Final Results

11th Mar 2009 07:00



Ark Therapeutics Group plc

Preliminary results for the year ended 31 December 2008

London, UK, 11 March 2009 - Ark Therapeutics Group plc today announces its unaudited preliminary results for the year ended 31 December 2008.

HIGHLIGHTS 

Cerepro®	Phase III trial reported positive efficacy results. Marketing Approval Application filed at EMEA
Trinam®	FDA Special Protocol Assessment granted and IND requirements met allowing Phase III to commence in USA
Vitor™	Phase III pilot study approved in Europe and patient enrolment commenced
Pre-clinical	Advances made with results and regulatory advice to allow three programmes to be selected for Phase I/IIa development using validated adenovirus vector platform and VEGF genes
Wound care	Neuropad® and Kerramax® launched and combined product sales grew at 66% year-on-year, attaining sales of just below £1 million in the year
Corporate/ Commercial	Acquisition of Lymphatix Oy securing milestone and royalty-free VEGF-C and D gene exploitation rights in angiogenesis areas New manufacturing facility opened in Finland Cash and money market investments of £40.6m at 31 December 2008 (£65.1m at 31 December 2007)
Post-period events	VEGF-C and -D gene and technologies for lymphatic disease licensed to Oy Lx Therapies Ltd in Finland Cerepro® MAA filing cleared validation and review commenced at EMEA First Named Patient Supply approval for Cerepro® Multiple gene regulation technology patent filed Dennis Turner, Chairman since September 1999, to retire at end June 2009. Andrew Christie, Non-Executive Director, appointed Chairman from 1 July 2009

Dr Nigel Parker, CEO of Ark, commented:

"In 2008 we continued to make solid progress in pioneering and building our specialist gene-based medicine products and capabilities. Not only have the Phase III leads moved successfully through key late-stage regulatory milestones, but we have strengthened the underlying pre-clinical pipeline to be in a position to take three more gene-based products into the Phase I/IIa trial stage in 2009.

We anticipate a busy period of newsflow during the coming year, with the outcome of the Cerepro® marketing application in Europe, the read-out of the results for the VitorTM Phase III pilot study and progress on the recruitment for the Phase III trial for Trinam®. Our objectives remain focused on strengthening our leadership position in the DNA-based medicine area and increasing our commercial effectiveness, enabling Ark to become a leading, sustainable provider of advanced biomedicines."

For further information:

Ark Therapeutics Group plc	Tel: + 44 (0)20 7388 7722
Dr Nigel Parker, CEO
Martyn Williams, CFO
Financial Dynamics	Tel: +44 (0)20 7831 3113
David Yates
Susan Quigley

Notes to Editors

Ark Therapeutics Group plc

Ark Therapeutics Group plc is a specialist healthcare group (the "Group") addressing high value areas of unmet medical need within vascular disease, wound care and cancer. These are large and growing markets, where opportunities exist for effective new products to generate significant revenues. With five marketed devices, Kerraboot®, Kerraped®, Flaminal®, Kerramax® and Neuropad®, and three further lead pharmaceutical products in late stage clinical development: Cerepro®, Vitor™, and Trinam®, the Group is transitioning from an R&D company to a commercial, revenue generating business.

Ark's own products are sourced from related but largely non-dependent technologies within the Group and have been selected to enable them to be taken through development within the Group's own means and to benefit from Orphan Drug Status and/or Fast Track Designation, as appropriate. This strategy has allowed the Group to retain greater value and greater control of clinical development timelines, and to mitigate the risks of dependency on any one particular programme or development partner. Ark has secured patents or has patent applications pending for all its lead products in principal pharmaceutical markets. 

Ark has its origins in businesses established in the mid-1990s by Professor John Martin and Mr Stephen Barker of University College London and Professor Seppo Yla-Herttuala of the AI Virtanen Institute at the University of Kuopio, Finland, all of whom play leading roles in the Company's research and development programmes. 

Ark's shares were first listed on the London Stock Exchange in March 2004 (AKT.L). 

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

Chairman and Chief Executive's review

During 2008 Ark continued to build its pioneering DNA-based medicine capabilities and advance its position as a world leader in this exciting new area of medicine. Our lead products in Phase III, Cerepro® (for brain tumours), Trinam® (for haemodialysis access), and VitorTM (for muscle wasting in cancer) all made material progress. Of most significance, at the end of the year, we submitted Cerepro® for marketing approval in Europe.

Our UK wound care business achieved consistent and strong growth (66% period on period) through the year and we were pleased to report successful UK reimbursement and full launch of two new products: Neuropad® and KerraMax®. The inclusion of Kerraboot®, Kerraped® and Flaminal® in the NHS Advanced Wound Care and Topical Negative Pressure Therapy Contract was clear evidence of the significant health economic benefits of our range of wound care products.

Regulatory progress was also significant with successful completion of the Trinam® SPA process mid year and subsequent clearance to start patient recruitment, approval in Europe of the Phase III pilot for VitorTM and publication of Phase III results and filing of the European Marketing Authorisation Application ("MAA") for Cerepro®.

Mid year we announced the opening of our new Finnish manufacturing facility (GMP 3), considerably strengthening our capabilities in full-scale production and filling for commercial supply of gene-based medicine. Validation and certification of the new facility is ongoing and we received renewal of our certification for our existing facility GMP 1 and an extension to a second theatre, GMP2, from the Finnish National Agency of Medicines in 2008.

We were pleased to report the acquisition of Lymphatix Oy earlier in the year which has allowed us to accelerate VEGF product development which will help maximise their value to the Company. Post period we also completed the out-licensing of the VEGF-C and VEGF-D gene and adenoviral technologies for lymphatic disorders to a new Finnish-based company, Oy LX Therapies Ltd ("Lx Therapies"), in return for an 'evergreen' equity stake in the business and royalties on future sales. Lymphatic disease is a very specialised medical area and we were pleased to grant this licence to a company with the appropriate expertise. We also plan to manufacture product for Lx Therapies in our Kuopio facility as their new business develops.

In summary, we are very pleased with the progress made in 2008. We look forward to strengthening our leadership role in the DNA-based medicines sector and to reporting further success in 2009 as we advance all our commercialisation activities.

PIPELINE REVIEW

Cerepro® 

We commenced the year with the announcement that the Cerepro® Phase III trial (Study 904) would give an initial read-out of results in July 2008. In April, the EMEA formally approved the paediatric investigation plans. In late July we announced that Cerepro® treatment resulted in a statistically significant improvement in the primary endpoint (time to death or reintervention). This is a milestone result for the Group.

Further results were presented in September at the European Association of Neuro-Oncology Congress and the Principal Investigator concluded with the very positive comment that "gene therapy history had been made with the Cerepro® results".

Also in Q3, we met with the rapporteur from the EMEA to discuss the MAA and, following certain further analyses, we submitted the MAA in December. We were pleased to report post period that the application had passed validation and the formal review of the dossier had commenced. The first annual update of the trial results is due late this quarter in accordance with the regulations for gene therapy trials and we look forward to working closely with the EMEA as the MAA review progresses.

Post period, the Company announced that the first Named Patient Supply for Cerepro® had been approved by the French Medicines Control Agency (AFSSAPS) following a 'nominative' ATU (Autorisation Temporaire d'Utilisation) application made by a neuro-surgeon in France.

Vitor™ 

Following our decision in late 2007 to conduct a pilot study to provide data to enable us to determine the final architecture for the Phase III study, we completed manufacturing the product for clinical trials supply and filed applications to commence the pilot study in a number of European countries. With the increased number of review committees now in operation, the processing of the applications was slower than we initially hoped but we secured approval to commence the study in June.

Following this, Ethics Committee approvals were obtained during the second half of 2008 and recruitment into the trial commenced late in the year. Preliminary results are expected in the second half of 2009.

Trinam® 

We continued to work closely with the US regulators to progress the SPA process through the first half of the year and this was formally awarded in June 2008. Concurrently, the Investigative New Drug ("IND") application reviewer requested that one of the battery of batch release assays be 'qualified' with further data. Work on qualification commenced immediately as did work with US investigator sites to enable enrolment of the first patient into the trial as soon as clearance of the assay was received. 

A suitable assay was qualified late in the period in line with the revised draft guideline covering this area issued by the FDA in October. Post-period we have filed the requisite IND updates with the FDA and recruitment of the first patient is expected shortly.

PRE-CLINICAL

Following the progress we made with our clinical stage gene-based technology and manufacturing we took the decision late in 2007 to invest in a number of the most promising pre-clinical gene-based programmes in order to move up to three into Phase I/IIa development.

The most advanced of these (EG011) is a short-form VEGF-D gene in our adenoviral delivery platform (as used in Cerepro® and Trinam®) under development for treatment of refractory angina. This reported very promising pre-clinical results in June 2008. In a heart attack model, treatment with EG011 restored the ejection fraction (the amount of blood pumped from the affected ventricle), a key measure of heart function, from 60% to 90% of the level observed before the heart attack occurred.

A further programme (EG013), also based on adenovirally delivered VEGF, is under development for foetal growth restriction, a serious disorder caused through insufficient blood supply to the placenta. This also showed promising results by producing improved blood flow for up to 50 days in an in vivo model. In April we held a meeting with the Gene Therapy Working Party ("GTWP") at the EMEA to discuss these findings, which clarified the indication of severe foetal growth restriction and the method of administration. They also commented positively both on a proposed programme of in vivo and in vitro work to be completed prior to Phase I/IIa and on the nature of the Phase I/IIa trial endpoints.

In addition, during the first half of 2008 we had a successful meeting with the GTWP to discuss Scavidin® in pre-clinical development for non-operable gliomas. The combination status of the product was confirmed as well as the manufacturing process and route of administration. In another of our pre-clinical programmes, EG014, a neuropilin-1 ("NP-1") receptor antagonist, we reported the discovery and understanding of the precise NP-1 receptor pocket structure and molecular binding site characteristics, allowing us to continue what we believe is the last stage of lead optimisation work to provide a compound to take into the clinic.

Through the latter half of the year we prioritised our pre-clinical programmes further and as well as making the determination to take our short-form adenoviral VEGF-D construct into Phase I/IIa in both myocardial ischaemia (EG011) and foetal growth restriction (EG013) we also selected, following early academic trials results, peripheral vascular disease prior to by-pass surgery as a clinical opportunity. All these programmes utilise the adenoviral vector platform on which Cerepro® and Trinam® are based with the short-form D gene allowing us to leverage both the 'approvable status' of this delivery technology and a single manufacturing process.

The combination of our DNA-based research capability and manufacturing expertise has put us in a unique position to develop these pioneering products, all of which address large markets with high clinical need. Whilst remaining attractive, our other pre-clinical programmes have been de-prioritised to give priority in time and resources to the most promising. Work on these will continue in academia capitalising on our academic partnerships, an important strength of Ark's approach to research.

Overall, our pre-clinical programmes have developed encouragingly towards the key value-creating Phase I/IIa trial milestones. We believe that such progress in these gene-based programmes is uniquely possible at Ark through the capabilities developed in our lead clinical products.

Going forward we expect to announce in the first half of 2009 the commencement of at least two of the Phase I/IIa programmes with our short-form VEGF-D construct in collaboration with academia.

WOUND CARE

UK wound care sales maintained the growth trend experienced in the first half ending the year 66% up on the previous year with sales of just below £1m.

We were very pleased to see Flaminal®, Kerraboot® and Kerraped® accepted for inclusion on the new NHS Advanced Wound Care and Topical Negative Pressure Therapy Contract as part of the new NHS supply chain purchasing system. Products on the contract are effectively deemed 'NHS best practice' and to achieve acceptance each has to pass a range of new, independently assessed, NHS standards of clinical and cost effectiveness. Ark's three products will now be actively promoted by the NHS supply chain to all NHS and primary care trusts via its catalogue. In the period we announced the in-licensing and launch of Neuropad® for diabetic patients initially available via podiatrists through non-reimbursed purchase. 

In October, both Neuropad® and KerraMax® secured UK Drug Tariff reimbursement and the launch of KerraMax® in November was very well received by the nursing community. Early sales trends indicate Kerramax® has the potential for rapid growth.

Post year end sales continue to show an encouraging rate of growth and we are very pleased with the way this business is gaining momentum towards break even.

PATENT PORTFOLIO UPDATE

In 2008, Ark had 25 new patents granted and we secured milestone and royalty-free exploitation rights to the angiogenic and lymphangiogenic gene application to VEGF-C and -D. We filed 7 new applications and through our continuous review policy ceased prosecution of 10 patent families which were considered not to have sufficient scientific or commercial value. At present, Ark has 170 patents granted and 76 pending applications and we remain successful in overcoming the various objections and oppositions that occur in the prosecution process.

We have recently announced a particularly interesting breakthrough technology patent application covering the ability to up and down regulate multiple genes in the same construct. This can be delivered with established gene delivery vectors and has the potential to supersede current RNA silencing technology, which has recognised limitations with specificity and delivery.

We have commenced dialogue with a number of companies regarding our stroke patent and have now initiated more direct activities to realise its commercial potential through the formal system. Prosecution of the stroke patent has been slow in the USA but it has now been prioritised at the US Patent Office and prosecution is now active. We look forward to the US grant at the Office's discretion.

CORPORATE ACTIVITIES

Early in the period we completed the acquisition of Lymphatix Oy in an all-shares transaction, securing for Ark milestone and royalty-free exploitation rights to VEGF-C and VEGF-D genes in Ark's area of interest. The transaction also secured certain pre-clinical science and results that have enabled us to move our pre-clinical programmes forward more rapidly.

In February we completed the work to validate our existing manufacturing facility in Finland (GMP 1) to US standards. Throughout the year we have continued to manufacture commercial grade product in GMP 1. We were also able to announce the extension by the Finnish National Agency for Medicines ("NAM") of the Company's GMP certification to include GMP 2, Ark's second Finnish production unit, increasing significantly our commercial grade manufacturing flexibility.

In mid-July we also expanded our future production capabilities with the opening of GMP 3. GMP 3 is linked to Ark's existing laboratory suites and has been built with the aid of funding from Finnish government agencies. This commercial scale facility initially contains 547m2 of clean rooms and will operate to Biosafety Level 2. GMP 3 provides Ark with two additional manufacturing suites specifically designed to manufacture gene-based medicines, particularly those in viral vector constructs. The facility is supported with full utilities and services for bioreactor and wavebag batch volume production, and is equipped through to commercial scale filling and packaging of finished product. We are now using it for large scale manufacturing process development and validation. This will allow the fully equipped production suites to be validated to enable full GMP certification to meet both EMEA and FDA standards.

GMP 3 was completed with the aid of a Euro 2.19m grant from the Employment and Economic Development Centre of Finland ("TE-Centre") which is the largest investment grant awarded to the biotech pharma industry by the TE-Centre since its foundation in 2000.

These are significant achievements allowing us to be self-sufficient in manufacturing all the gene-based products in our portfolio from research through to commercial supply.

Post year end, we announced that we had granted a licence for VEGF-C and VEGF-D to Lx Therapies for exploitation in the lymphoedema areas. Lx Therapies will take on all development and certain patent maintenance costs and, in return, Ark has received an 'evergreen' equity position in Lx Therapies as well as royalties on future product sales.

BOARD

After ten years as Chairman of Ark, Dennis Turner has informed the Board of his intention to retire at the end of June. Andrew Christie, who was appointed a non-executive Director of the Company in March 2008 and is a member of the Remuneration Committee, has accepted the Board's invitation to become Chairman of Ark and will take up his post on 1 July 2009. Mr Christie has spent 25 years in investment banking with extensive experience in the pharmaceutical and biotechnology sectors. The Board welcomes Mr Christie to this role and would like to place on record its gratitude to Dennis Turner for his outstanding contribution to the development of Ark over many years, including overseeing its successful flotation on the London Stock Exchange in 2004 and the Company's emergence as a world leader in DNA-based medicine.

SUMMARY AND OUTLOOK

In 2008 we continued to make solid progress in pioneering and building our specialist gene-based medicine products and capabilities. Not only have the Phase III leads moved successfully through key late-stage regulatory milestones, but we have strengthened the underlying pre-clinical pipeline to be in a position to take three more gene-based products into the Phase I/IIa trial stage in 2009. Our UK wound care sales are showing increasing strength and whilst sales are still relatively small we are optimistic for the growth of the wound care business towards break-even in 2009. Our manufacturing capabilities have been successfully expanded and we are now self-sufficient for our own needs and rapidly becoming recognised as the 'state-of-the-art' European site for production and fill of viral gene-based medicines and comparable advanced biologics. The new facility has already prompted a number of enquiries for third party manufacture.

During 2009 we expect to give the first annual update of the Cerepro® Phase III results, the read-out of the results for the VitorTM Phase III pilot study and to report on the progress of recruitment for the Phase III trial for Trinam®. As the year progresses we will report the outcome of the Cerepro® MAA and on our plans for commercialising the product in Europe and non-core territories. We also look forward to reporting on our activities to realise the value of our stroke patent. Finally, we expect to give periodic updates on progress of short-form VEGF-D based programmes in the Phase I/IIa trial stage.

We entered 2009 with cash and money market investments of £40.6m and in a period of global financial uncertainty, the Company will maintain its focus on managing its resources and cost base carefully and proactively to ensure that it can continue to meet its key value-generating objectives.

In summary we will continue to build and strengthen our position in the DNA-based medicine area and increase our commercial effectiveness to develop Ark into a sustainable advanced biomedicines provider.

Dennis Turner, Chairman	Nigel Parker, Chief Executive Officer
11 March 2009

Financial review

Overview

We report a loss for the year ended 31 December 2008 of £15.9m (2007: £18.2m). The Group's losses have decreased in the year primarily as a result of unrealised exchange gains on inter-company loans and gains on operational foreign exchange strategies pursued by the Group in the year.

Cash and money market investments at 31 December 2008 totalled £40.6m (2007: £65.1m).

Results of Operations

Years ended 31 December 2008 and 2007

Revenue

Revenue of £0.9m was recorded in 2008 (2007: £1.1m). Sales in the UK of wound care products were £0.93m (2007: £0.57m), the increase in the year arising from higher Flaminal® and Kerraped sales. The balance of revenues recorded in 2007 comprised a further milestone receipt due under the licensing agreement with Boehringer Ingelheim and an initial milestone payment in respect of the out-licensing of marketing rights for the Ox-LDL heart attack risk test kit. It is expected for 2009 that the primary sources of revenues will continue to be wound care product sales and out-licensing receipts. In future years an increasing proportion of revenues is expected to come from the products now in late stage clinical development, together with further out-licensing receipts.

Research and development expenses

Ark conducts research at its facilities in Kuopio, Finland, at University College London and through a specialist chemistry sub-contractor. Clinical studies are carried out by approved clinical research organisations within Europe and North America under the close supervision of senior project managers employed by the Group. Research and development expenditure in 2008 was £16.5m (2007: £14.6m), the increase reflecting additional expenditure on selected pre-clinical programmes and on manufacturing scale-up and support for Cerepro® and Trinam®. Research and development expenses comprise clinical development costs, manufacturing development costs and research costs and are detailed below. 

Clinical development costs

Major expenditures during the year were to complete the Phase III study for Cerepro® and to prepare the Marketing Approval Authorisation Application (MAA) for submission to the EMEA, the commencement of recruitment into the Vitor™ Phase III pilot study and preparatory activities for the Trinam® Phase III study. It is anticipated that 2009 will see the completion of the Vitor™ Phase III pilot study, the commencement of recruitment into the Trinam® Phase III study and further expenditure on the late-stage pre-clinical programmes, including initial clinical work.

Manufacturing development costs

Manufacturing development expenditure increased during 2008 to support the MAA process for Cerepro®, to continue commercial scale-up of GMP manufacturing capability and to manufacture GMP material for the selected pre-clinical programmes.

Research costs

Research costs rose by £0.8m due to continuing investment, in Finland and in the UK, in the Group's promising pre-clinical pipeline.

Sales and marketing expenses

Selling, marketing and distribution costs for the period were £1.7m (2007: £2.0m). These costs related largely to UK sales force expenses and marketing activities for wound care products which showed a small increase year on year. The reduction in expenditure in the year related to lower pre-marketing activities for Cerepro®, following initial key opinion leader development activities in 2007.

Other administrative expenses 

Other administrative expenses for the period were £5.3m (2007: £5.8m). These administrative expenses consist primarily of remuneration for employees in executive and operational functions (including finance, commercial development, legal and IT), facilities costs and professional fees. The lower spending in the year was a result of headcount reductions and other cost saving measures.

Share-based compensation 

Share-based compensation charges for the period were £1.0m (2007: £1.0m).

Other income and expenses

Other income and expenses comprised exchange gains, fair value gains on hedging arrangements, the cost of foreign currency options and income from EU and Government grants. The increase in other income and expenses from £0.5m, in 2007, to £3.5m, in 2008, arose principally from unrealised exchange gains on inter-company loans, the gain on which increased from £0.2m to £2.5m over the same period. These Euro denominated loans were granted to the Finnish subsidiary, Ark Therapeutics Oy, in order to finance the new biologics manufacturing facility. The £0.6m fair value gain on USD forward exchange contracts, taken out during 2008, also contributed to the increase.

Investment income

The Company invests its surplus cash in bank deposits of up to one year in accordance with the terms of the Investment Policy approved by the Board. This policy has as its principal aim the security of the Group's cash balances and contains strict criteria on minimum credit ratings and maximum deposit size. Net interest receivable comprises the interest income generated from cash invested in term and overnight deposits. In the year ended 31 December 2008 the Group earned investment income of £2.9m (2007: £2.2m) on cash deposits. The increase was primarily due to the higher balance of cash deposits following the placement and open offer in December 2007. 

Taxation

There were no UK corporation tax charges for the year under review due to the incidence of tax losses. We continue the policy of surrendering tax losses for cash by making research and development tax claims to the tax authorities and anticipate a tax credit receivable of £1.7m in respect of the year ended 31 December 2008 (2007: £1.8m), resulting from the continued investment in research and development in the year.

Balance sheet

Total net assets (defined as total assets less total liabilities) have fallen from £68.1m at 31 December 2007 to £55.1m at 31 December 2008, principally as a result of the operating cash outflows during the period. Property, plant and equipment at 31 December 2008 totalled £15.1m, up from £5.3m as at 31 December 2007, reflecting the increased investment in the biologics manufacturing facility in Finland.

Cash flow

The net cash outflow from operating activities for the year was £20.4m (2007: £18.1m). Ark's net cash outflow from capital expenditure was £8.9m (2007: £3.0m). The capital expenditure was principally the investment in upgrading the Group's biologics manufacturing facilities in Kuopio, Finland. Intangible capital expenditure included licence payments to access technology used in Ark's development programmes.

Ark's net cash inflow from financing activities was £2.1m (2007: £35.7m) primarily through the proceeds of the grant from the Employment and Economic development Centre of Finland for the GMP3 facility. Interest received from term and overnight deposits was £2.7m (2007: £2.1m).

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

Martyn Williams

Chief Financial Officer

11 March 2009

Consolidated income statement

for the year ended 31 December 2008 (unaudited)

	Year  ended  31 December  2008 £'000	Year  ended 31 December 2007 £'000
Revenue	929	1,125
Cost of sales	(479)	(374)
Gross profit	450	751
Research and development expenses	(16,461)	(14,611)
Selling, marketing and distribution costs	(1,667)	(2,035)
Other administrative expenses	(5,275)	(5,809)
Share-based compensation	(980)	(1,006)
Administrative expenses	(6,255)	(6,815)
Other income and expenses	3,472	491
Operating loss	(20,461)	(22,219)
Investment income	2,896	2,226
Finance costs	(35)	(26)
Loss on ordinary activities before taxation	(17,600)	(20,019)
Taxation	1,715	1,838
Loss on ordinary activities after taxation, being retained loss for the year	(15,885)	(18,181)
Loss per share (basic and diluted)	8 pence	11 pence

Consolidated balance sheet

as at 31 December 2008 (unaudited)

	31 December 2008 £'000	31 December 2007 £'000
Non-current assets
Goodwill	2,622	1,306
Other intangible assets	1,812	742
Property, plant and equipment	15,120	5,327
	19,554	7,375
Current assets
Inventories	479	381
Derivative financial instruments	610	-
Trade and other receivables	2,098	2,175
Research and development tax credit receivable	1,713	2,055
Current tax receivable	50	20
Money market deposits	33,509	46,000
Cash and cash equivalents	7,137	19,067
	45,596	69,698
TOTAL ASSETS	65,150	77,073
Non-current liabilities
Deferred income	1,892	-
Obligations under finance leases	62	79
Loans	578	321
	2,532	400
Current liabilities
Trade creditors and accruals	7,109	8,343
Deferred income	321	137
Obligations under finance leases	32	33
Loans	58	94
	7,520	8,607
TOTAL LIABILITIES	10,052	9,007
Equity
Share capital	2,052	2,019
Share premium	117,899	116,571
Merger reserve	38,510	36,989
Foreign currency translation reserve	313	(31)
Share-based compensation	4,017	3,052
Reserve for own shares	(1,274)	-
Retained loss	(106,419)	(90,534)
TOTAL EQUITY	55,098	68,066
TOTAL LIABILITIES AND EQUITY	65,150	77,073

Consolidated cash flow statement

for the year ended 31 December 2008 (unaudited)

	Year ended  31 December  2008 £'000	Year ended 31 December 2007 £'000
Operating loss	(20,461)	(22,219)
Adjustments for non-cash items
Depreciation and amortisation	1,518	1,019
Fair value gain on cash flow hedge	(610)	-
Share-based compensation	980	1,006
EU and Government grants	(95)	(71)
Unrealised exchange gains	(2,450)	-
Changes in working capital
Decrease/(increase) in receivables	331	(593)
(Increase)/decrease in inventories	(98)	89
(Decrease)/increase in payables	(1,595)	1,413
Net cash used in operations	(22,480)	(19,356)
Research and development tax credit received	2,058	1,300
Income taxes paid	(25)	(52)
Net cash used in operating activities	(20,447)	(18,108)
Investing activities
Acquisition of Lymphatix Oy	34	-
Interest received	2,663	2,114
Net maturities/(purchases) of money market investments	12,491	(6,000)
Purchases of property, plant and equipment	(7,944)	(2,267)
Purchases of intangible assets	(957)	(698)
Net cash generated from/(used in) investing activities	6,287	(6,851)
Financing activities
Repayments of borrowings	(166)	(68)
Proceeds from borrowings	58	-
Grants received	2,171	71
Proceeds on issue of shares	69	35,735
Finance costs	(17)	(12)
Net cash from financing activities	2,115	35,726
Net (decrease)/increase in cash and cash equivalents	(12,045)	10,767
Cash and cash equivalents at beginning of year	19,067	8,433
Effect of exchange rate changes	115	(133)
Cash and cash equivalents at end of year	7,137	19,067

Condensed statement of changes in equity for the year ended 31 December 2008 (unaudited)

	Year ended  31 December  2008 £'000	Year ended  31 December  2007 £'000
Equity at 1 January	68,066	49,511
Exchange differences on translating foreign operations recognised directly in equity	329	(5)
Share-based compensation	980	1,006
Loss for the year	(15,885)	(18,181)
Equity share options exercised	69	253
Share issue	2,813	37,418
Share issue expenses	-	(1,936)
Purchase of shares by Family Benefit Trust	(1,274)	-
Equity at 31 December	55,098	68,066

Selected notes to the financial information (unaudited)

1. Presentation of financial information

The financial information set out in this unaudited preliminary statement does not comprise Ark's statutory accounts within the meaning of section 240(5) of the Companies Act 1985. The statutory accounts of Ark Therapeutics Group plc for the year ended 31 December 2008, currently unaudited and to be published in due course, will be finalised on the basis of the financial information presented by the Directors in this unaudited preliminary statement and will be delivered to the Registrar of Companies for England and Wales in due course and will also be sent to shareholders.

Whilst the financial information included in this unaudited preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in March 2009. This preliminary announcement has been prepared on the same basis as the financial statements for the year ended 31 December 2007 except for the consolidation of the Family Benefit Trust.

The financial information set out in this unaudited preliminary statement includes comparative figures that have been prepared on the same basis. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The Auditors have reported on the financial statements for the year ended 31 December 2007 which were prepared under IFRSs. Their report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain any statements under s237(2) or (3) Companies Act 1985.

As at 31 December 2008 the Group had cash and money market investments of £40.6m. In accordance with the Combined Code the Board, having made relevant enquiries, has a reasonable expectation that at the time of approving the financial statements the Company has adequate resources to continue in operational existence for the foreseeable future. The Board receives regular, detailed cash forecasts from the Company's management. In view of the continuing review of these which takes place and considering the Company's current cash resources, the Board continues to adopt the going concern basis in preparing this financial information.

This preliminary statement was approved by the Board on 10 March 2009.

2. Revenue

An analysis of the Group's revenue is as follows:

	Year ended  31 December  2008 £'000	Year ended 31 December 2007 £'000
Continuing operations
Sales of goods	929	573
Revenue from out-licensing deals	-	552
	929	1,125
Other operating income
Investment income	2,896	2,226
	3,825	3,351

3. Business and geographical segments

Business segments

For management purposes the Group is currently organised into one business segment, which is the discovery, development and commercialisation of products in areas of specialist medicine with particular focus on vascular disease and cancer. Since this is the only primary segment, information on geographical segments has been shown as the primary segment analysis.

Geographical segments

The Group's operations are located in the UK and Finland. Commercialisation activities are carried out in the UK, whilst discovery and development of products occurs in the UK and Finland.

The following table provides an analysis of the Group's revenue from sales of goods and out-licensing deals by geographical market, irrespective of the origin of the goods and services:

	Year ended 31 December 2008
	UK £'000	Finland £'000	Inter-segment eliminations £'000	Total £'000
Total revenue (external)	929	-	-	929
Inter-segment revenue	-	9,102	(9,102)	-
Total segment revenue	929	9,102	(9,102)	929
Segment result	(23,898)	(35)	-	(23,933)
Other income and expenses				3,472
Investment income				2,896
Finance costs				(35)
Loss on ordinary activities before taxes				(17,600)
Taxation				1,715
Loss on ordinary activities after taxation				(15,885)
Assets and Liabilities
Segment assets	46,861	19,323	(1,034)	65,150
Segment liabilities	4,235	17,941	(12,124)	10,052
Other information
Capital additions	964	8,840	-	9,804
Depreciation and amortisation	830	688	-	1,518

	Year ended 31 December 2007
	UK £'000	Finland £'000	Inter-segment eliminations £'000	Total £'000
Total revenue (external)	1,125	-	-	1,125
Inter-segment revenue	-	6,463	(6,463)	-
Total segment revenue	1,125	6,463	(6,463)	1,125
Segment result	(22,538)	(172)	-	(22,710)
Other income and expenses				491
Investment income				2,226
Finance costs				(26)
Loss on ordinary activities before taxes				(20,019)
Taxation				1,838
Loss on ordinary activities after taxation				(18,181)
Assets and Liabilities
Segment assets	72,302	5,629	(858)	77,073
Segment liabilities	5,408	7,228	(3,629)	9,007
Other information
Capital additions	808	3,749	-	4,557
Depreciation and amortisation	457	562	-	1,019

4. Loss per share

International Accounting Standards require presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit per share or increase net loss per share. Since the Group is loss making, there is no such dilutive impact.

The calculation of basic and diluted loss per ordinary share is based on the loss of £15,885,000 (2007: £18,181,000) and on 205,077,342 ordinary shares (2007: 169,202,455) being the weighted average number of ordinary shares in issue.

5. Acquisition of Lymphatix Oy

On 8 January 2008, the Group acquired 100 per cent of the issued share capital of Lymphatix Oy financed by the issue of 1,733,657 ordinary shares in Ark Therapeutics Group plc. This purchase has been accounted for by the purchase method of accounting.

Net assets acquired

	Book and fair value
	At acquisition £'000	Final £'000
Other intangible assets (intellectual property)	737	737
Property, plant and equipment	5	5
Trade and other receivables	21	21
Cash and cash equivalents	96	96
Long term loans payable	(116)	(116)
Trade and other payables	(94)	(138)
	649	605
Goodwill	952	996
Total consideration	1,601	1,601
Satisfied by:
1,733,657 ordinary shares issued in Ark Therapeutics Group plc at 88.75 pence per share		1,539
Directly attributable costs		62
		1,601
Net cash flow arising on acquisition:
Directly attributable costs		(62)
Cash and cash equivalents acquired		96
		34

The goodwill arising on the acquisition is attributable to future product development synergies from the combination. The acquisition had no material impact on operations during the period. Lymphatix Oy did not earn any revenue during the period.

In accordance with IFRS 3 "Business Combinations", the fair values assigned to the identifiable assets, liabilities and contingent liabilities acquired on 8 January were determined provisionally on that date and disclosed in the Group's interim results for the six months ended 30 June 2008. These provisional fair values have now been finalised and are shown above. The change made to "Trade and other payables" arose from an increase in interest liabilities.

ENDFR SFFFUSSUSEED

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