PVG.L Regulatory News (PVG)

31 Aug 2005 07:01

Ark Therapeutics Group PLC31 August 2005 Ark Therapeutics Group plc Interim Results for the First Half of 2005 CONTINUING GOOD PROGRESS London, UK, 31 August 2005 - Ark Therapeutics Group plc today announces itsresults for the six months ended 30 June 2005. PERIOD HIGHLIGHTS • Patent granted in Europe for Trinam(R) • Marketing approval process commenced for brain cancer drug, Cerepro(TM), with EMEA in Europe for consideration under exceptional circumstances route • Kerraboot(R) demand continues to strengthen and international licensing discussions progress, with agreements signed for Ireland and South Korea • Cancer cachexia drug, Vitor(TM), completed enrolment of pivotal Phase III study with results due later this year • Licence with Boehringer Ingelheim announced in April over Ark's IP in the renin-angiotensin area • Cash and money market deposits of £40.5 million at 30 June 2005 • Strengthened international patent position for lead and follow-on products POST PERIOD HIGHLIGHTS • In July, Trinam(R) Phase II low dose stage completed and abstract of initial data judged to be of "exceptional merit" for presentation at American College of Surgeons meeting in October • New vector discovery announced in August, heralding potential breakthrough in targeted gene-based medicines Dr Nigel Parker, CEO of Ark, commented: "Our track record of performing against the milestones we set ourselves at thetime of the IPO has been very satisfactory and the resultant newsflow wellreceived. We remain focused on transforming the Company into a commerciallydriven specialist healthcare business and expect further strong progress duringthe remainder of the year." For further information: Ark Therapeutics Group plc Tel: + 44 (0)20 7388 7722Dr Nigel Parker, CEOMartyn Williams, CFO Financial Dynamics Tel: +44 (0)20 7831 3113David YatesLucy Briggs Notes to Editors Ark Therapeutics Group plc Ark is an emerging healthcare group (the "Group") with one product introducedinto hospitals and three further lead products in late stage clinicaldevelopment. Capitalising on over ten years of research in vascular biology andgene-based medicine, Ark has a balanced portfolio of proprietary healthcareproducts targeted at specific unmet clinical needs within vascular disease andcancer. These are large and growing markets, where opportunities exist foreffective new products to generate significant revenues. Ark's products are sourced from related but largely non-dependent technologieswithin the Group and have been selected to enable Ark to take each productthrough development and to benefit from Orphan Drug Status and/or Fast TrackDesignation, as appropriate. The Group generally retains ownership of itsproduct candidates throughout clinical development. Ark has secured patents orhas patent applications pending for all its lead products in principalpharmaceutical markets and retains the right to market its lead products in thekey North American and European markets. Ark has its origins in businesses established in the mid-1990s by Professor JohnMartin and Dr Stephen Barker of University College London and Professor SeppoYla-Herttuala of the AI Virtanen Institute at the University of Kuopio,Finland, all of whom play leading roles in the Company's research anddevelopment programmes. This announcement includes "forward-looking statements" which include allstatements other than statements of historical facts, including, withoutlimitation, those regarding the Group's financial position, business strategy,plans and objectives of management for future operations (including developmentplans and objectives relating to the Group's products and services), and anystatements preceded by, followed by or that include forward-looking terminologysuch as the words "targets", "believes", "estimates", "expects", "aims","intends", "will", "can", "may", "anticipates", "would", "should", "could" orsimilar expressions or the negative thereof. Such forward-looking statementsinvolve known and unknown risks, uncertainties and other important factorsbeyond the Group's control that could cause the actual results, performance orachievements of the Group to be materially different from future results,performance or achievements expressed or implied by such forward-lookingstatements. Such forward-looking statements are based on numerous assumptionsregarding the Group's present and future business strategies and the environmentin which the Group will operate in the future. Among the important factors thatcould cause the Group's actual results, performance or achievements to differmaterially from those in forward-looking statements include those relating toArk's funding requirements, regulatory approvals, clinical trials, reliance onthird parties, intellectual property, key personnel and other factors. Theseforward-looking statements speak only as at the date of this announcement. TheGroup expressly disclaims any obligation or undertaking to disseminate anyupdates or revisions to any forward-looking statements contained in thisannouncement to reflect any change in the Group's expectations with regardthereto or any change in events, conditions or circumstances on which any suchstatements are based. As a result of these factors, prospective investors arecautioned not to rely on any forward-looking statement. Chairman's and Chief Executive's statement Continuing progress We are pleased to report that progress in the first half of 2005 has once againbeen very encouraging, with the momentum built up during 2004 continuing. Wehave made significant advances with all products in our clinical and researchportfolio and our track record of performing against the milestones we setourselves for the period has been very satisfactory. We remain focused ontransforming the Company into a commercially driven specialist healthcarebusiness. Pipeline review Cerepro(TM) At the beginning of the year we started the process of filing at the EMEA forapproval of Cerepro(TM) as an Orphan Medicinal Product for consideration under the exceptional circumstances route. Shortly afterwards, we announced furtherprogress with the appointment in April of the two Rapporteur countries by theEMEA. The submission validation process has commenced and we are pleased withthe way discussions are progressing with the Agency and with the responses todate from the Rapporteurs. As part of the validation dialogue, we have nowagreed to bring commercial product 'fill' in-house, rather than implement ourprevious plan of using a certified contractor. This will make logicalimprovements to production run logistics and optimise the Company's ability tocontrol product quality. Work on this is now well advanced at our Finnishfacility and we have been given notice by the Finnish authorities (as agents ofthe EMEA) that they will inspect the additional fill line capability around theend of September. Furthermore, during the period we have introduced a furtherQC process to comply with new European manufacturing legislation. Trial logistics for the main corroborative study are virtually complete and weplan to commence enrolment concurrently with the completion of the manufacturingvalidation processes and batch acceptance later this year. This will ensure thatthe trial product is compliant with any changes to final product manufacturingspecifications which might arise during completion of the validation process. In summary, we are very pleased with the way Cerepro(TM) is progressing and,whilst the timing of certain milestone achievements is now partly dependent onthe respective Medical Control Agencies, we expect to provide a furtherregulatory and trial progress report later in the year. Kerraboot(R) UK prescriptions written for Kerraboot(R) have continued to rise steadilythroughout the first six months of this year and we have consistently increasedour market share quarter on quarter. Representatives report continuing clinicalsuccess in the field and in the second quarter we commenced the process ofshaping our sales force to optimise performance. Production of two new line extensions of the product requested by customers - asuper absorbent, non-transparent form and an extra large version - commencedduring the period and they are expected to be launched shortly. In parallelwith this progress, we announced two Kerraboot(R) out-licensing deals in theperiod, BellPharma Ltd for Ireland and BL&H Co Ltd for South Korea. Both wereexecuted on favourable commercial terms consistent with the Company'sobjectives. Other licensing arrangements are being discussed and we remain very enthusiasticabout the potential for Kerraboot(R) worldwide. Vitor(TM) Progress with Vitor(TM), our product for cachexia (muscle wasting) in cancer,continued, notably with completion of enrolment into the Phase III study. Therecontinue to be no safety issues of concern reported by the Data SafetyMonitoring Board and we were particularly pleased to have the Europeanregulatory approval route through the new decentralised process clarified by theUK Medicines and Healthcare Products Regulatory Agency. We look forward toseeing the results of this pivotal study later this year. Trinam(R) The period started well for Trinam(R) with the grant by the European PatentOffice of a patent giving protection in member states until 2017. Recruitmentinto the Phase II study gathered pace as we had hoped and we completed the lowdose arm in July. Immediately post period we announced both that the FDA hadaccepted the six patients as sufficient for the low dose stage and also theDSMB's approval for us to move to the higher (expected therapeutic) dose arm.Trinam(R) has started to receive the recognition the Company believes this noveland exciting programme warrants. In July the American College of Surgeonsaccepted the pre-clinical study, the Phase I study and the Phase II studyinitial data for presentation at their October meeting in San Francisco. Theabstract for the latter was judged to be one of twelve papers out of the 309originally submitted as having "exceptional merit", confirming the overallquality of the science and clinical significance of this programme. EG005 During the period we reported preliminary results from the Phase II study ofEG005 for HIV-associated lipodystrophy. This was a blinded, placebo controlled'first time to man' study in 50 patients. Four aspects of the patients' diseaseincluding the physician's overall assessment of lipodystrophy were showingencouraging trends. However, whilst these trends were in the product's favourin the three month stage, we do not intend to make further decisions on theproduct's future development until the results of the one year extension phasehave been analysed and this is expected early 2006. At the close of the firststage 72% of patients elected to continue on active treatment for the one yearextension study. EG010 We have now obtained the necessary stability and calibration data to completeCE-marking for this novel cardiovascular risk test. Of note we report that theresults of the final tests with independently sourced blood samples to producethe final data for CE-marking were consistent with the results previouslyobtained in the Company's clinical work. The CE-marking package is nearingcompletion and we believe CE-marking is imminent. Pre-clinical pipeline Progress with our pre-clinical pipeline has continued, with developments withinboth our in vivo and in vitro proof of principle models for Scavidin(R) andbaculovirus vector technologies. We recently released news on the excitingdiscovery of the technology for a targeted integrating vector which may herald abreakthrough in the gene medicine area. Additionally, we have innovated twofurther device products for use by hospital specialists, on which we expect toreport in more detail later in the year. We have continued to exploit ourunique and highly effective business model of integrating industry withacademia. We remain firmly of the view that this is a cost effective solution tothe challenge of sourcing innovation. Manufacturing and new facilities The Company commenced production early in the year of clinical batches ofCereproTM in our Finnish cGMP facility and throughout the period we havecontinued to produce successive batches as well as undertake production and QCtesting and process validations in accordance with ongoing requests from boththe EMEA and Finnish National Agency for Medicines (NAM - the EMEA localregulatory body). We have successfully introduced sub-visible particle testinginto the production process to comply with the new EU regulations (EuropeanPharmacopoeia 2.9.19). During the period we agreed with NAM to transfer finishedproduct filling and packaging (previously contracted to a certified third party)to the Kuopio facility so that the whole process is now integrated and in-house. This helps to optimise the production process and ensure product quality ismaintained completely within the Company's control. NAM has notified us that itwill inspect the validated extended fill facility around the end of September. In May, the Board made a commitment to expand our Finnish operations in order tohave the capability of undertaking commercial scale production and processdevelopment for the full range of DNA based medicines being developed by theCompany. We signed an agreement under very favourable terms with the Tekniabusiness park in Kuopio, Finland for the building and lease of a 3,000m2facility. This will house manufacturing as well as bringing all relatedresearch onto a single site. The new building is physically linked to thecurrent academic facilities to maintain the fruitful collaboration between Ark'sscientists and the University of Kuopio. Board and management further strengthened In June, Dr Bruce Carter joined the main Board as a Non-Executive Director andMember of the Remuneration Committee. Bruce is a very experienced internationalbiotechnology executive bringing to the Board 'hands on' biotech operatingexperience, particularly in the USA. Bruce is President and CEO of ZymogeneticsInc (NASDAQ) and prior to that was a member of the Board of Novo Nordisk, wherehe was responsible for research and development. We are delighted he made thedecision to join us. We were also very pleased to announce that Dr DavidEckland joined the Operating Board in May as Director of Drug Development.David takes over the full time responsibilities for this area as Dr Alan Boydmoves to a part time role, focusing on regulatory approvals. Both are welcomeadditions to our strengthening team. Staff Our staff in London and Finland have continued to work exceptionally hardthroughout the period. Ark is successfully pioneering leading edge biotechnologyand novel products, in many cases as 'world firsts'. The Board is well awarethat this success has only been achieved as a result of the expertise andtremendous dedication of our employees. We remain most grateful to all of themfor their efforts and their contributions. Financial review To date, the Company has prepared its primary financial statements under UKGenerally Accepted Accounting Principles ("UK GAAP"). The financial resultspresented below are, for the first time, presented in accordance with theGroup's accounting policies based on International Financial Reporting Standards("IFRS"). This unaudited results announcement for the six months ended 30 June2005 is prepared in accordance with the IFRS accounting policies that areexpected to apply in 2005. The 2004 comparator numbers in the financialstatements for the six months ended 30 June 2004 and the full year ended 31December 2004 have been restated under IFRS. In the Appendix to the financial statements, we describe our new IFRS accountingpolicies and reconcile previously reported UK GAAP results to IFRS results. Net cash outflow from operating activities for the period was £7.5 million (sixmonths ended 30 June 2004: £6.2 million). Cash and cash equivalents and moneymarket investments were £40.5 million at 30 June 2005 (£53.7 million at 30 June2004). Revenues of £1.3 million were recorded in the first six months of 2005 (sixmonths ended 30 June 2004: £0.03 million), including the first £1.2 million ofinitial milestone receipts due under the licensing agreement with BoehringerIngelheim and sales in the UK of Kerraboot(R). Prescriptions written forKerraboot(R) in the UK doubled in the six months ended 30 June 2005 comparedwith the six months ended 31 December 2004 but this is not reflected in sales(ex-warehouse) in the period due to the seasonal effects of pipeline stocking inthe last month of 2004 and the consequent effect on sales in the first month of2005. Research and development expenditure in the first six months of 2005 was £5.7million (six months ended 30 June 2004: £3.9 million), reflecting the higherlevel of late stage clinical trial activity, particularly in the Cerepro(TM),Vitor(TM) and Trinam(R) programmes and the continued investment in the cGMPmanufacturing facility in Finland as the Company scales up for Phase III andcommercial production. Sales and marketing expenses for the period were £0.7 million (six months ended30 June 2004: £0.6 million) and related exclusively to the UK sales andmarketing activities for Kerraboot(R). Administrative expenses for the period were £3.0 million (six months ended 30June 2004: £2.3 million), reflecting the general increase in Group activitiesand consequent strengthening of the management team as well as increased costsas a result of being a listed company. In the six months ended 30 June 2005 the Group earned interest receivable on itscash deposits of £1.0 million (six months ended 30 June 2004: £0.8 million),reflecting the increased level of cash following the March 2004 IPO. Prospects During the remainder of the year we expect to achieve further significantproduct milestones and consequently to have continuing strong newsflow. Weanticipate that revenues from Kerraboot(R) will continue to grow from increasingUK sales and the commencement of international marketing. We also expectfurther Kerraboot(R) out-licensing deals this year as internationalcommercialisation continues. We hope to announce news of Cerepro(TM)'s regulatoryprogress as well as commencement of enrolment into the main corroborative study.Vitor(TM) Phase III preliminary results are scheduled in Q4 and initial resultsfor the Trinam(R) Phase II study will be presented at the ACS meeting in SanFrancisco 16-20 October. The CE-marking of EG010 should be completed shortly andwe will commence out-licensing discussions on this innovative test. We alsoexpect to give updates on earlier pre-clinical programme results, notablyScavidin(R), Neuropilin 1 and the new devices programmes. With so much expected to come to fruition in the coming months against themilestones we have set for ourselves, we are enthusiastic about Ark's future asa commercially driven specialist healthcare company. Dennis Turner, ChairmanNigel Parker, Chief Executive Officer 30 August 2005 Consolidated income statement For the six months ended 30 June 2005 (unaudited) Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 (restated)* (restated)* Note £'s £'s £'s Revenue 1,270,021 26,980 154,353Cost of sales (44,200) (9,522) (45,401) ______ ______ ______ Gross profit 1,225,821 17,458 108,952Research and development expenses (5,733,109) (3,933,353) (9,147,324) ______ ______ ______ (4,507,288) (3,915,895) (9,038,372) ______ ______ ______ Selling, marketing and distribution costs (650,285) (595,901) (1,305,970) ______ ______ ______ Other administrative expenses (2,713,254) (2,055,564) (4,387,917)Share-based compensation (249,182) (205,332) (435,866) ______ ______ ______Administrative expenses (2,962,436) (2,260,896) (4,823,783) ______ ______ ______ Other income 16,679 76,974 96,199 ______ ______ ______ Operating loss (8,103,330) (6,695,718) (15,071,926) Investment income 1,026,099 752,823 1,959,891Finance costs (11,009) (2,645) (5,036) ______ ______ ______ Loss on ordinary activities before (7,088,240) (5,945,540) (13,117,071)taxationTaxation 618,631 550,947 1,211,436 ______ ______ _______ Loss on ordinary activities aftertaxation, being retained loss for theperiod (6,469,609) (5,394,593) (11,905,635) ______ ______ ______ Loss per share 2 (0.05) (0.05) (0.10) All results relate wholly to continuing activities. * Restated in accordance with IFRS as per note 1 Consolidated balance sheetAs at 30 June 2005 (unaudited) 30 June 30 June 31 December 2005 2004 2004 (restated)* (restated)* £'s £'s £'sNon-current assetsGoodwill 1,306,091 1,306,091 1,306,091Computer software 62,310 14,000 51,868Property, plant and equipment 1,192,905 907,403 1,009,102 ______ ______ ______ 2,561,306 2,227,494 2,367,061 ______ ______ ______ Current assetsInventories 327,599 94,120 331,010Trade and other receivables 3,293,963 2,228,059 2,576,572Money market investments 20,000,000 - -Cash and cash equivalents 20,507,642 53,738,381 47,256,285 ______ ______ ______ 44,129,204 56,060,560 50,163,867 ______ ______ ______ TOTAL ASSETS 46,690,510 58,288,054 52,530,928 ______ ______ ______ Non-current liabilitiesLoans 465,704 437,060 493,060 ______ ______ ______ 465,704 437,060 493,060 ______ ______ ______ Current liabilitiesTrade and other payables 3,638,268 3,218,897 3,617,473 ______ ______ ______ 3,638,268 3,218,897 3,617,473 ______ ______ ______ TOTAL LIABILITIES 4,103,972 3,655,957 4,110,533 ______ ______ ______ Equity Share capital 1,271,609 1,263,110 1,263,337Share premium 49,806,146 49,350,301 49,430,703Merger reserve 36,988,989 36,988,989 36,988,989Foreign currency translation reserve (20,339) (11,371) (23,194)Share-based compensation 714,446 234,730 465,264Retained loss (46,174,313) (33,193,662) (39,704,704) Shareholders' funds 42,586,538 54,632,097 48,420,395 TOTAL LIABILITIES AND EQUITY 46,690,510 58,288,054 52,530,928 * Restated in accordance with IFRS as per note 1 Consolidated statement of changes in equityFor the six months ended 30 June 2005 (unaudited) Share Share Merger Foreign capital premium reserve currency translation reserve £'s £'s £'s £'sBalance as at 31 December 2003 aspreviously reported 57,751 - 36,988,989 (21,411)Change in accounting policy forshare-based compensation - - - -Change of accounting policy onreclassification of preference shares toloans (50,000) - - - ______ ______ ______ ______ Balance as at 31 December 2003 as restated 7,751 - 36,988,989 (21,411) Exchange differences on translatingforeign operations recognised directly inequity - - - (1,783)Share-based compensation - - - -Loss for the year (restated) - - - - ______ ______ ______ ______ Total recognised income and expense forthe year - - - (1,783)Issue of share capital 414,535 54,666,080 - -Equity share options issued 1,462 253,695 - -Bonus issue 839,589 (839,589) - -Share issue expenses - (4,649,483) - - ______ ______ ______ ______ Balance as at 31 December 2004 1,263,337 49,430,703 36,988,989 (23,194) Exchange differences on translatingforeign operations recognised directly inequity - - - 2,855Share-based compensation - - - -Loss for the period - - - - ______ ______ ______ ______ Total recognised income and expense forthe period - - - 2,855Equity share options issued 3,322 205,125 - -Bonus issue 4,950 (4,950) - -Adjustment of share issue expenses - 175,268 - - ______ ______ ______ ______ Balance as at 30 June 2005 1,271,609 49,806,146 36,988,989 (20,339) ______ ______ ______ ______ Consolidated statement of changes in equityFor the six months ended 30 June 2005 (unaudited) continued Share-based Retained loss Total compensation £'s £'s £'s Balance as at 31 December 2003 as previously reported 1,911,240 (29,680,911) 9,255,658 Change in accounting policy for share-based compensation (1,881,842) 1,881,842 - Change of accounting policy on reclassification ofpreference shares to loans - - (50,000) ______ ______ ______ Balance as at 31 December 2003 as restated 29,398 (27,799,069) 9,205,658 Exchange differences on translating foreign operationsrecognised directly in equity - - (1,783)Share-based compensation 435,866 - 435,866Loss for the year (restated) - (11,905,635) (11,905,635) ______ ______ ______ Total recognised income and expense for the year 435,866 (11,905,635) (11,471,552) Issue of share capital - - 55,080,615Equity share options issued - - 255,157Bonus issue - - -Share issue expenses - - (4,649,483) ______ ______ ______ Balance as at 31 December 2004 465,264 (39,704,704) 48,420,395 Exchange differences on translating foreign operationsrecognised directly in equity - - 2,855Share-based compensation 249,182 - 249,182Loss for the period - (6,469,609) (6,469,609) ______ ______ ______ Total recognised income and expense for the period 249,182 (6,469,609) (6,217,572) Equity share options issued - - 208,447Bonus issue - - -Adjustment of share issue expenses - - 175,268 ______ ______ ______ Balance as at 30 June 2005 714,446 (46,174,313) 42,586,538 ______ ______ ______ Consolidated cash flow statementFor the six months ended 30 June 2005 (unaudited) Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 (restated)* (restated)* Note £'s £'s £'s Net cash outflow from operating activities 3 (7,483,600) (6,214,622) (14,087,940)Investing activities 4 (19,440,679) 401,700 1,495,902Financing activities 4 204,613 50,389,418 50,692,541 ______ ______ ______ (Decrease)/increase in cash and cash (26,719,666) 44,576,496 38,100,503equivalents Cash and cash equivalents at beginning of 47,256,285 9,157,565 9,157,565period Effect of exchange rate changes (28,977) 4,320 (1,783) ______ ______ ______ Cash and cash equivalents at end of period 20,507,642 53,738,381 47,256,285 ______ ______ ______ * Restated in accordance with IFRS as per note 1 Notes to the financial information 1 Basis of preparation The interim financial information has been prepared in accordancewith the IFRS accounting policies that are expected to apply in 2005. These interim financial statements do not constitute statutoryfinancial statements within the meaning of section 240 of the Companies Act1985. Results for the six month periods ended 30 June 2005 and 30 June 2004 havenot been audited. The results for the period 30 June 2004 and 31 December 2004,and the balance sheets at those dates, have been restated in accordance with theaccounting principles applied by the Company as set out in the Appendix. Copies of the interim results for the six months ended 30 June 2005are being sent to all shareholders. Details can also be found on the Company'swebsite at www.arktherapeutics.com. 2 Loss per share IAS 33 "Earnings per share" requires presentation of dilutedearnings per share when a company could be called upon to issue shares thatwould decrease net profit or increase net loss per share. For a loss makingcompany with outstanding share options, net loss per share would only beincreased by the exercise of out-of-money options. Since it seems inappropriateto assume that option holders would exercise out-of-money options, no adjustmenthas been made to diluted loss per share for out-of-money share options. The calculation of basic and diluted loss per ordinary share isbased on the loss of £6,469,609 for the six months ended 30 June 2005 (sixmonths ended 30 June 2004: £5,394,593; year ended 31 December 2004: £11,905,635)and on 126,463,186 ordinary shares (30 June 2004: 111,124,401; 31 December 2004:119,019,359) being the weighted average number of ordinary shares in issue. 3 Reconciliation of operating loss to net cash outflow from operatingactivities Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 (restated)* (restated)* £'s £'s £'sOperating loss (8,103,330) (6,695,718) (15,071,926)Depreciation charge 194,527 85,790 270,553Increase in accounts receivable (609,873) (527,655) (379,379)Decrease/(increase) in inventories 3,410 (84,920) (321,810)Increase in accounts payable 44,206 802,549 978,756Share-based compensation 249,182 205,332 435,866 ______ ______ ______Net cash outflow from operations (8,221,878) (6,214,622) (14,087,940) ______ ______ ______ Research and development tax credit received 738,278 - - ______ ______ ______Net cash outflow from operating activities (7,483,600) (6,214,622) (14,087,940) ______ ______ ______ 4 Analysis of cash flows for investing activities and financing Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'s (restated)* (restated)* £'s £'sInvesting activitiesInterest received 948,093 615,608 1,936,634Purchases of money market investments (20,000,000) - -Purchases of property, plant and equipment (370,599) (199,908) (388,864)Purchases of computer software (18,173) (14,000) (51,868) ______ ______ ______Net cash (outflow)/inflow from investingactivities (19,440,679) 401,700 1,495,902 ______ ______ ______ FinancingIssue of shares 227,098 50,393,807 50,686,289Repayment of loans (22,485) (22,425) (72,603)New loans - 18,036 78,855 ______ ______ ______Net cash inflow from financing 204,613 50,389,418 50,692,541 ______ ______ ______ * Restated in accordance with IFRS as per note 1 Independent review report to Ark Therapeutics Group plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2005 which comprises the income statement, balancesheet, statement of changes in equity, cash flow statement and related notes 1to 4. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in the Appendix, the next annual financial statements of the Groupwill be prepared in accordance with International Financial Reporting Standardsas adopted for use in the EU. Accordingly, the interim report has been preparedin accordance with the recognition and measurement criteria of IFRS and thedisclosure requirements of the Listing Rules. The accounting policies areconsistent with those that the Directors intend to use in the annual financialstatements. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the UK. A reviewconsists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. Deloitte & Touche LLP Chartered Accountants Cambridge 30 August 2005 Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the Directors but no controlprocedures can provide absolute assurance in this area. Legislation in the UK governing the preparation and dissemination offinancial information differs from legislation in other jurisdictions. Appendix Reporting under International Financial Reporting Standards (IFRS) From December 2005 Ark Therapeutics Group plc will produce its consolidatedreport and accounts in accordance with IFRS. This financial information hasbeen prepared on the basis of the IFRS expected to be applicable at 31 December2005. These standards are subject to ongoing review and endorsement by the EUor possible amendment by interpretive guidance from the IASB and are thereforestill subject to change. We will update our restated information for any suchchanges when they are made. The commentary below highlights the key changes that have arisen due to thetransition from reporting under UK GAAP to reporting under IFRS. The Group'sdate of transition to IFRS is 1 January 2004, which is the beginning of thecomparative period for the 2005 financial year. Therefore the opening balancesheet for IFRS purposes is that reported at 1 January 2004 as amended forchanges due to IFRS. The UK GAAP financial information contained in this document does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Theauditors have issued unqualified opinions on the Group's UK GAAP financialstatements for the years ended 31 December 2003 and 31 December 2004. This interim financial report is the first to be prepared under IFRS. Thecomparative figures have been prepared on the same basis and are thereforerestated from those previously reported under UK GAAP. To help understand theimpact of the transition, reconciliations have been produced to show the changesmade to statements previously reported under UK GAAP in arriving at theequivalent statements under IFRS. The following are the five unauditedreconciliations which are included in this Appendix. 1. Consolidated balance sheet at 1 January 2004 2. Consolidated income statement for the year to 31 December 2004 3. Consolidated balance sheet at 31 December 2004 4. Consolidated income statement for the six months to 30 June 2004 5. Consolidated balance sheet at 30 June 2004 The income statement for the six months to 30 June 2005 and the balance sheet atthat date are reported under IFRS. As they have not previously been reportedunder UK GAAP no reconciliation to IFRS is required. Key accounting policy changes are included within this report. A full set ofIFRS accounting policies will be published in the Group's report and accountsfor the year to 31 December 2005. The net effect of presenting the 2004 full year financial statements under IFRSrather than UK GAAP is to decrease the loss after tax reported from £12.8million to £11.9 million and increase net assets from £47.2 million to £48.4million. The changes have no impact on the cash flows previously reported. Thekey areas of change are outlined below. First time adoption IFRS 1 "First Time Adoption of International Financial Reporting Standards" setsout the approach to be followed when IFRS are applied for the first time. As ageneral principle, IFRS 1 requires that accounting policies are to be appliedretrospectively although IFRS 1 provides a number of optional exceptions wherethe cost of compliance is deemed to exceed the benefits to users of thefinancial statements. Where applicable, the options selected by managementunder IFRS 1 are set out in the explanatory notes below. Business combinations The method of accounting for business combinations under IFRS is significantlydifferent in a number of areas from that previously applied under UK GAAP. The most significant differences arise from the requirement under IFRS to bringall the assets and liabilities of acquired entities into the consolidatedfinancial statements at fair value, including intangible assets which would notmeet the criteria had they been internally developed. Under IFRS, managementconsiders it probable that, in respect of future acquisitions, more intangibleassets will be recognised separately from goodwill - including patents,technology, in-process research and development, trade names, customerrelationships - which will result in a corresponding reduction in initialgoodwill recognised relative to other intangible assets after the date oftransition compared to UK GAAP. Under IFRS 1, the Group may elect not to apply IFRS 3 "Business Combinations"retrospectively to transactions occurring prior to the date of transition toIFRS and management has elected to take this exemption. The carrying amount ofgoodwill in the opening IFRS balance sheet is that recorded under UK GAAP at thedate of transition. As from the date of transition goodwill is not amortisedbut subject to annual tests for impairment. Research and development No adjustment is required in respect of research and development expense. Afull accounting policy is set out in the summary of significant accountingpolicies in this Appendix. Cumulative translation differences Translation differences arise from the consolidation of the results of foreignoperations at the average rate and the balance sheet at the year-end rate ofexchange. UK GAAP does not require these translation differences to beseparately identified and accounted for in subsequent disposal of foreignoperations. Under IFRS the translation differences arising are separatelyrecorded in equity, net of any movements on related hedging instruments. Ondisposal of a foreign operation, the cumulative translation differences for theforeign operation are transferred to the income statement as part of the gain orloss on disposal. Deferred tax Under UK GAAP deferred tax is recognised in respect of all timing differencesthat have originated but not reversed at the balance sheet date wheretransactions or events have occurred at that date that will result in anobligation to pay more, or a right to pay less or to receive more tax. UnderIFRS, the change to the balance sheet liability method gives rise to a number ofGAAP differences. The amortisation of any asset under IFRS corresponds to thebuild up of the liability under UK GAAP. Deferred tax adjustments are also required in respect of other accountingadjustments reflected in the transition to IFRS, principally against shareoption expense. Share-based payment IFRS require the fair value of all share-based payments to be charged againstthe income statement over their respective vesting periods. Share-based paymentsinclude executive and employee share option schemes. Fair value is determinedat the date of grant and is calculated using an appropriate option pricingmodel. Under UK GAAP, an expense was recorded in respect of share option grantsbased upon their intrinsic value. In restating the financial results of theCompany under IFRS, expenses previously recorded under UK GAAP relating to theintrinsic value of share-based payments have been reversed and an expense hasbeen recorded based upon the fair value of share option grants. Reconciliation of the consolidated balance sheet and equity as at 1 January 2004 Accounting Policy Changes under IFRS As reported Goodwill Share-Based under UK Amortisation Payment GAAP Reversal Charge £'s £'s £'s Non-current assetsGoodwill 1,306,091 - -Computer software - - -Property, plant and equipment 834,838 - - ______ ______ ______ 2,140,929 - - ______ Current assetsInventories 9,200 - -Trade and other receivables 1,017,536 - -Cash and cash equivalents 9,157,565 - - ______ 10,184,301 - - ______ ______ ______ TOTAL ASSETS 12,325,230 - - ______ ______ ______ Non-current liabilitiesLoans 486,808 - - ______ ______ ______ 486,808 - - ______ ______ ______ Current liabilitiesTrade and other payables 2,582,764 - - ______ ______ ______ 2,582,764 - - ______ ______ ______ TOTAL LIABILITIES 3,069,572 - - ______ ______ ______ Equity Share capital 7,751 - -Preference share capital 50,000 - -Merger reserve 36,988,989 - -Foreign currency translation reserve (21,411) (2) - -Share-based compensation 1,911,240 (2) - (1,881,842)Retained loss (29,680,911) (2) - 1,881,842 Shareholders' funds 9,255,658 - - ______ ______ ______ TOTAL LIABILITIES AND EQUITY 12,325,230 - - ______ ______ ______ Reconciliation of the consolidated balance sheet and equity as at 1 January 2004- continued Other IFRS £'s £'s Non-current assetsGoodwill - 1,306,091Computer software 358 358Property, plant and equipment (358) 834,480 ______ ______ - 2,140,929 ______ ______ Current assetsInventories - 9,200