Final Results

RNS Number:4167K
PPL Therapeutics PLC
28 April 2003



Date:               Embargoed until 07.00 am, Monday 28 April 2003

Contact:            Geoff Cook, Chief Executive Officer
                    PPL Therapeutics plc
                    Telephone: [phone] April 2003
                    (and thereafter 0131 440 4777)

                    Philip Dennis
                    Hudson Sandler
                    Telephone: [phone]
                    Email: [e-mail]


                              PPL Therapeutics plc

                              PRELIMINARY RESULTS

PPL Therapeutics plc ("PPL") is pleased to report preliminary results for the
year ended 31 December 2002.

Preliminary Statement

*              New and commercially focused management team now in place

*              AAT now greatly increased in purity

*              New AAT process in operation at pilot scale

*              Bayer negotiations initiated on licensing, development and
               manufacturing

*              #42m manufacturing debt risk removed

*              Xenotransplantation spin-out successfully achieved

*              UK stem cell programme closure completed

*              Fibrin I formulated as ready-to-use liquid

*              Cash burn reduced and refocused


 Geoff Cook, Chief Executive Officer of PPL Therapeutics plc, said

"PPL has made significant progress over the past year.  A new management team is
now in place and the Group has successfully adapted a new commercial strategy of
focusing its resources on its core protein products.  The Group's non core
businesses have been successfully disposed of and the cash burn significantly
reduced."

The year 2002 represented a year of significant change for PPL as the company
focused its strategy on building a therapeutic proteins business.

The Board was strengthened with the addition of two new executive directors,
Lindsay Dunsmuir who joined in May 2002 as CFO and Adam Christie as Business
Development Director in September, following the appointment of Geoff Cook as
CEO at the beginning of the year. These appointments underpin one of PPL's key
objectives of providing a commercially focused leadership.

Following the announcement in March 2002 of a delay in the recombinant
Alpha-1-Antitrypsin (recAAT) project, significant resources were allocated and
work carried out throughout 2002 to improve the formulation of recAAT.  This
work was successfully completed resulting in a revised manufacturing process and
a significantly purer product at laboratory scale.  This process has now been
successfully transferred to PPL's pilot plant.

As a result of the associated delays, PPL and Bayer, are discussing the
realignment of the commercial terms of the original collaboration agreement,
including the possible acceleration of milestone payments, to reflect an
appropriate balance of risk in the programme.

The delay of the recAAT project necessitated a review of the manufacturing
strategy for recAAT. As a result of this review, your Board considers the
building of a #42 million debt financed manufacturing plant to represent too
great a risk to the future viability of PPL. Therefore it has taken the
decision, after consultation with all of the parties to the funding package, to
end its commitment to it and the building of a large-scale manufacturing
facility for recAAT by PPL. In addition to the strategic rationale underlying
the decision, the financial conditions associated with the funding package would
no longer have allowed PPL to build the manufacturing facility within the
original terms of the package.

As a result of this decision, the #7.5 million which PPL has prepaid on the
funding package will be written-off to the group's profit and loss account for
the year ended 31 December 2002. As the expenditure was made during 2001 and the
first half of 2002 there is no cash impact resulting from the write-off. With
the exception of #0.1 million specifically required to extend the funding
package paid in 2002, all of the obligations paid by PPL in 2001 and 2002 were
originally incurred prior to December 2001.

In light of this decision and the overall review of manufacturing strategy, PPL
and Bayer are discussing alternative arrangements for the manufacturing of
recAAT at commercial scale, including the use of a Contract Manufacturing
Organisation.

Product required for clinical trials will continue to be produced in PPL's pilot
plant in Scotland.

The comprehensive process of spinning out our regenerative medicine business
began in earnest during the year, culminating in the recent announcement that a
group of investors comprising University of Pittsburgh Medical Center ("UPMC"),
Highmark Health Ventures Investment Fund LP ("Highmark") and Fujisawa will take
the project forward.  This involved the transfer of the total manpower and
assets of PPL's USA subsidiary PPL Inc to a new company, Regenecor Inc.  Under
the agreement PPL holds a 22.2% stake in the new company and will receive
reimbursement of operating expenses incurred since 1 January 2003 through to
completion of the transaction on 10 April 2003.

As part of the strategy to focus resources on therapeutic proteins, and in view
of its early stage, PPL's UK-based stem cell project was closed in October.

PPL's first product to market will be Fibrin I and during 2002 the company has
successfully developed a stable liquid formulation which will result in a 'ready
to use' product. This holds the promise of conferring significant 'ease of use'
advantages over current marketed products. This is an exciting development for
the company and PPL remains very confident regarding the development path and
commercial profile of the product.

Review of products

PPL's pipeline is characterised by well-differentiated products which will
compete in highly priced niche markets. Of the three lead products two are
recombinant proteins produced in transgenic sheep. The first product to market
will initially be based upon a protein derived from human plasma with the
potential for a recombinant version to follow.

While the company remains committed to transgenics as a means of producing large
quantities of complex proteins, PPL's core capability lies more broadly as a
developer of protein-based drugs, irrespective of source. It is this core
capability which the company intends to deploy as it adds to the pipeline
through in-licensing.

The current pipeline consists of Fibrin I, a surgical tissue sealant,
recombinant alpha-1-antitrypsin (recAAT) for hereditary emphysema and cystic
fibrosis, and recombinant bile salt stimulated lipase (recBSSL) for lipase
deficiency in pancreatitis, cystic fibrosis and in pre-term infants.

Fibrin I

Fibrin I has the potential to be a leading product amongst surgical sealants and
haemostats. These products are used to stop bleeding during surgery or seal
tissue such as lung in order to prevent fluid or air leaks. The current
generation of fibrin sealants has multiple active ingredients which have to be
mixed for up to twenty minutes before use. This is clearly not convenient for
surgeons, who ideally want a sealant that is ready to use whenever they need to
seal tissue or stop blood loss.



Fibrin I is based on a fibrin monomer which is applied directly to tissue along
with a neutralising buffer where it immediately polymerises to form a clot and
seal the tissue. During 2002 PPL developed a ready to use liquid formulation
which stability studies suggest will enable surgeons to store and use Fibrin I
directly from the refrigerator.



While this will be seen as the product's major advantage by end users,
preclinical data generated during the year suggests that the healing process
associated with the use of Fibrin I may be more rapid and natural with less
inflammatory response than is seen with conventional fibrin sealants. This in
turn may account for the reduction in post surgical adhesions observed in the
preclinical programme, which could turn out to be a very valuable property of
Fibrin I if it reads through into the clinic.



PPL is in late stage discussions with suppliers of plasma derived fibrinogen
which will also perform the conversion of fibrinogen to Fibrin I under licence
from PPL. PPL also intends to form marketing partnerships with major
pharmaceutical companies to sell the product in the US, Europe and Japan and
discussions with potential partners continue with a view to securing partnership
agreements at the appropriate point in the product's development path.




The importance of Fibrin I to PPL is underscored by the fact that with a launch
in 2005, it will be the company's first revenue generating product. The rapid
progress to launch is possible because PPL will develop Fibrin I as a device in
Europe which entails a more rapid and straightforward regulatory route than that
associated with a medicine.



recAAT

PPL is developing recAAT in collaboration with Bayer's Biological Products
Division to address the supply constraints that restrict the availability of
plasma derived AAT therapy to the patient population. AAT is a natural
anti-protease which is required for normal healthy lung function. In those
individuals whose genetic make up causes AAT deficiency, proteases, particularly
elastase, become overactive in the lung causing progressive and irreparable
tissue damage which is manifested as hereditary emphysema.  This disease can
occur in patients in their thirties or forties and is associated with
considerable morbidity and reduced life expectancy. The large volumes needed to
treat patients mean that conventionally plasma sourced material does not meet
demand.



Transgenic production can provide virtually unlimited supplies of recAAT to
satisfy the needs of hereditary emphysema patients but also to address another
patient population. Cystic fibrosis patients, because of chronic cycles of
infection and inflammation in the lung, over-produce elastase which overwhelms
normal levels of endogenous AAT, again causing progressive and severe lung
damage. recAAT potentially represents the first fundamental treatment for lung
disease in cystic fibrosis patients who are currently treated symptomatically.



PPL and Bayer are developing recAAT as an inhaled product to deliver the product
directly to the site of action and to improve patient acceptability compared to
the currently available plasma derived product which is administered
intravenously. The agreement between the two companies which was signed in
August 2000 provides that Bayer has responsibility for conducting the Phase III
clinical trials and worldwide marketing, while PPL is responsible for developing
the process and manufacturing the product.



2002 has been a year of intense activity on the recAAT development programme
following the announcement that due to unexpected patient withdrawals in a phase
II safety study in patients with congenital AAT deficiency, the FDA had
suggested that PPL and Bayer needed to conduct further analysis before
progressing the clinical programme. The companies have extensively studied the
route of administration, dose, purity and formulation related issues. The result
is a revised manufacturing process leading to an extremely high purity product.



The companies have also jointly developed a modified formulation for the
product. In addition Bayer is performing further studies to improve the
deposition of the product in the lung using an innovative delivery device
designed to deposit an optimal amount of product to the appropriate area.



The revised development programme gives a launch date of 2007 which is in line
with guidance previously provided.




PPL and Bayer are currently reconsidering the overall structure of the
collaboration in the light of the revised commitments and responsibilities of
each party. Specifically, Bayer and PPL are discussing the possible acceleration
of milestone payments and, as mentioned earlier, the exploration of alternative
arrangements for the manufacturing of recAAT.



On 25th February 2003 the US Patent and Trademark Office issued a patent
relating to a highly purified (99.99% pure) Alpha 1-Antitrypsin product. The
grant of this patent further strengthens PPL's patent portfolio.



recBSSL

recBSSL is a unique product in development for a diverse range of patients who
have in common the fact that they cannot produce normal levels of lipase, which
leads to impaired digestion and absorption of fat. In the case of cystic
fibrosis patients or those with acute pancreatitis, the pancreas is damaged and
does not produce sufficient lipase. Inadequate fat digestion in these patients
leads to steathorrea (fatty stools), lack of absorption of fat soluble vitamins
and weight loss.



Existing products can require patients to take large numbers of tablets (up to
50 per day) and may be associated with side effects, especially at high doses.
These side effects occur because the products are based upon extracts of porcine
pancreas which contain both lipases and proteases. The availability of a pure
recombinant source of human BSSL should mean a much-reduced dose and fewer side
effects, greatly increasing patient acceptability and compliance.



Pre-term infants represent a further group of patients who could be helped by
recBSSL. Babies do not produce their own lipase for the first six months or so
of life and normally rely on maternal milk as their source. Pre-term babies
often do not receive maternal milk (or if they do it has been pasteurised which
destroys BSSL activity), so they suffer from fat malabsorption. In this patient
group the consequences may be more serious as fats are not only required to
support appropriate growth rates but also for normal neurological and other
development.



The priority attached to recAAT and Fibrin I means that PPL is currently
evaluating options to accelerate development of recBSSL at low cost.



Contract Manufacturing

PPL's pilot plant will be fully utilised in the future manufacturing of clinical
supplies of recAAT and, as a result, PPL is no longer seeking short term
contract manufacturing agreements.



Board Changes

Now the new executive team is in place the Board has turned its attention to the
timely replacement of the non-executive directors.  The Nominations Committee
has appointed an outside search consultant to assist in the process. That
process is underway and new appointments will be announced in due course.



Future Prospects

With a new and commercially led executive team in place and a single minded
focus on therapeutic proteins, the company is well placed to build and deliver
value from its portfolio of products.  Although 2002 posed a number of
significant challenges to AAT the company responded well and quickly to resolve
these issues reflecting its capabilities within the area of its core business.



We will continue to apply ourselves and our carefully targeted resources to
maximising and extracting value from our portfolio of products, with full
knowledge of the difficult financial market conditions, and opportunities within
the sector. The successful completion of the renegotiation of the AAT
partnership agreement with Bayer, the securing of a supply contract for Fibrin I
and the initiation of the associated clinical programme will mark significant
milestones in the development of this strategy and fundamentally strengthen the
company as it looks to the future.



Your Board is dissatisifed with the current share price but believes that the
portfolio of products holds significant value and is committed to delivering
this via programmable and measurable events which, we believe, should influence
the price positively.



Financial Review

In the year under review, PPL's Regenerative Medicine Business lost #1.1 million
after tax which broadly equates to the cash cost of running the business for the
period.  In addition, as previously announced, the closure of PPL's UK stem cell
programme saved #0.7 million after tax in annualised running costs. The absence
of these programmes in 2003 will save PPL approximately #1.8 million in cash
burn per annum. In addition, significant costs were incurred in 2001 and 2002
developing the large scale manufacturing facility. When these costs are excluded
from the group's historical costs, monthly cash burn falls from approximately
#0.9 million per month in 2001 to a revised figure of approximately #0.6 million
per month in 2002. The cash saving resulting from these measures is now capable
of being directed either towards PPL's remaining core programmes, or in
extending the length of time cash is available to the group, or in a combination
of the above. The key decisions on the appropriate level of future cash burn for
the group are largely a function of the commercial re-negotiations currently
underway with Bayer and the timing and structure of future partnering agreements
on Fibrin I.



Revenues (including grants) decreased to #1.2m (2001: #2.0m), due mainly to the
reduction of income from producing recAAT for clinical trials due to a delay in
the programme.



Expenditure on Research and Development was #10.7m (2001: #12.2m).
Administration expenses were #3.6m (2001: #4.2m).



As discussed above, PPL has decided that it will not proceed with the large
scale manufacturing facility for recAAT.  PPL had prepaid #7.5m of expenses in
2001 and the first half of 2002 in anticipation of the facility going ahead.
Given the decision not to proceed with the large scale facility these balances
are no longer considered as being recoverable.  Consequently, the amounts have
been written off to the group's profit and loss account as an exceptional item.
This is a write-off of assets in PPL's balance sheet and the write-off has no
cash impact on the group.



The number of employees decreased to 188 at the year end (2001: 215) as staff
numbers were reduced following the delay to recAAT noted above and the closure
of the UK stem cell programme.  As a result of the spin-out of PPL Inc, staff
numbers have reduced by a further 24 employees.



Net interest income was #0.6m (2001: #0.1m).



A tax credit of #1.4m (2001: #1.4m) has been provided, in respect of research
and development, which should be recoverable in 2003.  The group received a tax
credit in June 2002 of #1.5m in relation to the 2001 tax year.



The net loss for the year after exceptional items and taxation was #18.6m (2001:
#12.7m) and before exceptional items but after taxation it was #11.1m.



Capital expenditure for the year was #0.3m (2001: #0.6m).



The cash outflow for the year, before management of liquid resources and
financing, was #10.4m (2001: #17.6m).



The Group's cash and short term deposit balances at 31 December 2002 were #14.5m
(2001: #25.0m). Net assets at 31 December 2002 were #24.8m (2001: #43.2m).



Consolidated Profit and Loss Account
for the year ended 31 December 2002

                                                                                 2002              2001
                                                                                 #000              #000

Turnover - continuing operations                                                  228              1,022

Research and development costs                                                 (10,702)          (12,197)
Administrative expenses                                                         (3,643)           (4,174)
                                                                               ________          ________

Trading loss before exceptional item                                           (14,117)          (15,349)

Exceptional item                                                                (7,531)              -
                                                                               ________          ________

Trading loss after exceptional item                                            (21,648)          (15,349)

Other operating income                                                            983               972
                                                                               ________          ________


Operating loss                                                                 (20,665)          (14,377)
Interest receivable and similar income                                            774               394
Interest payable and similar charges                                             (220)             (269)
                                                                               ________          ________


Loss on ordinary activities before taxation                                    (20,111)          (14,252)
Tax on loss on ordinary activities                                               1,520             1,534
                                                                               ________          ________


Loss for the financial year                                                    (18,591)          (12,718)

Loss per share
Basic                                                                            (16p)             (20p)
Diluted                                                                          (16p)             (20p)





Statement of Total Recognised Gains and Losses
for the year ended 31 December 2002


Loss for the financial year                                                    (18,591)          (12,718)
Exchange differences arising on consolidation                                     106              (30)
                                                                               ________          ________


Total losses recognised during the year                                        (18,485)          (12,748)





Consolidated Balance Sheet

at 31 December 2002




                                                                                  2002              2001
                                                                                  #000              #000
Fixed assets
Tangible assets                                                                  11,924            13,854
                                                                                ________          ________

Current assets
Stock                                                                              96                114
Debtors                                                                           2,700             8,733
Short term investments                                                           13,932            24,021
Cash at bank and in hand                                                           587               944
                                                                                ________          ________

                                                                                 17,315            33,812

Creditors: amounts falling due within one year                                   (1,808)           (1,824)
                                                                                ________          ________


Net current assets                                                               15,507            31,988
                                                                                ________          ________


Total assets less current liabilities                                            27,431            45,842


Creditors:  amounts falling due after more than one year                         (2,663)           (2,653)
                                                                                ________          ________


Net assets                                                                       24,768            43,189

Capital and reserves
Called up share capital                                                          59,291            59,227
Share premium account                                                            55,035            55,035
Capital reserve                                                                   7,028             7,028
Profit and loss account                                                         (96,586)          (78,101)
                                                                                ________          ________


Equity shareholders' funds                                                       24,768            43,189





Consolidated Cash Flow Statement

for the year ended 31 December 2002



Reconciliation of operating loss to net cash outflow from operating activities

                                                                                2002              2001

                                                                                #000              #000
Operating loss                                                                (20,665)          (14,377)
Depreciation charges                                                            2,396             2,143
Gain on sale of tangible assets                                                 (25)              (21)
Decrease in stock                                                                18                11
Decrease/(increase) in debtors                                                  6,037            (5,923)
Increase in creditors                                                            55                224
                                                                               ______            _______


Net cash outflow from operating activities                                    (12,184)          (17,943)



Cash flow statement
Net cash outflow from operating activities                                   (12,184)          (17,943)
Returns on investments and servicing of finance                                 528               32
Taxation received                                                              1,520              884
Capital expenditure                                                            (255)             (597)
                                                                              _______           _______


Cash outflow before use of liquid resources and financing                    (10,391)          (17,624)
Decrease/(increase) in short term deposits                                    10,089           (24,021)
Financing                                                                      (51)             40,090
                                                                              ______            _______


Decrease in cash                                                               (353)            (1,555)



Reconciliation of net cash flow to movement in net funds


Decrease in cash                                                               (353)            (1,555)
Cash flow from movement in debt and lease financing                             115               151
Cash flow from (decrease)/ increase in liquid resources                      (10,089)           24,021
                                                                              _______           _______


Change in net funds                                                          (10,327)           22,617
New finance leases and hire purchase agreements                                (66)              (165)
Translation differences                                                        (40)                9
                                                                              _______           _______


Movement in net funds in the year                                            (10,433)           22,461
Net funds/(debt) at beginning of year                                         22,205             (256)
                                                                              ______            _______


Net funds at end of year                                                      11,772            22,205





Notes (forming part of the financial statements)



The financial information set out on the previous pages does not constitute the
Company's Statutory Accounts for the years ended 31 December 2002 or 2001 but it
is derived from these accounts.  Statutory Accounts for 2001 have been delivered
to the Registrar of Companies and those for 2002 will be delivered following the
Company's Annual General Meeting.  The Auditors have reported on those accounts:
the reports were unqualified and did not contain statements under section 237(2)
or (3) of the Companies Act 1985.



Exceptional Item



The exceptional item represents advance payments in relation to the financing
and construction of the recAAT manufacturing facility which, in the opinion of
the Directors, are no longer recoverable.



Dividend



The Directors do not recommend the payment of a dividend.



Loss per Share



The basic and diluted loss per ordinary share is based on the loss after
taxation of #18,591,000 (2001: #12,718,000) and on the weighted average number
of ordinary shares in issue during the year of 118,484,412 (2001: basic
63,307,845, diluted 64,398,399).  There was no dilutive effect of the Company
share option schemes.



Basis of Preparation



The Directors have considered the current cash flow projections and have a
reasonable expectation that the Company and the Group as a whole have adequate
resources to continue in operation for the foreseeable future.  The financial
statements have been prepared on the going concern basis.



                               -          Ends -

                                  -

Notes to editors

1      PPL Therapeutics is a biopharmaceutical company focused on the
development of therapeutic proteins.  The company is one of the world's leaders
in the application of transgenic animal technologies to the development and
production of human proteins for therapeutic applications. PPL's three lead
products are Alpha-1-Antitrypsin (AAT), Fibrin I and bile salt stimulated lipase
(BSSL). The company's GMP-grade production facility has the capability to
produce up to 1 kg/week of clinical grade material.

2      PPL's transgenic production of human proteins involves the introduction
of copies of human DNA into the genetic material of another species. The
resulting transgenic animals express the human gene product (protein) in the
mammary gland allowing its collection and purification during lactation. The
technique offers the opportunity to produce human proteins economically and in
potentially unlimited quantities.

3      Further information on PPL, its products and technologies can be found
at: www.ppl-therapeutics.com




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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