and in August 2012 he took up the role of CEO. David made an immediate impact in terms of further cutting the Company cost base and developing a sustainable client-based order book. Notwithstanding this, we reported an emphasis of matter in respect of the Company's 2012 half yearly accounts, along with the following statement:

"The Board recognises that the timing of contract and partnership revenues in the early stages is inevitably uncertain and therefore recognises that the Company may seek to raise additional equity finance to ensure sufficient funding through to optimal implementation of the strategic plan. As a consequence, we continue to review all options and have been in regular dialogue with our shareholders in respect of the general terms of the transition."

Post period on 21 January 2013, the Company announced that it had over the last year reduced its cost base, terminated all costly investment in early stage product development and re-structured its business to focus solely upon the generation of revenue from its viral development and manufacturing services based in Kuopio, Finland. Notwithstanding these initiatives and the fact that the Company had a growing order book of new contracts for its services, it was clear to the Board and management team that there would be a potential shortfall in working capital to enable the business to break through to profitability. This situation had been discussed with key Shareholders and highlighted in several of the Company's press releases in the period leading up to a planned fundraising in the second half of 2012. In addition, the financial position became more acute when there were delays in key contracts, which, coupled with the time taken to negotiate new customer contracts, resulted in the Company needing more capital than originally envisaged.

As a consequence, steps were taken to raise finance in order to fund the new business model through to profitability throughout the last quarter of 2012. Accordingly, the Board had discussions with a number of Shareholders and other financial institutions in order to gauge support for a substantial equity fund-raising. However, the level of support obtained was insufficient to justify continuing with the proposal and, as such, those discussions were discontinued.

With no prospect of any further revenue being received in the near term the Board, post period, announced on 30 January 2013 that the Company had appointed WG Partners LLP, to assist the Company in reviewing and evaluating a number of strategic options open to the Company to maximise value for Shareholders. These options included a formal sale process, which was initiated on 30 January 2013.

As of 28 February 2013 the Company was not in receipt of any indicative offers pursuant to the formal sale process. In parallel, your Board had attempted at various points to obtain finance from clients, direct competitors, banks and via the disposal of non-core product assets. However, all such steps proved unsuccessful.

Consequently, it became clear to the Board that unless an urgent solution was identified, the Group would be unable to continue to trade and the Group would run out of cash prior to the end of April 2013.

On 7 March 2013 a formal offer for Ark Therapeutics Limited, Ark Therapeutics Oy and Lymphatix Oy (the "Subsidiaries") was made by Wölbern Private Equity ("WPE") (the "Disposal").  This offer was expressly conditional on the UKLA (UK Listing Authority) agreeing to apply Listing Rule 10.8 to the Disposal due to WPE's concerns as to the financial position of the Group and the effect of a lay-off process being undertaken in Finland to further reduce costs which was due to complete on 15 March 2013 and which would have resulted in the bulk of the Finnish employees being laid off on that day.

WPE confirmed that it would not be prepared to proceed with the offer for the Subsidiaries if the lay-offs were effected, as such lay-offs would significantly reduce the value of the business in Finland. WPE therefore confirmed to the Board on 10 March 2013 that the transaction had to be completed on or before 15 March 2013 otherwise its offer would lapse.

The Company was not in a position to seek shareholder approval for the Disposal of the Subsidiaries, as WPE confirmed that it was not willing to proceed with an acquisition of the Subsidiaries post 15 March 2013.

Based on unaudited management accounts for the year ended 31 December 2012, the trade and assets of the Subsidiaries that were the subject of the Disposal contributed revenue of approximately £1.82m and losses before tax of approximately £9.98m with no prospect of any further revenue being received in the near term. The net book value of the assets subject to the Disposal was approximately £6.18m. Immediately prior to completion of the Disposal, the Group (including the Subsidiaries) had approximately £1.069m of cash and approximately £2.068m of total liabilities (before close down costs). Accordingly, the Group was materially balance sheet insolvent with no prospect of additional revenue in the near term. It therefore became clear to the Board that if the Disposal described in the announcement made to the market on 15 March 2013 was not effected immediately, the Company would not have been able to avoid formal insolvency proceedings. In such circumstances, there would have been no value left for distribution to the Shareholders.

The Board was advised that in light of the serious financial position of the Company, it had a primary duty to act in the best interests of its creditors. In order to achieve the best results for creditors and Shareholders the Board identified two courses of action. Either the Company could implement an appropriate insolvency procedure; or pursue the Disposal. The Board concluded that the Disposal was the preferable route. The terms of the Disposal were as follows:

(a) the purchaser acquired the majority of the assets of the Company, being the shares of the Subsidiaries (the "Shares"), the main operating companies of the Group, and procured the repayment of intercompany loans owed to the Company by the Subsidiaries by way of set-off;

(b) the Company received £1.335m in cash on completion from the sale of the Shares and will use all but £0.345m of this amount to satisfy its liabilities. The repayment obligations of the Company pursuant to intercompany loans granted by the Subsidiaries have been novated from the Company to the Purchaser. The Company therefore has a cash balance of approximately £1m (including existing cash balances), the majority of which will be available for distribution to the Company's Shareholders after payment of the Company's limited running costs, expected to be circa £0.3m;

(c) all of the current Directors resigned on completion from the boards of the Subsidiaries;

(d) the Company agreed to assist the purchaser to achieve an orderly transition; and

(e) WPE confirmed its intention to continue to operate the business as a going concern, thereby giving greater certainty of employment for the Subsidiaries' employees than would have been achieved via an insolvency process. The Disposal would have ordinarily required the consent of Shareholders in a general meeting and the posting of a circular. The UKLA agreed, however, under Listing Rule 10.8.1 not to require the Company to obtain the approval of its Shareholders for the Disposal as it had no alternative but immediately to dispose of these assets in order to avoid an insolvency process. The Company is expecting the woundcare business it disposed of in 2011 to continue to perform, so as to trigger the payment obligation of up to £0.926m in deferred consideration. This payment is expected to be made in early 2014. Following receipt of this deferred consideration, the Directors intend to make a distribution to Shareholders of all the distributable cash in the Company at that time following settlement of any liabilities and thereafter enter into a solvent liquidation process.

The Company is of the opinion that the working capital available to the Company (which no longer has any trading subsidiaries) is sufficient for its present requirements, that is for at least 12 months from the date of this report. The Company confirms, as it has so confirmed to the UKLA, that in respect of the Disposal:

(a) negotiation did not allow time for shareholder approval;

(b) all alternative methods of financing had been exhausted and the only option remaining was to effect the Disposal;

(c) by taking the decision to implement the Disposal, the Directors were acting in the best interests of the Company and its shareholders as a whole and unless the Disposal was completed receivers, administrators or liquidators were likely to be appointed; and

(d) the Disposal was not with a related party.

The Disposal could have been implemented following a delisting under Listing Rule 5.2.7. However, such a course of action would have necessitated a further delay of more than 20 business days. The Directors did not consider this route acceptable due to the lay-off process in Finland being completed on 15 March 2013 and WPE's confirmation that it was not willing to proceed with an acquisition of the Subsidiaries post 15 March 2013. Further such route would have resulted in no value being left for distribution to Shareholders.

Additionally, WG Partners, who acted as sponsor to the Company in relation to the Disposal confirmed, as it did to the UKLA, that in its opinion and on the basis of information available to it, the Company was in severe financial difficulty and the Company would not have been in a position to meet its obligations as they fell due unless the Disposal took place immediately.

The Directors believe that the Disposal was in the best interests of the Company and its Shareholders as a whole and that unless the Disposal was completed the Company would have been unable to meet its financial commitments as they fell due and consequently would have been unable to continue to trade, resulting in the Board having to conclude that there was no reasonable prospect of avoiding insolvency and file promptly for administration.

The Board and management of the Company had hoped to build the Company as a profitable standalone contract development and manufacturing organisation. Unfortunately, despite having built a strong order book, we could not raise sufficient funds to get through to profitability and therefore had no choice but to put the Company up for sale. In the absence of offers for the Company as a whole, and in view of our financial position, with the approval of UKLA, we made the Disposal as it ensured the best deal for our creditors, Shareholders and employees.

As a result of the Disposal, Professor Seppo Ylä-Herttuala, who was one of Ark's co-founders in 1997 and became a Non-Executive Director of the Company on 8 March 2004, and David Prince, who joined the Company as a Non-Executive Director in May 2004, both resigned from the Board on 15 March 2013 and Dr David Venables' employment as Chief Executive Officer and my employment as Executive Chairman were terminated on 31 March 2013. However, both David and I, along with Dr David Bloxham and Charles Spicer will continue to serve on the Board as Non-Executive Directors, until the remaining funds have been distributed to Shareholders.

As of the time of writing, the Company has received a number of approaches from third parties interested in 'reversing' into the Company in order to make use of its public listing and the remaining funds. The Board will assess the viability of these approaches in an attempt to secure additional Shareholder value. However, in the absence of any viable option being put to Shareholders the plan would be, following the receipt of the deferred consideration from the woundcare business disposal, to distribute the remaining funds to Shareholders in early 2014 through a solvent liquidation process.

On a personal basis, I can confirm that during the latter part of 2012 and early 2013 your Board made every effort to turn the Company into a revenue-generating, viral contract development and manufacturing services business, but when it became clear that this was not going to be viable in the short-term we vigorously explored a broad range of re-financing, collaboration and sale options before concluding the Disposal.

Iain G Ross

Chairman

Ark Therapeutics Group plc

29 April 2013

Financial review

Overview

The loss from continuing operations before tax increased significantly during the year (£13m in 2012 compared to £4.4m in 2011). This was as a result of the lower revenue arising from licensing agreements (£6.5m in 2011), impairment charges of £3.1m and an increase in administration costs associated with fundraising activities, even though restructuring and cost reduction measures were put in place. The restructuring activities included reducing headcount across all functions at our UK and Finland sites and also ceasing activity on our late-stage clinical trials, resulting in the reduction of research and development expenses from £7.7m in 2011 to £7.1m in 2012. In addition, other administrative expenses increased from £3.7m in 2011 to £4.3m in 2012 as a result of increased costs associated with fundraising activities and restructuring.

As announced previously, we completed the disposal of our woundcare business to Crawford Woundcare Limited in 2011. Total revenue recognised in the current year from this disposal totalled £0.2m and is disclosed under discontinued operations on the face of the consolidated income statement and also in note 9 of the Annual Report and Accounts.

Cash and cash equivalents as at 31 December 2012 totalled £2.1m (2011: £9.5m).

Results of Operations

Years ended 31 December 2012 and 2011

Revenue

Revenue from continuing operations recorded in 2012 totalled £1.8m, and related to the provision of contract manufacturing services. Revenue from continuing operations recorded in 2011 totalled £7.1m, and related to the provision of contract manufacturing services (£0.6m) and milestone receipts under an existing licensing agreement (£6.5m).

Research and development expenses

During the period Ark conducted research at its facilities in Kuopio Finland, at University College London and through specialist sub-contractors. Research and development expenditure in 2012 was £7.1m (2011: £7.7m), the decrease principally due to the effect of various cost-saving measures put in place during the latter half of 2012. Research and development expenses comprise clinical development costs, manufacturing development costs and research costs and are detailed below.

Clinical development costs

Total development expenditure amounted to £0.5m in 2012, compared to £0.2m in 2011. Increased costs were associated with the ongoing clinical evaluation of EG011 in refractory angina.

Manufacturing development costs

Manufacturing development costs remained constant during the year, at £4.9m in 2011 and £4.9m in 2012 as we continued to invest in developing manufacturing capabilities and know-how for the purposes of building a sustainable contract development and manufacturing business.

Research costs

Research costs in the period totalled £1.7m (2011: £2.6m) as a result of the decision to stop the development of our own products. Full cost savings arising from our decision to stop the development of our own products as part of our business re-organisation were not forecast to be fully recognised until 2013.

Impairment charges

Other income and expenses comprised exchange differences and income from EU and Government grants. During the year the Group recognised net other income of £0.4m (2011 £0.3m).

The Group invests its surplus cash in bank deposits of up to one year in accordance with the terms of the investment policy ("Investment Policy") approved by the Board. This policy has as its principal aim the security of the Group's cash balances and contains strict criteria on minimum credit ratings and maximum deposit size. Net interest receivable comprises the interest income generated from cash invested in term and overnight deposits. In the year ended 31 December 2012 the Group earned investment income of £0.05m (2011: £0.06m) on cash deposits.

Taxation

There was no UK corporation tax charge for the year under review due to a taxable loss being made in the period. Whilst we intend to make a claim in respect of research and development tax credits as in prior years, given the change in activity of the business we have reverted to recognition on a cash rather than on an accruals basis (2011: accruals basis £0.7m).

Balance sheet

Total net assets (defined as total assets less total liabilities) have reduced from £15.4m at 31 December 2011 to £2.8m at 31 December 2012, principally as a result of the continued depreciation of our tangible fixed assets, impairment charges and the operating cash outflows during the period.

Cash flow

The net cash outflow from operating activities for the year was £7.4m (2011: £1.6m). The principal reason for the increase in the net cash outflow from operating activities for the year was the decrease in licence income of £6.5m. Ark's net cash outflow from capital expenditure was £0.1m (2011: £0.3m). Intangible capital expenditure included licence payments to access technology used in Ark's research programmes.

The Board operates an Investment Policy governing the investment of the Group's cash resources, under which the primary objective is to invest in low risk cash or cash equivalent investments to safeguard the principal, ensuring that these resources remain available to fund the Group's operations.

Post-period events

As outlined in the Chairman's Statement on pages 3 to 6, on 15 March 2013, the Group sold 100% of the ordinary share capital of its subsidiary undertakings, Ark Therapeutics Limited and Lymphatix Oy, to WKD Holding Oy.

Sue Steven

Company Secretary

29 April 2013

Directors' responsibilities statement

The Directors are responsible for preparing the Annual Report, Directors' remuneration report and the Group and the Company financial statements in accordance with applicable laws and regulations.

Company law requires the Directors to prepare such financial statements for each financial year. Under IAS Regulation the Directors are required to prepare Group financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU"). The Group Financial Statements are also required by law to be prepared in accordance with Article 4 of the IAS Regulation and the Companies Act 2006. The Directors have also chosen to prepare the parent Company financial statements under IFRSs as adopted by the EU. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

·; properly select and apply accounting policies;

·; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·; provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

·; make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Group financial statements and the Directors' remuneration report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm to the best of their knowledge that:

(a) the financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

 (b) the Business Review, which is incorporated in the Directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board

Condensed consolidated income statement

for the year ended 31 December 2012

Condensed consolidated statement of comprehensive income

For the year ended 31 December 2012

Condensed consolidated balance sheet

as at 31 December 2012

These financial statements were approved by the Board of Directors and were authorised for issue on 29 April 2013. They were signed on its behalf by:

Condensed consolidated cash flow statement

for the year ended 31 December 2012

Condensed statement of changes in equity for the year ended 31 December 2012

Selected notes to the financial information

1. Presentation of financial information

These results for the year ended 31 December 2012 are an excerpt from the Annual Report and Accounts 2012 and do not constitute the Group's statutory accounts for 2012 or 2011. Statutory accounts for 2011 have been delivered to the Registrar of Companies, and those for 2012 will be delivered in due course. The Auditor has reported on both those accounts: Their report for the year ended 31 December 2011 was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under Sections 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation. Their report for the year ended 31 December 2012 was unqualified, did not contain statements under Sections 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation but did contain an emphasis of matter in respect of the fact the Group's financial statements were prepared on a basis other than that of a going concern.

Whilst the financial information included in this Annual Results Release has been prepared in accordance with International Financial Reporting Standards ("IFRS") adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. Full Financial Statements that comply with IFRS are included in the Annual Report & Accounts 2012 which is available at www.arktherapeutics.com, hard copies of which will be distributed in due course.

The accounting policies adopted are consistent with those followed in the preparation of the Group's Annual Report & Accounts 2012 which are unchanged from those adopted in the Group's Annual Report & Accounts 2011, except as described below.

In the current financial year, the Group has adopted IFRS 7 (Amendment) "Disclosures - Transfers of Financial Assets".

IFRS 7 (Amendment) requires enhanced disclosures for transactions involving transfers of financial assets. This amendment does not currently affect the Group's disclosures on Financial Instruments.

The following amendments to Standards are also effective from the current financial year but currently do not impact the Group's Financial Statements: IFRS 1 (Amendments) "Removal of Fixed Dates for First-Time Adopters" and "Severe Hyperinflation" and IAS 12 (Amendment) "Deferred Tax: Recovery of Underlying Assets".

Going concern

As outlined in the Chairman's Statement on pages 3 to 6 of this announcement on 15 March 2013 the Group sold 100% of the ordinary share capital of its subsidiary undertakings, Ark Therapeutics Limited and Lymphatix Oy, to WKD Holding Oy. Following the sale of those subsidiaries the Group ceased to trade. Ark Therapeutics Group plc will continue in operational existence for the foreseeable future for the purpose of receiving contingent deferred consideration from the sale of Patient Plus Limited in 2010. As required by IAS 1 Presentation of Financial Statements, the Directors have prepared the financial statements on a basis other than that of a going concern given that trading has ceased post year end. The financial statements do not include any provision for the future cost of terminating the business of the Company except to the extent that such were committed at the balance sheet date. No material adjustments arose as a result of ceasing to apply the going concern basis.

2 Revenue  

3 Business and geographical segments