Annual Financial Report

BTG plc

16 June 2014

ANNUAL REPORT AND ACCOUNTS 2014

In accordance with the Listing Rule 9.6.1, copies of the following documents have been submitted to the UK Listing Authority.

· A copy of the Company's Annual Report and Accounts for 2014

· A Circular to shareholders incorporating the Notice of the 2014 Annual General Meeting

· Form of proxy for the 2014 Annual General Meeting

These documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do

The Annual Report and Accounts 2014 and Notice of Annual General Meeting 2014 are available on the Company website at www.btgplc.com.

The Annual General Meeting will be held at 10.30 am on Wednesday, 16 July 2014 at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH

 In accordance with DTR 6.3.5, extracted below from the Annual Report and Accounts is a management report in full unedited text which contains a responsibility statement, principal risk factors and details of related party transactions. References to page numbers and notes in the extract refer to those in the Annual Report and Accounts 2014. A condensed set of financial statements were appended to BTG plc's preliminary results announcement issued on 20 May 2014.

Name of contact and telephone number for queries:

Andy Burrows 020 7575 1741

Vice President, Corporate and Investor Relations

BTG plc

 UNEDITED EXTRACT FROM ANNUAL REPORT AND ACCOUNTS 2014

 The directors include the following statements:

1. Statement of directors' responsibilities in respect of the annual report and accounts 2014 and the financial statements

The directors are responsible for preparing the Annual Report and Accounts, 2014 and the Group and Parent Company financial statements in accordance with applicable law

and regulations.

Company law requires the directors to prepare Group and Parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and

applicable law and have elected to prepare the Parent Company financial statements on the same basis.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the

Group and Parent Company financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard

the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' remuneration report and Corporate Governance Statement that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may

differ from legislation in other jurisdictions.

Directors' Responsibility Statement pursuant to DTR 4

Each director confirms that to the best of our knowledge:

• the Group and parent company accounts, prepared in accordance with the IFRS 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

• 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.

2. STATEMENT IN THE DIRECTORS' REPORT IN RESPECT OF THE STRATEGIC REPORT

The Company is required by the Companies Act 2006 to set out a fair and balanced review of the business, including the performance and development of the Company during the year and at the year end and a description of the principal risks it faces. This information is contained within the strategic report on pages 2 to 34 and incorporated into this report by reference:

• The Chairman's Statement on page 6, the Chief Executive's review on pages 6 and 7 and the Group overview on pages 4 to 5 provide details of the Group's principal activities and strategy, its performance during the year and its prospects for future development opportunities.

• Details of the principal risks facing the Group are set out on pages 30 to 34.

• Information relating to the environment, employees and stakeholders, health and safety, ethical considerations, charitable donations and policies regarding its employees is set out on pages 22 to 23.

This information is prepared solely to assist shareholders to assess the Company's strategies, the risks inherent in them and the potential for those strategies to succeed. The directors' report should not be relied on by any other person or for any other purpose. Forward-looking statements contained in this report have been made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the uncertainties, including economic and business risk factors inherent in them.

3. PRINCIPAL RISKS

i) External supply chain

Impact: We rely on third-party contractors for the supply of many key materials and services, such as supply of components and the filling and freeze-drying of end

products in the Specialty Pharmaceuticals business. These processes inherently carry risks of failure and loss of product and are risks over which the Company has a lower degree of control. Problems at contractors' facilities such as technical issues, contamination and regulatory actions may lead to delays and disruptions or loss of supply or available capacity. Some materials and services may only be available from one source and regulatory requirements may make substitution costly, time-consuming

or commercially unviable.

Mitigation: Rigorous monitoring of suppliers; maintenance of adequate product and component inventories; dual sourcing implemented or being investigated where practicable. In accordance with the risk rating the Company will continue to focus on

this area to ensure market demand for products can continue to be met (as has historically been the case).

Change in 2013/14: The acquisition of TheraSphere® has increased our reliance on third-party manufacturing (given our dependency on Nordion as the sole manufacturer of that product). We are assessing options to secure additional product capacity through the external supply chain.

ii) Internal supply chain

Impact: BTG relies on its single site in Wales for supply of manufactured antibody products, and a single site in Farnham, UK, for the manufacture of the Bead and Varithena™ products with the consequent possibilities for disruption to or loss of supplies resulting from, for example, technical issues, contamination or regulatory actions. BTG's polyclonal antibody products rely on serum produced from our sheep flocks in Australia, which could be subject to disease outbreaks or fire. BTG manufactures its EKOS products at a single site in Seattle, WA, USA, with the consequent possibilities for disruption to or loss of supply.

Mitigation: Dual sourcing is being investigated where practicable; inventories are being increased or maintained and monitored through a sales and operational planning process; production changes implemented where needed to ensure continued product

supply; rigorous quality control procedures in place; regular checks made on sheep flock health; disaster recovery plans under regular review. In accordance with the risk rating the Company will continue to focus on this area to ensure market demand for products can continue to be met (as has historically been the case).

Changes in 2013/14: The acquisition of EKOS Corporation resulted in an additional significant BTG product line being dependent on an internal single manufacturing site (Seattle). The disposal of the Brachytherapy business addressed an internal manufacturing risk that materialised during the year (receipt of an FDA warning letter relating to the Brachytherapy Oxford, US site).

iii) Intellectual property, know-how, trade secrets

Impact: BTG may be subject to challenges relating to the validity of its patents or alleging infringement by BTG of intellectual property rights of others, which might result in cessation of product sales, litigation and/or settlement costs and/or loss of earnings. BTG might elect to sue third-parties for their infringement of its patents in order to protect product revenue streams. Litigation, especially in the US, involves significant costs and uncertainties. Failure by BTG to maintain or renew key patents might lead to losses of earnings and liabilities to licensees or licensors. BTG may not be able to secure or maintain the necessary intellectual property rights in relation to products acquired or in development, limiting the potential to generate value from these products and investments.

Changes in patent laws and other intellectual property regulations in territories where BTG or its licensees conduct business that make it more difficult or time-consuming to obtain or enforce patents, or which reduce the available term of granted patents or periods of market exclusivity protection, could adversely impact the Group's financial performance.

Patent expiries can adversely impact the Group's revenues. Currently, BTG earns significant royalties from sales of Johnson & Johnson's Zytiga® (abiraterone acetate), which may be subject to generic competition in the US from our 2016/17 financial year when the US composition of matter patent expires, and in the EU from our 2020/21 financial year when the ten-year data post-approval exclusivity period ends.

BTG's patent portfolio is currently subject to several challenges.

Enforcement of third-party patents against BTG may prevent BTG selling products or require BTG to pay royalties or other compensation to the patent holder.

BTG may rely upon know-how and trade secrets to protect its products and maintain a competitive advantage, which may be important where patent protection is limited or absent. BTG may have to sue third parties to protect its know-how and trade secrets; failure to maintain them could result in the loss of earnings.

Mitigation: Dedicated internal resource, supplemented by external expertise, monitors third-party patent portfolios and patent applications and intellectual property rights; development and implementation of BTG patent filing, defence and enforcement strategies; robust processes are in place to automate patent renewals; internal controls established to avoid disclosure of patentable material prior to filing patent applications and to protect know-how.

Change in 2013/14: Intellectual Property (IP) management has been made more complex by the acquisitions of TheraSphere® and EKOS Corporation which are now overseen by the central IP group. The IP landscape is generally more complex in the

Interventional Medicine market place rendering IP management more challenging. BTG is enforcing its patent rights and has initiated the commencement by the US International Trade Commission (ITC) of an investigation in relation to the importation of the Anavip® product into the US (as a potential competitor to CroFab®). The ITC will consider whether to exclude the importation of Anavip®.

iv) Competition

Impact: The Group operates in competitive markets. The products on which BTG currently earns revenues, or from which it anticipates earning revenues once on the market, face competition from other products that are already approved or in development. Competing products may have superior efficacy or side effect profiles, cost less to produce or be offered at a lower price than BTG's products; such competition could materially adversely impact Group revenues.

There are currently no competitors to the Specialty Pharmaceuticals products CroFab®, DigiFab® or Voraxaze®. However, future competition is likely in some cases and competing products could materially adversely impact BTG's financial results. We believe Instituto Bioclon has submitted a Biological Licence Application to seek US approval for a potential competitor product (Anavip®) to CroFab®. That product may be launched in the US. Within Interventional Medicine, the Beads products compete with

products from US companies Merit Medical and CeloNova; TheraSphere® competes globally with a product from Australian company SirTex; Varithena™ competes with other treatment modalities including heat ablation, vein stripping and physician-compounded sclerosing foam; EKOS competes with other interventional clot treatment products from US companies Covidien, Bayer MedRad and others. In Licensing, Zytiga® (abiraterone acetate) competes with a number of recently approved treatments for advanced prostate cancer including Xtandi® (enzalutamide).

Mitigation: BTG focuses on niche opportunities, addressing specialist segments where there are high barriers to entry, for example, relating to the development and manufacturing processes, or to the need to generate significant supportive clinical data

to gain approval and commercial acceptance. We seek to differentiate our products by demonstrating in clinical trials safety and efficacy benefits, or greater patient acceptance.

Change in 2013/14: Following the acquisition of EKOS and TheraSphere® and the approval of Varithena™, we now assess the competitive landscape separately for Specialty Pharmaceuticals, and within Interventional Medicine, the Interventional Oncology (TheraSphere® and Beads) and Interventional Vascular (Varithena™ and EkoSonic®) businesses. The sectors in which the Group operates remain competitive.

v). Research and development execution

Impact: Failure to implement our research and development strategy could result in an inability to deliver new products and new approved indications for existing products, which would have a material detrimental effect on the sustainability of the business and on its medium- to long term growth prospects. Failure of the programmes could result from lack of organisational resource or capability deficiencies, from not aligning R&D programmes with commercial objectives or from changes in the regulatory landscape making it more difficult to conduct the planned R&D programmes or to achieve the desired clinical results and approvals.

Mitigation: Capabilities and organisational capacity enhanced through recruitment; monthly monitoring of performance against goals; monitoring of regulatory landscape; use of external resources such as contract clinical research organisations (CROs) are being more effectively leveraged; active development of R&D and regulatory strategies and delivery plans. However, notwithstanding our mitigation activities, the inherent risks in pharmaceutical and medical device R&D remain material and difficult to mitigate.

Change in 2013/14: We have reorganised our research and development function and processes to ensure full alignment with manufacturing and commercial functions. The acquisitions of TheraSphere® and EKOS Corporation have significantly increased the portfolio of R&D projects and clinical trials to be executed to deliver on the Company's strategy. Specific plans are being implemented to accelerate delivery of those studies, including revising how the Company works with CROs to support these efforts and increasing the number of sites participating in the relevant clinical studies.

Given the increase in number and complexity of studies and the additional focus of the Group's strategy on R&D investment this risk is assessed to have increased in comparison to last year.

vi) Quality & regulatory, process documentation

Impact: Our quality systems and regulatory processes and documentation (including those relating to Good Manufacturing Practice and Good Clinical Practice) are regularly audited by regulators such as the US FDA. Any inadequacies identified can result in observations, major findings and/or warnings, which would need to be addressed through remedial actions but if not addressed adequately, could lead to regulatory action such as cessation of product development, public censure, product recalls, an inability to release manufactured product, loss of manufacturing or product licences or forced temporary or permanent shutdown of facilities and the consequential disruption to product supply.

Mitigation: We have invested in upgrading our processes, capabilities and people capacity to ensure appropriate resources are available to support all required control measures. A Global Quality System has been established and implementation across the Group is nearing completion.

Change in 2013/14: EKOS and TheraSphere® were acquired during the year and continuing improvements are being made to the applicable quality systems to bring them into full conformation with the Company's Global Quality System as it continues to develop. As establishment of that system is nearing completion, overall, the risk is assessed as having decreased in comparison with the prior year and will continue to be assessed in light of the results of future external audits.

vii) Commercial Compliance

Impact: The pharmaceutical and device industries are highly regulated and, in addition to the broad range of regulations relating to the development, approval and manufacturing of its products, the Group must comply with many regulations relating to the marketing of its products. This is true in the US, from which the Group derives most of its revenues and where the Group has established its own direct sales and marketing operations. Ensuring compliance with such regulations necessitates allocation of significant financial and operating resources. Failure by BTG (or its commercial partners where BTG has a liability) to comply with certain rules, laws and regulations, including the US False Claims Act, Anti-Kickback Statute and the US Foreign and Corrupt Practices Act among others, for alleged improper conduct, including corrupt payments

to medical professionals, off-label marketing of products, or the submission of false claims for reimbursement to the Federal government may result in criminal and civil proceedings against the Group. Significant breaches could result in large financial penalties and injunctive or administrative actions against the Group which could materially adversely impact the Group's financial performance and prospects or result in the loss of product licences or exclusion from sale of certain products.

Mitigation: A Code of Conduct has been established, supported by a mandatory training programme. Robust and extensive compliance systems are in place to ensure sales and marketing and other activities comply with applicable regulations in the US and other territories in which the Group operates. Internal expertise, procedures, monitoring and training is maintained and provided to seek to manage these risks. Notwithstanding the significant efforts made in this area, given the significant potential fines and other penalties related to any compliance failures, the risk rating remains high, reflecting the Company's continuing vigilance in this area.

Change in 2013/14: Enhanced compliance processes and monitoring and auditing programmes have been established. EKOS and TheraSphere® marketing and other activities have been incorporated into BTG's global compliance programme.

Given the anticipated continued geographic expansion of the Group (with direct sales in the EU for TheraSphere® and Taiwan for DC Bead®) the remit for the compliance system has increased accordingly, including with respect to the Group's anti-bribery and anti-corruption controls and management processes.

viii) Organisational capabilities and capacity

Impact: Inability to implement growth and delivery plans through inadequate capabilities, capacity and processes would adversely affect the long-term sustainability and growth prospects of the business. BTG is subject to intense competition for key staff with the necessary skills and expertise. Given the industry in which the Group operates a significant proportion of the Group's staff are technical in nature. BTG's business and the scope of its activities have been transformed in recent years through organic growth and acquisitions. BTG's growth is being driven by numerous factors including new product launches and entering new markets. In parallel, the external environment has become more challenging as a result of increased regulation, pricing pressures and competition. To continue with its growth plans and be able to meet the external challenges, BTG must continue to enhance its capabilities through recruitment of key experienced personnel and training and development while delivering its financial targets.

Mitigation: Processes are in place to identify capability and resource gaps, and to identify and recruit key personnel to address those requirements. Training development and incentive plans are used to attract, motivate and retain staff.

Change in 2013/14: Initiatives introduced to promote BTG as an employer of choice. HR initiatives extended to include new employees associated with TheraSphere® and EkoSonic®. Continuing enhancement of BTG learning and development and leadership programmes.

ix) Product Liability

Impact: The manufacturing, clinical testing, marketing and sale of BTG's products involve significant potential product liability if our mitigation efforts fail. As the developer, manufacturer and/or seller of certain products, BTG may be held liable for death or personal injury to persons receiving the products during development or after the product is approved. BTG may be exposed to substantial product liability claims that could result in fines, damage awards to injured parties and legal or other material costs and sanctions. Adverse events may also result in product recalls or suspension or loss of product licences adversely impacting BTG's revenues.

Mitigation: BTG conducts robust and well-designed and monitored clinical trial development plans to seek to ensure the safety of its products. BTG operates comprehensive quality systems relating to the manufacture of its products and a pharmacovigilance system to monitor and rapidly respond to safety events arising with respect to products sold or used. BTG maintains product liability insurance but it may not be commercially viable to adequately insure against the occurrence of this key risk. Notwithstanding the efforts made, quality and other systems may fail. Even in the absence of failure, significant product liability events may occur.

Change in 2013/14: The expanding operations in the US (from organic growth and acquisitions of EKOS Corporation and TheraSphere®) potentially increase liability risks.

x) Non-IP-related litigation

Impact: As BTG grows and sells more products, particularly in the US, the likelihood of litigation increases. Defending against litigation brought by others, or pursuing litigation against others, requires substantial financial and human resources. Successful litigation against BTG could result in loss of rights, and the ability to commercialise products, substantial fines and damages, injunctive or administrative remedies that could materially impact the Group's performance and prospects. The range of types of actions and outcomes is broad: including employment claims, contract disputes, regulatory litigation and tax disputes.

Mitigation: Control procedures are in place to minimise litigation relating to the development, manufacturing and sale of the Group's products including the legal team oversight of contractual arrangements with third parties. Appropriate use of external advisers and dispute avoidance or resolution strategies.

Change in 2013/14: The operations of the Group have expanded through the acquisitions and Varithena™ approval, though all internal controls have been

applied across the businesses and portfolios.

4. RELATED PARTY TRANSACTIONS

The Company has a related-party relationship with its subsidiary undertakings and its Directors.

In relation to the related party relationship identified on page 44 concerning Giles Kerr, payments made by BTG to Oxford University and Isis Innovations Ltd under the relevant licence agreements were nil for the year ended 31 March 2014 (£1.5m during the year

ended 31 March 2013). There are no amounts still outstanding and payable by BTG under these agreements as at 31 March 2014 (2013: nil).

Key management personnel are considered to be the Directors and their remuneration is disclosed within the directors' remuneration report on pages 51 to 68.

-ends-