OXFORD BIOMEDICA

Oxford BioMedica's second year as a public company has seen impressive developments in its clinical programme, its commercial activities and its pipeline of novel technologies and therapies. The Company also added stability to its balance sheet through a rights issue and placing in the spring of 1998. The Board is now strengthened by the appointment of two new Non-Executive Directors bringing additional commercial experience to the management team.

Oxford BioMedica's dual commercial strategy is already proving successful. It is based on forming alliances with major pharmaceutical companies either through deals that are centred on the development of Oxford BioMedica's candidate products or through out-licensing components of those products to the industry for inclusion in other companies' therapies. Both arms of this strategy generate short-term and long-term revenue through upfront payments, milestone payments and royalties on sales. It is the multi-component nature of gene therapy products that allows these two routes to market to be exploited.

Over the past year product development has been advanced through the rapid progress of the Company's first candidate clinical product, MetXia-P450T, which is designed to treat a range of solid tumours. In December 1998, the UK Gene Therapy Advisory Committee approved BioMedica's clinical trial protocol, allowing the Company to progress MetXia-P450T into its first clinical trials for the treatment of breast cancer. This is a significant milestone for BioMedica and an impressive achievement after only 20 months of full operation.

In December 1998 the Company reported a collaboration with Rhone-Poulenc Rorer (RPR), to use the hypoxia response element (HRE) in cardiovascular gene therapy products which may lead to a total amount of research funding, milestone payments and equity subscriptions of approximately US$18 million. Importantly, this collaboration demonstrates clearly the validity of BioMedica's commercial strategy to place its technology in other companies' products, thus increasing the revenue generating potential of the Company's component technologies. Further, the alliance is a clear endorsement of the quality of BioMedica's technology, recognising that the HRE control system can complement RPR's own gene therapy technologies, thereby facilitating the development of new candidate products.

The Company recognises that its strength will always stem from its ability to turn sound scientific ideas into clinical products or component technologies. These innovations must be protected through strong patents. The Company's patent portfolio has grown further this year, and the important HRE patent has received a notice of allowance from the US Patent Office. In addition, the pipeline of new candidate products has also expanded, with exciting developments on several fronts including cell-based therapy (MacroGenT), novel antibody-based systems and anti-tumour vaccination, as well as many potential applications for the LentiVectorT technology.

While the significant potential of the Company's science develops, its finances have also been carefully managed. The loss for the year of £3.7 million was closely in line with budget. The rights issue and placing in the spring of 1998 raised £5.4 million and resulted in the issue of 60 million new shares. Significant shareholders in that issue include Prelude Trust plc, whose 17 million shares represent 14% of the current issued equity of the Company. Mr Andrew Allars, a director of Prelude, joined the Board of Oxford BioMedica on 25 March 1998.

A further board appointment, on 12 February 1999, was that of Mark Berninger as Non-Executive Director. Mark has extensive experience as a senior executive in a number of major US biotechnology companies. Most recently he was Vice President for Business Development for Genetic Therapy Incorporated, a Novartis company. It is expected that his experience and ability will be a great asset to the Company as it progresses its first products into clinical development and expands its commercial activities.

Sir Brian Richards retired from the chairmanship and the board of BioMedica on 26 June 1998. The Company expresses its thanks to Brian for his valuable contributions to Oxford BioMedica during its foundation.

With the continuing rapid pace of development, 1999 promises to be another challenging and exciting year for Oxford BioMedica and its shareholders. The year has started with the Directors proposing a rights issue to further strengthen the balance sheet.

Year ended
31 December
1998
£

15 months ended
31 December
1997
£

Turnover

50,002

2,800

Research and development

(2,981,726)

(1,972,309)

Administrative expenses

(1,194,813)

(1,180,416)

Operating expenses

(4,176,539)

(3,152,725)

Other operating income: government grants receivable

181,895

-

Net operating expenses

(3,994,644)

(3,152,725)

Operating loss

(3,944,642)

(3,149,925)

Interest receivable

263,384

224,591

Interest payable

(54)

(432)

Loss on ordinary activities before taxation

(3,681,312)

(2,925,766)

Tax on loss on ordinary activities

-

-

Loss for the period

(3,681,312)

(2,925,766)

Loss per ordinary share

(3.5p)

(4.9p)

Diluted loss per ordinary share

(3.5p)

(4.9p)